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98–966 2017

S. HRG. 114–466 

THE NEAR-TERM OUTLOOK FOR ENERGY AND 

COMMODITY MARKETS 

HEARING 

BEFORE THE 

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JANUARY 19, 2016 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 

Available via the World Wide Web: http://fdsys.gov 

(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

LISA MURKOWSKI, Alaska, Chairman 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

MIKE LEE, Utah 

JEFF FLAKE, Arizona 

STEVE DAINES, Montana 

BILL CASSIDY, Louisiana 

CORY GARDNER, Colorado 

ROB PORTMAN, Ohio 

JOHN HOEVEN, North Dakota 

LAMAR ALEXANDER, Tennessee 

SHELLEY MOORE CAPITO, West Virginia 

MARIA CANTWELL, Washington 

RON WYDEN, Oregon 

BERNARD SANDERS, Vermont 

DEBBIE STABENOW, Michigan 

AL FRANKEN, Minnesota 

JOE MANCHIN III, West Virginia 

MARTIN HEINRICH, New Mexico 

MAZIE K. HIRONO, Hawaii 

ANGUS S. KING, JR., Maine 

ELIZABETH WARREN, Massachusetts 

COLIN HAYES, Staff Director 

PATRICK J. MCCORMICK III, Chief Counsel 

TRISTAN ABBEY, Senior Professional Staff Member 

ANGELA BECKER-DIPPMANN, Democratic Staff Director 

SAM E. FOWLER, Democratic Chief Counsel 

SCOTT MCKEE, Democratic Professional Staff Member 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Murkowski, Hon. Lisa, Chairman, and a U.S. Senator from Alaska .................. 1 

Cantwell, Hon. Maria, Ranking Member, and a U.S. Senator from Washington .................................................................................................................... 2 

WITNESSES 

Sieminski, Hon. Adam, Administrator, U.S. Energy Information Administration, U.S. Department of Energy ........................................................................ 10 

Halff, Antoine, Senior Research Scholar and Director, Global Oil Market 

Program, Center on Global Energy Policy, Columbia University School of 

International and Public Affairs ......................................................................... 29 

Lucier, Jr., James, Managing Director, Capital Alpha Partners LLC ................ 38 

Zindler, Ethan, Head of Americas, Bloomberg New Energy Finance ................. 58 

McGroarty, Daniel, Principal, Carmot Strategic Group Inc. ................................ 64 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED 

Cantwell, Hon. Maria: 

Opening Statement ........................................................................................... 2 

Press Release dated 1/20/2016 entitled ‘‘The Solar Foundation’s National 

Solar Jobs Census 2015 Finds that U.S. Solar Workforce Grew by 

More Than 20% for the Third Consecutive Year’’ ...................................... 4 

Written Statement regarding Energy-Related Job Estimates ...................... 9 

Halff, Antoine: 

Opening Statement ........................................................................................... 29 

Written Statement ............................................................................................ 32 

Responses to Questions for the Record ........................................................... 106 

Lucier, Jr., James: 

Opening Statement ........................................................................................... 38 

Written Statement ............................................................................................ 40 

Responses to Questions for the Record ........................................................... 107 

McGroarty, Daniel: 

Opening Statement ........................................................................................... 64 

Written Statement ............................................................................................ 66 

Responses to Questions for the Record ........................................................... 116 

Murkowski, Hon. Lisa: 

Opening Statement ........................................................................................... 1 

Sieminski, Hon. Adam: 

Opening Statement ........................................................................................... 10 

Written Statement ............................................................................................ 13 

Responses to Questions for the Record ........................................................... 99 

Zindler, Ethan: 

Opening Statement ........................................................................................... 58 

Written Statement ............................................................................................ 60 

Questions for the Record .................................................................................. 115 

(1) 

THE NEAR-TERM OUTLOOK FOR ENERGY AND 

COMMODITY MARKETS 

TUESDAY, JANUARY 19, 2016 

U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. 

The Committee met, pursuant to notice, at 10:10 a.m. in Room 

SD–366, Dirksen Senate Office Building, Hon. Lisa Murkowski, 

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. LISA MURKOWSKI, 

U.S. SENATOR FROM ALASKA 

The CHAIRMAN. Good morning. We will call to order this hearing 

before the Committee on Natural Resources. 

Gentlemen, thank you for joining us this morning. 

This is the first hearing that the Energy Committee has had in 

2016, and I think it is rather auspicious that today we are going 

to be conducting oversight to examine the near-term outlook for energy and commodity markets. I think everybody is interested in 

what you have to say, the predictions, the forecasts. Hopefully your 

crystal balls are clear and sharp this morning. 

It is an issue that is not only interesting but clearly consequential in so many different ways as we look to the outlook for not only 

the energy, but the mineral markets as well. 

There are few commodities that are more foundational to the 

health of our economy than energy and minerals. Most Americans 

are certainly familiar with gasoline prices and their electricity bills, 

but I would submit that it is our responsibility as Senators on this 

Committee to do our best to understand the complex interplay of 

our nation’s energy mix and the influences that drive key energy 

and resource indicators. Low oil prices, for example, lead to lower 

gasoline prices. Americans are certainly enjoying that. 

But what is the knock on effect with respect to our natural gas 

prices? As fossil fuel prices fall, how does that affect the competitiveness for renewables, as well as nuclear power? Also what is the 

impact on jobs, on consumer spending and so on? There is just so 

much that is, again, interrelated and the complexities are such that 

we require experts to come and give us a little bit of a forecast as 

to how it all plays out. 

I am reminded, however, that as we see things like lower oil 

prices in the lower 48, they are not necessarily reflected evenly 

across the United States. I was home in Nome, Alaska, about ten 

days or so ago. The prices up in Nome are in the mid-$5 range. 

Down in Unalakleet, where I was the following day, it was about 

2 

$5.40 a gallon. They are looking with some envy at the fact that 

in the lower 48 we are looking at gas prices at the pump just above 

$2.00. Sometimes things do not work to the benefit of all evenly 

and I think that is something that we keep a particular eye on in 

Alaska. 

We did some good work on the Committee here last year in 2015, 

and I think within the Senate itself. We saw the return of regular 

order in the Senate a little bit. 

In energy policy we laid some foundations to modernize our strategic petroleum reserve, we lifted the ban on oil exports, and then 

more specific to where we are right now, we passed on an 18 to 4 

bipartisan vote, the Energy Policy Modernization Act that moved 

out of this Committee. 

I am working to ensure that bill gets to the floor, hopefully as 

soon as possible. I think it is fitting, therefore, that we hold this 

hearing on the broad energy outlook shortly before the full Senate 

might turn to our broader energy bill. It is my hope we will gather 

critical, current information this morning to inform our thinking 

before we head to the floor to debate S. 2012. 

So again, I thank all the witnesses for joining us this morning. 

We have some familiar faces, Mr. Sieminski, who has ably led the 

Energy Information Administration (EIA). We have some newcomers as well, and we welcome you. We are fortunate that there 

are reams of data from government and neutral sources to help us 

deepen our understanding of the energy markets, and I look forward to hearing from you all. 

With that I will turn to my Ranking Member, Senator Cantwell, 

for your comments this morning. 

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

WASHINGTON 

Senator CANTWELL. Thank you, Madam Chair, and thank you for 

holding this important hearing to examine the near-term outlook 

for energy markets. I thank the witnesses for joining us here today 

on a very important and timely discussion ahead of a potential 

floor debate on the bipartisan energy bill. 

Energy markets have been changing rapidly in the last year and 

I am sure we are going to hear a lot about that, but I want to emphasize a few things. Utility scale wind capacity has grown by 677 

percent from less than nine gigawatts to nearly 70 gigawatts in the 

last ten years. In part, the successes were enabled by an all-time 

low reduction in the cost of wind power; the rates for wind power 

purchase agreements have fallen seven cents a kilowatt-hour in 

2009 to two cents a kilowatt-hour recently. That is a 71 percent 

drop. 

These trends are prevalent all across the United States. Utilityscale wind power is deployed across 39 states, and in nine states, 

wind exceeds ten percent of the total in-state electricity generation. 

And it is not just wind. Solar photovoltaic technology has rapidly 

emerged as a mainstream technology over the last few years. Utility-scale PV solar has grown to more than ten gigawatts in 2015, 

and distributed PV systems installed on customer and business 

rooftops have seen the same level of growth. Now there are more 

than 80,000 distributed PV systems installed. This is possible beVerDate Nov 24 2008 14:58 Jan 23, 2017 Jkt 098966 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\98966\F98966.TXT F98966
3 

cause of a dramatic decline in the price of PV systems, down 59 

percent, over the last six years. 

But interest in renewable energy has not just been from electric 

utilities and customers. In 2015, there was a record-breaking year 

for corporations such as Amazon, Microsoft, Google, Walmart, who 

purchased large-scale wind and solar energy. These corporations 

signed roughly three gigawatts of power purchase agreements for 

large-scale renewable energy last year. This is more than double 

the amount signed in 2014. 

These trends have also been benefiting my home state. Washington’s wind industry is seventh in the nation for installed wind capacity and ranks 15th in the country for solar power capacity per 

person, 25th in the nation for total solar capacity. Recent policy 

changes will accelerate these trends creating more jobs, reducing 

carbon pollution and saving consumers money. 

Why the sudden drop in cost? In part because of policy in 2015 

in the addition of new policies that will build upon the success of 

previous support for renewable energy. For instance, in August 

2015 the EPA finalized the Clean Power Plan Rule which will reduce carbon pollution from power plants and drive a more aggressive transition to renewable energy. Last December more than 190 

nations reached a historic accord to address climate change committing nearly every country to lower carbon pollution and keep 

global temperatures from rising more than two degrees Celsius. 

These domestic and global commitments to reducing carbon pollution will create new global market opportunities and export opportunities for the U.S. and our technologies. In fact, the International Energy Agency estimates that $4 trillion in renewable energy investments and about $8 trillion in energy efficiency investments will be made across the world in the next 15 years. 

Lastly, at the end of the last year, the Omnibus spending bill included long-term extensions for clean energy tax credits. That will 

also be sending a signal. According to Bloomberg New Energy Finance, as I am sure we will hear shortly, it is estimated that this 

will result in 76 percent more wind energy and 44 percent more 

solar energy than if these policies had not been extended. 

All these policies continue to accelerate the trends of clean energy development, reducing carbon pollution, saving consumers 

money, and creating jobs. This is a big factor for us to consider 

here. There are job creation activities going on here. 

A report from the Solar Foundation found that the U.S. solar industry employed more than 200,000 Americans in 2015 with 20 

percent growth in the solar industry employment. 

[The information referred to follows:] 

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For perspective, the solar industry grew 12 times faster than the 

national employment growth rate during this same time period, 

and the solar work force is now larger than the more well-established fossil fuel generation sectors such as the oil and gas extraction industry. 

The U.S. wind industry has had similar job growth trends, supporting over 70,000 well-paying jobs. 

It is also important to talk about the consumer in this equation. 

Renewable energy policies not only create jobs, but they help save 

money for consumers and provide consumers with more choices. 

In a new study by the National Renewable Energy Laboratory at 

Lawrence Berkeley National Laboratory, renewable portfolio standards help to lower prices saving consumers up to $1.2 billion from 

lower electricity prices and $3.7 billion from reduced natural gas 

prices. 

Recent low oil and natural gas prices have also resulted in savings for consumers. For example, the AAA estimates that Americans saved $115 billion on gasoline in 2015 compared to 2014, 

which was an average of about $550 per driver. 

However, these fossil fuel commodities are still susceptible to 

price swings, and I am sure we are going to hear about that today. 

Less than two years ago the oil prices were over $100 a barrel and 

EIA’s short-term energy outlook states that, ‘‘Oil prices could continue to experience periods of heightened volatility’’ over the next 

two years. In contrast, renewable technologies, which use wind and 

solar, are not as susceptible to these price volatilities. Consumers 

should have choices and should not face roadblocks to being able 

to implement these choices. 

We will continue to support those policies that give homeowners 

and businesses the freedom to generate their own energy. Whether 

you are an environmentalist or a Member of the Tea Party, supporting distributed generation and making sure consumers get access to choose their own energy distribution or storage methods is 

something, I think, we will continue to be talking about. 

Again, thank you Madam Chair for holding this important hearing, and I hope that we will hear a lot from our witnesses today 

about how and what we can expect in the next few years. 

[The written statement of Senator Cantwell follows:] 

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The CHAIRMAN. Thank you. 

With that we will turn to our panel of witnesses. It will be led 

off by Mr. Adam Sieminski, who is the Administrator for U.S. Energy Information Administration, the EIA. He will be followed by 

Mr. Antoine Halff, the Program Director for the Global Oil Markets 

for the Center on Global Energy Policy located at Columbia University. We also have Mr. James Lucier, who is the Managing Director 

for Capital Alpha Partners. We also have Mr. Ethan Zindler, who 

has joined the Committee here today as Head of the Americas, 

Bloomberg New Energy Finance. Rounding things out is Mr. Daniel 

McGroarty, who is the Principal at Carmot Strategic Group. 

With that, Mr. Sieminski, if you would begin with the panel? 

I know you have a lot to say, so we will probably have to go over 

our allocated five minutes. We are good with that because there is 

a fair amount of information that I think needs to be imparted. 

STATEMENT OF HON. ADAM SIEMINSKI, ADMINISTRATOR, U.S. 

ENERGY INFORMATION ADMINISTRATION, U.S. DEPARTMENT OF ENERGY 

Mr. SIEMINSKI. Maybe just a couple of minutes, Senator. [Laughter.] 

The CHAIRMAN. Well, we appreciate what you will give to us and 

know that we will also have opportunities for expansion when we 

come to the Q and A. 

If you would please start off. 

Mr. SIEMINSKI. Thank you, Chairman Murkowski, Ranking Member Cantwell, Senators Cassidy and Hoeven. I really appreciate the 

opportunity to provide testimony today on the U.S. energy outlook. 

The Energy Information Administration is a statistical and analytical agency within the Department of Energy, but by law EIA’s 

data analysis and forecasts are independent of approval by any 

other Federal office or employee. Therefore, my views should not be 

construed as representing those of the Department of Energy or 

any other Federal agency. 

Major changes affecting energy markets have occurred over the 

past year in the areas of global commodity prices, energy technologies and U.S. energy and environmental policies. EIA’s Annual 

Energy Outlook for 2016, which will be published by mid-year, will 

include these changes. 

What I’d like to do now is talk just a little bit about last year 

and then we’ll talk about the forecast. 

Crude oil ended 2015 with both Brent and WTI below $40 a barrel, the lowest level since early 2009. The decline has continued 

with today’s WTI price trading just under $30 a barrel. With the 

fall in prices U.S. onshore crude oil production began to decline in 

early 2015 but still averaged 9.4 million barrels a day and that was 

eight percent higher than 2014. 

Natural gas spot prices at Henry Hub in Louisiana averaged $2.63 per million BTU in 2015 and that was 40 percent below the 

2014 average; however, the rigs that continued drilling were highly 

productive and total dry natural gas production in 2015 reached an 

estimated 74 and a half billion cubic feet per day, almost six percent higher than 2014. 

11 

In April of ’15 natural gas-fired electricity generation surpassed 

that of coal-fired generation on a monthly basis for the first time 

in history and did so for much of the rest of the year. That and 

lower exports led coal production in 2015 to fall below 900 million 

short tons, the lowest level since the mid–1980’s. 

Commodity prices, weather and investment in renewable capacity drove changes in electricity. The wholesale price of electricity 

set by natural gas generators fell between 27 to 37 percent at 

major trading hubs across the nation. Nuclear generation through 

October of ’15 was the highest since 2010 due to low levels of outages. They were the lowest on record of about three percent of the 

summer capacity. 

Hydroelectricity accounted for nearly six percent of total generation through October despite lower than normal water and snow 

pack levels in several regions. Wind provided four percent of the 

number. 

Net generation from distributed solar PV systems increased 28 

percent and utility scale solar photovoltaic generation increased by 

half over the first ten months of 2015 based on EIA’s new monthly 

estimates of capacity and generation from small scale distributed 

solar that we are now publishing by both sector and state. 

Now I’m going to turn to the short term energy outlook which 

provides a monthly forecast through 2017. 

Crude oil and refined product prices in 2016 are forecast to be 

lower than in 2015 with Brent crude back up to about $40 a barrel 

by the end of ’16 and $50 a barrel in 2017 with WTI averaging $2 

to $3 a barrel lower than Brent. 

A word of caution is advisable. The current values in the futures 

and options markets suggest that market participants see very 

high uncertainty in the price outlook. This is similar to what Senator Cantwell said, and the risk is both on the upside and the 

downside. The retail price of regular gasoline is forecast to average 

just a little over $2 a gallon in 2016 and $2.21 in 2017. And that’s 

down from $2.43 last year and down from $3.36 in 2014, so a big 

drop in gasoline prices. 

U.S. crude oil production is expected to continue to decline 

through 2016 and through most of 2017. So this is very different 

than two years ago when production was climbing and climbing 

rapidly. The global oil market becomes more balanced because of 

these declines in 2017. Non-OPEC production is estimated to fall 

by 600,000 barrels a day in 2016, about two thirds of that is driven 

by lower production in the United States. 

Outside of the U.S. non-OPEC production declines are relatively 

small because of past investments and project commitments made 

when oil prices were higher. Canada and Brazil are good examples 

of that situation. EIA forecasts a half a million barrel a day increase in OPEC crude oil production in 2016 and about 0.6 million 

barrels a day in 2017 with Iran, again, accounting for most of the 

increase at 300,000 barrels a day in 2016 and a half a million barrels a day in 2017. There were developments there over the weekend with the sanctions finally being removed. EIA’s forecast assumed that sanctions targeting Iran’s oil sector would be lifted and 

that is the case. 

12 

EIA’s forecast for Henry Hub spot prices to average $2.65 a mil- lion BTU in 2016 and $3.22 in 2017. Current levels are near $2.00. 

That would be a fairly big increase but it reflects consumption 

growth, mainly in the industrial sector, fertilizers and chemicals, 

for example. And EIA expects a small decline in the power sector 

as natural gas prices rise and renewables hydro, wind, and solar, 

increase. 

EIA projects production growth will be slow in 2017 as prices rise 

with more demand from industrial users and exports, and the exports are expected to grow quite a bit. Both pipeline to Mexico and 

liquefied natural gas tanker shipments with the startup of 

Cheniere Sabine Pass facility later in the spring. 

Coal consumption in the power sector forecast remains unchanged in 2016 and declines slightly in 2017 while the forecast of 

higher natural gas prices helps to support coal generation. Expected increases in electricity from renewables and nuclear reduce 

the need for coal generation. With slower growth in world coal demand and lower international coal prices also expected, U.S. coal 

production is forecast to decline by 38 million short tons in 2016 

and by an additional nine million tons in ’17. 

The change in the mix of electric generating units that supply 

the United States is expected to continue with a declining generation share from fossil fuels offset by the growth in the role of renewable resources as shown in Table 1 in my full written statement. 

Madam Chairman, this concludes my testimony, and I would be 

happy to answer questions later. 

[The prepared statement of Mr. Sieminski follows:] 

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The CHAIRMAN. Mr. Sieminski, thank you very much. I am sure 

there will be questions. 

Mr. Halff, welcome. 

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

SCHOOL OF INTERNATIONAL AND PUBLIC AFFAIRS 

Mr. HALFF. Thank you very much. 

Chairman Murkowski, Ranking Member Cantwell, Senators Cassidy and Hoeven, I appreciate very much the opportunity to share 

some of my views here today and provide testimony. I’d like to 

focus on the oil market and take a step back on some numbers and 

try to identify some of the key drivers that I see as pushing the 

price lower. 

The selloff, the scope, and the duration of the down turn in prices 

has come as a surprise to the market. It hasn’t run its course. 

There’s more room for lower prices but the selloff is not sustainable 

and eventually the price will rebound and the market will show a 

recovery. I think we’ll emerge different from the recovery from 

what it was before. 

This is not the first selloff in the market. There’s been major 

price collapses about every ten years. This one is different because 

the market has changed in key ways on the supply side and on the 

demand side. 

On the supply side two key factors are the advent of shale oil in 

the U.S., light, tight oil production and also the wave of social unrest and instability that is sweeping through many producing countries. 

The impact of shale oil has made OPEC to give up its price management strategies, the practice of cutting supply to support prices 

with which OPEC has been identified over the last 30 years. There 

are three main reasons why that it so. 

One reason is that shale oil has changed the perception of supply 

scarcity into a perception of supply abundance. It has unlocked 

huge resources, not just in the U.S. but potentially elsewhere in 

Argentina and Russia, and this has likely changed the view of 

major producers like Saudi Arabia about how best to optimize revenue from their resources. 

The Saudi oil minister, Ali al-Naimi, for instance in the last 18 

months or so, has repeatedly come back to the idea of what he calls 

a ‘‘Black Swan.’’ The idea that in 20 years demand will not be there 

and Saudi Arabia might sit under a huge ocean of oil that’s not 

worth as much as before. So it’s essentially seemingly incentivized 

the users to speed up the base of extraction of their resource and 

maximize their revenue by selling more now and keeping less for 

future generations. 

Another way in which shale oil has changed the picture is by 

shrinking the trade map for crude oil. The U.S. doesn’t need to import as much crude as before. That is also the case of Europe because European refineries have found it difficult to compete with 

U.S. refineries which have increased their activity with the development of natural domestic resources in the U.S. 

30 

So there’s less crude flowing into the U.S., less crude flowing into 

Europe. The market is now heavily concentrated in the eastern region, east of Suez in Asia and increasingly so in the next few years 

that makes it much more difficult for OPEC to cut production and 

allocate production cuts across the world when, in fact, OPEC producers, as other producers are increasingly competing with one another in a very fine like marketplace in Asia. 

The third factor which limits the scope for OPEC to cut production is the way shale has changed the business cycle of the oil market. It’s a much shorter business cycle. The shale industry, the 

shale companies are very different from traditional, conventional 

oil companies. They require less initial capital investment, they 

have much shorter lead times, much shorter payback times, and 

much steeper decline rates that are much more price responsive, at 

least in theory. So that means that if OPEC had clung to its old 

strategy of cutting supply it would, in effect, have subsidized shale 

production and enabled shale oil producers to come back in the 

market very quickly as soon as prices came back up. So it’s not entirely a surprise that Saudi Arabia and the other OPEC members 

have given up the practice of cutting production. 

Now, other producers also have been incentivized to produce 

more by the unrest in their countries. This is the case of Russia, 

this is the case of Iraq, this is the case of Brazil. This is the case— 

all these producers have been incentivized to produce more and to 

make up in volume what they’ve lost in per barrel price. 

Now on the demand side, demand has also been very weak and 

that has undermined prices as well. The normal demand response 

that one might expect from a drop in prices has not happened for 

a number of reasons, the slow pace of the economy, the slowdown 

in China, changes in the currencies of major consuming countries 

and an effort to de-subsidize oil prices by a number of emerging 

economies. 

In addition, the deflationary or quasi-deflationary environment 

in many economies has meant that low prices increase expectations 

of deflation instead of stimulating economic growth. And there’s 

concerns in the oil sector about the rapid pace of penetration of 

competing fuels in traditional oil markets like natural gas and renewables. 

So all these factors are changing the picture and mean that 

there’s much more supply, much more downward pressure on 

prices. We are seeing now the beginning of a supply response, but 

supply continues to exceed demand. Inventories continue to build, 

and that means more pressure. 

Longer term though, there will be a correction because the same 

factors that are incentivizing producers to maximize their revenue 

also incentivize them to cut their spending and invest very little in 

future production. So there’s a lack of new projects to make up for 

decline rates and the decline rates themselves are increasing because necessary maintenance has been pushed back or reduced. So 

we’re likely to see an increase in decline rates, an increase in the 

natural drop in production and the lack of new projects to make 

up for those declines. 

31 

So eventually we see a very steep rebound in prices when really 

would be shift in inventories which has an inflection points and 

even to restart drawing down. 

This concludes my remarks, and I’d be very happy to take questions. 

Thank you. 

[The prepared statement of Mr. Halff follows:] 

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The CHAIRMAN. Thank you. 

Mr. Lucier? 

STATEMENT OF JAMES LUCIER, JR., MANAGING DIRECTOR, 

CAPITAL ALPHA PARTNERS LLC 

Mr. LUCIER. Well Chairman Murkowski, Ranking Member Cantwell, Senator Cassidy, Senator Hoeven, thank you for the opportunity to testify before this Committee. I’m honored that you’d request my views on the state of the electric power industry and the 

power markets. In these remarks I’ll present high level views on 

electric utilities, merchant power producers and the critical issues 

of price formation and market structure in the wholesale power 

markets. 

My name is James Lucier, and I’m a Managing Director and 

Head of the Energy Practice at Capital Alpha Partners. That’s an 

independent research and advisory firm that serves mostly institutional asset managers and financial participants in the power markets. 

I personally have been devoting the bulk of my time to the electric power industry and to the power markets since I first started 

following them as an analyst at the Prudential Equity Group in the 

California power crisis of 2001, 2000–2001 actually. So it’s been an 

interesting 16 years. 

If I were to characterize the state of the power markets in five 

points I would offer the following. 

First, inflation adjusted retail power prices are at historically low 

levels but also consistent with the historically stable range showing 

that the system and the industry, generally, have served consumers well by maintaining low and stable prices over a considerable period of time. 

Also, wholesale power prices are similarly at a ten-year low 

which again shows service to consumers but also reflects low interest rates and low natural gas prices which cannot be taken for 

granted and possible design flaws in the wholesale power markets 

which, I believe, may not be sustainable. 

In the regulated utility space, corporate management faces a conundrum, how to maintain or increase earnings to satisfy shareholders at a time when power demand, after declining year on year 

for the first time in U.S. history after 2008, remains flat or nearly 

flat as far as the eye can see which is to say well into the 

forecastable future. 

In the merchant power space generators are hard pressed to 

show a return on equity that would justify new investment in competitive markets that serve two-thirds of the U.S. population. A 

step change downward in natural gas prices since 2008 which we 

will credit to the shale revolution is part of the story but so also 

are troublesome issues, price formation in the energy markets and 

the development of appropriate pricing mechanisms for reliability 

and ancillary services. 

Finally, as this Committee knows so well, the demands of the 

EPA’s Clean Power Plan will drive the greatest investment cycle 

ever in the history of the U.S power industry, perhaps amounting 

to hundreds of billions of dollars as existing baseload power plants 

retire beginning, as we’ve already seen, with the mercury and air 

39 

toxic standards, MATS, driven cycle of 2015 and continuing 

through 2030 and beyond. 

The single greatest challenge in the power markets today is financing the technology investment and the infrastructure upgrade 

cycle needed to replace retiring base load and to handle new, perhaps even unforeseen, demands between now, 2030 and beyond. 

This challenge must be dealt with now in a prudent, thoughtful 

and timely manner lest due to failure to act consumer price increases that could be managed or mitigated now become disruptive 

price shocks later. 

The power industry has been battered by a series of exogenous 

shocks, including interest rates, commodity prices and the lingering 

effects of the great recession of 2008. But at the same time this always evolving industry is in a period of rapid technological innovation. 

Policy makers should take a balanced, long-term view looking to 

maintain a diversity of options long into the future. New technology and innovation by all participants should be welcomed. But 

at the same time, policymakers should recognize that the existing 

infrastructure with its diversity of business models, fuel types and 

public or private ownership represents not just the spinning reserve or fly wheel that keeps power flowing, but also the deep pool 

of invested capital that keeps the system working financially as 

well. 

That concludes my remarks. I look forward to your questions. 

[The prepared statement of Mr. Lucier follows:] 

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The CHAIRMAN. Thank you, sir. 

Mr. Zindler, welcome. 

STATEMENT OF ETHAN ZINDLER, HEAD OF AMERICAS, 

BLOOMBERG NEW ENERGY FINANCE 

Mr. ZINDLER. Good morning and thank you for this opportunity 

today. This is my first appearance before this panel under Chairman Murkowski’s new leadership, so thank you. I appreciate the 

opportunity to contribute. 

I’m here today in my role as an analyst with Bloomberg New Energy Finance, an energy market research division, a financial information provider, Bloomberg LP. Our group provides investors and 

others with data and insights on what we call new energy technologies. These include renewables such as wind and solar, electric 

vehicles, energy efficiency technologies, power storage such as batteries and natural gas, among others. 

I would note that my remarks today represent my views alone, 

not the corporate positions at Bloomberg LP. They also do not represent specific investment advice and should not be construed as 

such. 

I’d like to start by saying that these are, without a doubt, auspicious and exciting times for new energy technologies both globally 

and in the U.S. thanks to a confluence of economics and policy actions. I would argue that a fundamental rethink is now well underway about how energy gets produced, delivered, consumed and 

managed in many parts of the world, including the U.S. 

In 2015 investment in these new energy sectors achieved an alltime high of $329 billion globally. The volume of renewable energy 

capacity deployed into wind, solar and other similar power generating technologies also soared to a record globally. 

What’s notable is this build out of new projects is rising at a 

much quicker pace than is investment reflecting the fact that clean 

energy unit costs have dropped very dramatically. 

In all the clean energy sector has received over $1 trillion in new 

capital over the past four years and over $2.5 trillion in the past 

decade. With approximately one half of all new capacity built 

worldwide in 2015 represented by renewables, it is fair to say that 

clean energy is no longer an alternative source but now very much 

in the mainstream. 

What’s behind this growth? Improved price competitiveness for 

these technologies and policy support from governments. It should 

be noted that the latter, policy actions, has certainly assisted in 

achieving the former, of lower clean energy prices. 

Here in the U.S. we’re seeing the power sector continue an unprecedented shift away from traditional higher CO2 emitting 

sources of power generation. And in that regard, last year will likely be remembered as a watershed year for decarburization. 

Consider that in 2015 an annual record volume of coal-fired 

power generating capacity was either retired or converted to burn 

other fuels such as natural gas or biomass, a record volume of natural gas was burned in power plants and gas accounted for approximately a third of all U.S. power, about the same as coal, for 

the first time. 

59 

Solar photovoltaic capacity added hit an all-time high with a 

strong growth in both rooftop and utility scale subsectors. And U.S. 

clean energy investment totaled $56 billion which was the most in 

four years and the second most ever. 

Since 2007 the share of U.S. power provided by renewables including large hydro projects and natural gas and nuclear has 

surged from 49 percent to 65 percent with wind, gas and solar accounting for nearly all the new capacity that’s been added. The net 

result is that CO2 emissions in 2015 fell to their lowest level since 

sometime in the 1990’s from the power sector. Over the past eightyear average retail power prices in most markets remain roughly 

level while average wholesale prices have dropped. 

Regarding energy efficiency, over the past five years U.S. demand for electricity and for all sources of energy has remained basically flat, even as the economy has grown. Efficiency improvements to homes, buildings and automobiles have all made contributions. As an aside, I would just note that many of these trends will 

be highlighted in an upcoming sustainable energy in America fact 

book which we’ll be releasing in just a few weeks. 

The achievements of the past year for clean energy came even as 

fossil fuel prices, most notably oil, but also gas and to a lesser extent, coal, were falling. At least thus far the impact on new energy 

technologies has been muted for a variety of reasons. The one area 

where lower oil prices did impact this sector was in the sale of hybrid electric vehicles which slipped in 2015. However, it should be 

noted that pure electric vehicle sales continued to rise and auto 

makers are now rolling out new, more affordably priced electric vehicles with longer ranges thanks to lower priced batteries. 

Looking ahead the growth path for clean energy technologies appears wider and better to find than perhaps at any time. The socalled Paris agreement at the end of 2015 saw over 190 nations 

committing to reduced CO2 emissions. Here in the U.S. the EPA’s 

Clean Power Plan has the potential to offer greater certainty for 

clean energy through the next decade. And finally, Congress’ extension of key tax credits for wind and solar ensure solid short run 

growth for these technologies as well. 

Just as importantly the playing field where clean energy technologies compete and beat their incumbent rivals in cost continues 

to expand thanks to technological innovation and economies of 

scale. While risks and potential obstacles still exist the outlook 

overall is generally positive for continuing growth and change. 

Thank you again for this opportunity. I look forward to questions. 

[The prepared statement of Mr. Zindler follows:] 

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The CHAIRMAN. Thank you, Mr. Zindler. 

Mr. McGroarty? 

STATEMENT OF DANIEL MCGROARTY, PRINCIPAL, CARMOT 

STRATEGIC GROUP INC. 

Mr. MCGROARTY. Thank you. 

My thanks to the Committee for the opportunity to testify this 

morning. I’m Dan McGroarty, Principal of Carmot Strategic Group, 

an issues management firm based here in Washington, DC. Strategic resources are a core element to my practice. 

My advisory companies include Texas Rare Earth Resources, 

Graphite One, American Manganese, Denham Capital Management, and Rio Tinto, companies that are working to develop new 

sources of metals ranging from copper and graphite to manganese 

and rare earths. I also consult to the Institute for Defense Analyses 

which supports the Departments of Defense and Homeland Security, the Joint Chiefs and Intelligence community, on issues related 

to strategic materials and resource security. That said, the views 

I express today are my own. 

The Committee asked the single question as the entry point into 

today’s hearing and that’s where I will start. The near-term outlook 

for the commodity markets can be summed up in a single word, 

bleak. 

We’ve heard this morning about the collapse in price of oil. The 

same is generally true for hard rock commodity prices. Look at five 

key industrial minerals, aluminum, copper, lead, nickel and zinc. 

In the past five years aluminum is down 36 percent, lead 35, zinc 

down 40, copper down 55, nickel down 64. 

Of course it’s not as if commodity cycles are novel, they happen. 

That’s Econ 101. The market is self-corrective, and in the long run 

that is true. What’s also true, as Keynes put it, that in the long 

run we are all dead. 

I can’t answer the question how long is the long run. What I can 

discuss is what risks we run now and in the near-term while we 

wait for the long run to arrive. Those risks are real. 

When it comes to critical metals the United States is deeply dependent and growing more so. The U.S. Geological Survey has just 

released a useful historical snapshot. 30 years ago the U.S. was 

100 percent foreign dependent for 11 metals and minerals. Today 

the U.S. is 100 import dependent for 19 metals and more than 50 

percent dependent for 47 minerals, nearly half of the naturally occurring elements on the periodic table. 

This dependency has serious implications for national security. 

In the most recent defense stockpile report of the 12 materials the 

Pentagon recommends for stockpiling, China is a significant supplier of all 12. 

We are in the midst of a material science revolution and access 

to the so-called minor metals is taking on major implications. Unfortunately, in many cases U.S. dependency is severe, even complete. 

Consider clean energy. Graphite is key to EV batteries and energy storage. The United States produces zero natural graphite. 

We’re 100 percent import dependent. Indium is needed for flat 

screen TVs and solar panels. We produce zero indium. Thin film 

65 

solar panels are made of CIGS materials, copper, indium, gallium, 

selenium. We have a 600,000 metric ton copper gap at present and 

selenium is recovered from copper processing. Gallium comes from 

aluminum processing. We are 99 percent import dependent. 

The list is long. We need radium for high strength alloys on 

fighter jets like the F35. Radium is dependent on copper processing, and we’re 83 percent import dependent. 

We need rare earths in too many applications to list. Wind turbines, lasers for medical and national security applications, smart 

phones, smart bombs. We produce zero rare earths. We’re once 

again 100 percent dependent on China. In the effort to reverse our 

resource dependency the American Minerals Security Act is a 

strong step in the right direction. 

In the Executive Branch productive work is being done at the 

Defense Logistics Agency to address strategic metal’s needs and 

Critical Materials Institute at DOE. And at the White House the 

materials, the White House’s Materials Genome Initiative which 

aims at supporting and I quote, ‘‘U.S. efforts to discover, manufacture and deploy advanced materials twice as fast at a fraction of 

the cost.’’ That’s a laudable goal but it’s going to prove difficult for 

American innovators to be twice as fast when America’s mine permitting process is twice as slow as in many other mining nations. 

We could also do more to encourage recycling of rare metals from 

scrap laptops and cell phones, so-called urban mining. And we 

should continue efforts to find substitutes to rare metals. But we 

must recognize that the search for substitutes may simply swap 

our dependency on one scarce material for another equally or even 

more scarce. 

That’s why I’m a subscriber to the all of the above school. Let’s 

recycle and seek substitutes, but let’s also recognize there’s no way 

out of our dependency without added production. 

Going back to that commodity cycle. Pricing will come back. Remember the long run. But if the U.S. allows the trends making the 

long permitting process even longer, production of key metals is 

going to take place elsewhere and the manufacturing we want to 

see right here in America will be pulled where the metals are. 

I’ll close with a comment and a question. I don’t think there’s another nation in the world that can match American ingenuity. We 

can pioneer the ideas behind wind and solar, we can design ever 

more powerful technologies for our war fighters, but where will the 

materials that make these new applications real come from? 

I thank the Committee for this opportunity to testify, and I look 

forward to your questions. 

[The prepared statement of Mr. McGroarty follows:] 

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The CHAIRMAN. Thank you, Mr. McGroarty. 

I think it is so important to the conversation that we be discussing minerals and those commodities. I think far too often we 

get focused on the vulnerability we have had historically when it 

comes to reliance on others for oil. That is understood. People know 

about that, but they fail to make that connect when we are talking 

about the need for our minerals and what it is that we use them 

for. So I look forward to that discussion with you. 

I want to ask the question that I think is on everyone’s mind 

here today. As we have seen over the weekend the implementation 

day with the agreement with Iran. The fact that the sanctions that 

have been put in place on oil coming out of Iran have now been 

lifted, that those reserves that were sitting in tankers offshore are 

now able to go out and find customers. 

You have suggested, Mr. Sieminski, that in ’16 we should anticipate about 300,000 barrels coming out of Iran into the global oil 

market by ’17 an additional 500,000. 

Mr. SIEMINSKI. Additional, right. 

The CHAIRMAN. That is what I would like to ask you about because there have been suggestions that what we will see ultimately 

is in the range of a million barrels a day coming from Iran. When 

you look to the longer term and what is happening with the response today from Iran getting their oil out on the market, the impact to the global market and to the price of oil, the fact that we 

already have a glut of oil out on the market, what does that mean 

for the short-term pricing of oil? 

You have indicated your estimate is somewhere between 40 and 

50 between year 2016 and 2017. Can you give me more certainty 

going beyond ’17 in terms of what Iran does to the market? 

Also if you can, and I will ask you, Mr. Halff, to join this conversation, discuss the situation in Venezuela and the fact that you 

have indicated that we cannot ignore Venezuela in this discussion 

as we are looking at the international picture on production. So if 

we can have this conversation, Iran, Venezuela and just for good 

measure we can throw in Saudi Arabia here. 

Mr. Sieminski, if you want to start. 

Mr. SIEMINSKI. Senator, Iran had been producing about 2.8 million barrels a day of crude oil and other liquids. So we think that 

that could hit 3.3 million barrels a day by the end of 2016. So these 

numbers move around a lot. It depends on how much comes out of 

storage and how much comes out of production, and I’ll come back 

to that in a second. 

And then we thought that the number could hit 3.7 million barrels a day by the end of 2017. So that’s a little less than a million, 

but it’s close to that million barrel a day growth number from 

where they are now to where they would be at the end of 2017. The 

annual averages would be a little bit different because the trend 

is up so the annual averages are going to be a little bit lower. 

In thinking about Iran there are two aspects to this. They have 

between 30 and 50 million barrels of floating storage in tankers 

that could come onto the market fairly quickly. But a lot of that 

is believed to be condensates. So it’s a very light kind of crude oil, 

and the markets for that are mostly in the chemicals business and 

72 

a lot of it was probably destined for China. And we’ll just have to 

see how that works into the estimates for China’s economic growth. 

The second aspect is how quickly production can actually grow. 

And that may depend on how rapidly foreign investment is allowed 

to come into Iran to help them rebuild their oil fields. And that 

could be a bit slow too. So there are a lot of uncertainties in this. 

And then layering on something that Antoine mentioned earlier, 

this relationship between Saudi Arabia and Iraq and Iran is very 

important. Iran is one of the three big players along with those 

other two countries in the Gulf area, and how each of those countries puts their volumes of crude oil on the market has a lot to do 

with where prices end up. And so there’s probably going to be a lot 

of back and forth between those three countries. 

So I think we’re back to that observation that says that the uncertainty in crude oil prices as we look out over the next year too, 

is very high. 

The CHAIRMAN. Greater volatility. 

Mr. Halff? 

Mr. HALFF. Yes, I agree totally. 

I think for Iran the question is—there are four questions that we 

have to consider. The first one is how much can they produce now? 

The second one is how much are they willing to produce now? The 

third is how much is the market capable of absorbing now from 

Iran? And the fourth is how much is the long-term production capacity or the capacity to increase production in the longer term? 

The bottom line is nobody knows exactly how much they can 

produce today. We tried to look at it when I was working at the 

International Energy Institute looking at the testimony from people who’ve had access to the fields there. Our perception was that 

Iran had managed to repair some of the damage that had been 

caused under the previous President, Ahmadinejad, and it had the 

capacity to increase production fairly rapidly, almost instantly, by 

somewhere between 500,000 and 800,000 barrels per day. 

The question is for Iran. How much is it willing to sell given its 

price appetite? It’s always been a hoggish member of OPEC. Since 

the early days of the Iranian revolution it’s always taken the view 

that the west of the market should pay more for oil and that that 

oil is worth more than the market is paying for it. 

So not surprisingly I think Iranian dealers have made contradictory statements over the last few months that said they wanted to 

ramp up production immediately but they’ve also said they don’t 

want to crash the market. They don’t want to flood the market too 

quickly with too much oil and cause the price to fall even further. 

So the main question is how much the market can take? And I 

don’t think it can take more than a few hundred thousand initially, 

two, three, maybe four hundred. And it’s going to be a gradual 

ramp up for Iran to regain its market share. 

Now the capacity to increase production over the longer term 

that would depend on the willingness of investors to go back, the 

terms offered and that’s much more questionable, much more 

longer term. 

The CHAIRMAN. Please, go ahead because I asked about Venezuela. We have not heard that yet. 

73 

Mr. HALFF. Venezuela is struggling. Its production capacity has 

been degrading over the years. Production volumes have been falling. It’s managed to produce as much as it can, but its revenue has 

been doubly hit by the drop in volumes and the drop in prices. And 

it can sustain its production. 

Now based on the national oil company is asking for its foreign 

partners to pay for the light liquids or the condensates or enough 

of the import to blend the heavy crude to export it. The partners 

are not willing to do that. It’s going downhill, and the social outlook, the social stability outlook is also looking very bleak. 

Now the question there is whether social turmoil could actually 

be, cause production to fall or to be disrupted as had been the case 

in 2002–2003 during the general strike there. And my view is that 

capacity is probably more insulated now from social turmoil than 

it had been at the time. But the outlook and the capacity to sustain 

production looks very, very dismal. 

The CHAIRMAN. Thank you for your comments. 

You know, this whole discussion about Iran is just so galling as 

a representative from a state that has enormous potential. We will, 

as a country, tell Iran go ahead, produce more while at the same 

time we are going to continue locking up our potential for further 

oil exploration and production whether it is on ANWR or whether 

it is our potential for offshore. 

So know that this is going to be a year where you are going to 

continue to hear me not complaining but being very discouraged 

and really quite angry at the way we have chosen to advance a policy when it comes to greater reliance on people, nations, that have 

not been good actors and yet continuing sanctions on ourselves 

which is what we are doing with certainly Alaska production. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Madam Chair. 

I want to, again, thank all the witnesses. When I think of your 

collective wisdom here of covering energy markets over your careers. It certainly must be an interesting time to now have your expertise asked for because certainly we are on a roller coaster of 

sorts. I am sure that it has been very interesting. 

I think for me you just have to understand I come from a hydro 

state where cheap electricity has rebuilt our economy over and over 

and over and over again. I appreciate not only it is not without 

some environmental cost, there clearly have been, but the efficiency 

which I think is the nom de jour in the context of where we are 

as a country, efficiency in every business model. Efficiency is going 

to continue to drive the energy sector as well. That is why so many 

people are interested in distributed generation because distributed 

generation, being closer to the source, automatically cuts out a big 

part of cost. 

So I wanted to ask you, Mr. Zindler—the years brought a significant shift in generating cost comparison between renewable energy 

and fossil fuels that is by Bloomberg New Energy Finance. Can you 

talk about how you see these trends moving forward and whether 

they will continue to compete based on price? And how do you see 

solar and battery technology and their trajectories in continuing to 

lower costs? 

Mr. ZINDLER. Sure. So thanks for that question. 

74 

Well, I mean, look, the first thing to note about renewables and 

I think I hope I made this point in my comments, is that they are 

increasingly cost competitive. They’re not cost competitive everywhere. And essentially the playing field in which this competition 

is taking place is growing virtually every day. 

And so, obviously the place where renewables are most competitive are in places where you have excellent natural resources and/ 

or very high incumbent power prices. So they can compete against 

the incumbents and potentially win. 

So the places where we’re seeing, let’s say, wind most competitive often are in the center of the country, particularly in Oklahoma and parts of Texas, but also Iowa and Minnesota and elsewhere where you have some extraordinary winds. That combined 

with the fact that we are seeing bigger and more effective wind turbines that are being deployed that essentially can scoop up more 

of the wind and generate more power is making wind more competitive all the time. 

On the solar side the costs have been dropping, as you noted in 

your comments as well, quite rapidly. We don’t see quite the same 

level of decline over the next couple years. Although we do see it 

declines longer term. 

And as you note quite rightly that when you’re competing at the 

local level solar can be best positioned. In other words, as I’m sure 

you know, electricity is priced on a wholesale basis and then it’s 

priced at a retail basis. And on a retail basis those prices are much 

higher. 

So inevitably solar can be much more competitive at a retail 

level, so-called behind the meter, because you just have to offset 

the price that the homeowner or the business owner is paying, the 

final price for electricity that they’re paying which includes the distribution cost of getting it there. So, you know, those costs in the 

regions where this is taking place is expanding all the time. 

I would say this, that looking forward a big part of thinking 

about how competitive renewables will be, will be contingent on the 

price of natural gas. Gas is increasingly the price setter in the market. And gas trading at $2 per million BTU today, I think Adam 

was saying that they’re forecasting up to $3 in the next several 

years. We do forecasting as well. It’s probably in about the same 

ballpark. 

But so long as gas prices, you know, stay relatively low they’ll 

be strong competition between those technologies. If gas prices 

zoom back up then we think renewables are extremely well positioned. But overall we think renewable costs continue to slope 

downward, not at the same accelerated pace we’ve seen recently 

but more gently going forward. 

Senator CANTWELL. But if you were going to describe this inning 

of the ball game in reducing costs, we are probably just in the first 

or second inning. 

Mr. ZINDLER. Yes, we’re somewhere in, I don’t know, maybe the 

third or fourth. But, I mean, it’s starting, you know, everyone 

thinks that one day we’ll wake up and suddenly, wow, clean energy 

is cheaper than fossil energy. And it doesn’t work like that, you 

know. It’s a great, big, complicated world. And over time in different places we’re seeing more and more of this take place. 

75 

Last quickly just on storage and you did ask about that and I 

didn’t answer. Similar, sort of, economics where power storage 

starts to make the most sense on the distributed behind the meter 

level at first because you’re helping to offset the cost of retail 

power. And in some cases you’re helping to offset if you have to pay 

surge pricing or you know, particularly high pricing or any kind of, 

you know, fees related to your excessive use of power. If you can 

offset that with power storage you’re in good shape. 

So that’s where we’ll probably see some of this stuff come into 

the money first but there’s been a lot of developments around utility scale power storage taking place as well and battery prices 

are—have been dropping. We anticipate will continue to drop as 

more capacity comes online. 

Senator CANTWELL. On that point I want to keep making more 

investment because when I look at where this discussion has gone 

about oil and I remember Mr. Tollerson was before the Finance 

Committee a few years ago. I asked him what the price was just 

on the development. He was a very forthright, and he basically said 

$60 a barrel. 

So if we’re at $30 today and $60 is the recovery cost, it seems 

to me that yes, as Mr. Halff said, there’s going to be a correction 

at some point in time. I am not hoping to go back to $60 a barrel 

oil though. I want to diversify and make sure that we have a 

smoother path toward this transition. 

So thank you for that. 

The CHAIRMAN. Senator Cassidy? 

Senator CASSIDY. Thank you. 

First, I think I heard Senator Cantwell mention that and I think 

I heard this, Senator Cantwell, that either wind or solar now provides more jobs than those which are in oil and gas? If that is what 

you said, maybe I misheard. That is not true. 

Just to point out the Bureau of Labor statistics points out that 

their direct employment under oil and gas is about 1.6 million jobs, 

1.86 million, and renewable jobs related to all renewable jobs in the 

United States is 724,000. And there is a greater differential if you 

include the indirect. Just to mention. 

Mr. Zindler, in your testimony you speak about how renewables 

now account for 67 percent of energy production but you include 

natural gas as a renewable. Is that in your kind of list of those 

which account for that 67 percent, was that a misprint or ? 

Mr. ZINDLER. I think I said if you include renewables with a definition including large hydro, if you include nuclear and you include 

natural gas. Those are not, those are different categories. 

Senator CASSIDY. Okay. So under renewables, you are lumping in 

natural or put it this way, in that statement, renewables plus natural gas. 

Mr. ZINDLER. That may have been what I said, but I think what 

I wrote was I described these as different categories and that was 

my intention. 

Senator CASSIDY. I will look at that again. I think I read differently but will not dwell upon it. 

Mr. Halff, I really enjoyed your testimony. I have enjoyed it all, 

but I never understood the perspective of the Saudis as well until 

76 

I read your testimony. So, thank you for that. Let me ask a couple 

questions on that. 

You had mentioned that imports of light oil into the United 

States are increasing. Why is that if we have all this surplus light 

oil in the United States? 

Mr. HALFF. So that’s a function of the—thank you for the question. It’s a function of the differential between U.S. prices and European prices. 

Senator CASSIDY. But I presume that our Louisiana light sweet 

and West Texas intermediate is priced now similar to Brent but yet 

the transportation cost has to be less here. I mean, obviously, you 

are shipping it from Louisiana into a Gulf Coast refinery, so it 

seems that that would be a price advantage for a domestic producer. 

Mr. HALFF. But that’s the trick about U.S. transportation of 

crude oil within the U.S. It has to be done with Jones Act vessels 

or by rail and that’s—— 

Senator CASSIDY. Or by pipeline off the Louisiana coast. 

Mr. HALFF. Right. But there’s only so much that can be moved 

by pipeline from east to west. 

Senator CASSIDY. Okay. 

Mr. HALFF. And to the markets where the imports of light crude 

have been coming in. 

Senator CASSIDY. I am still not quite sure I’m, just because it 

even seems like most of the Louisiana, most of the West Texas intermediate is coming by pipeline. I am still not sure the impact of 

the Jones Act deployment. I can see if you are moving from Louisiana to Philadelphia but since most of our refining capacities are 

on the Gulf Coast I am still not sure unless you are saying that 

we are importing the light oil into Philadelphia. 

Mr. HALFF. Yes. My understanding is the imports of light crude, 

light sweet crude, tend to go to the East Coast. 

Senator CASSIDY. Gotcha. 

Mr. HALFF. Of the U.S. 

Senator CASSIDY. Gotcha. 

Next, Mr. Sieminski, this is not related to your testimony but it 

is something you are probably familiar with. The EIA has projected 

decreased energy consumption relative to baselines a little bit ago. 

So if there is a baseline five years ago your predicted energy consumption would be here. Your more recent forecast has energy consumption there. 

There is a tight correlation statistically, and it is reflected in 

EIA’s data as well between economic growth and energy consumption. Is it fair to say that EIA has decreased its forecast for the 

amount of energy consumed, electricity consumed, because you 

forecast less economic growth? 

Mr. SIEMINSKI. Our economic growth forecasts have come down 

slightly over the past few years, but I think that’s just a reflection 

of some of the overall economic conditions and not just in the 

United States, but globally. To say that the ratios of energy consumption to GDP generally have been improving because of efficiency gains and some structural changes in the economy. So as 

you move from high energy consuming industrial activities to service sector, consumption goes down. 

77 

Senator CASSIDY. So maybe facts from energy intensive enterprises, if you will, offshore to China and what is left are service related jobs. If I may kind of, interpret that. And so you end up using 

less when your GDP is down but also you use electricity in a service job relative to energy intensive industry. 

Mr. SIEMINSKI. I think these gains and efficiencies are taking 

place around the world including in China. But—— 

Senator CASSIDY. Now I have read though, if I may, that actually 

in times past when efficiencies have increased the amount of electricity used has likewise increased because the cost input, if you 

will, is now lower and so therefore folks are able to ramp up production because the cost input is lower. 

Mr. SIEMINSKI. When EIA has done our long-term projections in 

our annual energy outlooks on the electricity side, I do know that 

a lot of the improvements are in efficiency. That’s reduced use in 

households, for example, because of improved efficiency of lighting, 

improvements in the efficiency of big energy using equipment. 

Senator CASSIDY. I am sorry, I am way over. Hopefully there will 

be a second round, so I will come back to that. 

Thank you. 

Mr. SIEMINSKI. Happy to do that, Senator. 

The CHAIRMAN. Okay. 

Senator Hoeven? 

Senator HOEVEN. Thank you, Madam Chairman. 

Alaskan water which is very nice. 

The CHAIRMAN. Alaskan glacier water. 

Senator HOEVEN. Right, yes. That is great. Thank you. 

I would like to thank all the witnesses. 

We have an Administration, the Obama Administration, that 

continually makes it harder and more expensive and more difficult 

to produce oil and gas in this country through regulation and other 

restrictions while at the same time making it easier for our adversaries to produce and export oil and gas. 

An example is recently lifting sanctions on Iran. That is actually 

borne out in your projections. I think both Mr. Sieminski, Mr. Halff 

and maybe others just got done informing us that U.S. domestic 

production will decline by approximately 600,000 barrels a day over 

the next several years and that Iran production and export will increase by 800,000 barrels a day over 2016 and 2017. 

I think that is the wrong approach, and I think it has ramifications in job creation in this country, in economic growth in this 

country and in national security from the standpoint of energy security. 

So my question to you, and I would like to start with Mr. 

Sieminski and Mr. Halff. I appreciate both of your testimony very 

much. I might ask Mr. Halff also to put in some projection in terms 

of what he anticipates for price over 2016 and 2017 as Mr. 

Sieminski did. 

Others can respond to this as well, but I would like you to give 

me your recommendations as to what we should do from a public 

policy standpoint so that our industry can better compete in this 

global economy. As we look at energy legislation, I know Senator 

Murkowski and Senator Cantwell have energy legislation they 

hope to bring to the floor, possibly even this week. What type of 

78 

provisions should we advance to help our industry compete? I 

would like to start with Mr. Sieminski. 

Mr. SIEMINSKI. Senator, I think I’ll let Antoine talk about policy 

recommendations since EIA generally tends to stay away from 

those. And if I want to keep my job I should as well. [Laughter.] 

Mr. SIEMINSKI. On the question of what has been the main factor 

driving oil production down, I would say it’s the price. So I don’t 

think it was a policy decision that caused oil production to climb. 

Senator HOEVEN. That was not my question. 

Mr. SIEMINSKI. Right. 

Senator HOEVEN. My question is how do we empower our industry to compete rather than shackle it at the same time we are actually taking steps that assist our adversaries? That was my question. 

Mr. SIEMINSKI. Right. 

Well, one thing that Congress and the Administration did in a 

bipartisan fashion was to agree to allow crude oil exports. So that 

would be one answer to your question. I think that allows for U.S. 

crude oil production to compete on global markets. 

The thing that’s, kind of, limiting the impact that that would 

have in the near-term is that the Brent and WTI prices are very 

close together. And so the advantage that our crudes had on global 

markets is somewhat limited. 

Senator HOEVEN. I agree. 

Lifting the oil export ban was very important and that set a very 

good example of what I am talking about. What else can we do that 

can make a difference, again, empowering our industry to compete? 

If you do not want to make recommendations, I understand. But 

then I would like to go to Mr. Halff. But that is specific to what 

I want. What can we do that helps our industry compete which 

benefits our nation? That is what I am looking for. 

Mr. SIEMINSKI. I don’t know whether it’s necessarily a government function, Senator, but I think one of the big advantages that 

U.S. industry has had and is likely to continue to have is the technology, the technology of shale oil development occurred here and 

maintaining the improvements in costs of drilling and production 

is something that would make a big, positive difference for our producers. 

Senator HOEVEN. Mr. Halff, do you have recommendations as to 

how we can help our industry better compete in this global competition, this global economy? 

Mr. HALFF. I wish I had but I think it’s actually doing a pretty 

good job competing. And I would agree that the lifting of the export 

restrictions is a very positive step because it allows oil to go where 

it’s needed in the market and that the U.S. can compete in that. 

It’s opening up new markets, potentially, if the financials support 

exporting. So that’s a very good step. 

Another thing which I think is very good for competition is what 

Adam Sieminski has been doing at the EIA which is improving 

data transparency. The more the market knows about how the industry is doing, where the stocks are going, what are the trends 

in production and demand, the more investors are capable of providing the right response to making the right moves and helping 

the industry compete. 

79 

But I think it’s a very new world for the oil industry, you know, 

for most of its history oil companies have operated under some 

kind of price umbrella whether under the Rockefeller standard oil 

system or the Seven Sisters Texas Railroad Commission or OPEC. 

There was always some kind of protection against the fluctuations 

in prices that was provided to industry and enabled it to make a 

large, long term investments. 

Now, that umbrella has disappeared. It’s gone. OPEC is out of 

the picture for now. It could come back later but it’s out right now, 

and industry has to learn to live in a very different world. 

This is a process that will plan its course naturally. But my projections are that once the rebalancing of the market runs its course 

and the market starts recovering the U.S. industry would be in 

pretty good shape. 

I don’t think that the oil companies in the U.S. would be the 

largest, the main victims of the price correction. OPEC, I think, 

will come out pretty good. GCC countries, I mean, Saudi Arabia, 

Kuwait, UAE and U.S. companies, I think, would come out on top. 

The bigger victims of the downturn would be the very heavy, big 

ticket projects, deep water, West Africa, all the very high investment intensive projects. Those would likely be more affected by the 

downturn in my view. 

Senator HOEVEN. Any other recommendations, specifically, that 

help us compete? Alright, thank you. 

The CHAIRMAN. Thank you, Senator Hoeven. 

These are very important questions in terms of where these forecasts place the United States and our domestic production, what it 

means for our economy, what it means for our jobs and what it 

means for prices for the American consumer. 

It has been a tough, tough 18 months or so in Alaska. We have 

seen Shell, obviously, lay off almost all of their folks up north. Conoco has had major layoffs. BP just announced last week major layoffs in the state. Repsol canceled a winter project which meant contractors not moving forward with projects. Statoil returned their 

leases in the offshore. It has been a very, very discouraging time. 

Low prices in Alaska do not necessarily translate to good news. 

Our treasury is certainly hurting as a state that is very reliant on 

oil. But as I mentioned, low prices for the consumers do not necessarily line up with what you are seeing in the lower 48. 

I mentioned the prices in Nome. I tried to get a better read on 

what they were actually. In October they were hanging at $6.22. 

When I was there in January, they had dropped to about $5.50 a 

gallon. 

The clips this weekend have gasoline at $9.99 in Noatak, and 

they are trying to work with the Park Service to be able to haul 

some fuel across Park Service lands. I do not know whether we are 

going to be able to do that, but by gosh I am sure going to try because nobody should be paying $9.99 for their oil when people here 

in Washington, DC are getting it for $2.10 or whatever it is here. 

So there is a great deal of inequity, and that is what gets my 

dander up and gets my ire up. When I look to the opportunities 

that we have now created for Iran that we are not creating, that 

we are not allowing, for Alaska or other states like North Dakota 

or Louisiana, it should get us riled up. 

80 

I recognize that so much of this is about price, but it is also 

about the policies that we put in place and making sure that you 

have an environment that is constructive. This is where I want to 

talk a little bit about the critical minerals and the situation that 

you spoke of, Mr. McGroarty. You said that the outlook is bleak 

when it comes to our mineral, critical minerals and particularly 

with our rare earths. 

Mr. Zindler, you have stated that 2015 will likely be remembered 

as watershed for de-carbonization. I think Mr. McGroarty went on 

to state exactly how important these minerals are so that we can 

move forward with wind and solar and all of the smart technologies 

that we want, but we really do not want to be even more reliant 

than we already are. 

I appreciate what you did in terms of outlining how, historically, 

we have been so reliant in certain areas. But instead of making 

progress it seems that we are actually going backward. 

Now you have indicated that there are some areas that we might 

be able to reduce this dependence. The fact that we produce zero 

rare earths and are now, again, 100 percent dependent on China 

for our rare earths should be unsettling to all of us. 

We have lousy permitting processes. Where, in terms of permitting for mines, minerals, if we are not the worst in the world, we 

are close to being the worst. I think Papua, New Guinea, is worse 

than us in terms of permitting. [Laughter.] 

But you have also mentioned prospects for recycling and substitutes. You have indicated that really even with that, unless we 

do something to increase our production, we are not going to get 

ourselves out of this hole. 

Can you speak a little bit to what you think our genuine alternatives may be when it comes to this reliance on our minerals? 

Mr. MCGROARTY. Thank you, Senator. 

Yes, there’s—it’s a very deep dependency, first of all. And in 

terms of bridging topics from oil and gas to hard rock minerals, as 

we look at, just from the energy side, new sources, new energy 

sources, alternative energy sources, I certainly would not want us 

to move from a dependency that has been difficult for us over 50, 

60 years into a different sort of dependency for a whole series of 

new technologies. 

The CHAIRMAN. In fairness, aren’t we there already? 

Mr. MCGROARTY. We are there. 

The CHAIRMAN. Yes. 

Mr. MCGROARTY. And that’s why, as I said in my remarks, you 

know, all of the above. I mean we have to recycle. Such is our degree of dependency, we have to recycle. We have to reclaim the 

metals and minerals that are in, you know, the devices that we use 

every day, small and large, urban mining as they say. 

We have to look, I didn’t mention one in the oral testimony, but 

a lot of waste piles from mines that are no longer in operation that 

date back 50 years, 70 years, 100 years and the rate of extraction 

there is very dependent on the technology of the time and also, our 

interest in the metals and minerals of the time. So in many places 

around the United States we may have, we do have, opportunities 

to reclaim waste tailings by extracting the metals and minerals 

that are still there that either we did not do efficiently enough the 

81 

first go round or we didn’t learn after them at all the first go 

round. And now they’re part of that periodic table that we’re suddenly interested in. 

We should be doing all of that. We should be looking to substitute. But I am concerned about the easy discussions of substitution when you look, specifically, at what the possibilities are, the 

material scientists on these issues, where you’re substituting for, 

you know, rhenium where we’re 83 percent dependent and you can 

substitute for this particular applications of vanadium. But we’re 

95 percent dependent on vanadium, you know, vanadium from 

Kazakhstan and vanadium from China. 

Are we looking at the degree of dependence that we’re reinforcing 

or are we looking at the geopolitics of it? And so it pushes me back 

in the direction, we absolutely have to expand where we can, bringing new production into play. 

The metals and minerals we’re talking about, all of the devices 

that we use, we’re at the very bottom edge of that. I really do believe there’s a revolution going on in material science, and it is impossible that it’s not going to put a lot more demand pressure on 

us. So that we’re going to have to get very inventive too. 

We’re a very blessed nation. We’re resource rich, but are we 

bringing these new resources into development or are we creating 

obstacles there? 

I just think as this whole sphere is evolving so rapidly I don’t 

think our ability to, kind of, process what the physicality of the 

needs. You know, we’re bringing power from the wind and the sun. 

The physicality of bringing it into the grid, distributing it, as we 

talked about today. Those take devices. What are those devices 

made of? Are we going to be buyers of those devices or would you 

rather be producers of those devices? 

So it’s big issues for manufacturing, national security. And 

there’s just a whole lot of metals and minerals where we’re going 

to have to get used to treating in the same way as we’ve talked 

about oil and gas. 

The CHAIRMAN. Well, the good news for us is that not only are 

we blessed with amazing resources when it comes to our energy potential, but we have some amazing mineral resources as well. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Madam Chair. 

I want to go back to electricity for a few minutes. 

Obviously the business models are changing for utilities. I do not 

know if they feel that intensely at this moment, but I think future 

change will continue to drive that. 

It used to be that vertically integrated monopolies built power 

plants, strung transmission lines, distributed, you know, the customer billing and now customers or consumers and businesses are 

demanding more control and getting it. They are looking at cleaner 

sources. Clearly there is a lot of change to what has been the traditional utility model. 

We obviously want to continue to stir investment as well. I wanted to ask you, Mr. Zindler and Mr. Lucier, how do you see these 

business models evolving for utilities over the next several years, 

and how do we make sure that consumers feel even more empowVerDate Nov 24 2008 14:58 Jan 23, 2017 Jkt 098966 PO 00000 Frm 00085 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\98966\F98966.TXT F98966
82 

ered to get the kind of efficiency that they want out of their energy 

prices? 

Mr. LUCIER. Well, the utility business model—thank you, Senator 

Cantwell, for that very important question. 

The utility business model has really been evolving rapidly, ever 

since Thomas Edison’s Pearl Street Station in 1882. And the initial 

concept that served us well into the 1970’s was the idea of economies of scale, to get low consumer prices we needed bigger and bigger operations. That broke down for a lot of reasons in the 1970’s. 

It is actually the 70’s, 80’s and the 90’s when we heard about distributed generation on a big scale. 

Back then the focus was on distributed generation in terms of 

natural gas. But it still raised the issue of unbundling. I think that 

the model of cost-based regulation has been very helpful for providing infrastructure, but we’re moving into a model now where 

scarcity-based pricing is what applies to the wholesale power markets. 

And that’s really the fundamental issue here. You need to define 

scarcity based pricing in such a way that you adequately price reliability. You adequately price load following. You adequately price 

ancillary services to keep the grid going. 

And for that reason, I think, that you need to pay attention to 

a balance of industries and a balance of business models so that 

you have, not only the fly wheel, the power reserves that keep the 

grid going, but also the financial wherewithal to keep the entire 

thing flowing financially too. 

Senator CANTWELL. Before Mr. Zindler answers I should just 

note we are pretty big fans of cost-based power in the Pacific 

Northwest. 

Mr. ZINDLER. So I would just say that I think this is a very interesting time for utilities. And in particular the question you asked 

earlier around distributed generation is what is causing probably 

the biggest sense of disruption and frankly, concern. 

Obviously when you, when a customer in your operating area 

starts generating power off their roof they don’t need to buy as 

much, necessarily, from you as the utility. If you compound that by 

the fact that there may be so-called net metering where by effectively they can, you know, de facto sell the power back into the grid 

at a retail price, that also can be threatening. And so we have seen 

what I would say are at times confrontational situations between 

utilities and what have sprung up to be, you know, a relatively 

small industry growing of installers who have put these systems on 

peoples’ roofs. 

And I guess the one, hopefully, constructive statement I can 

make about that is that I would hope that utilities would view this 

trend as something that they want to participate in and take advantage of and find business models whereby they can be the ones 

who can help either be directly involved in doing the installing or 

partnering with some of these players. And I say that only because, 

at least in our view, this is, to a large degree, inevitable. 

The costs are coming down. The technology is getting easier to 

put on peoples’ roofs. It’s going to happen. And so, it is probably 

better to be involved rather than being in conflict, necessarily, with 

what is an emerging industry. 

83 

Senator CANTWELL. Do you have a way to communicate that? 

Mr. ZINDLER. Testifying before the U.S. Senate Energy Committee. [Laughter.] 

Senator CANTWELL. I hope you are right. I hope you are right because I see, as I mentioned in my opening statement, everybody 

from Tea Partiers to environmentalists coming to terms on the fact 

that they do not want to be overcharged just to get more energy 

efficiency as they participate in creating energy. I think utilities 

have to understand that. 

Mr. ZINDLER. And I, Madam Chair, will submit for the record Department of Labor statistics on green energy jobs verses fossil fuel 

jobs just to show the growth and amazing surpassing of that sector. 

Senator CANTWELL. Yes? 

Mr. LUCIER. Well Senator, I just wanted to follow up on the question of regulated utilities in the business model. 

I think that with regard to distributed generation one of the key 

issues is really just cost allocation. How do you price the power? 

How do you price the grid? 

And there’s a lot of experimentation going on at the state level. 

And I think it’s only a matter of trial and error, somewhat evolution until we find the answer that’s going to work consistently 

across the country. 

If you look at what happened last year in the equity markets the 

S and P were down about one percent, utilities were down about 

seven percent. But on the whole, I think, utilities have a much 

more stable business market. And utilities in the regulated space 

actually have their own interests in utility scale solar as well. 

Where I’d really direct your interest would be the merchant 

power markets where last year we saw the stock prices of major 

merchants going down anywhere from 30, 40, even 70 percent. A 

lot of it having to do with natural gas but also a lot of it having 

to do with market price issues and policy questions about how markets would be structured in the future. So while I think that we 

can certainly accommodate the dynamic or distributed generation 

in a variety of ways, the area that’s probably most urgent right 

now is the wholesale power market that serves two-thirds of the 

American public. 

Senator CANTWELL. Yes. 

I would just note on that, that we in the Northwest, I think, have 

one of the largest deployments of electric vehicles just because, 

again, we have cheap electricity. So there is an upside as well to 

the utilities. Clearly, I think as Mr. Zindler said, get on the side 

of the consumer and see the many applications here that could 

grow the business, but grow it in a different way. 

Thank you. 

The CHAIRMAN. Senator Cassidy? 

Senator CASSIDY. Yes, thank you. 

Mr. Sieminski, going back to where we left off our last conversation, whether or not the residential efficiencies can totally make up 

for this loss of projected power. You can explain it, if you will? 

I am looking at EIA’s Annual Energy Outlook figures and because others cannot look, I will mention them. Your 2015 base case 

had 4,070 terawatts in 2013 increasing to 4,691 terawatts in 2030. 

84 

A terawatt being 100 billion kilowatts, I think, a 100 billion kilowatts. 

Now under the Clean Power Plan rule there is actually a savings, if you will, of 581 billion kilowatts which is to say, 581 

terawatts. Can we really save 581 terawatts on residential efficiencies? I mean, is that part of your projections? 

Mr. SIEMINSKI. Well, there are three big factors that are driving 

the deployment of renewables: tax issues, regulatory issues and 

technology issues. 

Senator CASSIDY. Now going back to this question. 

Mr. SIEMINSKI. Right. 

Senator CASSIDY. Is the EIA really, now granted these clean 

power plant projections, but EIA is estimating a 581 terawatt increase over the Clean Power Plan rule in 2030. You had mentioned 

some of those savings will come from residential efficiencies. Is it 

reasonable to assume that we can save 581 terawatts from residential efficiencies? 

Mr. SIEMINSKI. I’ll have to get back to you with numbers. We 

have not done our final analysis of the Clean Power Plan overall 

impact. We will have that as part of the 2016 Annual Energy Outlook. 

Where the savings come from that would be required with the reduction in coal are—there was also the other side of that which is 

the possible increases in output of electricity from natural gas and 

of course, renewables. 

Senator CASSIDY. Now under the Clean Power Plan will natural 

gas stay basically stable? 

It is amazing we have been looking at how much we would have 

to invest in renewables in order to make up for the shortfall. It is 

incredible, like the entire state of Massachusetts would be covered 

with the highest efficiency windmills sort of thing. It just does not 

seem practical. But that said, that is what the numbers show. 

Okay Mr. Zindler, by the way, I apologize. You were right when 

I read your statement again, you do read renewables, natural gas 

accounts, for most of the increase. I thought you were including the 

two, but as it turns out, of course, natural gas is the lion’s share 

of that. I just misread, so I apologize. 

Mr. Lucier and then Mr. Zindler, distributed energy we speak of 

in terms of solar panels, but I remember being in California and 

people were putting in distributed energy natural gas generators at 

their office buildings. It comes to mind, Mr. Zindler, you said that 

an almost prerequisite for renewables to be competitive is for a 

high cost of electricity in that setting. 

To what degree are the distributed energy sectors, actually natural gas in these areas of high electricity like California, as opposed to solar or wind? 

Mr. ZINDLER. I can come back to you. I’ll have to get back to you 

about exact numbers but the, at least in the most recent years, 

most of distributed phenomenon has been around solar. 

Senator CASSIDY. Now is that in terms of volume of kilowatts 

produced or just in terms of installations? 

Mr. ZINDLER. I believe in terms, well certainly in terms of installations because obviously these PV systems can be very small. In 

85 

terms of actual kilowatt hours produced it’s probably a smaller 

margin. But still mostly, it’s my understanding, it’s PV. 

But you raise a good point which is there’s an interesting opportunity there, certainly, for gas. And gas is finding its way into the 

economy in lots of different ways. There was, in fact, there was a 

good deal of talk around natural gas vehicles. That was before the 

oil price collapsed. And now it’s going to be more challenging, of 

course, for gas to compete in vehicles. But there are more and more 

ways. 

I would say this that obviously when you do onsite natural gas 

generation you have to get the gas there and there’s, you know, 

there can be those issues. But it’s certainly not—there’s nothing 

about the solar distributed, you know, generations or revolution 

that we’re seeing that precludes gas also being a distributed source. 

Senator CASSIDY. Gotcha. 

Mr. Halff, you have done a really good job, excuse me, I am almost out of time, Mr. Lucier, I am sorry. 

Mr. Halff, you did a really good job of showing the international 

instability that is being created in some countries have an increase 

in instability because of high energy, two things, either high energy 

cost and/or low energy, low income from energy production, if you 

will. 

Now I am struck. Mr. Zindler says that for renewables to work 

the base load has to be expensive. Coal is cheap worldwide. India 

and China have clearly invested tremendously in coal in an effort 

to increase their economic growth. Obviously coal is cheap. It is 

there. They do not have to import it, that sort of thing. 

If we are to bring in those sorts of high energy costs that seems 

to be a prerequisite for mass scale electrification of, let’s say, India. 

That almost seems unaffordable for India. 

I say that because economic growth is clearly in the interest of 

India. They are going to the Chinese to head off instability with 

economic growth. So in this context is it practical, is it foreseeable 

that those two countries, for example, will forego the use of their 

own natural resource, coal, for a renewable sort of grid? 

Mr. HALFF. You are absolutely right that coal is very attractive 

for those countries and it’s been the backbone of the Chinese energy sector. But we’ve seen some retrenchment in China, in coal 

use. Coal use has actually been declining lately. 

And—— 

Senator CASSIDY. Now is that related to the economy declining 

or is that related to—— 

Mr. HALFF. Well I would say it’s related to the economy in part 

because there’s less industrial activity but also to the external costs 

associated with coal. And for instance, pollution in major cities has 

become a top concern with Chinese policymakers. It’s deterred, for 

instance,—workers from going to the Beijing area. It’s caused social 

instability. It’s been a cause of poor taste and riots and—— 

So it’s a top concern. And we’ve seen renewables take market 

share from coal in China, the margin. So it’s not entirely just based 

on the domestic availability and the cost base. There’s other factors 

at play. 

86 

Also some of the coal pipelines, for instance, or coal-run factories 

in China have been very ineffective. And those are the ones that 

have been targeted for closure first by the government. 

In India, coal remains a very big part of the picture for the foreseeable future. But there the case for renewables comes from the 

idea of generated, of distributed generation and leap frogging some 

of the costs that have been associated with transmission and distribution in other emerging economies after they’ve gone through 

periods of expansion. 

Senator CASSIDY. Gotcha. 

Mr. Zindler, I am sorry, I am out of time. But is that okay? Mr. 

Zindler? 

Mr. ZINDLER. I would just jump in and say I think on India in 

particular I’m happy to share with you, Senator, some of the really 

exciting things that have gone on around renewables and particularly distributed solar, as Antoine mentioned. 

There are 400 million people in India with no access, basic access, to electricity. And one of the most interesting developments 

we’ve really seen in just the last few years as a result of the lower 

cost of solar are very tiny microsystems that are being distributed 

for $100 or less into rural communities that provide just basic 

power needs to turn on a light, you know, a radio. These are the 

most basic needs that people have that are starting to be served. 

And frankly, if you do the math on that verses building a giant 

coal plant with the hub and spoke network, solar definitely competes. 

Senator CASSIDY. Totally works on that. It is just the energy intensive enterprise that actually elevates them out of poverty, and 

that is, I guess, the more demand. Step one for 400 million people 

that was just to turn on a light bulb. 

I yield back. Thank you. 

The CHAIRMAN. Thank you. 

I have got just a couple, hopefully brief, questions here. I want 

to go back just for a moment on natural gas and the reality that 

we have got to be able to move that natural gas and some of the 

opposition to infrastructure development. 

You noted this in your testimony, Mr. Lucier, and I think you 

state opposition to infrastructure development that could prolong 

the supply glut and put the timing of relief in question. 

So the question to you is if we have a situation where pipeline 

siting and permitting is delayed on a bigger scale what happens? 

What do you think the consequences are for natural gas? Could 

these types of impediments and we are seeing them, believe me, we 

are seeing them, particularly in certain parts of the country where 

there is a nimby attitude that while we want to have pipeline 

transmission but we do not want it running through our state, 

move it through somebody else’s. Could we be in a situation where 

because of just that, kind of, political opposition we have a real 

threat to natural gas supply itself? 

Mr. LUCIER. Well Senator Murkowski, we have too much of a 

good thing in some parts of the country. In the Marcellus, obviously, there’s a tremendous amount of gas. And it is really building 

up there. We don’t have the take away capacity. 

The CHAIRMAN. Right. 

87 

Mr. LUCIER. What that means is that the price of gas is lower 

in that Marcellus region which corresponds to PJM even MISO. 

And this is putting huge pressure, not just on power prices but 

coal-fired power plants and in particular on nuclear. So take away 

capacity for that gas is key. 

On the other hand, just three, four, five hundred miles, depending on where you count, we have New England. New England 

which is just totally dependent on gas for its merchant power. Very 

efficient network, but they don’t have access to this great gas supply from the Marcellus. 

We’ve been fortunate this year to have warm weather. We’ve had 

El Nino shining on us. But we came very close to severe weather 

events during the Polar Vortex in 2014, not once but twice. And 

New England is still in a situation where they can still be one 

weather emergency away from a serious power or heating crisis. 

That shows the urgency of delivering gas from areas that are gas 

rich, in fact, oversupplied, to areas that are actually quite exposed 

right now. 

So I think in your oversight you should definitely pay attention 

to the efforts to build pipeline capacity into New England. 

But on the broader question of delivering natural gas to provide 

clean gas generation we’re seeing a record number of pipeline proposals at FERC right now that is straining the resources at FERC. 

They’re actually doing quite a good job to move forward. 

But we’re also seeing FERC literally surrounded by hunger strikers who are demanding that FERC issue their new permits for anything. And the litigation is also slowing down those pipelines. And 

while natural gas is still a carbon based fuel it’s cleaner than the 

alternatives. 

I was driving through the coal country of Southwest Virginia this 

time last year and noticed anti-pipeline signs. The State of Virginia 

wants to build natural gas power plants to reduce its overall dependence on coal, but if you can’t build a power line in Virginia if 

the Atlantic coast pipeline is held up. 

People in my client meetings are constantly asking about what’s 

happening with the Constitution pipeline, what’s happening with 

any number of other projects. There is a lot of uncertainty among 

investors as to whether you can actually build a new power plant 

if you can’t actually supply the gas to them. 

The CHAIRMAN. This is a huge issue for us, and they do not get 

near the attention. This is why I think it is going to be important 

that we are able to move some of our energy policies forward such 

as we have within the Energy Policy Modernization Act that we 

hope we will bring to the floor here very shortly. 

In this same context then about the impact of natural gas and 

what it does to other energy sources, whether it is coal or whether 

it is nuclear, I want to ask Mr. Sieminski about your projections 

on nuclear because in your chart, your table, number one on nonhydro renewables expected to make up nine percent of electricity 

generation by 2017. You indicate that by 2017 actually our nuclear 

generation makes up less of that overall portfolio than it has in 

years past. 

If we have a situation as Mr. Lucier and I have just been talking 

about where you are not able to either move that gas to where it 

88 

needs to get what does this do to your projections? How do you see 

the viability of nuclear as part of the energy portfolio going forward 

given what we are seeing with some of the constrictions on natural 

gas? 

Mr. SIEMINSKI. Senator, I think in our annual energy outlook we 

have just a small amount, you know, 0.8 I think or it’s 800, the difference between 789 and 808 billion kilowatt hours of generation 

from nuclear in the annual energy outlook. In the clean power 

plan, the proposal will have the final numbers out soon, but that 

didn’t change very much. I would say that was nuclear is flat because we have total electricity consumption growing by about 0.7 

or 0.8 percent per year. Nuclear’s share is slightly decreasing. 

Back to the question that Senator Cassidy was asking. We do see 

under the clean power plan and the extension of the PTC and ITC 

for wind and solar, the tax credits as well as improvements in technology that have been talked about by other members of the panel 

that there will be improvements in the use of solar and wind as 

you look out. But we’re also assuming that natural gas-fired generation goes up both in the annual energy outlook and in the clean 

power plan. 

The amount of generation under the clean power plan will come 

down a little bit. It will be replaced by more wind and solar and 

natural gas, not so much nuclear, back to your question, lower coal. 

But the total amount of generation is just a little lower. 

And so you don’t have to have massive changes in the efficiency 

in the residential sector to make up for that. So basically residential users will be using more solar and wind capacity as well as 

natural gas capacity, but not nuclear. 

The CHAIRMAN. Not nuclear. 

Mr. Zindler, I am out of time, but if you wanted to add something very quickly, certainly we will give you that opportunity. 

Mr. ZINDLER. Yes, just very quickly back on the gas pipeline 

question. 

I did want to just note that, you know, we’re looking at our forecasting where 2017 will probably see more capacity added for natural gas delivery than we’ve seen since 2008 with about 65 billion 

cubic feet per day being added over the next three years. There’s 

a lot of pipelines that have been approved that are coming online 

that are directly related to that Marcellus and the Utica, and it’s 

worth noting that I think that that may ease some of the bottlenecks that have existed so far. 

The CHAIRMAN. We are hoping so. Thank you. 

Senator Hoeven? 

Senator HOEVEN. Thank you, Madam Chairman. 

I want to go back to Mr. Sieminski and Mr. Halff in terms of 

their energy, oil and gas price outlook. 

Mr. Halff, you talked about this black swan concept whereby 

OPEC and others may pump a lot of their oil now with the thought 

that later there may be less demand. Given the Saudi needs about $100 a barrel. In fact, Russia needs 

about $100 a barrel to cover their all in costs for, in terms of their 

spending in the budget. How does that impact they’re continuing 

to produce at a high rate with prices as low as they are and how 

long do they continue that? 

89 

Mr. Halff? 

Mr. HALFF. Thank you. 

So Saudi Arabia can produce and endure on these reserves for 

some time. There’s no immediate pressure there. Certainly they 

have been dipping in their reserves. 

Senator HOEVEN. Are you talking about their financial reserves? 

Mr. HALFF. Yes, yes. But they have the capacity, perhaps more 

than any other producers, to continue blending at fairly low prices 

for quite a while. However, we’re seeing signs of pressure and we’re 

seeing signals that they may be considering some quite revolutionary changes in the economy. There’s talk of privatizing the national company to some degree. It’s hard to say how much of that 

is for real, but there’s signs of pressure and signs of a shift in the 

makeup in the economy and the mindset. 

Russia, it’s a different situation because Russia has, in a way, 

benefited from the collapse of its currency. So its production costs 

have come off dramatically compared to the revenue which continues to be in dollars. So that, I think, partly explains why Russia 

has done so much better than anybody expected. 

In fact, its production has increased dramatically since things 

started looking really bad for Russia, since the beginning of the 

price drop and the imposition of international sanctions. Production 

had been expected by many to fall. And it’s actually increased 

steadily. And Russia has been producing at record levels. 

So how long can this go on? Not forever. One advantage that the 

Russian companies have had also is that they haven’t been affected 

by the price drop as much as the state revenues have. Their tax 

system is such that the companies have managed to keep, to hold 

onto, a lot of the take and the state budget has suffered most from 

the price drop. 

Now the companies go to state finances for funding. So that will, 

that’s where, I think, the companies will hurt eventually. And 

that’s what going to put a stop on the kind of steady production 

that was a growth that we’ve seen over the last few months. 

Senator HOEVEN. Aren’t those factors though going to drive 

prices higher at some point because how long, I mean, if their all 

in cost is $100 and they’re selling at $30 or $40, how long can they 

sustain that? 

Mr. HALFF. There’s no question in my mind that the price will 

rebound and will rebound even steeply. When that will happen it’s 

very difficult to time. Is it going to start at the end of 2016 or 

sometime in 2017? 

Currently the futures markets are pricing oil in 2020 under $50 

a barrel. I don’t think that’s realistic. And you know, futures market are not particularly good forecasters of long term prices. Their 

track record is quite poor. In my view it’s almost a given that 

prices would be significantly above $50 by 2020. Now the timing 

is difficult to assess. 

And the capacity to grow production from many counties would 

be degraded. Russia, I don’t think, will be able to continue producing at the kind of growth base that we’ve seen. 

Iraq has dramatically increased production, but it will be hurt by 

its incapacity to pay the companies operating there. So the dramatic increase we’ve seen more than one million barrels per day of 

90 

capacity since the price collapse and the takeover of Mosul by ISIS. 

That’s not likely to be sustainable to continue. 

And we’re seeing now production drops in the U.S. in light, tight 

oil production. Those declines, I think, will continue. Eventually 

there will be a rebound. Light, tight oil is presumably much more 

price responsive, will be able to come back quickly when the price 

turns. 

Senator HOEVEN. What is that? 

Mr. HALFF. Shale oil. 

Senator HOEVEN. Oh, yes. 

Mr. HALFF. For short. 

Now one of the big questions is will shale oil when it comes back 

to the market, when both comes oils come back, will it come back 

at the kind of pace we’ve seen over the last few years or at the diminished pace? 

One key factor there would be the degree to which the cost deflation that companies have enjoyed since the price collapse whether 

that will stay or how much will re-inflation we’re likely to see as 

demand for oil services rebounds with the price increase. 

Senator HOEVEN. Mr. Sieminski, your thoughts? 

Mr. SIEMINSKI. With the Chairman’s permission. 

Senator HOEVEN. Well, would you like to—— 

The CHAIRMAN. Why don’t you continue? 

Senator HOEVEN. Thank you. 

Mr. SIEMINSKI. Senator, I grew up in Pennsylvania and not in 

the great state of North Dakota but there is a phrase that might 

apply here. This ain’t my first rodeo. I’ve seen seven big price declines, and I’ve seen six big price increases. I think Antoine and I 

agree that prices are coming back. 

I think getting at the heart of your question, let me just try to 

separate it into two parts. 

A number of countries, Iraq was in there. Venezuela was also in 

there, had numbers calculated, you know, a while ago, and they 

needed $100 to make their budgets. And in Russia’s case the collapse in the ruble and the strength in the dollar have really improved their position. 

So they export oil. They get dollars for it. Their costs are in rubles. So that currency exchange ratio has really helped Russia. 

In the Saudi case they might not need $100 a barrel anymore either because they’ve undertaken price reform. They’re now starting 

to look at ways to charge people a little bit more for gasoline and 

electricity and so on. So, you know, they can make some changes. 

But I think coming back to the heart of your question is can we 

have $30 a barrel oil continuing indefinitely into the future? And 

I think the answer to that is no. Prices could go lower. We could 

see $20. Why? Because the cash costs, there are three layers of 

costs in the oil business. There are cash costs and that’s what you 

need to cover your immediate bills in a sense. And that’s down 

near $20 a barrel. 

And then you’ve got mid-cycle costs. This is kind of like what you 

need to kind of hang on, it’s like you might not be doing really well 

but you’re paying some of your debts and so on. So you’re not being 

shut down. That’s probably in the range of $40 to $60 a barrel. 

91 

And then there are the full-cycle costs. What does it actually 

take to go out and find more oil and to meet rising demand for oil 

because every forecast that I’ve seen assumes that. And those numbers are at least $50, I think, and possibly as high as $75, maybe 

even $80 a barrel. 

So at some point I think we’ve got to get back to that full cycle 

cost range because if we don’t this big buildup that we’ve seen in 

inventories over the last year and a half is going to get drained 

down. And then something will happen and we could come back to 

the Senator’s question. I think it was your first question, Senator 

Murkowski. 

What about Venezuela? They’re exporting two million barrels a 

day on net. And that could go off the market given the social, political turmoil in that country. And then we wouldn’t be talking about 

these layers of costs we’d be talking about, you know, what does 

it take to replace two million barrels on a global market where 

there’s not a lot of spare capacity. 

Senator HOEVEN. I am going to— [Laughter.] 

I have a couple more questions but I would certainly defer if you 

have, if you want another round. 

The CHAIRMAN. No, I’m just sitting here enjoying this exchange. 

The Alaska legislature is convening this morning for their inaugural, the kickoff of their session, and the questions that are being 

raised in the discussion here is as important as anything for a 

state like mine that relies so heavily on oil and a state like yours 

that has relied so heavily. We have seen what happens when the 

price tanks and what that does to your economies. 

So please, continue, and I will have some when you are done. 

Senator HOEVEN. Great. Thank you, Madam Chairman. 

The testimony really is important. If you look over the last several years the testimony that you and others provided, the information you provided was very important. 

We just recently, led by our Chairman, lifted the oil export ban 

which had been in place for 40 years. That was only possible because of the information you put forward that actually showed the 

benefits of doing so in terms of jobs, economic growth, energy security, lower prices at the pump and all those things. So in terms of 

creating the public policy we need this testimony, I think, matters 

dramatically so that we do create an environment wherein American entrepreneurs and our companies can unleash their ingenuity 

and compete. 

Mr. Halff, your comment about reducing the price curve and the 

ability to respond to the markets I think is an incredibly important 

key just like understanding long term, the pressures that will drive 

underlying pricing. 

It is not just important to fossil fuels. I think it has a dramatic 

impact on what happens and a realistic approach in terms of renewables and other types of energy. 

I want to shift, Mr. Lucier, you went to coal for a minute. What 

is the impact going to be from the Administration’s three-year moratorium on leasing coal on Federal lands? What are the ramifications going to be for the coal industry as a result? This is now in 

addition to the CO2 regulations the Administration has put forVerDate Nov 24 2008 14:58 Jan 23, 2017 Jkt 098966 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\98966\F98966.TXT F98966
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ward, stream buffer rule regulation, many other things. Now what 

is the impact of this three-year moratorium going to be? 

Mr. LUCIER. Well Senator, thank you for that question. That’s actually an extremely important question. I haven’t prepared an 

analysis of the impact of the three-year moratorium on coal leasing, 

but obviously it’s going to be quite significant because it points to 

assets which are being tied up through extended studies and which 

may actually be developed in the future, only subsequent to, you 

know, increased charges, carbon charges, land access charges, increased royalties, etcetera. 

So this is interesting. The coal industry right now, as you know, 

is tremendously depressed. We actually have over supply in coal 

which is driving coal prices down. 

But I think you need to watch what the Administration is doing 

here to see what this means for all fossil sources because if we 

have to have programmatic environmental impact statements, looking at leasing on Federal lands for coal. This is clearly the first 

step for doing such programmatic environmental impact statements pertaining to leasing oil and gas on public lands too. 

So I think the economic significance given coal’s depressed state 

is actually not a major issue right now. But the precedent this sets 

for all other fossil fuels and for public lands generally, is quite substantial. 

Senator HOEVEN. Thank you. 

Mr. Sieminski? 

Mr. SIEMINSKI. Senator, just some facts on this. 

In 2014, and that’s the latest data, 42 percent of coal produced, 

U.S. coal production, was from Federal lands. That’s a fairly high 

number. And the main states, Montana, Colorado, Wyoming, New 

Mexico, Arizona, and North Dakota, Senator, I think, possibly Alaska might even have some coal production from Federal leases. So 

there are issues there that in the longer term could be impacted. 

In the short-term there’s probably enough property under lease to 

maintain output. 

I wonder if I could take a minute to come back to your question 

about—I’m going to risk talking a little bit about policy which I am 

not supposed to do. I want a do over on your question, Senator. 

The CHAIRMAN. I knew if we kept you for longer we could get 

some policy. [Laughter.] 

Mr. SIEMINSKI. I think if you were looking to say what could you 

do to enhance U.S. energy production in the oil area, maybe even 

in a few of the other areas that the issues of infrastructure are 

really important and policy is the deal with the interest. I was reminded, Senator, because you were asking about the ability to 

move natural gas around. I think the ability to move oil around is 

an important one. Even crude oil products, the colonial pipeline 

which runs up into this area is running pretty full. 

Even issues like the electric grid which is being looked at by 

many people, including the Department of Energy. 

The Strategic Petroleum Reserve and the ability to get oil water 

borne from the Strategic Petroleum Reserve so that it can be 

moved to other parts of the United States and the DOE is looking 

at that. In fact, I think it was part of the law that just passed that 

instructed DOE to do so. 

93 

So there are a lot of policy issues associated with improving the 

midstream, so not so much the well head. But I think that bit in 

the middle before we get the products to consumers that are, I 

think, we’re really ripe for a good look at the policy issues surrounding that. 

Senator HOEVEN. Thank you, Mr. Sieminski. I think that is absolutely right on, and I appreciate it. 

Mr. Lucier, I think you bring up a very important point when 

you describe how the moratorium that the Administration has put 

forward is right now on coal. But what are the ramifications of that 

for other types of energy like oil and gas? I think your point is very 

well made and it’s deeply concerning. 

I will just wrap up with this question and that is as part of the 

legislation that our Chairman and Ranking Member are advancing 

one of the provisions included in the LNG Permitting Certainty 

and Transparency Act which Senator Barrasso is the lead on and 

I am co-sponsoring on with our Chairman and others. I would like 

some sense from, and I would start with again, Mr. Sieminski, Mr. 

Halff, but from any of you, in terms of what do you see, if we are 

able to advance that legislation and more readily allow for LNG export, what do you see the ramifications in terms of actually making 

a difference with some of our allies? For example, with creating 

markets here at home but actually making a difference for some of 

our allies in Europe and so forth in terms of reducing Russia’s tremendous control because they are the energy supplier to Europe. 

Are there other things that would help? 

Mr. SIEMINSKI. Right now I think that the main impediment to 

LNG exports is not the permitting which is, I mean, there are a 

number of Federal agencies that are involved in permitting. The 

two main ones are the Federal Energy Regulatory Commission for 

the engineering and environmental aspects and the Department of 

Energy Office of Fossil Energy for the national interest. 

Senator HOEVEN. You are not just saying that because you are 

part of the Department of Energy? [Laughter.] 

Mr. SIEMINSKI. I think that there was at one point, there was a 

view, Senator, that there was a bottleneck there. But that doesn’t 

really seem to be the case. The—there has been an alignment between the Department of Energy and the Federal Energy Regulatory Commission on the permitting. 

So I think that coming back to what are the issues. I think that 

it’s largely the economics. With lower oil prices the spread between 

global oil prices and lower U.S. natural gas prices has narrowed, 

and it’s made it more difficult to export LNG or to look at the economics of LNG exports. If we should see a recovery in oil prices 

that would probably do much more to improve the prospects for 

further LNG exports. 

In EIA’s numbers we do have LNG exports going up. I mean, it 

still makes sense into the Asian markets and possibly into Europe. 

So I think that things will look very different at the point that we 

get back more toward those full cycle costs associated with oil 

prices that you were asking about earlier. 

Senator HOEVEN. Mr. Halff? 

Mr. HALFF. Well I think the rise in the future price in U.S. LNG 

exports that’s part of a game changer, the real transformation of 

94 

the gas market. And I would just point out a couple of ways in 

which things would be different. 

One is the growth of gas as an international, global market with 

probably different pricing mechanisms looking forward and more 

international competition. That’s going to be very important for European energy security because it would provide an additional 

source of gas supply in addition to the sources that Europe relies 

on right now. 

But also very important for Asia. And I think one key factor 

would be, one key way in which energy would have an impact, and 

it’s not just U.S. LNG based or so. It’s Australian LNG and Qatari 

LNG which are increasing. It would be to allow for more international competition between oil and gas and an increased use of 

gas as a bridge fuel in the energy transition. 

Senator HOEVEN. Mr. Lucier? 

Mr. LUCIER. Well Senator, you’re really correct that if we want 

to help our friends, especially our gas consuming friends in Japan, 

in Asia and elsewhere, we do want to increase global supply. This 

will certainly help Europeans looking for broader supply. 

But it’s not just our friends that we have to think about. We 

have competitors too. And in a very tight global LNG market right 

now there could be competition to see who actually builds the export facilities and to see who actually get the export business. 

So anything we can do on the margin that means that U.S. 

projects have an edge or U.S. projects have more certainty against 

last minute delays does help U.S. producers and it does improve 

our competitive position. Sure, it helps our friends, but I think we 

need to think of ourselves in comparison to competitors as well. 

Senator HOEVEN. Mr. Zindler? 

Mr. ZINDLER. Just a very, very quick point which is that I think 

the LNG play, I agree with what everyone said on LNG. 

One area I would say take a look at which has been interested 

is exports into Mexico which is not LNG but just simple cross border stuff. And that, we think, is going to continue to rise. It’s a 

very interesting area for the gas market. And there’s major energy 

reform underway in Mexico as well that could drive even further 

gas demand as well. 

The CHAIRMAN. All excellent points. 

Thank you. 

Senator HOEVEN. Thank you, Madam Chairman. 

The CHAIRMAN. Thank you. 

Senator Cantwell? 

Senator CANTWELL. Senator Hoeven, that was the longest question session I think I have seen in this Committee. 

The CHAIRMAN. But it was good—— 

Senator CANTWELL. Well, yes, I know, I understand. I think it’s 

been a good discussion and panel. 

And again, I thank the witnesses. 

Mr. Halff, to me I do not necessarily want to argue as much 

about the past as I want to plan for the future. I think your answers to my colleague, Senator Cassidy, about the Chinese are to 

point that part of the discussion here is also political and that consumers are demanding a different world and China is responding 

to that. 

95 

So no, I don’t think India is going to build coal plants galore 

when they have issues, nor do I think that China is going to pursue 

that. I do think that the President’s action since we already have 

20 years of coal under lease, I think is very important that we assess for the taxpayer what the 30 years beyond that looks like and 

make sure the consumers are getting a fair price. 

My question is to Mr. Zindler on the corporate installation of renewables because I think this is also where consumers are somewhat driving behavior, but also I think corporations are driving efficiency. I think corporations are looking at it as a win/win. I think 

Walmart looks at it and says energy efficiency is a win for us. It’s 

a win with consumers, and it’s a win for our power. I think that 

is where Google and other people are. What do you think the renewable purchase from corporates to do grid scale renewables is 

going to look like for 2016 and into the future? 

Mr. ZINDLER. That’s a good question. 

So last year I think was roughly about a third or so of all power 

purchase agreements that were signed in the U.S. for large scale 

clean energy were signed by corporations, essentially directly to 

buy the electricity themselves. 

And I think the motivation there is primarily economic which is 

that essentially it gives you the opportunity to know that what 

your price of power is going to be over a long, fixed period of time 

and essentially lock it in. It’s not that they’re buying all of their 

power from renewables, but if they can essentially lock in some 

chunk of it then they can offset the risk of fluctuations in electricity prices going forward. 

So that’s been one of the main motivators I think that we’ve seen 

take place so far. And you’re right in noting Google, certainly 

Microsoft in your state, but not just, you know, tech companies, but 

others as well. Kaiser Permanente, IKEA, others have been involved in different ways in renewable energy. 

So I think that that’s how they view it is that you essentially 

eliminate one risk which is the unknown of electricity prices which 

are tied to a variety of factors we talked about here today including 

gas prices and other things and you essentially just lock it in. So 

that is an area we think will continue to look interesting. 

I will say this which is that it is predicated on the notion that 

you have fears about power prices rising. And if power prices go 

down then corporates might get a little less interested in this area 

because then they’re not as worried about the fluctuation in prices 

because they feel like they could go down in the future. 

But thus far, most of the attempt has just been to lock in a price 

that you know it’s going to be over a long, fixed period of time. 

Senator CANTWELL. I think what is happening is consumers find 

out more information about pollution and particularly in China 

they are raising great concern. 

Mr. ZINDLER. Yes. 

Senator CANTWELL. I think people are trying to respond. But I 

see it across the board even in marketing that i3 which is a great 

vehicle by BMW, who is advertising not only the fact that it is this 

next generation car, but that it is also built with renewable energy. 

Their plant run in Moses Lake is using hydro power. They are trying to say it is the all renewable car from the beginning of its oriVerDate Nov 24 2008 14:58 Jan 23, 2017 Jkt 098966 PO 00000 Frm 00099 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\98966\F98966.TXT F98966
96 

gins and how power was generated to create it and the fact that 

it is recyclable material within the car. 

I think people are trying to win in the marketplace on this issue, 

and I think the consumers are demanding it. So I think it is probably both, at least for now anyway. 

I definitely think it is something for us to continue to look at how 

grid-scale renewables, solve some of the questions that we want answered as it relates to distributed generation. Moving forward I 

don’t know if you have anything else on that point, Mr. Lucier, 

about questions that we want answered in the electricity grid. But 

obviously, you know, there is everybody from Elon Musk to many 

others who are putting lots of ergs into battery technology as it relates to giving us more flexibility on renewables and building that 

capacity into the grid. 

Mr. LUCIER. Well that’s a big—well thank you, Senator Cantwell. 

That’s a big, open invitation. I’m not sure what I can say succinctly 

in 30 seconds. 

I mean, clearly, putting power storage on the grid and combining 

it with distributed generation on the edge of the grid is something 

that really could revolutionize the industry. It certainly does provide a lot of solutions for many issues. 

I just point out though that the grid is a totality and that while 

the grid has an edge, the grid also has a core. And at the moment 

it’s the core, the core transmission that works the core generation 

assets that are keeping the grid alight, if you will. 

I think back to discussions of things like participant funding or 

stranded assets back in the 80’s and 90’s. That was actually part 

of a discussion that led into distributed generation too in the 90’s. 

So these are not necessarily new issues. 

The key point is that power has a price. Access to the grid should 

have a price. Regulators who do cost allocation are very good at figuring this out. And over time in market evolution we do figure out 

ways in which you can fairly price resources whether it’s the energy side or the infrastructure side. 

So I’m actually very confident that we’ll see a very robust partnership develop. I think there’s an opportunity for many thousand 

flowers to bloom. And I think we’ll see a lot of innovation going forward. 

Senator CANTWELL. Well I certainly like that analogy. And I definitely think that what we get out of the grid is a layer of efficiency. 

When I look at that ability to have that technology, not only utilized in the United States, but around the globe, now that is a 

major transformation. 

Thank you, Madam Chair, for this hearing. 

The CHAIRMAN. Thank you, Senator Cantwell. 

And thank you, to each of you gentlemen. I appreciate the time 

that you have given us. We have gone well over our usual time, but 

when you think about what has been discussed here today we really are at that point of substantial change. 

Mr. Zindler, in your testimony you say, ‘‘A fundamental rethink 

is now well underway about how energy gets produced, delivered, 

consumed and managed in many parts of the world including the 

U.S.’’ 

97 

I would think, based on the testimony from each of you that you 

would all concur with that. When you think about where we are, 

the discussion that was raised about coal. The impact that we will 

have of this three-year moratorium on leasing on Federal lands. 

The impact of the clean power plan. 

When you think about where we are with natural gas, what’s 

happened with the low prices, the potential for some disruption because of infrastructure issues. 

When we talk about the necessity for critical minerals and how 

that will allow us to build out our renewable energy sources 

through enhanced technologies, and yet we recognize that we are 

going in the same direction with critical minerals that we were historically with oil. 

The oil picture we could take a week of hearing in just understanding what is going on in Iran and Iraq and Saudi Arabia and 

Venezuela. We did not talk about Libya. Russia. Layer in now in 

the discussion about our ability to export onto the global oil market 

and what that means. 

The impact to all of this on nuclear as we are seeing changes or 

our policy decisions made through clean power plan. What the 

price of natural gas does to nuclear, what we are seeing there. Distributed generation in the mix of renewables. The policy decision 

that we made last month to allow for a continuation of the production tax credits there. The policies that we are putting in place juxtaposed to the political and geopolitical aspects of energy. The pricing situation. Infrastructure. 

It begs for a modernization of our energy policies, and that is 

what Senator Cantwell and the members of this Committee have 

produced in an 18 to 4 vote moved out of the Committee in July. 

It might not solve all the problems in the world. In fact, I think 

we can guarantee that it will not. But what it does do is updates 

our energy policies from eight years ago which desperately need 

updating in all of these different areas whether it is permitting, 

whether it is how we look at our grid. It is how we move forward 

in the energy space. 

So my hope, and I think Senator Cantwell’s, is that we will be 

able to move to this quickly. I think it is an imperative. An imperative for our economy because when we are talking about energy security, to me that translates to national security which also translates to economic security. 

So we have a lot to offer in this space. Know that we will be 

working on it. 

But we appreciate your guidance this morning. I do not know if 

you have made the crystal ball clearer or have just reminded us as 

to how cloudy and complex it really is, but we appreciate your wisdom. 

With that, we stand adjourned. 

[Whereupon, at 12:28 p.m. the hearing was adjourned.] 

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Æ 


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