    [Senate Hearing 116-246]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-246

                      PROSPECTS FOR GLOBAL ENERGY MARKETS,
                    INCLUDING THE ROLE OF THE UNITED STATES_
               PERSPECTIVES FROM THE INTERNATIONAL ENERGY AGENCY

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               FEBRUARY 28, 2019

                                   __________

    [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
    35-557                     WASHINGTON : 2020

    --------------------------------------------------------------------------------------

                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                        LISA MURKOWSKI, Alaska, Chairman
    JOHN BARRASSO, Wyoming               JOE MANCHIN III, West Virginia
    JAMES E. RISCH, Idaho                RON WYDEN, Oregon
    MIKE LEE, Utah                       MARIA CANTWELL, Washington
    STEVE DAINES, Montana                BERNARD SANDERS, Vermont
    BILL CASSIDY, Louisiana              DEBBIE STABENOW, Michigan
    CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
    CINDY HYDE-SMITH, Mississippi        MAZIE K. HIRONO, Hawaii
    MARTHA McSALLY, Arizona              ANGUS S. KING, JR., Maine
    LAMAR ALEXANDER, Tennessee           CATHERINE CORTEZ MASTO, Nevada
    JOHN HOEVEN, North Dakota

                          Brian Hughes, Staff Director
                         Kellie Donnelly, Chief Counsel
      Brianne Miller, Senior Professional Staff Member and Energy Policy
                                    Advisor
                    Sarah Venuto, Democratic Staff Director
                    Sam E. Fowler, Democratic Chief Counsel
                    Renae Black, Democratic General Counsel
                    David Gillers, Democratic Senior Counsel

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
    Manchin III, Hon. Joe, Ranking Member and a U.S. Senator from
      West Virginia..................................................     2

                                    WITNESS

    Birol, Dr. Fatih, Executive Director, International Energy Agency     4

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Birol, Dr. Fatih:
        Opening Statement............................................     4
        Quote from the launch presentation of WEO-2012, London, 11/
          12/12......................................................     7
        Written Testimony............................................    10
        Responses to Questions for the Record........................    39
    Manchin III, Hon. Joe:
        Opening Statement............................................     2
    Murkowski, Hon. Lisa:
        Opening Statement............................................     1

     PROSPECTS FOR GLOBAL ENERGY MARKETS, INCLUDING THE ROLE OF THE UNITED
           STATES--PERSPECTIVES FROM THE INTERNATIONAL ENERGY AGENCY

                                  ----------

                          THURSDAY, FEBRUARY 28, 2019

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:06 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. The Committee will come to
    order.
        This is the second hearing of the week, so we are moving
    along aggressively, which is a good thing. We are here this
    morning to consider the perspective of the International Energy
    Agency (IEA) on global energy markets.
        It has been a busy couple of weeks here. We have done some
    scene-setting hearings. We have covered the energy and minerals
    sectors, we have discussed the outlook for domestic policy, we
    have looked to the future of innovation, and we have examined
    the very real and persistent cyber threats to our critical
    infrastructure.
        This morning we are very, very pleased to welcome back to
    the Committee Dr. Fatih Birol, who is the Executive Director of
    the IEA. He has had an opportunity to be before this Committee
    on numerous occasions. I am always, always, very pleased with
    the opportunity that we have to ask you your views, your
    perspectives and for the information that you are able to
    provide to all of us for this global outlook for the year.
        The IEA is one of the world's premier organizations for
    energy information, insight, and analysis. So, again, the
    opportunity to discuss the agency's new World Energy Outlook is
    greatly appreciated.
        The good news for us right now is I think we are in a
    pretty good place. Over the past decade, the United States has
    transformed into a dominant player in global energy markets.
    Breakthroughs in hydraulic fracturing and horizontal drilling
    have allowed the United States to avoid building LNG import
    terminals up and down our coasts and instead export to our
    friends and our allies.
        We ended the arbitrary prohibition on domestic crude oil
    exports a few years ago. Since then, we have watched our
    exports take off and OPEC's power start to decline, all while
    prices remained at low to moderate levels.
        New technologies have substantially reduced our nation's
    greenhouse gas emission levels, and that points to our most
    reasonable path forward on climate change, which is lowering
    the cost of clean technologies--as opposed to burdensome new
    taxes, or endless regulations.
        We have also continued our strong commitment to research
    and development which allows the United States to be a
    technology driver with an impact that reaches far beyond our
    borders. As more of the world electrifies, we have an
    opportunity to build a supply that is more resilient, more
    affordable, and more reliable.
        I was pleased as I looked at the Outlook, Dr. Birol, that
    you take a very, very close look at the global power sector for
    these trends. And key to so much of this is the
    interconnectedness of our energy systems. No longer do we need
    to wonder what is happening on a pipeline or wind turbine in a
    remote part of the world. We have sensors that can provide its
    status almost instantly. And while this technology is
    remarkable and transformative, it is also critical to ensure
    that worldwide networks are protected against the evolving
    cyber threats and other vulnerabilities as interconnectedness
    grows in the energy sector.
        I am certainly among those who look to the IEA on energy
    policy, and what I find, what I hear from IEA helps ensure that
    our policies here are well-considered. I appreciate that the
    agency has branched into sectors beyond oil and gas, which had
    been that focus historically. I would also note that IEA's
    membership has now grown to 30 countries, each with dynamic and
    diverse energy portfolios.
        So again, Dr. Birol, it is wonderful to have you here, we
    appreciate your leadership. We all know that Paris is a long
    way away. We appreciate that you take the time to come here to
    Washington, DC, and particularly that you accept our invitation
    to speak before the Energy and Natural Resources Committee. You
    provide a very valuable perspective to the Committee. This is a
    hearing that I look forward to each year. And again, I welcome
    you.
        With that, I turn to my colleague and Ranking Member,
    Senator Manchin.

                  STATEMENT OF HON. JOE MANCHIN III,
                    U.S. SENATOR FROM WEST VIRGINIA

        Senator Manchin. Chair Murkowski, thank you for convening
    the Committee today, and Dr. Birol, thank you so much for
    joining us.
        I have been so impressed with the energy scene-setting
    hearings we have held in recent weeks, and hearing your view
    from the International Energy Agency is a great way to round
    those out for us.
        I also want to thank you for your focus on CCUS as an
    important part of our energy future. Both the Chairman and I
    come from energy producing states that have helped lead the
    U.S. to energy independence.
        West Virginia's coal and coal miners have done a lot of the
    heavy lifting for this country's economy, and West Virginia
    continues to be an energy exporter. Additionally, the Marcellus
    and Utica shale plays in West Virginia and Appalachia, more
    generally, have been key drivers in our nation's ability to
    further establish ourselves as a global energy leader. Of
    course Alaska, in turn, has long been a leader in oil and gas
    production. So the Chairman and I both believe that the U.S.
    needs to continue to lead in sustainable energy production as
    well as develop the energy technologies that incentivize other
    nations to reduce emissions to address the climate crisis.
        It has been some time since the Senate took a hard look at
    where we stand in terms of the power sector as it relates to
    climate change, so I am excited that Senator Murkowski and I
    will be holding a climate hearing next week to discuss where
    things stand here in the U.S. and globally. And this is most
    timely for you to be here today. Energy is often looked to as
    being at the heart of the climate debate, so I am very happy
    Dr. Birol is here to give us the global picture on energy
    needs.
        As we have discussed at previous hearings, breakthrough
    technologies will help us reliably meet our energy needs in the
    future while decarbonizing our energy system, and that is an
    all-of-the-above conversation. It can't just be about one fuel
    type, renewables or otherwise. If we are being realistic, we
    need to pursue solutions across the board. And the United
    States as a leader in energy production has a unique role to
    play in developing and commercializing innovative technology
    solutions. We need to prioritize advancing technologies like
    carbon capture that we can employ both here at home and
    overseas.
        According to the IEA in 2017, China and India used coal for
    67 and 74 percent of their electricity, respectively. Under
    current policies, that will be 51 and 57 percent by 2040. While
    I understand both countries are taking steps to reduce
    emissions and add more renewable generation, fossil fuels are
    still a part of their future in all three of the scenarios that
    IEA models in its most recent report. In other words, no matter
    how you slice it, coal is going to be part of the energy mix
    for decades to come around the world. So innovation in carbon
    capture, advanced nuclear, storage, energy efficiency, and
    other technologies are going to be key.
        I also want to touch on a topic that I believe you can
    speak to which concerns my colleagues and me deeply, that is
    the use of energy as a geo-political weapon by countries such
    as China and Russia.
        Russia has for years relied on their energy resources to
    exert influence and exact concessions. Central and Eastern
    Europe are relying on Russia for approximately 75 percent of
    their gas import needs. Russia, in turn, uses that reliance for
    political coercion and influence, and that is why I oppose the
    Nord Stream 2 pipeline.
        Meanwhile, China is buying up energy and natural resources
    around the world, from large parts of Africa, Latin America, to
    Asia, to right here in the United States. For certain
    commodities, China has become the price setter and exerts
    enormous influence. When it comes to using energy and natural
    resources for manipulation or influence, it sometimes feels
    like we are short-sighted while Russia and, particularly, China
    are playing the long game. We have to get back in the game and
    lead in order to promote American energy independence and serve
    as a bulwark against Russia and China's aggression.
        I very much appreciate you making the trip to be here today
    for your third annual visit to share your views on the global
    energy markets and the role of the United States.
        With that, Chairman Murkowski, I look forward to hearing
    from our witness today.
        The Chairman. Thank you, Senator Manchin.
        I have introduced Dr. Birol as head of the IEA, the
    Executive Director. We all have a little bit of a background
    and a biography contained within our background memo, so I
    won't read it in detail.
        But I do think that it is important to note that in
    addition to his tenure there at IEA, the background, the
    experience that he brings to these issues, not only before us
    in the Committee here, but really, around the world, Dr. Birol
    has been named by Forbes magazine as among the most influential
    people on the world's energy scene. He was recognized by the
    Financial Times in 2017 as Energy Personality of the Year. What
    a great title.
        [Laughter.]
        Energy Personality of the Year. We are honored, truly
    honored, to have you here again--your leadership at IEA and
    your willingness to share so much of it with us.
        Typically, we ask our witnesses to try to limit their
    testimony to about five minutes, and their full statements are
    incorporated as part of the record. But because you are the
    sole witness this morning, we certainly give you discretion to
    share with us this morning the time that you need to present on
    the outlook for 2019 and then we will move to questions and
    your responses.
        So, again, Dr. Birol, welcome.

    STATEMENT OF DR. FATIH BIROL, EXECUTIVE DIRECTOR, INTERNATIONAL
                             ENERGY AGENCY

        Dr. Birol. Thank you very much, Madam Chair.
        Chairman Murkowski, Ranking Member Manchin, distinguished
    members of the Committee, thank you very much for this great
    opportunity and honor for me and for my agency to appear in
    front of you.
        I am since almost two decades with the International Energy
    Agency and I appear in front of this Committee as the Chief
    Economist before you have invited me, Madam Chair. But I am the
    head of the Agency since three years, almost, and then I had
    the pleasure to be here each of the past three years and to
    share with you our views. And I benefited from that discussion
    very much. Thank you very much, Madam Chair.
        Perhaps more information about the IEA. This year is our
    45th anniversary. We are 45 years old, and we were founded by
    Henry Kissinger in the State Department just over here with 16
    other countries. In fact, after this very meeting I will go to
    the State Department for some celebration for our 45th
    birthday.
        Now, I thought the following, Committee. First, I will
    share with you some of the trends in the global energy markets
    because even though the United States is perhaps the most
    important energy country in the world, today no country is an
    energy island. So I want to highlight what's happening in the
    world. And second, some observations about the U.S. role in the
    global energy picture.
        First of all, I start with general trends. We see that the
    global energy demand is growing strongly, mainly driven by
    Asia, but also Africa, Latin America with the increase in
    income levels, increase in population, urbanization,
    modernization because energy means better lives and energy
    means more comfort, more productivity. We see a growth across
    the world, and this is solid growth.
        Particularly, natural gas is growing very, very strongly,
    driven by Asia. And when I say Asia, one country is very
    important here which is China. The China effect we have seen in
    the oil markets some ten years ago, we are seeing now in the
    natural gas markets. As we speak now, China is overtaking Japan
    as the largest gas importer of the world, and most of this gas
    imports will be in the form of LNG. So gas is growing and LNG
    will have a very important part of it.
        Second, oil. We also see the global oil demand is growing
    very strong. Some observers look at the changes in the
    automotive sector and calling the end of the oil era which we
    believe is not right because, first of all, global oil demand
    growth is not driven by the cars, it is driven by trucks,
    aviation and petrochemical industry. And on top of that the
    share of cars in the world oil consumption is about 18
    percent--82 percent everything else put together and cars are
    only 18 percent.
        We also see that the increasing share of electric cars
    around the world, it is making some dent on the global oil
    demand growth but looking at other factors, it is going very
    strongly global oil demand, in any case, one million barrels
    per day.
        Having said that, looking at the production side to that
    where the oil production come from. It will come in the U.S.
    part, the exclusive part of the United States, but I have one
    major concern, namely the growing geopolitical tensions around
    the world, especially in those countries where the significant
    amount of oil production is coming from.
        I am, Madam Chair, since 13 years I am attending the Davos
    meetings at the World Economic Forum, and I have another hat. I
    am the Chair of the Energy Board of Davos World Economic Forum
    and this year I have never seen that the geopolitics, the
    overarching team on the energy sector. Geopolitical
    developments with Russia, with the trade tensions around the
    world, what's happening in the Middle East Gulf countries, some
    Gulf countries, Iran, Venezuela. When we look at all these
    issues, including Brexit, if I may say so, geopolitical
    tensions are everywhere and, as such, we think that the supply
    disruptions is a very important area that we need to pay
    attention to.
        These geopolitical tensions plus the possible hurricanes
    and the others that we experience in this country and abroad
    tells us that the main thing in strategic oil stocks is still a
    critical issue, we believe. We have to think about the rainy
    days and not only looking at the current station.
        A few things on the wind and solar. After gas and oil, wind
    and solar are growing everywhere across the world mainly
    because of the one particular reason--they are getting cheaper
    and cheaper and they are also, in many cases, subsidized by the
    governments and their share are increasing.
        And as a result of that, we are also having some benefits
    in terms of environmental benefits, but also some challenges
    because, as we all know, solar and wind are intermittent energy
    sources. If there is no sun, we don't have electricity. If
    there is no wind, we don't have electricity, if we do not take
    the necessary measures.
        So therefore with the increasing share of renewables, we
    also need to pay attention to flexibility of our electricity
    systems, including those such as nuclear power, gas, coal and
    hydropower and others.
        A few words on coal, Senator Manchin also mentioned, now
    many people say also, we came to the end of the coal age but
    when we look at the numbers, we don't see the same picture. In
    the last two years, leading scientists tip decline of coal
    globally. We have seen an increase in the global coal
    consumption. And China alone is very important in this equation
    because China, today, consumes half of the global coal. So
    about 50 percent of coal in the world is consumed by China, the
    other half, everybody else put together.
        So to sum up the global picture--oil, gas, coal--they are
    all growing still in the global energy scene, but the
    renewables are making strong inroads, especially in the
    electricity generation.
        A few words about the United States and starting from oil.
    We expect that, thanks to shale revolution, United States will
    be providing 70 percent, 7-0 percent of the global oil
    production growth between now and 2025. And the impact of this
    cannot be overemphasized on the prices, on the energy security
    and on the geopolitics of finance which means about almost
    three-fourths, almost three-fourths of the global oil
    production will come from the United States only. And this is
    something very important to underline.
        And in terms of natural gas, I mentioned to you that
    globally there is a demand for natural gas. We expect that the
    about one-third of the global gas production will come again
    from the United States.
        Maybe more importantly, two-thirds, two-thirds of the LNG
    exports worldwide comes from the United States between now and
    2025. This is extremely important.
        Now, Madam Chair, some seven years ago when I was a Chief
    Economist, I had made the World Energy Outlook and made the
    international press release and in that seven years ago I said,
    ``United States will overtake Saudi Arabia as the number one
    oil producer.'' My colleagues will give a copy of this. It was
    in the Wall Street Journal cover page.
        [The information referred to follows:]
        [GRAPHIC] [TIFF OMITTED] T5557.020

        Dr. Birol. And as we expected, as of next year, they are
    now, the U.S. is in the same level of production with Saudi
    Arabia and Russia. By 2020, U.S. is definitely, by far, the
    number one oil producer of the world. This is an incredible,
    incredible development as the IEA seven years ago was spot on
    said and it was a very daring expectation at that time.
        But the most important message I want to give here to you
    and to the world is the following. Many people think that this
    is we now slow the impact of shale revolution. This is not
    exactly right. What I believe this is only the first wave of
    the shale revolution impact. The full impact of the shale
    revolution is yet to be seen.
        It is now coming because the first wave of oil and gas
    shale was mainly used domestically to replace the imports for
    the petrochemical industry, for other power generation it is
    used there. And the second wave of production is going to be
    used to export U.S. oil and gas several nations around the
    world and this will have a major impact on the established oil
    and gas market order around the world. And I believe this
    impact will be not limited to energy only, it will go beyond
    energy.
        A few other thoughts, Committee members, on renewables. I
    think the achievements of the United States in terms of
    renewables may be a bit behind the shadow of shale oil and
    shale gas. In the United States, the renewables are also
    growing very strongly. In the year 2010, the share of
    renewables in the U.S. electricity generation was 10 percent
    and as of today it is about 18 percent. There's very strong
    growth there mainly driven by wind and solar and this is very
    good news, but there is a lot of potential to increase even
    further.
        We are also seeing that in the United States the
    electricity networks are also getting some attention from the
    policymakers as the transmission system in the United States is
    a bit segmented now and it results in some bottlenecks. And we
    hope that these bottlenecks will be treated appropriately by
    using the right technologies and there is more connection
    between the different parts of the United States.
        Now, coal. It is, it will be very wrong not to see what is
    happening in the coal markets around the world. Coal is still
    the second largest energy carrier after oil in the world. And
    in terms of the power sector, it is number one source of
    electricity generation, especially big load is coming from
    Asia.
        And more importantly, in United States or in Europe the
    coal plants, the power plants, are very old. They are about 40-
    42 years old. They are aged, so they are coming to the end of
    their lifetime, many of them.
        But in Asia, there is a huge coal fleet and it is very
    young. It is 11 years old. So it means investments were made
    there and the utilities, the countries, would not change their
    plans before those investments are paid back. And it is across
    Asia, very young fleet. And of course, the question is how do
    we, how do we find the solution while they provide much needed
    electricity for the poor segments of the population there and
    providing input to the economic growth, how do we address their
    environmental impacts?
        Now for me, the magic word here is carbon capture,
    utilization and storage (CCUS). If you ask me, Madam Chair, if
    I have to pick out one technology, advanced technology, which
    is vital for our planet, it is difficult to choose. They are
    all very important, but for me, CCUS is extremely important, as
    in all of our expectations in the future, we see fossil fuels
    still have a large share and we can make use of CCUS.
        The problem is not with, we don't have any problem with
    energy. We have a problem with emissions. And that is a very
    good thing. It brings us better lives, growth to our economies,
    but emissions is the problem and CCUS can definitely address
    this problem.
        And here I would like to thank the U.S. Administration and
    your Committee and legislators for the 45Q business model that
    you came up with which provides a very nice business model in
    United States and also around the world.
        I am traveling to many, many countries around the world.
    The critical importance of CCUS is more and more recognized and
    your leadership here would be extremely important pushing the
    45Q that it may need some fine tuning here and there, but it's
    an extremely important model.
        Now, to finish I wanted to talk another important
    technology for me, for the International Energy Agency, I
    believe and for the world which is nuclear power.
        I believe nuclear power should be seen as a key asset in
    the United States. United States has been the leader of nuclear
    energy for almost 60 years together with Japan, France and
    other countries. However, I think we are at a very critical
    juncture of the nuclear industry in the United States now. If
    you do not change the policies as far as nuclear energy is
    concerned, our numbers show that in less than ten years of
    time, China will overtake the United States as the number one
    nuclear power in the world. This is very important for the
    electricity sector, but I think it may have well other
    implications beyond electricity sector as well.
        Today, nuclear power generates about 20 percent, one-fifth,
    of the U.S. electricity, but if we do not change our policies
    in the United States this share will go down to seven percent
    only. And this will have implications for the electricity
    security as the nuclear power provides baseload electricity
    generation and very flexible, but also the carbon footprint of
    the U.S. electricity generation and therefore the change of the
    policies is very important.
        And there, I'm sure, there are many measures that you and
    the Administration are thinking about. But for me, the very
    first priority would be extending the lifetimes of the existing
    nuclear power plants and to have them with us as long as the
    safety considerations allow.
        And of course, in the longer-term looking at advanced
    nuclear technologies such as the SMRs, small modular reactors,
    will be of crucial importance to help the U.S. leadership
    continuing in the nuclear domain.
        So, Madam Chair, these are some thoughts about the global
    energy picture, the U.S. success stories in oil and gas, also
    renewables, but some challenges in terms of the coal markets
    and at the same time, nuclear energy.
        Thank you very much, Madam, for your kind consideration.
        [The prepared statement of Mr. Birol follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Dr. Birol.
        Again, very, very, very interesting. There is so much to
    ask about. So many good conversations here. So let me begin.
        Your observations here as they relate to oil where the
    United States is in terms of meeting that growing global demand
    there. Your comment that the U.S. will be providing 70 percent
    of the oil production growth between now and 2025. I guess the
    question to you is, in anticipating that, are we seeing the
    level of investment that we need to have here in the United
    States in order to be able to meet that?
        From a policy perspective, obviously what we did several
    years ago in lifting the oil export ban, that has had a
    significant impact on what we have seen with increased
    production and our participant on that world market. So,
    specific to the adequacy of the investment and then from a
    policy perspective, is there more that we should be doing here?
        Obviously from Alaska's perspective we are trying to do as
    much as we can in meeting the demand with increased
    opportunities within the federal lands, within the National
    Petroleum Reserve. And then just last year, in moving forward
    on the 1002 area in the coastal plain. That is still a long way
    out from production. We won't have that online by 2025. So can
    you speak to those aspects, please?
        Dr. Birol. Thank you very much, Madam Chair.
        The U.S. oil production is becoming more and more cost-
    effective as a result of improvements in the technology. It is
    now cheaper and easier to produce compared to, for example,
    five, seven years ago. So therefore, with the current prices,
    we don't see any major problem that the U.S. oil production
    will be profitable in most of the provinces in the United
    States.
        Where is the challenge? In my view, the challenge will be
    how do we bring the oil to the international markets, namely
    the pipeline capacity? This is extremely important. We are
    aware that there is a lot of efforts now to improve, to
    enhance, the pipeline capacity to bring the oil to the
    international markets. And if those efforts are successful, it
    will increase the U.S. oil industry's ability to respond to the
    changes in the international oil markets because to produce oil
    is important but it is one thing.
        The second thing is to send for the other nations that they
    need that oil and for that you need the pipeline capacity to
    increase. There's a lot of effort there but these efforts need
    to be, in our view, enhanced and the bureaucratic hurdles, in
    our view, need to be softened, eased in order to give licenses
    for those efforts.
        Other than that, we don't see any major risk to observe
    substantial increase of U.S. oil coming to the markets.
        When it comes to Alaska, Madam Chair, 2025 is too short to
    see substantial amount of oil coming from Alaska to the
    markets, but we know that there are huge resources there and
    with the improving of technology one may well expect beyond
    those dates the Alaskan oil goes to the customers as well.
        I'm a believer of the economic facts. The economic facts
    are stubborn. The oil resources are there. Oil demand is going
    worldwide. I am sure, sooner or later, that oil will go to the
    customers around the world from Alaska.
        The Chairman. Well, we are working on it as quickly as we
    can. I appreciate that.
        I've got many, many more questions, but I am going to
    respect colleagues here and move to Senator Manchin.
        Senator Manchin. Thank you, Madam Chairman. Very quickly,
    thank you so much again and your enlightening statement, the
    opening statement. So many things are going on.
        We are trying to decarbonize, if you will, by using
    everything in a pragmatic way. You are telling me that no
    matter what we do in the United States of America, Asia has a
    younger coal fleet. They are going to basically run that coal
    fleet out for a minimum of 20 to 30 years. Is that the
    timeframe?
        I would ask first of all: Most of the coal fleet we have
    left in the United States has used scrubbers, low
    NOX boilers, and baghouses for mercury. We have
    taken most of the particulates and the harmful effects of the
    particulates out. CO2 is what we have not been able
    to perfect through CCUS.
        The coal fleets that are young and new over in Asia, do
    they have at least what we have been striving for with sulfur,
    NOX and MATS? Have they--so all the China and India
    fleet coming on. So, they are building new, young, new fleets.
    Are they using this technology?
        Mr. Birol. Thank you very much, sir.
        First of all, yes, efforts are, of course, very, very
    important to get efforts coming from, hopefully, from the rest
    of the world. But you're completely right, we have in the
    world, about 2,000 gigawatts of coal fleet and the bulk of it
    is in Asia today.
        Senator Manchin. Right.
        Dr. Birol. And it is being--every day.
        And to be honest with you, not all the countries building
    coal plants have their scrubbers, the so-called, the filters
    and on top of that, perhaps more subtle but maybe more
    importantly, some of them, even though they don't have the
    scrubbers, they don't use them during the generation of the
    electricity. For some reasons which is not well known to us to
    build it to equip the power plant to something to use it during
    the electricity generation something, yes. So this is what we
    are seeing.
        Senator Manchin. But they are not using the scrubbers or--
    --
        Dr. Birol. Not all the time.
        Senator Manchin. Because of the cost, right?
        Dr. Birol. Exactly. Cost issues is----
        Senator Manchin. So this is what I have a hard time with.
        We have a global climate concern. We should have an
    alarming concern, but unless we get the rest of the globe to
    participate, how do we incentivize them? How, as the IEA, are
    you able to raise the flag that they should be participating?
    All these new coal-fired plants should use the latest in
    technology. For us to use carbon capture and sequestration, we
    have to do something because the cost is prohibitive right now
    if you don't have any enhanced revenue coming out of the ground
    when you sequester.
        Dr. Birol. Yes.
        So we are talking with all these governments from Indonesia
    to China, China to India and for them the first thing, very
    important, is the cost of electricity. Then they think and they
    make a point that because they are developing nations, but the
    obligations of our planet is definitely nothing to compromise
    there.
        Senator Manchin. Right.
        Dr. Birol. So the scrubbers are very important for the aid
    of pollution in those cities and many of the major problems in
    those countries----
        Senator Manchin. Well, the air that we see in China. And
    the other thing I would say is that storage is important as far
    as our renewables.
        Is our wind and solar more efficient than China's and other
    places around the world? Do we have a more efficient renewable
    energy than others? And how close are we to the storage? As we
    know, it is intermittent.
        Dr. Birol. Yes.
        Senator Manchin. And when the wind blows, we have
    electricity. When the sun shines, we have electricity. When it
    doesn't, we don't.
        If we are overproducing in net periods of time, do you see
    storage coming on to where we will be able to be more efficient
    in those arenas?
        Dr. Birol. Yes.
        First of all, you are right, the U.S. wind generation is
    much more efficient than the global averages, you're completely
    right there. But in terms of storage being commercially viable
    and used in a large scale, we are not yet there but there's a
    lot of R&D, research and development, coming around the world
    to make it commercially viable and use it in large scale.
    Because without the storage the benefits of solar and wind are
    not fully utilized. As you rightly mention, they are
    intermittent and they have a major challenge.
        Senator Manchin. Finally, my last question.
        If the United States wants to be a leader in reducing its
    carbon footprint, should it not use its trade policies, or so-
    called tariffs that we use in different types of opportunities
    that come to our markets, as an incentive to use the technology
    that we develop?
        Dr. Birol. The United States, today, is the leader of the
    global energy technology research and development. You have
    wonderful national laboratories around this country, and I
    believe there may be different ways of incentivizing them. It
    can move from putting tariffs or the value like you did, like
    the 45Q which is recent----
        Senator Manchin. Right.
        Dr. Birol. ----to some regulations that can change from
    technology to technology.
        But wherever I go, Mr. Senator, I give the 45Q as a gold
    star example to the rest of the world how the fossil fuel--of a
    country can marry with the environmental objectives in a market
    friendly way. So there are some examples.
        Senator Manchin. Thank you.
        Thank you, Madam Chairman.
        The Chairman. Thank you.
        Senator Cassidy.
        Senator Cassidy. Dr. Birol, I always enjoy your
    conversations.
        What do you foresee for deepwater oil production? I am from
    Louisiana, so the Outer Continental Shelf is very important.
        Dr. Birol. It is definitely very important. I talk about
    the shale today as it is the big news around the world but
    also, of course, the offshore with the decreasing cost of
    deepwater, offshore technologies it will be growing world both
    for the United States and beyond, including Louisiana.
        Senator Cassidy. Have we reached that price point now where
    it is profitable to resume or to et cetera?
        Dr. Birol. I think we need to see that either the cost
    needs to go down, maybe tomorrow, or the process remain a
    little bit higher levels in order have a very decent profits
    there. But we are almost there. We are close to the break-even
    points.
        Senator Cassidy. Now you hear about energy but you spoke a
    lot about carbon. One thing that seems to empirically have
    occurred when the EU began their cap and trade system and we
    began to regulate greenhouse gas emissions, there appears to be
    a lot of carbon leakage to China and India.
        You are nodding your head, yes.
        Dr. Birol. Yes.
        Senator Cassidy. And when you speak about their energy
    growth, it suggests to me that there will continue to be some
    carbon leakage, i.e., energy intensive manufacturing moving to
    China. Any thoughts on that?
        Dr. Birol. Yes, definitely.
        The EU is putting climate change as a top priority in their
    energy and maybe economic policies and they are making a lot of
    efforts to reduce their CO2 emissions, but the
    CO2 emissions coming from, I don't know, from Paris
    or from Jakarta or from Ipswich or from Ottawa it is the same
    impact on everybody----
        Senator Cassidy. Now if they are not using--according to
    Mr. Manchin's question--if the coal-fired plants in China and
    India are not using scrubbers, whereas in Germany they are, it
    suggests to me that if we have carbon leakage from the EU, the
    United States to China, we actually end up with more global
    greenhouse gas emissions than we would if the industry stayed
    resident in the country of origin. Is that a fair statement?
        Dr. Birol. Yeah, I think it is going in the right
    direction. But what I mean is the following, we should do
    whatever we can do. But whatever we can do in Germany or the
    United States is not enough to reduce the CO2
    emissions at the appropriate level.
        Senator Cassidy. No, I realize that. But my question is if
    we put in a policy that merely causes a company to move energy
    intensive enterprises to China, it sounds from your statements,
    that we will end up net worse, globally, because China does not
    use the same environmental standards/techniques as do we.
        Dr. Birol. It may well be the case but I should tell you
    that India, China, Indonesia, they are also trying to reduce
    emissions but the main driver there comes from, not from their
    concern about the climate change. They're concerned about the
    local pollution in the cities which at the end of the day may
    have to reduce the CO2 emissions as well.
        But in any case, we have seen, for example last year,
    global CO2 emissions once again increased and the
    main driver of that increase came from Asia.
        Senator Cassidy. And again, carbon leakage would contribute
    somewhat to that. Just the point I----
        Dr. Birol. Definitely.
        Senator Cassidy. Definitely.
        Dr. Birol. Oh, yeah.
        Senator Cassidy. Let's see if I have any more time. I sure
    do.
        Next, you mentioned as well the CC, the carbon capture and
    sequestration. Do you see any use of captured CO2
    being economic, any use of it being economically viable in the
    short- or medium-term?
        Dr. Birol. Yeah. First of all, I believe carbon capture,
    utilization and storage is perhaps the most critical technology
    we have now if we want to find a peaceful marriage between the
    global fossil fuel resources and our environmental objectives.
    And here we can both do two things, to capture the carbon and
    store it or use the carbon.
        Many countries are working to get money using carbon.
    There's a lot of research and development going there to put
    money on carbon, to make money out of carbon.
        Senator Cassidy. Do you see anything that is close to
    bearing fruit?
        Dr. Birol. It is not yet there to be very frank, but
    there's a lot of work going on.
        But I should also highlight that the scrubbers are mainly
    used to reduce the local pollution and the CCUS is used to
    reduce the carbon, the so-called CO2 emissions. So
    there are two important technologies addressing two important
    and long-term problems.
        Senator Cassidy. Real quickly.
        So I am also gathering the degree to which the United
    States increases LNG exports to China allowing them to use
    cleaner burning LNG is the degree to which we can have a
    positive impact upon their global greenhouse gas emissions.
    Again, is that a fair statement?
        Dr. Birol. Exactly.
        So what we have seen in the United States, for example, a
    big chunk of the major achievement of the United States in
    terms of historical drop-off CO2 emissions was due
    to using a lot of----
        Senator Cassidy. And that is despite methane leakage
    because you mention methane leakage.
        Dr. Birol. Yes. It can happen also in China as well if the
    U.S. LNG replaces China's coal which is very, very likely. But
    the pure condition here is, as I mentioned, is the methane
    issue.
        So it is very important that we produce natural gas in a
    responsible way to minimize, if not nullify, the methane
    venting and flaring, and the United States and other countries
    are taking measures in order to minimize the methane emissions
    there.
        Senator Cassidy. I am a minute over. I thank you, Madam
    Chair.
        The Chairman. Thank you, Senator Cassidy.
        Senator King.
        Senator King. My first question will surprise you, Madam
    Chairman.
        The Chairman. Go ahead.
        Senator King. Thank you very much. I apologize for being
    late. I was in an Armed Services Committee meeting.
        Are we headed for a place where natural gas, because of
    exports and the technology of LNG, is a worldwide commodity
    like oil? And if so, what does that imply for the domestic
    prices of natural gas here in this country where it is produced
    in great quantities?
        Dr. Birol. So, Mr. Senator, we are seeing natural gas is
    entering a golden age in the United States and globally because
    not only from the United States, but also from Australia, from
    Qatar, substantial amount from Canada, I just came from Canada,
    substantial amount of natural gas is coming to the markets.
        And this is having two types of impacts. Number one, it is
    providing flexibility to the customers around the world. They
    can choose whatever the exporters they have, which conditions
    and this brings the prices down. Second, increasing natural gas
    production in the United States and elsewhere also puts
    downward pressure on the natural gas prices which is also very
    good news which is good for the heating bills of the families
    for electricity cost. So therefore, natural gas is good news
    overall, except for the countries who are pipeline exporters
    today.
        Senator King. My concern is--and maybe you just said that
    in your last phrase, I am not sure.
        My concern is if we get to a place where we are exporting
    natural gas in much larger quantities than we are today, and it
    becomes a worldwide commodity. China increases its utilization,
    which could be almost infinite. Doesn't that inevitably put
    pressure, upward pressure, on prices which would reflect
    themselves in domestic prices?
        What I am getting at is I am afraid of exports affecting
    the low price in the U.S., which is one of our few advantages
    in terms of things like manufacturing.
        Dr. Birol. I don't expect this to happen in a big manner,
    Mr. Senator. That may be different, some fluctuations, but the
    U.S. gas resources are so huge that even the prices we are
    talking about now it is enough to increase the production.
    There's a lot of resources now.
        Senator King. So it is supply and demand. You believe that
    the supply is so large that----
        Dr. Birol. I can give you one example, sir.
        When the shale gas revolution started, we hit a lot of
    shale gas resources. And in the last ten years we used a lot
    from those resources, normally should go down because we use
    from those resources, but we have discovered in the United
    States also, a lot of resources. And now, as of today, the
    shale gas resources in the United States are seven times higher
    than 2010. So even though we also use because we have
    discovered with the new technologies, more resources.
        So we have huge resources and I wouldn't worry of the shale
    or natural gas price spikes in the United States. That may be
    volatility, but the increase of the price is because of the
    exports.
        Please do not forget that the exports, the revenues coming
    from exports will also inject U.S. dollars to the country's
    economy as well.
        Senator King. Well, I hope you are right. And I think what
    I hear you saying is that in the short- and medium-term, you do
    not see a risk to domestic prices.
        But didn't that happen in Australia? I thought I had seen
    data that Australia's domestic prices went way up when they
    significantly increased their exports.
        Dr. Birol. The main reason there is some of the shale gas
    resource states in Australia put a ban on the shale gas
    production because of, as they said, environmental----
        Senator King. So they restricted the supply?
        Dr. Birol. Exactly, exactly.
        And the ban because of environmental reasons, they say,
    didn't allow them to produce gas there.
        Senator King. Quick question.
        We tend to think of ourselves as being the repository of
    all the research and work that is going on. I believe in your
    previous discussion you talked about the importance of storage.
        Dr. Birol. Yes.
        Senator King. In terms of developing solar and wind and
    other renewables, is significant research going on in other
    parts of the world on storage? It seems to me that is the
    greatest energy question we face right now.
        Dr. Birol. Everywhere, sir.
        It is ranging from the United States to China, China to
    Europe, Europe to Japan. Everybody is after to find the
    economic solution to storage that can be used at the large
    scale so that we can address the limitations of wind and solar.
    But if you ask me whether or not we are there today that it is
    economically viable at the large scale, we are not yet there.
        Senator King. Give me a timeframe. Five years?
        Dr. Birol. Five years, it would be reasonable, but I would
    say between five and ten years.
        Senator King. So we are looking at technological
    breakthroughs.
        Dr. Birol. Exactly, technology breakthroughs, especially to
    bring the cost down because the cost issue today because we
    have also a lot of alternative technologies, established
    technologies such as the gas, such as the coal, such as others
    in order to make them competitive needing to bring the cost
    down and address the other challenges.
        Senator King. Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator King. Always good
    questions, we appreciate it.
        Senator McSally.
        Senator McSally. Thank you, Madam Chair.
        Dr. Birol, I served in the military, deployed to the Middle
    East five times. For many reasons I have long been an advocate
    for our energy security and energy independence to also be a
    part of our national security, because it is not just about
    energy prices and energy security is so much part of the
    geopolitical environment and where our reliance comes from
    related to these issues. So I think these last years have been
    so significant for us in America and in North America in the
    larger context of the geopolitical dynamics in the world.
        You mentioned in your testimony on page three that there
    are energy security and sustainability challenges we still have
    to overcome. In particular, the Northeastern United States
    needs a more robust gas pipeline infrastructure to maintain
    supply security. I want to talk about this a little bit.
        In 2016, it is my understanding that Massachusetts and New
    Hampshire blocked funding for the Access Northeast Pipeline.
    And in the cold snap of last year, it was reported that they,
    in fact, because of the challenges there, had an import from
    Novatek, a Russian oil company that was actually sanctioned by
    the Obama Administration and there was increased reliance on
    coal during the cold snap last year in the Northeast because of
    their ability to be resilient and provide and fill those gaps.
        It just seems like there is potentially some activism or
    ideological views that are causing policymaking decisions in
    the Northeast that maybe do not have good outcomes related to
    our energy security, national security or other elements.
        Could you just comment on that and what else needs to be
    done in order to better secure our energy security and issues
    related to this?
        Dr. Birol. Thank you very much for your question.
        Before answering your question, if I may, since you worked
    in the Middle East and you follow, I guess, the Middle East
    issues, I would like to make the following point. I mentioned
    that the U.S. is set to become the number one oil producers of
    the world but this is different than the very fact that, for
    example, Saudi Arabia is still the number one oil exporter of
    the world.
        So a lot of exports are still going from the Middle East to
    the rest of the world, especially to Asia where the economic
    growth comes from. Therefore, the oil security is still an
    issue because a price spike----
        Senator McSally. Right.
        Dr. Birol. If it happens, it will affect, including United
    States, all of us.
        Senator McSally. Right.
        Dr. Birol. Therefore, once again, I want to underline the
    critical importance of the strategic stocks we have in this
    country, also, of course, in Japan, Korea and Europe.
        Coming back to your question. I, of course, I don't want to
    intervene in the internal discussions of this very nation, but
    not to have given permission to the pipelines to bring the gas
    from Point A to Point B is, in my view, economically, it
    doesn't make any sense. It doesn't make any sense because
    natural gas is one of the cleanest fuels we ever have and it is
    good for the United States, good for the United States'
    neighbors, U.S. partners around the world. But once again, I
    believe the economic facts are stubborn and at the end of the
    day those problems will be solved.
        As I said, I came from Canada here. It was a problem in
    Canada, but now Canadians are pushing the Canadian LNG and the
    Canadian LNG is now meeting the Asian customers and they solved
    these pipeline problems. I believe it to be the same case
    across the United States because this is where the
    international is and it is every fuel has its own disadvantages
    or challenges. We have to see that. But we do need energy for
    our daily lives, for our economies.
        Senator McSally. Right, thank you.
        I agree with you. I just think to summarize, it is
    important for us to have the pipelines to access the energy
    that we have here.
        Dr. Birol. Exactly.
        Senator McSally. And choosing not to do that, having states
    like Massachusetts rely on Russian imports, does not make any
    sense geopolitically.
        And then also the reliance on coal which is an important,
    resilient factor----
        Dr. Birol. Exactly.
        Senator McSally. ----for our energy is also the result of
    that.
        So, let's not--let's do the right thing for our country,
    for our energy security and for the economic opportunities for
    people. Let's have that drive our decisions and not other
    factors.
        Dr. Birol. I completely agree, madam.
        Senator McSally. Great. Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator McSally.
        Senator Cortez Masto.
        Senator Cortez Masto. Thank you, welcome, thank you so
    much.
        I apologize I was not here earlier; I was in a Banking
    Committee hearing going on at the same time. We seem to do that
    here.
        Let me talk a little bit about electrification of
    industries. We know that electrification can bring countless
    benefits, notably by reducing local pollution, but it requires
    additional measures to decarbonize the power supply in order to
    unlock its full potential. And furthermore, the World Energy
    Outlook for 2018 mentions that some significant parts of the
    energy system, such as long distance road freight shipping and
    aviation, are not electric ready with today's technology.
        Doctor, you have previously stated that in order to
    decarbonize the whole energy system, we are going to have to
    start getting large amounts of wind and other renewables into
    heating, transport, and industrial processes. From your
    perspective, what research needs to be done to ensure that
    these three sectors catch up to the future of electrification?
        Dr. Birol. So thank you very much for this question as
    well.
        I mentioned it to renewable energies, solar and wind, are
    penetrating the energy markets. This is true. But they are
    almost exclusively concentrating on the electricity systems,
    power systems. But we use energy also in the industry sector to
    produce, to manufacture, a lot of goods or we use energy also
    for the heating at home. We use energy for the transportation
    sector. The renewables are very little, if any use here.
        So what are we going to do? So we can do at least two
    things. One, the bulk of the energy use in the industry sector
    are coal or gas and we have to, Mr. Manchin also highlighted,
    the CCUS, carbon capture, utilization and storage is a critical
    technology here and more research and development in this
    country is already being made, but outside as well would be
    very helpful. This is number one.
        Number two. Another way of that, in addition to using the
    fossil fuels in a long-term way to CCUS, we can also see that
    the storage is another thing also highlighted, storage,
    development of storage, making research and development there
    to bring the cost down and making renewables also used in the
    industry sector would be of crucial importance. Therefore, if I
    have to pick up two technologies that I would be very happy to
    see more research and development efforts go to, CCUS and the
    storage will be two candidates from my side.
        Senator Cortez Masto. So what potential do hydrogen fuel
    cells have for the industry?
        Dr. Birol. Hydrogen will also play a very important role,
    especially in the context of, we call that hard to abate
    sectors. Hard to abate meaning mainly the industrial, the iron
    steel sector, the petrochemical sector and others and, in fact,
    this year Japan is chairing the G20 meetings and the Prime
    Minister Abe asked the International Energy Agency to prepare a
    report on hydrogen, how it can help to decarbonize our energy
    system. And we are working very hard on that.
        Hydro energy is also a very promising option. It was done
    many years ago, but it is coming back as a result of the lower
    cost of solar and wind and also diversification of our energy
    mix.
        Senator Cortez Masto. Thank you.
        Recycling of critical minerals has not been economically
    viable to date. It is less expensive to mine raw minerals than
    to recycle with current technology, but mining these materials
    is highly complex and hazardous to both workers and the
    environment. With the demand of these materials growing
    throughout the world, what is your outlook on the potential for
    recycling these critical minerals to meet our manufacturing
    needs?
        Dr. Birol. With the current energy path we don't see a
    major problem with the current level of rare earths we have
    now. The problem is it is concentrated on a few countries
    around the world and it may well be again a secular energy
    supply question.
        But in terms of availabilities, economic availability, we
    don't see a major challenge at the moment.
        Senator Cortez Masto. Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Cortez Masto.
        I am going to defer to my colleague here for a question. I
    think he is going to have to leave the Committee.
        Senator Manchin. Really quick, I have to go to another
    committee, but Dr. Birol, thank you so much for being here. We
    look forward to staying in touch with you.
        To follow up on Senator Cortez Masto's question on spent
    fuel--nuclear, right now--and you have showed that nuclear, the
    utilization of nuclear power in the United States, is reducing.
        Dr. Birol. Yeah.
        Senator Manchin. And you think that is harming us as far as
    decarbonizing.
        Dr. Birol. Yes, sir.
        Senator Manchin. You said that in your opening statements.
        Is the reason for that because of our inability to dispose
    safely of the waste? Is that what is holding us back or is it
    basically that we are just not promoting it because of cost
    ineffectiveness of new nuclear reactors, if you will?
        Dr. Birol. I would say the second one, Mr. Senator.
        You have lots of very tough regulations in this country.
    It's very good to have safety concerns. It's very good to have
    prepared measures.
        But it is mainly the cost issue today and gas is very
    cheap, natural gas. The renewables are becoming also cheaper
    and cheaper and we have difficulties under the very heavy
    pressure of those existing regulations for the nuclear to be
    profitable. So, therefore, my plea is that we need to find ways
    to appreciate the contribution nuclear has for our electricity
    security and also for the environmental challenges and find
    some ways to----
        Senator Manchin. Your opening statement was very
    enlightening in saying that basically, on a global basis,
    fossil is going to be used and depended upon and not always in
    the cleanest fashion to decarbonize.
        Dr. Birol. Exactly.
        Senator Manchin. So no matter what the United States does,
    we are not making a dent in the atmosphere.
        Dr. Birol. Yeah.
        Senator Manchin. It is basically coming from Asia right
    now. We can't get them up to speed.
        But for us, basically not having our nuclear facilities
    online or coming up, you said, the number one thing if you want
    to decarbonize is carbon capture and utilization. And if the
    world would adapt technology that we could develop and
    basically perfect, that would be the number one source of
    decarbonizing.
        Dr. Birol. Exactly.
        Senator Manchin. And then nuclear would be the number two
    source to rapidly decarbonize?
        Dr. Birol. Yeah.
        Senator Manchin. As we develop technology for storage and
    using our renewables or hydrogen coming on, that is something
    in the future, but you are talking right now to stop the global
    warming that is going on. Is that accurate?
        Dr. Birol. Exactly. This is, we have so big challenges in
    terms of emissions because every time there comes a report or a
    government statement, government target, that we need to reduce
    emissions immediately, but when we look at the numbers, we see
    that the emissions are increasing.
        There is a growing disconnect between those targets and
    what is happening in the real life. And this disconnect is
    very, very worrying and to be honest with you, we are not in a
    position to pick up our favorite technology today. We need all
    these technologies, renewables, CCUS, nuclear power, energy
    efficiency, if we are serious to address those challenges.
        But the renewables are only making good inroads, but I
    believe it is CCUS and nuclear in the United States that need
    special attention if you want nuclear as a part of the U.S.
    power generation mix, which I believe, very important for the
    electricity security of the United States and also for the
    leadership of the United States globally.
        Senator Manchin. Thank you.
        The Chairman. I appreciate that, agree.
        Senator Hoeven.
        Senator Hoeven. Thank you, Madam Chairman.
        Greetings, Dr. Birol.
        One of the things that I would like to get your input on is
    how we get natural gas to markets. In North Dakota we drill for
    oil, in the Bakken and other shale plays and so forth.
        Today, we produce 1.4 million barrels a day of oil, 1.4
    million barrels a day, and that is going up. And so, we don't
    drill for natural gas. We are not actively trying to produce
    natural gas, but every time we drill another oil well, we
    produce more natural gas.
        So our challenge is capturing it and, you know, either
    processing it locally or shipping it off to markets, but our
    problem is getting it to markets. For example, whether it is
    Asia or the European market, we are constrained because of the
    difficulty of building LNG facilities on the West Coast--
    California, Oregon, Washington State, British Columbia--or
    getting a pipeline to the West Coast to move it most
    efficiently.
        We are in a situation where we are producing more and more
    natural gas, but our challenge is to get it to market. So it
    is, you know, it would be very low cost. It would be a
    tremendous opportunity for us to export and get value. It is
    not only a very good economic proposition for the United States
    and for states like mine, but it is also a national security,
    geopolitical security issue, right? In other words, us selling
    energy to our allies rather than our adversaries, be that
    Russia or somebody else, right?
        What can we do to convince people that we need to have
    access for pipelines and other means to export our natural gas?
    It is in the national interest of our country, the national
    economic interest and the national security interests of our
    country.
        Dr. Birol. Yes.
        Senator Hoeven. How do we do that?
        Dr. Birol. Thank you very much, Mr. Senator.
        I think your problem is many countries around the world
    would consider as a ``sweet problem'' because many countries
    are dying to have natural gas for their energy mix. You have
    natural gas, but you are not able to export it.
        Senator Hoeven. Correct.
        Dr. Birol. So this is really such a pity because, as I said
    in the beginning, Asia is gas hungry. Asia is gas hungry and
    the amount of gas they need is huge, large amounts. There's a
    huge market out there and that market will be desperate to look
    for the U.S. natural gas in terms of LNG.
        I think the missing link between you and Asian gas markets
    is the pipeline capacity. So this is what needs to be done is
    the, to have the right investment framework there and to tell
    the investors how lucrative those returns would be and to tell
    them that there's a huge amount of demand for your natural gas
    waiting in Asia.
        Senator Hoeven. It is not an investor issue. I think the
    investors--I know the investors would step up right now and
    build the infrastructure. The challenge is the approval
    process. How do we win the argument so we can get approval to
    build? The capital is there. I mean, the price of natural gas
    in our state, it is not zero, it is probably negative because
    what do they do with it?
        Dr. Birol. It comes anyway.
        Senator Hoeven. They can't flare it off. They have to
    capture it. There is a cost to it. And if they can't market it,
    what do they do with it?
        There is, I think, any number of investors that would
    build, put the investment forward right now to build the
    pipelines. The problem is getting the approvals.
        Dr. Birol. Yeah.
        When I said the investment framework was essential I also
    meant the, all these administrative processes which are
    sometimes too slow and it makes the investors losing their
    appetite for the steps they are going to make. And it is the
    case in many countries around the world, but maybe a bit too
    much in some other parts of the world which would lead to a
    loss of money, loss of economic value in the exporting
    countries.
        And when you think about what is being lost, it's not only
    the money, but U.S. providing the security, energy security,
    around the world.
        Senator Hoeven. Right.
        Dr. Birol. In terms of providing flexibility in the gas
    markets, it is not only losing money, but losing from the
    energy security in the world.
        Senator Hoeven. Right.
        How do we convince people that this is a winning
    proposition? It is a winning proposition as we are talking
    about economically, it is a winning proposition in terms of
    national security and our global security interests, and it is
    a winning issue from an environmental standpoint, you know,
    with natural gas.
        Dr. Birol. Exactly.
        Senator Hoeven. And the infrastructure to move it most
    efficiently, cost-effectively, is also the most environmentally
    sound.
        Dr. Birol. Yeah.
        And definitely, we're talking about the CO2
    emissions in the world and when I said Asia is waiting for the
    U.S. natural gas, it is in most cases, it will end up with
    reducing the global CO2 emissions which is a net
    benefit for the world.
        But of course, what needs to be done is to find ways to
    ease up those administrative steps and bureaucratic hurdles
    through administrative measures.
        Senator Hoeven. Well, absolutely.
        I mean, if you are going to commit to billions in capital
    it takes to build that kind of pipeline, you probably want to
    know that you are going to be able to build it, don't you?
        Dr. Birol. Exactly. Definitely, definitely.
        The Chairman. Thank you, Senator Hoeven.
        We are talking about, when you say that the missing link
    here in addressing the Asian market is pipeline capacity----
        Dr. Birol. Yes.
        The Chairman. ----there are some who are not bothering with
    that, and I want to talk about Russia here for a moment. I am
    glad that my colleague and co-chair of the Arctic Caucus is
    with me today, because it is an issue that I think we are just
    closing our eyes to here in the United States and that is what
    is going on with Russia and how Russia is working to meet the
    Asian demand for natural gas.
        There is a lot of discussion. I think everybody over here,
    Senator Manchin just mentioned his opposition to the Nord
    Stream 2 pipeline, we focus a lot on the sanctions against
    Russia in these, you know, asking our European friends and
    allies to join us with this. Again, a lot of discussion there.
        Well, up in the top, up in the Yamal Peninsula right now,
    Russia is going ``hucklety-buckle'' and they are producing in a
    way, bringing on these resources that I think has really been
    quite remarkable. And they are not building a pipeline across
    Siberia. What they are doing is they are putting that natural
    gas into LNG tankers. These are tankers that are being built by
    South Korea. They are ice strengthened, so they can go through
    the Northern Sea. They are going down--they are coming right
    through the Bering Strait, you know, 20, 30, 40 miles from
    Alaska--going down and meeting the demand in Korea. They are
    working with Japan to supply Japan with natural gas. Nobody is
    raising the hue and cry about well, wait a minute, where are
    the Russian sanctions when it comes to oil over here?
        In Alaska, we are still quite a few years away. We have
    been struggling to get an agreement for a pipeline through
    Alaska that could take our natural gas to Tidewater and supply
    that Asian market. Our market has never been in the Lower 48.
    It has always been Asia. Well, we are working to gain these
    partnerships. We have made good headway, not only with Korea,
    Japan, Vietnam, Russia, certainly with Russia with the past
    Administration.
        But if you can, give me some of your observations here. You
    mentioned a little bit about Russia's role, but how has the
    stepped-up activity in Russia, particularly coming off the
    Yamal Peninsula, how has the increased LNG production in the
    Arctic impacted the global energy markets as well as the
    Russian sanctions here? Because I am trying to get some
    attention to the Arctic issues.
        Dr. Birol. Yes.
        The Chairman. And I think we just, kind of, have a tendency
    to either stick our head in the sand or stick our head in the
    snow on this one. And Russia is not sitting around waiting, and
    neither are some of our other Arctic neighbors. In fact, our
    non-Arctic neighbors--China, Japan, Korea--are having
    discussions about this as we speak. They are more involved in
    the Arctic right now than we are.
        Dr. Birol. This is an excellent, excellent question. Thank
    you very much, Madam Chair.
        Let me put it this way, there are two important current and
    possible customers of Russia--Europe and Asia. In Europe, many
    countries since long time came to the conclusion that they need
    to reduce the Russian gas imports because of the energy
    security. But what is happening is just opposite. At the end of
    2018 the share of Russian gas in the European gas consumption
    reached a record high, about close to 40 percent mainly in
    addition to pipelines, as you mentioned LNG coming from Russia
    to you. It is a very important trend. Forty percent of the
    European gas, close to 40 percent, comes from Russian pipelines
    and now with LNG.
        This is--Russia or in other countries political intentions
    for any business to rely on one single partner is, in my view,
    a risky way to go.
        Plus, European domestic gas production is in a decline now.
    There are a couple of fields which are in a decline. Therefore,
    European gas imports will increase very rapidly.
        Now the question is, new imports will come from, again,
    from Russia or from other countries. This is a historical
    moment. It is the reason why I tried to say in the beginning of
    my remarks, in my view, if the U.S. Government, U.S.
    Administration, uses in a wise way, we may well see the full
    impact of shale starting now. And how we see it, we see that
    the U.S. shale comes to the markets in a big time and also
    competes with the Russian and other gas exporters.
        Some people say that the U.S. gas, U.S. LNG, is more
    expensive than the Russian pipe, but I say the following. We
    have calculated, Madam Chair, let's assume one major European
    economy who has no LNG facility. If this country decides to
    build an LNG facility, it will give this country a very
    important negotiation power with the contracts they have with
    the partner exporter, such as Russia. And because they will
    say, if you don't bring the prices down, I have LNG for sale, I
    will import LNG. And we have calculated that if they improve
    their LNG contracts only one percent of the gas prices as a
    result of having another option in their hand, it would be
    enough to finance a major LNG facility for 30 years. So
    therefore, to have the LNG facility there would be very
    important to negotiate with Russia and others to bring the
    prices down. This is number one.
        Number two. Many countries, some OPEC members and Russia
    wants to bring the oil prices up higher levels. If the oil
    prices go up, most of those contracts to Europe are indexed oil
    prices. Those gas prices will go up and in the United States,
    as one of the Senators mentioned here, most of the gas in the
    United States is associated gas. Since the oil prices go up,
    oil production will go up. Therefore, the shale production,
    shale gas production, will go up and the prices of gas will go
    down. So the difference between the contracted oil/gas to oil
    index gas prices will go up, U.S. shale prices will go down,
    and economically it will be much more visible.
        Coming back to Asia. I have a completely different picture.
    I see a huge opportunity U.S. LNG making major, major, having a
    major market share in Asia, especially replacing inefficient
    coal plants because the biggest headache today in China, India,
    Thailand in those countries is the air pollution in the cities,
    local pollution in the cities. And natural gas may well be the
    key solution to all of those countries, and they are building
    LNG terminals. China built, only in the last five years, 13 new
    LNG terminals. And United States together with Australia is a
    very good candidate to bring LNG there, also to India, also to
    Japan, of course, to Korea, the other countries in the
    southeast Asia region of the world.
        So there will be a very harsh competition between the
    established exporters such as Russia and the U.S. LNG. And I
    see many great opportunities for the U.S. LNG to have good
    competition, bringing more flexibility to the markets because
    U.S. LNG is much more flexible and much more optional and I see
    that it will be bringing more, make the gas markets much more
    fluid than it is today. And it is the reason many countries are
    now building LNG terminals.
        When we look at the next ten years, we see that the LNG
    trade is at least three times faster developing competitive
    pipeline gas trade. There's a big growth there. And U.S. is the
    number one candidate to fill that gap, Madam.
        The Chairman. I am going to come back to the Arctic,
    because I am still curious about how you see Russia's LNG in
    Asian countries and impacting them. But I didn't stop you,
    because I think what you have outlined is so key to all of
    these discussions.
        I want to have a little more follow-on there, but let me
    turn to Senator King.
        Senator King. First, Madam Chair, I just want to compliment
    you on the passage of the Lands package. I often think we don't
    celebrate enough around here. We always focus on the next
    problem. This Committee and you, as the Chair, had one of the
    most significant legislative achievements in decades in the
    last two weeks, and I just think we ought to take a minute and
    say this is something that was well done and will be important
    for the country for generations.
        The Chairman. And if we were 16, we would all go like this.
    [Snapping fingers.]
        [Laughter.]
        But thank you, I appreciate that.
        Senator King. So I do want to thank you.
        And thank you for your testimony, Doctor. It has been very,
    very illuminating.
        I will just share one little thought which you could put in
    your rhetorical tool box. We are always looking for a silver
    bullet, something that will solve the problem with one
    solution. I have a good friend in Maine who says there is
    rarely a silver bullet; there is often silver buckshot.
        Dr. Birol. Yes.
        Senator King. A lot of solutions.
        And I think one of the things we take from your testimony
    today is that the world energy situation is not subject to a
    silver bullet, although natural gas has an important role to
    play, as you say. But there are all kinds of other pieces of
    this puzzle, and I think that is one of the things that we have
    learned today. And we have to work on all of them.
        Dr. Birol. Exactly.
        Senator King. And I think that is important.
        An example is the Senator from Arizona. It was heartening,
    by the way, to have a Senator from Arizona expressing sympathy
    with the weather plight of New England.
        [Laughter.]
        But the interesting part about that issue which I have been
    very involved with for some years, is that it is a short-term
    problem. And the economic and energy issue is, do you develop a
    billion dollars' worth of pipeline for a two-week problem or is
    that a storage issue, and what other kinds of options are
    there? LNG may be one of the options, storage in the region in
    order to meet the demand that comes in a few week period,
    usually in January.
        It is a very serious problem. It is very serious, because
    it gets priced into our electric rates and we are now 50
    percent dependent upon natural gas.
        So, I don't expect an answer to that, but I think this is
    another kind of storage. It is not day-to-day storage, but it
    is a longer period storage to meet a shortfall.
        Maybe the pipeline capacity is the answer, but it is at
    least worth discussing what is the exact nature of the risk and
    what is the most cost-effective way to solve it?
        If you have any thoughts, I----
        Dr. Birol. Thank you very much, Mr. Senator.
        First of all, if I can wholeheartedly agree with you that
    in the world of energy, unfortunately, we don't have this
    silver bullet. We work on all the fuels, all the technologies
    since 45 years but we have not yet discovered the back door to
    paradise, if I may say so. It's definitely a big challenge.
        But we are, we need to improve the technologies which are
    promising and which needs more help such as CCUS, such as the
    electricity storage you mentioned a few minutes ago. I think it
    will be a combination of all these technologies working
    together to have a more sustainable and secure energy system.
        But it can change from one country to another. Some
    countries, for some reason, don't want to have nuclear. It is
    their choice. Some countries don't want to use renewables. It
    is their choice. But we believe at the IEA we have to make use
    of all of them because there is not even one perfect solution.
    Even natural gas, you say, in fact natural gas is an excellent,
    excellent fuel in terms of addressing the, reducing the local
    pollution, be plant available pressure not so high but natural
    gas, if not produced sustainably, it has some impact on the
    environment as that so both methane leakage going into the
    atmosphere----
        Senator King. And there is a concern. We have the concern,
    and I have the concern in New England. We are now 50 percent
    dependent upon natural gas for our electricity supply. That was
    maybe five percent 20 years ago.
        Dr. Birol. Yes.
        Senator King. There is a danger, as you pointed out, when
    you have one customer.
        Dr. Birol. Yeah.
        Senator King. When you have one energy source, particularly
    if it is a fossil fuel that we have no control whatsoever about
    the price, it is a commodity. There is a risk there where,
    again, diversity of sources seems to me is the best policy.
        Dr. Birol. Exactly.
        And if, I agree with you that there is no silver bullet but
    if there's a magic word in the energy world for me it is the
    diversification. Diversification is always good for the energy
    sources, for your customers, your importers, your exporters.
        Coming back to your question on natural gas. Of course, the
    gas storage is very important to have enough amount of gas
    storage and the adequate level of pipeline capacity answers to
    the problem. But of course, I didn't study your case very
    carefully, but 50 percent reliance on natural gas may be on the
    high side.
        Senator King. Thank you.
        Thank you, Madam Chair.
        The Chairman. Senator Cortez Masto.
        Senator Cortez Masto. Thank you.
        Let me shift gears for a little bit. I am curious. I am
    from a Western state and in the West, water is a very precious
    commodity. So much so I think there is a famous quote that
    says, ``Whiskey is for drinking, water is for fighting.'' And I
    understand, for the first time, the World Energy Outlook
    incorporates a water dimension in the sustainable development
    scenario----
        Dr. Birol. Yes.
        Senator Cortez Masto. ----illustrating how water
    constraints can affect future fuel and technology choices. I
    also understand a sustainable development scenario details the
    energy required to provide universal access to clean water and
    sanitation for countries around the world.
        I am curious, how is the IEA compensating for changes in
    water availability and the potential declining supply of water
    as you conduct your reports and analysis?
        Dr. Birol. Now, first of all, water is extremely important
    for the energy sector. We need water, for example, we talk
    about the shale gas and we need water for shale gas for LNG. We
    need water for biofuels. We need water also when we're talking
    about the power plants, coal plants, nuclear plants. You need
    water to cool down the towers of those power plants. It is a
    very important element for the energy system.
        But we see that the availability of water is becoming a
    question in many places around the world, including the United
    States. Therefore, now water this time comes to energy because
    now energy is used and will be used more and more to desalinate
    the water, desalination of water and use it as tap water,
    useable water. So not only the energy sector needs water but to
    get, to make water, drinkable water and also to be useable
    water, we need energy to desalinate the seawater and make use
    of it.
        But if I look at the trends, the availability of water will
    be a question, at least for the energy sector, for many years
    to come. Not a big problem in the United States, but a growing
    problem, especially in Middle East and Africa.
        Senator Cortez Masto. Well, in the Western states we know
    this, and I appreciate your comments because I think we have
    looked at desalination, and it just does not pencil out right
    now. I think Israel does an incredible job with desalination.
        Dr. Birol. Yes.
        Senator Cortez Masto. But in the Western states,
    particularly those along the border of the Colorado, we are in
    a drought mode. Water is precious. And utilization of that
    water, how we manage that water amongst the states, is
    important moving forward.
        And so, I appreciate the thought now that as we incorporate
    and move forward and look at, not only future fuel in our
    energy portfolio and those technologies, but also water and how
    it is incorporated into this is going to be important whether
    we can move forward or not, particularly whether you are a
    Western state or an Eastern state.
        Dr. Birol. Exactly.
        Senator Cortez Masto. So, thank you, I appreciate that.
        Dr. Birol. Thank you very much.
        The Chairman. Thank you, Senator. I always appreciate when
    we are able to bring back the issue of water.
        In our Energy 2020 that we laid down some years ago, we had
    a little chapter there on the energy water nexus. It was really
    the first time we had had conversation about this and the key,
    as you have mentioned, Dr. Birol, you can't produce energy
    without water and you can't have water without energy. And so,
    understanding that and how it all fits in is so, so key. So the
    fact that you have included it as well.
        I want to ask about a couple different policy initiatives
    that are coming our way in the very short-term.
        The first one is this IMO 2020. The International Maritime
    Organization (IMO) regulation that is going to go into effect,
    literally overnight, capping the amount of sulfur in the marine
    fuel.
        What is your best estimate in terms of the impact that this
    regulation is going to have on the middle distillate market?
    What are we going to see with regards to diesel fuel, jet fuel
    prices? Are we going to see a jump up with that?
        There has not been a lot of discussion about it, and it is
    one of these things where I am afraid we are going to wake up
    on January 1st and people are going to be saying, what just
    happened there? Yet, theoretically, we have been planning for
    it for years now. But your observations, please.
        Dr. Birol. Thank you very much.
        I would be happy to mention this, but also one point on the
    Arctic, I will comment on that, if you don't mind.
        For that, you are right, these regulations from the IMO are
    very serious and there was, in the beginning, a bit of a type
    of panic in the oil industry. But what we are seeing now with
    all of the oil industry around the world, the refineries are
    adjusting themselves to these regulations.
        There may be some temporary price spikes for diesel, jet
    fuel prices, but we think that the market will adjust and we
    don't expect those price spikes will be long lasting and big.
    There will be some adjustment period but refineries are now,
    today, being configurated according to the IMO rules around the
    world and the U.S. is one of the leaders.
        The Chairman. So, you don't think that it would potentially
    be necessary to have, kind of, a phase in period just to avoid
    any potential for price spikes? It sounds like you think that
    we are preparing for this and will be ready.
        Dr. Birol. Definitely. We are preparing around the world.
    There may be some price spikes, but it will be temporary and it
    will not be big.
        In terms of Arctic, I think you are completely right from
    your perspective. Russia is making substantial efforts in terms
    of the LNG from Yamal, but the volumes are not yet that big,
    but they are working on that.
        But in my view, this is a signal for the United States that
    if the U.S. wants to get the market share, to put the market
    share in its pocket, it should move very fast in order to get
    that market share because the volumes might not be very big
    today, but tomorrow it may be bigger and they will be a much
    tougher competitor.
        The Chairman. So you see that as an area of growth for
    Russia. Do you factor that in as you are looking then to where
    the demand for natural gas is coming from? Do you see the
    production in this very remote part of Russia as coming on in a
    significant way?
        Dr. Birol. Yes.
        The Chairman. Or what does your analysis show you at this
    point?
        Dr. Birol. Currently, Madam Chair, not big volumes but I
    can't exclude that it will grow in the future. My advice would
    be to take this challenge seriously and the U.S. LNG should, I
    think, be ready to compete with the possible growth coming from
    Yamal LNG which is small today but may be bigger tomorrow.
        The issues that some of the Senators mentioned today, not
    having enough licenses for building the pipeline capacity, I
    think those decision-makers should see those facts and perhaps
    make their decisions accordingly.
        The Chairman. I appreciate that.
        I thank you for your focus on nuclear and a recognition
    that when it comes to nuclear and leadership, the United States
    had a very, very, very key role and we are standing, almost
    standing, down on that. And I do not, I hesitate to use that
    terminology because it makes it sound pretty dismal, but to
    know that right now 20 percent here in the United States comes
    from nuclear but we are headed down to 7 percent.
        Dr. Birol. Yes.
        The Chairman. Again, when we want to talk about ways that
    we can be meaningfully reducing our emissions in this country
    and around the world, in my view, nuclear energy is that source
    that we should be looking to and making those investments in an
    aggressive way toward the advanced technologies in dealing with
    our waste issues but really being aggressive rather than, kind
    of, pulling back on that now. I am more than a little bit
    concerned that we are placing less value on nuclear here.
        I have been trying to take point on this and move us out,
    but when you look around the world, you mentioned that China is
    moving more aggressively with nuclear. What other nations are
    stepping up? I mean, there have been some very political
    reasons where countries have drawn back after the horrible
    incident in Fukushima, Japan, but we saw some of the European
    nations really pulling back. Do you see that turning at all
    where there is now renewed interest in nuclear? Speak a little
    bit more to your long-term view.
        Dr. Birol. Right.
        Thank you very much for this opportunity.
        Now we see that not only in the U.S. but also in Europe,
    the share of nuclear will go down if there is no policy change.
    And there are two countries going in the other direction, China
    and Russia. China and Russia are building nuclear power plants
    and what will happen if the policies do not change? At least
    two things. One, the U.S. and Europe will lose major
    technological advantage because many countries around the world
    would like to import nuclear technology and China and Russia by
    learning by doing, they are bringing the cost of nuclear down.
    And therefore, they will have more advantage compared to U.S.
    or the European countries to sell their nuclear technology.
        So this is because cost is a major issue and the United
    States, we have, or in Europe, we don't build any nuclear power
    plants, perhaps just a few and we are even the opposite of
    learning by doing, forgetting by not doing. So we are
    forgetting how to do these technologies.
        The Chairman. Yes.
        Dr. Birol. So, therefore, it is, you know, the second one
    is, in my view, you rightly mention, again, Madam Chair, the
    emissions. Nuclear is a technology which reduces the emissions
    in a very, very radical way.
        And in the absence of nuclear, the reaching our
    environmental goals will be much, much tougher. And when we
    look at today, we talk about the United States being also a
    successful country in terms of renewables, but in nuclear
    generating electricity as much as all the other renewable
    sources put together in the United States today. Losing this
    would be, in my view, not a very wise policy.
        So this would be another negative implication and, of
    course, I am only talking about here energy and environment,
    not U.S. but other countries being together on nuclear capacity
    may well have other implications beyond energy and environment.
        The Chairman. You had made the comment that most notably in
    places like Russia, certainly India, while environmental
    concerns are important that affordability, access to
    electricity----
        Dr. Birol. Yeah.
        The Chairman. ----these are the things that are really
    driving, as they are working to build out these countries here.
        Do you think we get to a point with nuclear where it is
    viewed as, not only the environmental choice, but from the
    perspective of the cost and a stability of cost that we are
    going to see greater investments? Obviously China is taking
    that step, but in other countries as well.
        I just see the focus, the global focus on what we are
    dealing with with our emissions, recognizing that, and I noted
    in my opening comments, we were on a pretty good trend here in
    the United States with reducing our emissions. But you know, we
    have bumped back up here. I want to think that that is just a
    temporary bump, and we are going to work to keep reducing them.
        But is this global dialogue about how we reduce our
    emissions, will that begin to have an impact on some of the
    investment and policy decisions or is it still always going to
    be about, what does it cost me to stay warm, to stay cool, to
    keep my lights on?
        Dr. Birol. First, about the nuclear, I think the challenge
    for current nuclear technologies, the first down payment is
    very, very high cost but operation costs are very cheap.
        Since a big chunk of this new investment needs to be done
    in the emerging countries whose the financial means are a
    little limited, it may not be a mushrooming technology in those
    countries.
        Having said that, advanced nuclear technology such as small
    modular reactors (SMRs) can be a very good fit for those
    countries and in the United States and other parts of the world
    there's a lot of work going there. And if we see the commercial
    success in the SMRs, it can be definitely one of the favorite
    options.
        Now, the investments today are going for renewables but at
    the same time for oil, at the same time for gas and coal. It is
    very difficult to say that there is a clear winner today.
        But when we look at the last year, for example, more than
    50 percent of the new power capacity came in the world was
    solar only. Solar was 50 percent, everything else put again,
    another 50 percent and the renewables are getting a lot of
    attention from investment community as well.
        The Chairman. One last question, and it is something that
    nobody has really hit on today. In your outlook you mention
    that the electricity sector, star of the show, is experiencing
    its most dramatic transformation since its creation more than a
    century ago, a lot of focus and attention on that as well and
    acknowledgement that our electricity grid is increasingly
    becoming more digitalized. This allows us to be clearly
    smarter, much more efficient which, again, is important for a
    more flexible grid.
        But it then presents issues that make us realize how
    vulnerable our grid can be to any level of cyberattack. Your
    thoughts on how we balance the real benefits of this
    digitization of our electric sector versus the vulnerabilities
    that are then created. And are there any good examples
    worldwide where some nations are really aggressively taking
    this on in a way that you see is making a difference?
        I know that here this is an issue that we talk about in
    every single committee that I am on, but it is almost like this
    is so big we don't know how to start taking a bite at this
    elephant. And so, looking to others who might be able to show
    some progress here would be interesting to learn from.
        Dr. Birol. This is an extremely important point, Madam
    Chair.
        In the '70s when the IEA was founded, oil security was a
    key issue and it still is. There is no change there. But
    electricity security is becoming a major issue as well for two
    reasons.
        One, the share of solar and wind, they are increasing in
    our electricity system and if we do not take the necessary
    measures, in the absence of solar and wind, we may see
    blackouts. For examples, we have seen one in Australia
    recently. The share of renewables was more than 50 percent in
    that day, there was no electricity and blackout in our country
    like Australia. So this is one electricity security issue.
        The second one is the cybersecurity and this is an area
    which needs the utmost attention of not the energy people, but
    also security people and the necessary measures and the backup
    technologies and backup the security measures need to be taken
    in an area, that again, we are working very hard with the
    regulators, system operators and also security forces so that
    we are prepared for cybersecurity attacks.
        To be very frank with you, we have 30 member countries and,
    if you ask me if any of those countries are fully equipped vis-
    a-vis such cyberattacks, I would have hesitations to say yes to
    you for any country we have. It's a major issue and we all know
    that without electricity, hospitals, lifts, nothing will work
    and our system will be completely paralyzed.
        As such, we have as IEA, in addition to oil security we are
    working now on the electricity security as a major issue for us
    too.
        The Chairman. Good.
        Well, next year we will anxiously await your report to see
    what progress you have made on that. It is certainly key.
        Senator Cortez Masto, did you have any other comments or
    questions that you wanted to ask?
        Senator Cortez Masto. No, thank you.
        The Chairman. I want to thank you, Dr. Birol. You have
    been, again, very informative. It has been a very important
    discussion.
        I always leave these hearings taking my notes with me and
    finding myself referring to them throughout the year. But you
    have given us some good reminders here when you start off with
    just the reminder that, you know, no country is an energy
    island. We sure got that.
        But a reminder, too, that the role that the United States
    is playing when it comes to oil and natural gas is not only
    important for us, it is important globally, it is important to
    our partners, to our allies.
        And we have a lot of good news that is there. We have some
    policy considerations that we need to address that relate to a
    limitation of our own capacity here that we can address that
    and help ourselves and help others. I think that that is
    significant.
        You know, we always ask, are there any, whether it is
    silver bullets or silver buckshot, as Senator King reminded us,
    but you have given us some specifics where the United States is
    leading.
        You mentioned the 45Q as a business model out there. You
    have clearly reminded us that if we want to truly work toward a
    diversified portfolio that helps us reduce our emissions, in
    addition to what we are doing with renewables, that nuclear and
    particularly, advanced nuclear, has got to be so much of our
    calculus here.
        We have no shortage of issues to deal with before the
    Committee, but I think as we move forward and lay down our
    priorities here, what you have given us this morning and what
    the agency has provided us with--just the background and the
    factual analysis--is good, it is solid and it allows us to be
    better informed as we move forward with our policies.
        So, again, I thank you in so many ways for your leadership
    on this. And again, thank you for coming to the Energy
    Committee this morning.
        With that, the Committee stands adjourned.
        [Whereupon, at 11:56 a.m. the hearing was adjourned.]

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