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21–990 2017

S. HRG. 114–470 

OIL AND GAS PIPELINE INFRASTRUCTURE AND 

THE ECONOMIC, SAFETY, ENVIRONMENTAL, 

PERMITTING, CONSTRUCTION, AND MAINTENANCE CONSIDERATIONS ASSOCIATED WITH 

THAT INFRASTRUCTURE 

HEARING 

BEFORE THE 

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JUNE 14, 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 

RICH GLICK, Democratic General Counsel 

(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 

Black, Andrew, President and CEO, Association of Oil Pipe Lines (AOPL) ....... 4 

Eisenberg, Ross, Vice President, Energy and Resources Policy, National Association of Manufacturers (NAM) ......................................................................... 11 

McGarvey, Sean, President, North America’s Building Trades Unions .............. 21 

Parfomak, Dr. Paul, Specialist in Energy and Infrastructure Policy, Congressional Research Service (CRS) ............................................................................ 28 

Peress, N. Jonathan, Director of Air Policy, Environmental Defense Fund 

(EDF) ..................................................................................................................... 33 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED 

American Gas Association: 

Letter for the Record ........................................................................................ 106 

American Petroleum Institute: 

Statement for the Record ................................................................................. 113 

Supplemental Statement for the Record ........................................................ 115 

Black, Andrew: 

Opening Statement ........................................................................................... 4 

Written Testimony ............................................................................................ 7 

Responses to Questions for the Record ........................................................... 75 

Cantwell, Hon. Maria: 

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

Eisenberg, Ross: 

Opening Statement ........................................................................................... 11 

Written Testimony ............................................................................................ 14 

Response to Question from Senator Franken ................................................ 63 

Interstate Natural Gas Association of America: 

Letter for the Record ........................................................................................ 120 

McGarvey, Sean: 

Opening Statement ........................................................................................... 21 

Written Testimony ............................................................................................ 24 

Murkowski, Hon. Lisa 

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

Parfomak, Dr. Paul: 

Opening Statement ........................................................................................... 28 

Written Testimony ............................................................................................ 30 

Peress, N. Jonathan: 

Opening Statement ........................................................................................... 33 

Written Testimony ............................................................................................ 35 

Responses to Questions for the Record ........................................................... 77 

Supplemental Letter for the Record ............................................................... 125 

Stupp Corporation: 

Statement for the Record ................................................................................. 129 

(The) Williams Companies, Inc.: 

Statement for the Record ................................................................................. 132 

(1) 

OIL AND GAS PIPELINE INFRASTRUCTURE 

AND THE ECONOMIC, SAFETY, ENVIRONMENTAL, PERMITTING, CONSTRUCTION, 

AND MAINTENANCE CONSIDERATIONS ASSOCIATED WITH THAT INFRASTRUCTURE 

TUESDAY, JUNE 14, 2016 

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

The Committee met, pursuant to notice, at 10:09 a.m. in Room 

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

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. LISA MURKOWSKI, 

U.S. SENATOR FROM ALASKA 

The CHAIRMAN. Good morning, everyone. 

The Committee will come to order so we can begin our oversight 

hearing this morning on our nation’s oil and gas pipeline infrastructure and the economic, safety, environmental, permitting, construction and maintenance considerations that are associated with 

it. 

Infrastructure is one of those things that everybody claims to be 

in favor of. We all support infrastructure. Who could be against it? 

It is only when you get down to the details of where that infrastructure is located, what the infrastructure will be transporting 

and how that infrastructure will be built—that is where you run 

into the controversy. 

In the world of oil and gas pipelines, known in the industry as 

the midstream, this is actually not a complicated question. At point 

A, you have the immense resources, whether it is places like the 

NPRA, the non-wilderness portion of ANWR, in the Bakken, in the 

Marcellus or in the Eagle Ford. At point B, you have the refineries. 

You have the chemical facilities, the power plants and other consumers. The infrastructure that we will be hearing about today is 

necessary to move the resources from point A to point B. 

It is pretty simple. Without infrastructure we cannot move these 

vital resources from one place to another. While some would contend otherwise, we know for a fact that pipelines are the safest and 

the most efficient way to move these resources. 

In the world of economics, experts debate about direct impacts, 

indirect impacts and induced impacts. We know that pipelines directly create jobs in their construction, maintenance and operation, 

and we know that these are good jobs. We also know that pipelines 

2 

indirectly create jobs because it is a materials intensive industries. 

These are also good jobs. We also know that all of this induces economic growth and additional job creation. 

So I am big into bumper stickers and trying to distill down all 

that we do here in Washington into some simplistic notions. If we 

have got to place a bumper sticker here this morning, it is that 

‘‘Jobs are good, energy is good and energy jobs are great!’’ 

In Alaska we are very proud of an infrastructure network known 

as the Trans-Alaska Pipeline System, or TAPS. The system 

stretches 800 miles, runs across all sorts of terrains, two mountain 

ranges, huge mountain ranges, from Prudhoe Bay down to Valdez. 

An estimated 70,000 people helped build this pipeline from 1969 to 

1977 with the actual construction phase taking just over three 

years. I cannot overstate the positive impact this project has had 

on the State of Alaska. Without it, I can tell you for a fact we 

would not be able to fund our state’s government. 

Energy is the lifeblood of our state. We have to continue to fight 

to boost the throughput of that pipeline which is vital to the energy 

security of this country, particularly the West Coast where the refineries are optimized to process North Slope crude. 

TAPS, in many ways, I refer to as the gold standard. And I question, honestly, whether or not we could build it today. Certainly not 

in three years as we were able to do four decades ago. 

We know new infrastructure is still the best way to deliver affordable energy to places that need it. We know the pipeline permitting process should be streamlined, yet those who opposed to 

building oil and gas infrastructure, often the same people, likely to 

be up in arms when prices get too high or service quality suffers. 

I think we have got some cognizant dissonance here. How we can 

expect affordable energy if we cannot move the energy? You have 

to be able to move it. 

Since I released my Energy 20/20 Blueprint in 2013 and follow 

on white papers on energy insecurity, the power grid, exports and 

the energy/water nexus, I have emphasized five principals that our 

nation’s energy policy should embody. They are pretty simple. Energy needs to be affordable, abundant, clean, diverse and secure. 

Infrastructure is really at the heart of all five of those principals. 

Without proper infrastructure, energy will be unnecessarily 

unaffordable. It will be scarce. It could be dirty, limited and insecure. 

So as we welcome today’s witnesses and begin this hearing, I will 

tell you all to look for more from this Committee on these issues 

in the upcoming future. 

With that, I turn to Ranking Member Cantwell, for your comments and I appreciate your work in getting us here as well. 

Thank you. 

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

WASHINGTON 

Senator CANTWELL. Thank you. 

Thank you, Madam Chair and thank you for holding this hearing 

and to our witnesses today for talking about issues associated with 

natural gas and oil pipelines. 

3 

Domestic production of natural gas and oil has reached record 

levels, and this increased production requires a network of pipelines and other modes of transportation to ensure that natural gas 

and oil can be moved from the point of extraction to the point of 

consumption. In many instances, new pipelines will be required. 

But it is also important to note that we are talking about transporting toxic, highly flammable materials hundreds, if not thousands of miles across the United States. So new pipelines must 

meet Federal and state standards so that the public health and 

safety can be addressed. 

We can always look to improve the efficiency of the pipeline 

siting process, but we have to remember not to take short cuts. 

The Senate Energy bill attempts to enhance the coordination between FERC and other Federal agencies with responsibility for 

issuing permits before a new pipeline is built. 

In contrast, the House bill passed proposed to give FERC just 90 

days to make a final decision on permit applications no matter the 

complexity of the proposed pipeline or the potential impact on people and the environment. This is something that we cannot do. 

In addition to the potential impacts to public health and safety, 

leaks of methane from natural gas and oil pipelines can also have 

a dramatic impact on our climate. In the first two decades after 

methane is released into the environment, it is 84 times more potent as a greenhouse gas than carbon dioxide. The recent leak at 

the Aliso Canyon Natural Gas Storage Project in California is estimated to have caused more damage to the environment than any 

other leak in gas history. The project emitted more greenhouse 

gases than even the Deep Water Horizon explosion in the Gulf of 

Mexico. 

Most new interstate natural gas pipelines require multi-billion 

dollar investments. These investments are recovered through rates 

charged to consumers signing on to long-term contracts. Obviously 

I am concerned that these multi-year contracts may delay the transition to non-fossil fuel alternatives. 

Natural gas is a very important bridge fuel helping to reduce our 

reliance on coal while bringing online greater amounts of intermittent renewable energy such as wind and solar power. We are in the 

middle of a revolution and advances are made every day in technologies, the way that we can create and use energy, that will further reduce the demand for fossil fuels. 

We undoubtedly will need some traditional natural gas capacity. 

I have often mentioned to the Chair my interest in support of a 

natural gas pipeline in Alaska. But as the Department of Energy 

Quadrennial Review suggests, we should focus on using existing 

pipelines more efficiently and making sure that the certificate process for new pipelines explores better ways to utilize existing capacity and mitigate issues and make sure that we are making the 

right decisions. 

I want to mention, because of the health and safety issues, we 

were unfortunate enough on June 10th, 1999 to have a gas line explosion in Bellingham, Washington killing three children who were 

playing in Whatcom Creek. We have made some improvements in 

pipeline safety, but we can never forget the importance of these 

issues as we continue to move forward on this. 

4 

I look forward to hearing what the witnesses have to say today, 

Madam Chair, and look forward to our discussion. 

The CHAIRMAN. Thank you, Senator Cantwell. 

Again, welcome to the witnesses. We appreciate you making the 

effort to be with us today and for what you will contribute to the 

conversation. 

We will lead off this morning with Mr. Andrew Black, who is the 

President of the Association of Oil Pipe Lines. He will be followed 

by Mr. Ross Eisenberg, the Vice President of the National Association of Manufacturers. Mr. Sean McGarvey is with us as President 

of the North American Building Trades Union, welcome. Dr. Paul 

Parfomak is the Specialist at the Congressional Research Service, 

CRS. Mr. Jonathan Peress will wind up the panel. He is the Air 

Policy Director for Natural Gas at the Environmental Defense 

Fund. We welcome all of you this morning and thank you. 

I will let colleagues know that we are scheduled to have a vote 

at 11 o’clock, so hopefully our witnesses will be able to get through 

all of their testimony prior to that time. It may be that we jump 

up, go take a vote and then come back to ask questions. 

With that, Mr. Black, if you would like to lead off and welcome. 

STATEMENT OF ANDREW BLACK, PRESIDENT AND CEO, 

ASSOCIATION OF OIL PIPE LINES (AOPL) 

Mr. BLACK. Thank you, Madam Chair, Senators. 

The Association of Oil Pipe Lines represents transmission pipeline operators who deliver crude oil, refined products like gasoline, 

diesel fuel and jet fuel and natural gas liquids such as propane and 

ethane. 

The U.S. pipeline network plays a critical role in delivering energy needed by American workers and families. Pipelines help 

American drivers get the gasoline and diesel fuel they need to drive 

their cars and trucks. Propane delivered by pipeline allows farmers 

to dry crops and warm livestock barns and is essential to heating 

millions of homes. 

American workers rely upon pipelines to deliver the raw material 

feedstocks needed for good paying, manufacturing jobs. Just last 

week Shell Chemical announced it will build a multi-billion dollar 

petrochemical plant in Pennsylvania. That new plant turning raw 

ethane into polyethylene will employ 6,000 workers in construction, 

600 permanent plant workers and provide economic benefits for the 

entire region. This is made possible by a liquids pipeline delivering 

100,000 barrels per day of ethane to the plant. 

Pipeline operation also supports other good paying jobs. The 

TransAlaska Pipeline System, for example, employs 2,500 men and 

women delivering crude oil to world markets. Alaska’s oil and gas 

production, much of it delivered at some point by pipeline, provides 

110,000 Alaska jobs and supports one third of Alaska’s work force. 

Pipelines are an exceedingly safe way to deliver the energy 

America needs. A barrel of crude oil petroleum products reaches its 

destination safely greater than 99.999 percent of the time. 

Liquid energy pipelines are also getting safer. Since the year 

2000, pipeline incidents impacting the public or environment are 

down 55 percent. Since 2000, corrosion-caused incidents are down 

over 70 percent. 

5 

Pipeline safety is spurred by a combination of government regulation and industry-wide safety improvement efforts. The U.S. 

Pipeline and Hazardous Materials Safety Administration, or 

PHMSA, contributes to pipeline safety by providing minimum pipeline safety standards, accountability for pipeline safety shortfalls 

and an independent source of pipeline safety. 

PHMSA is proposing and finalizing several new pipeline safety 

regulations. Last summer PHMSA proposed a new Federal rule 

raising training requirements for pipeline personnel performing 

pipeline safety related tasks and details on a new requirement for 

prompt notification to authorities of pipeline incidents. 

Last fall, PHMSA proposed a large set of new regulations on liquid pipeline systems to expand inspections of pipelines after extreme weather events, expand the number of pipeline segments requiring intensive inspection, shorten timelines for performing pipeline maintenance and expand requirements for pipeline leak detection. 

Congress has taken action to improve pipeline safety by increasing funding for over 100 new PHMSA personnel, many of them for 

inspections and enforcement. 

Congress also, just within the last few days or hours, passed new 

pipeline, bipartisan safety regulations. The Pipes Act, passed by 

the House last week and the Senate last night, will ensure pipeline 

operators receive timely, post inspection information from the government. Thank you to Senator Daines for inspiring that, to allow 

them to maintain and improve their safety efforts. It will ensure 

that product composition information is quickly provided to first responders after an incident and improved protection of coastal 

areas, marine waters and the Great Lakes. The bill was passed in 

large part on legislation passed by the Senate in March and negotiated in advance with Senate Republican and Democratic staff, 

along with their House counterparts. AOPL thanks the Senate for 

adopting this bipartisan bill last night. 

Even though pipelines are one of the safest modes of energy 

transportation, the pipeline industry believes it is important we are 

proactively improving pipeline safety further and have set a goal 

of zero incidents. Through the AOPL and American Petroleum Institutes’ pipeline safety excellence initiative, pipeline operators 

have engaged nearly a dozen industry-wide groups to improve pipeline operations and safety. Together we’re funding research and development on pipeline inspection technologies, enhancing our 

threat detection and response capabilities, expanding safety culture 

and management systems and boosting our response capabilities. 

Last year liquid pipeline operators developed industry-wide programs to improve our ability to detect cracking, integrate safety 

data, manage safety efforts holistically, manage leak detection programs and better plan for and respond to pipeline emergencies. 

This year we will complete a new program for comprehensive 

management systems, complete expansion of industry-wide guidance on river crossings, develop a new recommended practice for 

construction quality management and update our recommended 

practice for pipeline inspection and preventative maintenance. 

6 

As you can see, there’s a lot going on to improve pipeline safety, 

and pipelines continue to provide benefits to American workers and 

consumers. 

Thank you. 

[The prepared statement of Mr. Black follows:] 

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The CHAIRMAN. Thank you, Mr. Black. 

Mr. Eisenberg. 

STATEMENT OF ROSS EISENBERG, VICE PRESIDENT, ENERGY 

AND RESOURCES POLICY, NATIONAL ASSOCIATION OF MANUFACTURERS (NAM) 

Mr. EISENBERG. Thank you, Madam Chair, Ranking Member 

Cantwell, members of the Committee for having the NAM here 

today to talk about pipelines and what they mean to manufacturing. 

Our message today is simple and direct. Manufacturers’ already 

high demand for oil and gas is going to increase dramatically over 

the next ten years, and we’re going to need adequate pipeline infrastructure to ensure that the nation’s ample supply of these resources are delivered efficiently, safely and securely to the manufacturers who need it. 

We have, essentially, a math problem. Over the next decade natural gas demand is going to grow about 40 percent, and that’s generally from the power sector and manufacturing, so 40 percent increase in demand for natural gas. On the flip side, we’re predicting 

about a 48 percent supply increase. So we’ve got more than enough 

to meet the demand which is fantastic. 

What is uncertain is the amount of pipes and really the geographic distribution of the pipes to get the gas from point A to 

point B to the end users who need it. We’re going to need a lot 

more of those. 

Manufacturers use a third of the energy consumed in the United 

States. We’ve got—we’ve historically had an outsized reliance on oil 

and gas. Manufacturers use oil for fuel and as a feed stock and we 

use natural gas for a great many things, drying, melting, process 

cooling, machine drive and refrigeration, heating, ventilation, A/C, 

in boilers to produce steam and electricity and finally as a feed 

stock for refining chemicals in primary metal sectors. 

Because of this reliance our members have asked us and we recently retained IHS Economists to examine our oil and gas pipeline 

needs and the challenges and opportunities that exist for manufacturers. 

The challenges are what IHS calls a mismatch geographically in 

the growth in natural gas demand and supply in the U.S. lower 48. 

The rapid growth of low cost production out of the Marcellus and 

Utica plays has created a bottleneck as producers are unable to 

find pipeline capacity to move gas from the well to consumer markets. 

IHS believes that some of the pipeline capacity can be achieved 

by re-engineering the existing pipelines and changing the ones that 

are coming in and turn them and make them go out so that that 

low cost gas can go to some of these regions. However, the potential 

for reversal of these pipelines is going to be exhausted at some 

point and we’re still going to need to build more. The only way to 

do that is by committing to building new pipeline capacity. 

And when pipelines aren’t available manufacturers do suffer. The 

EPA’s recent boiler MACT regulations, generally speaking, have 

forced most manufacturers to switch their boilers to natural gas. 

But several struggle to meet the boiler MACT imposed deadlines 

12 

because they have trouble getting authorization and approval to 

get the gas to their plants. 

In the Northeastern United States, where this is happening, 

some manufacturers are basically having to turn to truck CNG to 

their facilities because they can’t get a pipeline which places them 

at a disadvantage relative to other places like the Gulf, who could 

just have the gas. 

The opportunities, on the other hand, are significant. When pipelines are built it means jobs across the manufacturing supply 

chain. IHS estimates the construction of new natural gas transmission lines meant more than 347,000 jobs in 2015 with almost 

60,000 of them manufacturing products like steel pipe, coatings, 

construction equipment, compressor motors, gauges and instruments and sand and gravel. 

On the oil pipeline side, at least 66 different manufacturing subsectors benefited from the construction of crude oil pipelines in 

2015 and these include iron and steel, fabricated metal, cement, 

machinery and paints and coatings. 

As with most studies of the energy renaissance the numbers, the big numbers, are very, very big. Real GDP increased by $190 billion and 1.4 million more jobs in 2015 because of shale gas. The 

average family had about $1,300 in their pockets that they would 

not otherwise have had because of the shale renaissance. 

But I’d like to spend a few minutes talking about the stories behind this which are really pretty remarkable in the manufacturing 

sector. 

Stories like ACME Brick Company, the largest brick manufacturer in the U.S., with facilities in Minnesota, Arkansas, Oklahoma, Texas and Colorado. ACME produces a product that is heavy 

bricks, so moving natural gas via pipelines to where the bricks are 

made is far more efficient than moving the heavy bricks long distances. 

CF Industries uses natural gas to make enough fertilizer to nourish ten percent of the corn planted nationally. 

Covestro uses natural gas as a raw material to manufacture energy efficient products like polyurethane insulation. 

UPS has more than 6,500 alternative fuel and advanced technology vehicles in operation, more than half of which operate on 

natural gas. 

Caterpillar and CNH Industrial, they make the equipment to 

support the construction of the pipelines and the operation of them, 

but they also use natural gas as a fuel for their own operations. 

And small manufacturers like Marble King in West Virginia, a 

28-person manufacturer, and Biad Chili Company, a New Mexico 

manufacturer who grows and processes chili peppers. They credit 

local pipelines as their key to staying competitive in the face of 

growing international competition. 

As our pipeline network grows so does manufacturing opportunity. It’s imperative that the oil and gas pipeline system keep 

pace with supply and demand growth. So much new capacity is 

going to be needed over the next decade that prolonged delays 

could cause major problems for manufacturers. 

The NAM appreciates the attention this Committee is giving this 

issue and stands ready to support any efforts to ensure that pipeVerDate Nov 24 2008 14:38 Feb 28, 2017 Jkt 021990 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\21990\C21990.TXT C21990
13 

lines are built in a timely fashion to meet our sector’s growing energy demand. 

Thank you. 

[The prepared statement of Mr. Eisenberg follows:] 

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The CHAIRMAN. Thank you, Mr. Eisenberg. 

Mr. McGarvey, welcome. 

STATEMENT OF SEAN McGARVEY, PRESIDENT, NORTH 

AMERICA’S BUILDING TRADES UNIONS 

Mr. MCGARVEY. Thank you, Madam Chair. It is an honor to join 

you today to discuss our nation’s energy infrastructure. 

As many of you know North America’s Building Trades Unions 

is comprised of 14 national and international unions representing 

three million skilled craft professionals in the United States and 

Canada. On behalf of our members I welcome the opportunity to 

explain how our value-based business model and our world class 

training capacity play an integral role in the construction and 

maintenance of oil and gas infrastructure. 

But our expertise and exposure to the energy industry does not 

end there. Building Trades members can be found working in extraction sites, power plants, carbon capture and sequestration facilities and export facilities. Currently we estimate that 50 percent 

of our membership is employed by energy-related industries. 

I also wanted to take a moment to thank the members of this 

Committee on both sides of the aisle who have voted to retain prevailing wage protections in the construction industry. By helping 

safeguard these community standards and promoting training, we 

are protecting and preserving some of the few remaining occupations that cannot be outsourced to foreign countries or decimated 

by low road business models that are centered upon low wage, low 

skilled and easily exploitable work force. 

In any successful organization, labor or otherwise, being the best 

means setting high standards and maintaining and exceeding those 

standards. 

We harbor no illusions that our success is predicated on anything 

other than delivering the safest, most highly trained and productive skilled craft work force found anywhere in the world. That’s 

why our rank and file members and our signatory contractors collectively fund, to the tune of roughly $1 billion a year, a nationwide 

network of 1,600 local joint labor management apprenticeship 

training programs, or JATCs. They are regulated by Department of 

Labor or State Apprenticeship Councils and they are governed by 

a Board of Trustees made up of equal numbers of contractors and 

labor representatives. 

If the building trades system which includes both apprenticeship 

level and journeyman level training was a degree granting college 

or university, it would be the largest degree granting college or university in the United States, over five times larger than Arizona 

State University. If it was a K through 12 school district, it would 

be the fourth largest school district in the U.S., only behind New 

York, Los Angeles and Chicago. And there’s no taxpayer money involved in this system. Our members contribute a portion of their 

hourly wage, and our contractors contribute out of their own pockets. 

We are successfully working with community leaders to leverage 

both public and private investments in capital construction projects 

to create structured career training opportunities for historically 

underserved communities such as women, minorities and veterans. 

22 

Through these efforts and others, we now boast over 100 pre-apprenticeship programs to ready students for the academic and real 

world challenges of being in a union apprenticeship program. 

Specific to the topic of today’s hearing I want to highlight the 

International Union of Operating Engineers Pipeline Training 

Fund. Many of the work opportunities in the natural gas industry 

require specialization within the pipeline crafts. For example, most 

operating engineers run traditional heavy equipment such as bulldozers, backhoes and cranes and excavators. However, the pipeline 

industry has a unique set of skill requirements and the operating 

engineers maintain a robust training program in partnership with 

the Pipeline Contractors Association to meet the industry’s needs. 

For example, during the natural gas renaissance, the OEs developed a new curriculum and course work in directional drilling to 

add to their existing pipe bending and pipe lifting classes, maintenance and rehabilitation in rock drilling classes. The OE currently 

offers more than 130 classes in different areas of the pipeline sector 

alone. 

In real terms it means in right to work states like South Dakota specialized operating engineers average $35 an hour, and that 

means workers are able to provide for their families while receiving 

union provided health care and pension benefits. But it is not easy 

to make it—it’s not as easy as we make it sound. 

Every single large energy project is subjected to years of regulatory environmental study. And to be sure, pipeline infrastructure 

has failed to keep pace with the increased production which has 

caused several regions of the country to experience shortages and 

severe price spikes. 

New England is a perfect example of how the lack of sufficient 

pipeline infrastructure can have an adverse effect on both businesses and consumers. In 2000 only 15 percent of New England’s 

electric generation was from natural gas fuel-power plants. By 

2015 that number was nearly 50 percent but the pipelines need to 

feed these plants with natural gas, presumably from the Marcellus 

shale region, had not kept pace. It isn’t for lack of trying. 

Less than two months ago New York State denied the Constitution pipeline after it had already received FERC approval and the 

company had been working with the state for three years to mitigate environmental concerns. The permit denial will delay about 

2,400 direct and indirect jobs that will be created during pipeline 

construction generating $130 million in labor income for the region. 

That decision could also cost local governments approximately $13 

million in annual property tax revenue. 

Other recent delays which have essentially put the pipeline industry into a tail spin include the Jordan Cove LNG export terminal and associated gas pipeline was rejected by FERC in March 

and then granted a rehearing; in April Kinder Morgan’s withdrawal of the Northeast Energy Direct Pipeline application with 

FERC due to opposition; the New Jersey Department of Environmental Protection’s review of the final section of the Transco Leidy 

Pipeline is significantly delayed due to pending litigation; the Dakota Pipeline received revocation of its permit from the U.S. Fish 

and Wildlife Services; the Rover Pipeline from the Marcellus shale 

region to the Midwest continues its lethargic approval process; and 

23 

Dominion’s Atlantic Coast Pipeline route has been rerouted a number of times to address concerns. 

The bottom line is that pipelines are the safest mode of transporting natural gas and the U.S. Department of Transportation’s 

statistics show that underground pipelines transport natural gas 

far more safely than ships, rail cars or trucks. All the major pipelines I listed above will employ the most advanced technology and 

monitoring systems to make it even safer with 24/7 safety measures and regular pipeline safety plans. 

To look at it from a different angle there are three components 

to every pipeline project: industry, labor and government. Industry 

wants to grow, labor wants to create jobs and the government 

wants safety and environmental concerns adequately addressed. 

But the third leg of this stool is proving to be adversarial. Instead of an advocate for the first two, comments out of the Administration such as eliminating the ‘‘dash for gas’’ are only superseded 

by the lack of support for gas to back up intermittent renewables 

and a less than ambitious support system for carbon capture and 

sequestration at power plants and industrial facilities and a virtual 

vendetta against hydraulic fracturing and enhanced oil recovery 

and of course, the denial of Keystone XL. Our country cannot afford 

an energy policy that is all hat and no paddle. 

North America’s Building Trades Unions stand ready to work 

with this Committee and Congress to find innovative funding 

mechanisms, sensible regulations and collaborative tripartite relationships between government, labor and industry to bolster America’s leadership in the energy industry and put a floor under the 

middle class while creating millions of jobs. 

Madam Chairwoman, while we talk about the various components of an energy project we cannot neglect to mention the impacts of the local community. Many of our small communities 

across the country welcome infrastructure investment. In just the 

pipeline industry alone, we’re talking about 800,000 jobs. The income from these jobs goes directly to our members and local training programs and, in turn, supports the tax base of Main Street 

and those seeking employment in the construction industry. 

This is truly how we can invest in America without spending a 

single Federal dollar. 

The CHAIRMAN. Mr. McGarvey, I am going to ask you to wrap up 

here. 

Mr. MCGARVEY. I apologize, Madam Secretary. 

Thank you for your invitation and opportunity to address the 

Committee. 

[The prepared statement of Mr. McGarvey follows:] 

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The CHAIRMAN. Thank you. I am sorry to cut you off. Your full 

statement will be included as part of the record. 

Mr. MCGARVEY. Thank you. 

The CHAIRMAN. We are just trying to stick to our five minutes 

here. 

Mr. MCGARVEY. Gotcha. 

The CHAIRMAN. Dr. Parfomak, welcome. 

STATEMENT OF DR. PAUL PARFOMAK, SPECIALIST IN ENERGY 

AND INFRASTRUCTURE POLICY, CONGRESSIONAL RESEARCH SERVICE (CRS) 

Dr. PARFOMAK. Good morning, Chair Murkowski, Ranking Member Cantwell and members of the Committee. My name is Paul 

Parfomak, Specialist in Energy Policy at the Congressional Research Service. CRS appreciates the opportunity to testify about oil 

and gas pipeline infrastructure today. 

In accordance with our enabling statute CRS takes no position 

on policy or legislation. 

The United States pipeline network is integral to the nation’s energy supply and provides vital links to other critical infrastructure 

such as power plants, airports and military bases. Recent growth 

of domestic natural gas and crude oil production has resulted in an 

unprecedented expansion and reconfiguration of this network. 

From an energy market perspective continued expansion of U.S. 

pipelines has the potential to improve the efficiency of gas, oil and 

refined products transportation linking new producing regions with 

traditional consuming markets more directly with greater capacity 

and reliability. Such linkages may lower average transportation 

costs and may reduce regional price differences for energy commodities, especially in the case of crude oil that may also reduce the 

volume shipped by rail, truck and barge. 

Pipeline expansion may also support jobs in energy production 

and pipeline construction and may create economic benefits among 

industries that rely on oil and gas as key inputs. 

However, the future operation and expansion of the pipeline network also face significant challenges related to safety and security, 

emissions regulation, price volatility and public perception which I 

will now discuss. 

Pipelines are a comparatively safe means of transportation compared to other modes. Nonetheless, a single, uncontrolled pipeline 

release can be catastrophic in terms of human life, property damage and the environment. Uncontrolled releases in Michigan, Arkansas, California and other states have raised congressional concern about pipeline risks and increased local intervention in pipeline development. 

Over the last 15 years Congress has acted repeatedly to strengthen Federal oversight of pipeline safety and security. Additional 

safety regulations are being finalized and new safety legislation is 

pending. Congress is likewise examining the Federal oversight of 

pipeline security addressing both physical threats and the growing 

threat of cyber-attacks. 

New safety regulations and evolving security guidance are intended to reduce overall pipeline network risk but their associated 

costs and practical impacts have yet to be determined. 

29 

In 2015 the Environmental Protection Agency finalized its Clean 

Power Plan to regulate greenhouse gas emissions from existing 

power plants. Last month, the EPA also issued new regulations to 

reduce emissions of methane and volatile organic compounds from 

the oil and gas industries including pipelines. 

The Clean Power Plan is currently under litigation. If implemented, it may encourage natural gas-fired generation to replace 

coal-fired generation and to firm up renewable power. Such an outcome could increase demand for pipeline capacity and could potentially increase gas and power interdependency. Regulations to reduce pipeline system direct emissions will likely effect how pipelines are operated and maintained with implications both for the 

environment and public safety. 

Energy markets are in a period of significant price volatility. In January, for example, the price of Brent crude fell below $29 per 

barrel, dropping over 45 percent in about three months. Last week, 

Brent crude traded back above $50. Likewise, since 2012, Henry 

Hub natural gas prices have fluctuated from under $2 to over $6 

per million BTU. 

Such price volatility adds significant risk premiums to capital investment decisions for pipeline developers. One result of these uncertainties may be greater caution among developers before committing additional capital to new pipeline projects or the cancellation of existing projects such as the Northeast Energy Direct Pipeline which failed to attract enough customers. 

The oil and gas sectors tend to have a long-term perspective on 

infrastructure investment, often 20 years or more. So a short-term 

price volatility may not change their long-term plans, but the timing and location of their pipeline investments may have important 

implications for regional markets. 

Public perception of pipeline infrastructure has long been a consideration in pipeline development, but its importance seems to 

have intensified over the last several years. Public concern about 

pipeline safety has prevented new pipeline siting in certain localities and increased development time and cost in others. Controversy surrounding the Keystone XL pipeline and the Constitution pipeline are just two recent examples of projects heavily influenced by public opinion, even where there is Federal siting authority state and community stakeholders retain many statutory and 

regulatory avenues to affect siting decisions. Consequently, public 

perception is likely to be an ongoing priority in planning and policy 

related to pipeline development. 

Thank you for the opportunity to appear before the Committee. 

I will be happy to elaborate on my opening remarks and address 

any questions you may have. 

[The prepared statement of Dr. Parfomak follows:] 

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The CHAIRMAN. Thank you, Dr. Parfomak. 

Mr. Peress, welcome. 

STATEMENT OF N. JONATHAN PERESS, DIRECTOR OF AIR 

POLICY, ENVIRONMENTAL DEFENSE FUND (EDF) 

Mr. PERESS. Chairman Murkowski, Ranking Member Cantwell 

and members of the Committee, thank you for providing this opportunity for the Environmental Defense Fund to discuss challenges 

and opportunities associated with natural gas pipeline infrastructure. 

Pipelines play a critical role in our economy and in the ongoing 

transformation of the energy system to reduce air pollution and deploy renewable energy resources. In this regard natural gas is particularly well suited to provide flexible reliability services like fast 

ramping in response to variable wind and solar output. 

The challenge we face is that the natural gas market design is 

no longer in sync with contemporary supply and demand dynamics. 

Market price signals for the kinds and amounts of new midstream 

gas infrastructure are not focused and as discussed in my written 

testimony, are likely to result in more pipeline capacity than we 

need. And because pipelines are so expensive to build and operate 

excess capacity will impose billions of dollars in unnecessary costs 

to energy customers. 

At a time when energy customers have new data-driven tools and 

smarter control over energy consumption decisions, the natural gas 

market design is comparatively dumb, especially in comparison to 

the wholesale electricity markets. 

Electricity markets balance supply and demand continuously and 

they financially settle. In other words, they price and set the value 

of electricity and reliability services every five minutes, every 15 

minutes at the most. Natural gas pipelines, on the other hand, are 

compensated based almost entirely on fixed charges to reserve capacity through long-term contracts, 20 years or more for new pipelines, not fees based on how much gas is delivered and not the 

value of gas delivery services at times during the day when pipeline customers most need gas. 

As a consequence, pipeline operators are somewhat financially 

indifferent to whether their pipelines are fully utilized. Nationally, 

46 percent of available pipeline capacity goes unused according to 

a recent Department of Energy study. In other words, almost half 

of the money being paid by the pipeline customers, often retail and 

energy consumers, is for annual capacity that they are not using. 

Likewise, pipelines have muted incentives to provide flexible delivery services in response to customer needs. 

Gas-fired electric power generators, now the largest pipeline 

growth customer, simply do not operate in a steady state. What 

generators and most pipeline customers desire is the flexibility to 

get gas deliveries when they need gas and this flexibility need is 

increasing in a more flexible dynamic and controllable system. 

Flexibility then, in general, is not offered and is not priced by the 

pipelines. 

In some regions it may be that what is needed is more natural 

gas storage, more LNG storage, electric storage or price responsive 

demand response or it may be more pipelines. Without the market 

34 

creating targeted price signals, gas consumers and regulators can’t 

determine the least cost solutions. 

We empathize with the challenges being brought to the Committee’s attention by the National Association of Manufacturers. NAM 

needs better gas deliverability but because pipelines are paid for 

capacity, not services, the price for that deliverability has not been 

clarified. And paying for more annual capacity is not necessarily a 

cost investment, cost effective investment, for NAM’s members to 

make, otherwise they would be making it. Those are the economic 

underpinnings to the math problem that Mr. Epstein mentioned 

earlier. 

FERC understands this problem. They asked the pipeline industry to voluntarily develop faster, more responsive services, but the 

pace of change is too slow. 

EDF, at its core, believes that well-structured markets efficiently 

allocate capital and resources and will benefit—and will foster beneficial environmental outcomes. 

In the context of efficient outcomes, I want to touch on methane 

emissions which when leaked into the atmosphere constitute waste. 

Waste which not only adversely effects energy customers but also 

which goes to the heart of natural gas as an environmental solution. 

Earlier this year we had a glaring example of that waste. The 

leak at Aliso Canyon was the largest ever measured in U.S. history 

forcing thousands to flee from their homes, releasing enough methane to supply 60,000 homes for a year. Methane is a potent climate 

forcing agent, and this disaster was preventable through basic, well 

construction, operation and inspection practices. Aliso Canyon 

amounts to a failure of voluntary measures and of regulatory oversight. The extent of preventable leaks raises legitimate questions 

about the propriety of substantial further gas infrastructure expansion. 

Thank you for the opportunity to present our perspectives which 

my written testimony discusses in greater detail. 

[The prepared statement of Mr. Peress follows:] 

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The CHAIRMAN. Thank you, Mr. Peress. 

I thank each of you for your testimony here this morning. 

Again, I mention that we will likely see a vote around 11 o’clock, 

so we will be moving in and out here but do not let that reflect a 

lack of interest. I think the fact that we have seven members from 

each side of the aisle here today indicates a clear interest in understanding more of our infrastructure issues, the capacity issues and 

I think really, the math problem that you have mentioned, Mr. 

Eisenberg. 

Mr. Peress, I think you are the only one here on the panel who 

thinks that we might possibly be suffering from over capacity. More 

of what I hear is a concern that we lack capacity, not only for the 

immediate term but moving forward and understanding what those 

needs will be, recognizing that building a pipeline today is extraordinarily expensive and extraordinarily costly from a time perspective. 

I mentioned the fact that the construction of the TransAlaska 

pipeline was a three-year construction process. But getting us to 

that point, I think we will recall the history, was much longer than 

that. 

Mr. Black, nobody has really talked about the permitting issues 

and some of the siting challenges. 

Maybe it was you, Dr. Parfomak, that spoke to the disincentive, 

if you will, for investment in pipeline siting things like the regulatory issues, the siting concerns, the permitting. 

Mr. Black, can you give us some discussion here on how long permitting is taking for an oil pipeline in the United States? I know 

we are talking a lot about natural gas here, but can you please talk 

to me a little bit about the time involved with permitting a pipeline? 

Mr. BLACK. Thank you, Senator. 

It’s taking longer to site many liquids pipelines. 

The CHAIRMAN. Define longer. 

Mr. BLACK. I don’t have that. By a period of years, sometimes, 

pipelines are taking longer. Of course, Keystone XL is a great example of a pipeline review process that took longer. 

Liquid pipelines are sited under state laws so state processes like 

in Minnesota for the Sand Piper pipeline have been lengthened 

years beyond what they should be. 

And then for Federal issues we need to go through Federal lands 

agencies if we pass Federal lands or if we need construction-related 

environmental permits. And in many cases we’re able to get 

through those processes, and we’ve built more than 20,000 new 

miles of pipe in the last ten years but it’s taking longer and that 

process adds to the cost of the projects and those costs can ultimately be passed on to the consuming public. 

The CHAIRMAN. I want to switch over to jobs for just a moment. 

I will probably have an opportunity for a second round here, but 

there has been some push back, if you will, when we talk about the 

jobs numbers. Several of you have laid some significant and some 

impressive numbers out there that come with the construction of 

a pipeline. But we hear repeatedly the challenge that you are only 

creating jobs for that specific period of construction; and therefore, 

44 

these are considered just temporary jobs. We heard that replayed 

a lot with the Keystone XL. 

Mr. McGarvey, can you speak to the jobs issue? 

Mr. Eisenberg, you talked about, kind of, the broader impact 

when you create a pipeline it is not just the pipe that is bisecting 

an area but the implications for broader job creation. 

Mr. McGarvey, if you can start, please. 

Mr. MCGARVEY. Thank you. 

You know, that’s the language that’s been used around that has 

been a little aggravating. I don’t—people don’t really understand 

the construction industry. The Hoover Dam was a temporary job, 

the Golden Gate Bridge was a temporary job, and the new Freedom 

Tower in New York that rose in place of the Twin Towers was a 

temporary job. That’s the nature of construction. People, through 

the course of 30 or 40 years, maintain their position in the middle 

class going from construction project to construction project. I’m not 

aware of a project where somebody starts on their first day and 

ends their career 40 years later on a construction project. 

So that temporary job thing is a real itch for us. It bothers us 

greatly. It bothers our members when they talk about these career 

construction craft professionals just being temporary jobs. 

The CHAIRMAN. Because they are professional jobs, most clearly. 

Mr. Eisenberg, can you speak very quickly to that in terms of the 

jobs impact and what it means beyond the actual construction of 

laying the pipe? 

Mr. EISENBERG. Absolutely and thank you for raising this. 

Obviously, through the Keystone process, I mean, where there 

was a lot of inflamed rhetoric from every side, it was frustrating 

to hear that there just wouldn’t be many, many jobs. I mean, obviously, there’s the jobs for the men and women who are going to be 

making the pipe and building this facility and operating and maintaining it and then the manufacturing jobs that from rolling the 

aluminum and the steel and the things like that, that actually go 

into the inputs here, the compressor stations, things like that. 

Our studies actually looked at this and added up both the—and 

analyzed both the construction and the operations and maintenance. And so, just, I mean, I pulled up the oil study. In 2016 when 

you add those together oil pipelines, both construction and maintenance, will contribute 243,167 jobs. Twenty-eight thousand of 

them, 28,438, will be in manufacturing. 

So the operations and maintenance piece is obviously smaller 

than construction. These are gigantic construction infrastructure 

projects, but they’re there and you have to maintain these things. 

You have to keep them safe, you have to keep them secure and you 

have to keep supporting them. 

Between 32 and 37 percent of that is going to be from the manufacturing side of it, so these are real jobs. They matter to our members, and obviously, we care about them continuing. 

The CHAIRMAN. Thank you. 

Senator Cantwell. 

Senator CANTWELL. Thank you, Madam Chair. 

Mr. Black, oil being transmitted by pipeline, typically, is it treated to reduce volatility and vapor pressure? 

45 

Mr. BLACK. The pipelines are designed for crude oils of all volatility. Many of the products that we deliver have a higher volatility 

than even light crudes, so the volatility is not really an issue for 

pipeline transportation which operates mostly underground and 

does not have the risk of the product coming to an abrupt stop like 

it does on another transportation mode. 

Senator CANTWELL. So there is no regulation, you are saying? 

Mr. BLACK. Well there’s certainly regulation about worker safety. 

Senator CANTWELL. What is it? 

Mr. BLACK. And about pipeline safety, but there are not additional regulations dealing with product volatility—— 

Senator CANTWELL. What do you—— 

Mr. BLACK. Because anything that covers gasoline would certainly cover a light crude from the Bakken. 

Senator CANTWELL. What do you think the volatility is for most 

pipelines shipping oil? Do you know? We will follow up with you 

on a question for the record. 

Mr. BLACK. Sure. 

Senator CANTWELL. I don’t want to put you on the spot about 

vapor pressure and pipeline volatility, but it is certainly a subject 

I have gotten up to speed on in the last year. 

Mr. Peress, I want to go back to your comments about natural 

gas market changes. I don’t want this Committee to get into a debate that we often have now about nuclear power, which is about 

we have got to change the way it is regulated because nothing can 

get built. I don’t want to have the same discussion about natural 

gas, because I would actually like to see natural gas. 

But you are basically saying that the market has changed and 

that we need to have different signals if we want to improve the 

utilization of the pipelines that we have today. So what do you 

think those signals are? Shorter contracts? What it is that will 

allow gas to continue and flourish as a bridge fuel source? 

Mr. PERESS. Right now the market is completely based on bilateral contracts between pipelines and their customers for capacity. 

Capacity does not necessarily equal deliverability. 

What customers need is they need to get fuel delivered to them. 

And because that deliverability is not priced because what—pipelines are totally compensated based on capacity. We see inefficiencies within the way that the pipelines are operated. 

We are suggesting that pipelines should be able to earn premium 

revenues for providing enhanced deliverability and flexibility services so that they’re not just getting paid for capacity so that the 

market calls forth the right types and amounts of resources for customers to get gas when they need it. 

Customers don’t need capacity. Customers need gas. There’s a 

difference. 

Senator CANTWELL. How do you think we make this transition, 

because I am assuming the companies that invested in these pipelines need to recoup their investments. Obviously, there has been 

a structural change in gas pipeline contracts. I do not know if this 

came about because we used to use natural gas primarily for heating and now it is for electricity? And the electricity markets are 

what they are today. I mean, there has been a big change in the 

market. Is that what we are dealing with here? 

46 

Mr. PERESS. Yes, Senator. 

It came about in the early to mid–90’s when FERC, I think, prudently decided that they were going to turn both the interstate 

transmission companies on the electric side and the interstate pipelines into common carriers and take them out of the supply business. 

And part of the deal that they struck in order to take the pipelines out of the supply business, in other words, pipelines are not 

selling gas molecules, they’re selling transportation services, was to 

come up with a compensation scheme that would keep them interested, engaged and investing capital. And that compensation 

scheme was based on the value of capacity. And by and large, that 

compensation scheme and that market design has been highly successful. 

Fast forward 20 years. At this point in time it’s—there’s a need 

for that compensation scheme to evolve. Virtually every customer 

or company that Mr. Epstein mentioned currently has arrangements to buy firm capacity off of a pipeline. If they wanted to buy 

more firm capacity, they can invest their money and get more firm 

capacity. But they don’t want to do that. What they want to do is 

enhance deliverability. Paying for capacity is not a cost effective investment. 

Why? Because you’re paying for that capacity every day of the 

year, 24/7 over the term of that contract whether or not you use 

it. 

What we think needs to happen is there needs to be a shift in 

the rate design so that as pipelines are incented to provide more 

flexible delivery services they can earn and garner revenues from 

those services which are actually the services that customers need. 

Capacity does not equal deliverability and FERC understands this. 

Senator CANTWELL. Well, I know my time is about expired, but 

I will say I definitely support the Senate version that we worked 

out on siting. I am not against siting of new pipelines, but we have 

to meet safety standards in the law. 

But I think this issue that you touched on today is a really big 

issue. I want safety. I also do not want to get caught short in the 

long-term because the market has changed and we are not building 

capacity. 

I think it is a very interesting conversation here about how we 

move forward, so I hope we will continue this conversation. 

The CHAIRMAN. Thank you, Senator Cantwell. 

Senator Daines. 

Senator DAINES. Thank you, Chair Murkowski and Ranking 

Member Cantwell for holding this important hearing. 

I come from the State of Montana. It is a place where we have 

some of the country’s most pristine wild spaces along with an abundance of natural resources, including robust oil and natural gas industries which support the employment of 43,000 people. 

At the same time our scenic mountains, our rivers, our elk, our 

trout and so forth are the main motivator one might want to stay 

in our state. In fact, tourism is an industry that is nearly $6 billion 

and employs over 53,000 Montanans. 

That is why, I think, we strike the right balance with the Safe 

Pipes Act. I was pleased to help author it, and it passed the Senate 

47 

unanimously last night. Among other provisions this bill reauthorizes PHMSA through 2019. That takes some of the uncertainty out 

of the equation. It also helps safeguard the environment by improving inspection report turnaround times. I look forward to seeing the 

President sign this into law soon. 

Mr. Black, I would like to start with the Safe Pipes Act which 

passed unanimously last night. In your experience in the industry 

how do you see the Safe Pipes Act making our pipelines even safer? 

Mr. BLACK. Well thank you, Senator, for your role in that bill 

and in pipeline safety. I remember the field hearing you convened 

in Montana through your role on the Senate Commerce Committee. 

I’d like to single out the provision that you helped author on 

quicker inspection results. Pipeline operators want to hear for the 

purpose of improving safety if a PHMSA inspector finds something 

on his or her visit. Sometimes, unfortunately, we were having a period of even more than a year or two years for that safety inspector 

to tell the pipeline operator about those concerns. 

We’re in the business of learning from each other and continually 

improving our pipeline safety programs, and we want that input 

quickly. I want to thank you for that provision that encourages/directs PHMSA to give a post inspection briefing to a pipeline operator much more quickly so that we can get about the business of 

addressing whatever that PHMSA inspector finds. That’s one way 

it’s going to improve pipeline safety, and it was a great bill that 

we were happy to support. 

Senator DAINES. Thanks, Mr. Black. 

I want to shift over to Mr. McGarvey. I was struck by your comments about temporary jobs. I grew up in the construction industry. My dad is still building houses. If you keep food on the table 

in construction, it is by stringing together a series of temporary 

jobs to stay employed. 

I was struck by the inconsistency on the battle on the Keystone 

pipeline. Why is it those were temporary jobs but when we are 

building bridges and highways and infrastructure, those are jobs? 

I think it is hypocrisy, frankly. That is how you stay employed 

through a lot of temporary jobs in construction. Thank you, Mr. 

McGarvey, for that point. 

It is clear we need to invest in our energy future and expand our 

energy infrastructure in order to keep up with demand. Projections 

in the next 25 years, we are going to add two billion people to the 

planet. Energy demand is going to increase 85 percent from where 

we stand today, almost doubling in the next 25 years. The question 

is how are we going to meet that demand and what role will America play in that? 

However, it appears that the Obama Administration is not listening to the unions. I am glad to have a union leader here today, Mr. 

McGarvey. They are not listening to associations and the families 

that are most affected by these anti-energy policies. 

The denial of the Keystone pipeline was a big loss for Montana 

workers and families and teachers and unions. Seventy million dollars of tax revenues every year in the State of Montana because 

that pipeline comes into Montana first. 

By the way, it is not just about Canadian oil. One hundred thousand barrels a day of Montana/North Dakota oil was part of the 

48 

Keystone pipeline. It was just one of many denials and delays by 

this Administration. 

I appreciate your comment too. You are speaking my language 

when you said, all hat, no cattle. As a Montanan, I know exactly 

what you meant by that. 

Mr. McGarvey, in your testimony you state that the denial of the 

Constitution pipeline in New York will delay thousands of jobs that 

would generate millions in income for families in the region. Can 

you elaborate on how this denial, like the Keystone XL pipeline 

and others around the country, is hurting our economy, our unions, 

our energy security and the families that most need it in this very 

lethargic economy that we have today? 

Mr. MCGARVEY. Yes, Senator, I’ll do my best. These denials of 

these pipelines which are the most advanced, technologically advanced, safest pipelines, you know, in the history of the world. 

In the case of the New York pipeline, which was already approved by FERC, it really got bogged down which, I believe, was 

in local politics. There were very strong, anti-pipeline, activist 

groups in the State of New York. There’s a—just last week, I think 

it was the State of New York just passed a pretty big bill on green 

energy which proving that pipeline would have been moved in the 

opposite direction in the view of some of those folks. 

But the bottom line is when it comes to our natural resources, 

oil and gas, the manufacturing that comes about once we get the 

pipeline system in place, speaking of the Shell cracker, you know, 

$6 billion project in Southwest Pennsylvania and New York State 

hasn’t been able to take advantage of any of that. It doesn’t have 

the infrastructure in place when it comes to transporting gas and 

oil through the state. 

On top of that, my skilled professionals that I represent, men 

and women who’ve gone through, you know, three to five years 

worth of training, 6,000 to 10,000 hours, to be that safest, most 

productive craft work force in the world, aren’t getting the opportunity to apply their skills. And they’re being told that the green 

energy future is where we’re going to need your skills. And I would 

note that the DOE’s Quadrennial Report pointed out that the average medium wage for a solar installer in the United States is 

$16.01 an hour. 

And my membership that I represent currently is making substantially more than that and their families are depending on those 

higher income levels that are paid, particularly in the oil and natural gas and petrochem industries, to maintain their place in the 

middle class. So it has a devastating impact when they don’t have 

the opportunity to go to work and apply their skills. In some cases, 

they have to travel from their homes to places where work is available, be away from their families, their children. And that puts a 

separate hardship on a family. 

But you do what you have to do in the construction industry, and 

that’s why it’s called journeyman’s card because you go where the 

work is. But a reasonable, rational policy in New York State and 

through the United States on energy, settling most of these differences and continuing the arguments where we need to have 

them. 

49 

Listen, I’m insulted sometimes when people talk about the safety 

issue because I represent men and women, three million of them, 

and their families. And if you’ve ever had a member get killed in 

a construction accident and you’re responsible to go and meet with 

that family and explain what happened and explain what their future looks like and how you’re going to be able to help take care 

of them. We put a preeminent focus on safety. That’s why we’re so 

safe. 

And that’s why the industry, also, mostly publicly traded companies, put that emphasis, you know, on making sure that they’re 

building those safe pipelines, that they’re maintained safely and 

that they continuously get good ratings and good returns for their 

investors and the people that live in the communities in which 

those infrastructure projects go through. 

So— 

Senator DAINES. Yes, and to that point we are out of time, but 

I know the energy jobs in Montana pay twice, twice, what our state 

averages are. 

Thank you. 

Senator BARRASSO. [presiding]: Thank you, Senator Daines. 

We will start with Senator Manchin and the roll call vote has 

begun. 

Senator MANCHIN. Thank you very much. Thank all of you for 

your testimony today. 

I wanted to say, Mr. McGarvey, basically, I think you know the 

State of West Virginia pretty well. We have been a heavy, heavy 

lifter for many years and produced an awful lot of energy for this 

country. We are an exporter of energy, and we have been heavy in 

fossil with coal and now we have a natural gas with Marcellus 

shale coming on and the wet gas with ethane which has been very 

instrumental in our state. 

We have very high unemployment right now because of the demise of the coal industry, if you will. With that being said, we are 

looking for more opportunities in jobs. I know through your apprentice programs you have been trying to get more of our labor force 

in there. Can you give me a little update quickly on what you have 

done so far for some of our laid off miners and some of these people 

with the skill sets because of the shift in our energy in West Virginia or have you been able to identify that? 

Mr. MCGARVEY. Yes, Senator, we are in one instance across the 

United States in my testimony talked about apprenticeship readiness programs. 

They’re usually a 6- to 12-week program that’s an introduction 

to the construction industry. So you would take women, communities of color, veterans and bring them into apprenticeship readiness programs, also displaced workers, for instance coal miners in 

West Virginia. We have a program just starting in—— 

Senator MANCHIN. They have a high priority, I am saying. 

Mr. MCGARVEY. Right in Southwest Pennsylvania on the border 

with West Virginia. 

Senator MANCHIN. Right. 

Mr. MCGARVEY. Which will give opportunities for lots of West 

Virginia. 

50 

Senator MANCHIN. Well, the cracker plant is going to be tremendous for all of us. 

Mr. MCGARVEY. That’s right. 

Working in conjunction with Shell we put that program together. 

Just kicking it off. 

So they move from apprenticeship readiness into apprenticeship. 

They’ll get credit for skill sets from other occupations they already 

had, move them further up the economic ladder in the apprenticeship and quickly into journeyman status in a new career that’s selfsustaining in the middle class. 

Senator MANCHIN. I have been advocating for a three state solution which would basically be the Mid Atlantic energy hub, the 

same as the Southwest hub. The three states of West Virginia, 

Ohio and Pennsylvania should be building the loop to keep the ethane, to keep basically the gas, natural gas, supply to attract more 

businesses to that area. I think this would be a tremendous opportunity for all of us, and hopefully you all can support that. 

Mr. Peress, I think that your group is basically opposed to the 

XL pipeline. I would just like to hear your explanation. 

We have had a train blow up in West Virginia. We had trains 

blow up everywhere. Why are you all opposed to the line? 

Mr. PERESS. Senator Manchin, I’m not aware that—— 

Senator MANCHIN. EDF? 

Mr. PERESS. EDF opposed the XL. 

Senator MANCHIN. Let me read it to you. Do you want me to read 

it to you? You’re—you didn’t know that your president? 

Mr. PERESS. Well, I work on natural gas issues, Senator 

Manchin. If you—— 

Senator MANCHIN. Well, here is what it says. 

It says, ‘‘The Keystone pipeline was not the right path for America. President Obama deserves credit for rejecting the project. As 

a nation we have turned the corner and now recognize that we 

need to consider the impact of energy projects on climate pollution.’’ 

Mr. PERESS. Senator, maybe I can address it in the policy context 

in which you are asserting it? 

Senator MANCHIN. And that was by Mr. Fred Krupp. 

Mr. PERESS. Would that be okay if I—— 

Senator MANCHIN. Sure, anyway you want to do it. 

Mr. PERESS. So anytime there is a large investment in infrastructure that’s a bet. That’s a bet because infrastructure is so costly 

and so expensive, in the billions of dollars. 

Senator MANCHIN. Can I interrupt? 

I am going to have to move on because we are running out of 

time. I want to hear this, but I have never known of a company 

that would make this type of investment unless they had a market. 

You are saying they are building these projects on spec whether it 

be a pipeline or a transmission line, they are building on spec, hoping it will come. Build it and they will use it? 

Mr. PERESS. No, I’m saying that companies that invest in infrastructure are making a bet that there’s a market for that infrastructure over the long period of time it takes to pay down that infrastructure. 

And from our perspective and what we know, and I can only 

speak to this on the gas side, not the oil side because my area of 

51 

expertise is on gas. The gas industry itself, in recent filings, is suggesting that renewable energy, like wind and solar, will be taking 

market share away from them, that those will be an increasingly 

lower cost energy sources. 

Senator MANCHIN. But the EIA basically predicts that fossil, as 

far as gas and coal, is going to be a major player with almost 70 

percent of the play, up until 2040. Seventy percent of the energy 

produced for this nation is going to come from, those resources. 

Mr. PERESS. The EIA also predicts increasing amounts of wind 

and solar—— 

Senator MANCHIN. That is great, I am saying but it is not going 

to be baseload. You agree to that, right? It will not be baseload. 

Mr. PERESS. I do agree with that. 

Senator MANCHIN. So you are going to have to have baseload. 

Mr. PERESS. I don’t agree with that. 

Senator MANCHIN. You do not agree about the need for baseload 

generation? 

Mr. PERESS. No. 

Senator MANCHIN. So you like intermittent power? You are okay 

with—— 

Mr. PERESS. I think an optimized system uses the lowest cost resources in consideration of public policy elements. 

Senator MANCHIN. And you think those could make it without 

the subsidies that we have given? 

Mr. PERESS. Are you referring to pipelines or? 

Senator MANCHIN. I am referring basically to renewables and everything else that we have done. 

Mr. PERESS. I think once we start opening the door on who is 

subsidized, how much that becomes a much more assurance. 

Senator MANCHIN. Sure, I agree. 

I think, Mr. Black, I have one question for you here, real quickly. 

Do you agree that the type of hub, shale basically, with what 

Shell is doing up there in the play? Do you believe that type of a 

hub would attract greater manufacturing infrastructure investment 

to our region? How do you see something like that developing? It 

took quite a while for Shell to make a decision on that hub up 

there, the cracker hub. Do they have the supply in place to do that? 

Mr. BLACK. Well, we’re going to need enough pipelines to move 

ethane to those plants. That’s a tremendous decision that Shell 

made that’s going to help the region, as you said. 

That’s a lot of ethane coming out of the Marcellus, very rich, wet 

gas. We need enough pipelines. If the hub is the way to do it, that’s 

great, because without it there are workers and consumers that are 

just not getting those benefits. 

Senator MANCHIN. Okay. I am sorry, we are off to go vote. Everyone has left. I think it is time to vote. 

Thank you all. 

Senator BARRASSO. Thank you, Senator Manchin. 

Senator Cassidy. 

Senator CASSIDY. Well, thank you all. I am really enjoying the 

testimony. 

I love the all hat, no cattle. People say that for jobs but they do 

not support something which clearly will create jobs. 

52 

Mr. Eisenberg, I think it was you. You pointed out that not only, 

I think Mr. Black and Mr. Eisenberg, that part of the power of this 

is that it leverages the creation or the preservation of other jobs. 

Senator Franken, who is not here, has once asked what has the 

shale revolution done for Minnesota? I was able to quickly find 

something that it had done but I think you, Mr. Eisenberg, pointed 

out that ACME Brick still produces because they can get gas 

shipped there and that energy intensive, low cost input allows 

them to preserve those jobs. 

Mr. EISENBERG. That’s correct. 

Senator CASSIDY. Now I am sure that is one example, but there 

will be many more too, I am sure. 

Mr. EISENBERG. There are many, many more in the State of Minnesota and everywhere else that when you invest in manufacturing, a dollar invested in manufacturing, creates $1.40 in economic benefits across the economy. 

Senator CASSIDY. Then you pointed out, going back to Mr. 

McGarvey, that the nature of these jobs are not low paid, service 

jobs. Rather, they are well paid jobs and although they may be 

temporary, that is the kind of temporary jobs that preserve somebody’s position in the middle class with good benefits. 

Mr. EISENBERG. That is absolutely correct. 

Senator CASSIDY. Yes, I thought that was all very well done. 

By the way, for the record we should point out that the State Department said that if the Keystone XL pipeline were built, it would 

result in greater safety to current modes of transportation, a lower 

carbon footprint and more lives saved. So just for the record, that 

is the State Department that has pointed that out. 

Now, I really enjoyed your testimony. It was very technical in economics, and it is something that although I suspect one to pass 

on in disagreement, I thank you for that analysis. 

But I could not help but thinking as you mentioned that we have 

an increased capacity, and we are specifically speaking of the 

Northeast that I gather during the cold, the polar vortex, they are 

actually shipping in LNG from the Caribbean and burning heating 

oil—very carbon intensive and a lot of emissions. 

So isn’t part of our capacity, kind of, like an interstate highway 

system which usually it is easy to travel at three in the morning, 

but it is rush hour that we need the capacity? It seems as if that 

capacity is not just for the incremental or the base load, it is also 

for that spike when you have a polar vortex or when you do an economic development and you need to have another energy intensive 

enterprise move and create jobs to a region therefore you could say 

oh, yes, we have the capacity to provide your energy needs. How 

would you respond to that? 

Mr. PERESS. Thank you very much for that question. And incidentally, I spent seven of the last ten years on the Participant’s 

Committee of the New England Power Pool and have been deeply 

engaged in discussions around gas capacity into New England. 

The issue that they’ve—that’s been addressed in New England is 

focused on getting gas during those peak days, as you put it. 

And—— 

Senator CASSIDY. May I also interrupt? 

53 

We have also looked at that. It also seems that there has been 

a tremendous substitution with both petroleum oil as well as coal 

with natural gas. The amount of natural gas growth in the Northeast has been remarkable. I am sure that was allowed because 

there was already existing capacity. 

Mr. PERESS. And indeed I think it’s pretty clear that that shift 

in natural gas has provided benefits. 

But the real question and the issue that I raised in my testimony 

is when you’re in a region like New England where you’re facing 

a peak challenge. That is there are 15, 30, 40 days a year when 

you need to get gas deliverability that arguably, and there’s some 

data that suggests that the pipelines are being used to capacity 

during those days, is building new capacity and paying for that capacity every day of the year for the other 340 days, the most cost 

effective way to overcome that problem. 

Rational, commercial actors, power plants, industry have decided 

that pipeline capacity is not the most effective way to address that 

problem. And indeed, it has been relieved over the past several 

years. And it’s been relieved by those actors making a decision that 

there are, just in time fuel availability to lower customers—— 

Senator CASSIDY. But that may be a more carbon intensive method of production, right? It would be cheaper to use petroleum oil 

to heat, but frankly if we are concerned about greenhouse gases 

that would be a worse way to do it. 

Mr. PERESS. There’s no doubt that natural gas, at least at the 

burner tip, emits less greenhouse gases than oil does. The question 

is when you considered the limited amount of time where they face 

these peak issues is that a material difference? 

And thus far, the numbers suggest that it is not a material difference. And in fact, LNG which is, which provides for just in time 

delivery, people are not paying for capacity. They’re paying for the 

fuel that they use because the ability to get LNG to these power 

plants is not costly, unlike new power plants, has also been a large 

part of the solution. 

And what my testimony suggests is that when we call forth the 

competition for solutions to address those deliverability challenges, 

markets will provide the most cost effective outcomes. 

Senator CASSIDY. I am over time. I yield back, and I thank you 

all for really intriguing testimony. 

The CHAIRMAN. [presiding]: Thank you, Senator Cassidy. 

Senator Barrasso. 

Senator BARRASSO. Thank you very much, Madam Chairman. 

Mr. Peress, you are the Air Policy Director for Natural Gas at 

the Environmental Defense Fund. In that role you focus on midstream, downstream areas of the natural gas supply chain such as 

the interstate pipeline system. 

I understand you also represent the Environmental Defense 

Fund in proceedings before the FERC, the Federal Energy Regulatory Commission. 

Recently a different environmental group which calls itself Beyond Extreme Energy has engaged FERC albeit using, I believe, 

highly questionable tactics. 

For example, in February of this year this group sent mail protesting FERC’s decisions to the homes of the FERC’s commisVerDate Nov 24 2008 14:38 Feb 28, 2017 Jkt 021990 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\21990\C21990.TXT C21990
54 

sioners, not to their office, but to their homes. The group even went 

so far as to hand deliver its protest mail to the homes of FERC’s 

commissioners and then post the commissioner’s home addresses 

online. Last month this group announced that it would again target 

FERC’s four commissioners at their homes, directly at their homes. 

The group issued a press release saying it would, ‘‘visit the four 

FERC commissioners at their homes to hold them accountable for 

their decisions.’’ 

Now, I find these tactics in today’s world to be extremely troubling, very dangerous. Other environmental activists recently drove 

the Chairman of FERC, Norman Bay, from the stage at an event 

in Albany, New York. They reportedly stormed the stage and accused FERC of genocide. 

Do you believe that physically intimidating public officials at a 

time like this or any time and their families is an appropriate protest tactic? 

Mr. PERESS. Senator Barrasso, the way that we, as a society—— 

Senator BARRASSO. Yes or no? 

Mr. PERESS. Well, I’m not going to speak for the Environmental 

Defense Fund. I will speak for myself. I think it’s highly unfortunate. 

Senator BARRASSO. Then why hasn’t the environmental community stood up to denounce these tactics? Is it waiting until a public 

official of FERC confirmed individual or his family or her family, 

if they get hurt? Is that the plan? 

Mr. PERESS. What I can tell you, Senator Barrasso, is that any 

tactics that constrain civil discourse to come up with solutions to 

complex problems are not valid tactics in my personal opinion. 

Senator BARRASSO. Because your organization, the Environmental Defense Fund, has worked with the group Beyond Extreme 

Energy on legal initiatives. 

Last fall, your group and Beyond Extreme Energy and other organizations co-signed a letter to Attorney General Loretta Lynch. 

I imagine you did not deliver that to her house. Did you? 

Mr. PERESS. I would hope not. 

Senator BARRASSO. So tell me, why is your organization now 

linking arms with a group who believes that physically intimidating public officials and their families is acceptable behavior? 

Mr. PERESS. I’m not really sure what precipitated that sign on 

letter. Sign on letters go around our community all the time. 

Senator BARRASSO. Mr. McGarvey, do you believe that blocking 

the construction of an oil and gas, natural gas, pipeline is a smart 

and effective way to regulate hydraulic fracturing? 

Mr. MCGARVEY. No. 

Senator BARRASSO. Do you believe that blocking the construction 

of oil and gas pipelines is a smart and effective way to reduce 

greenhouse gas emissions? 

Mr. MCGARVEY. No. 

Senator BARRASSO. So what happens to American workers and 

their families when environmental activists succeed in blocking the 

construction of oil and gas pipelines? 

Mr. MCGARVEY. Well I think our greatest example was when the 

rest of the country and most of the world was going through the 

great recession in the construction industry, we were going through 

55 

a great depression where in many states we were north to 25 percent unemployment. Our unemployment is still double the national 

average, and where there was an opportunity to put thousands 

upon thousands of people to work on one pipeline, it was blocked. 

And unfortunately, many people lost their homes, health care, unemployment insurance ran out. In some cases, suicides amongst 

our membership spiked because of people’s inability to take care of 

their most important asset, their family, to financially provide for 

them. So the effects of those kinds of actions in energy infrastructure have a serious, serious economic impact on the members that 

I represent. 

Senator BARRASSO. Thank you. 

Thank you, Madam Chairman. 

The CHAIRMAN. Thank you, Senator Barrasso. 

Several of you made a reference to energy renaissance, natural 

gas renaissance, shale renaissance. Would we have had a renaissance, would we have had this uptake in the economy, to use your 

terms, Mr. McGarvey, and we were in a depression effectively? 

Would we have had that if we had not had infrastructure in place 

to avail ourselves of the technology that allows us to go after this 

resource? 

This resource just did not appear there overnight. It has been sitting there. It has been our ability to access it through the technologies that have come about. It is a pretty generic question to 

you all, but it again speaks to the critical issue that we are talking 

about here which is making sure that we have adequate capacity 

within our infrastructure. 

Mr. Black, can you speak to that? And Dr. Parfomak, given the 

research that you have done at CRS, can you also speak to that? 

So, Mr. Black first. 

Mr. BLACK. Thank you, Senator, for hitting the key point that 

you need pipeline infrastructure to make this happen. 

You discussed the importance of getting product from point A to 

point B, whether it’s crude oil to refineries where it’s lower costing 

or natural gas liquids that get to a petrochemical plant. It wouldn’t 

be possible without the pipeline infrastructure. It’s absolutely necessary and it wouldn’t happen without it. 

The CHAIRMAN. Dr. Parfomak. 

Dr. PARFOMAK. There’s no question that the unprecedented developments in shale gas were reducing the price of natural gas, you 

know, from $15, if you remember just a few years earlier, to $2 to 

$3 to $4 range created a host of economic benefits. 

It lowered home heating costs so folks had more money to spend 

on discretionary expenditures. It lowered manufacturing costs, as 

others have stated in the past. It made electricity cheaper. And so 

there are a host of benefits now. 

You know, economics tells you supply and demand. Cheap commodity, you’re going to increase demand for it and we have this, 

sort of, you know, cyclical nature in the energy industry as we always have had. 

What is interesting to me as an analyst is that we are just, in 

my view, in the beginning of a huge transition infrastructure wise 

from an economy where natural gas is produced in certain regions, 

consumed in certain regions to a physical reshuffling of that, as I 

56 

stated in my testimony, and continued transition in the way that 

natural gas is being utilized. 

From my point of view, it sort of requires constant vigilance as 

to how are things going regulatorily, construction wise, the price of 

fuels which are influenced not only by developments here but internationally. So it requires a lot of attention to all of these factors, 

and unfortunately, it’s a lot more complicated that it used to be. 

The CHAIRMAN. Let me ask about that, the fact that it is more 

complicated because we speak about the benefits to consumers 

whether it be lower energy cost. We certainly recognize that the 

jobs benefit, just the overall benefit, that comes to the broader 

economy as a whole. 

Yet we have this nimby attitude where okay, I want to make 

sure that I have access to that natural gas. I want to make sure 

that I have access to this resource, but just don’t put it within my 

eyesight, don’t put it in my state, put it in somebody else’s backyard. 

If the benefits are so apparent and again, I look at you, Mr. 

McGarvey, because I think from a jobs perspective it is just bold 

and in your face, why is there this disconnect? I think I called it 

a cognitive dissonance here. What are we not doing right in conveying to the American public, the consumer, that there is clear 

benefit here? By the way, if you want to have more affordable, accessible, clean, diverse, secure supplies, you are going to need the 

infrastructure. What are we doing wrong? Are we not conveying to 

the work force the importance of this? 

Mr. MCGARVEY. My work force understands the importance of it 

for sure. It’s just ironic that, again, it goes back to our discourse. 

We can’t have an honest conversation where, in a region or in a 

local area, we have to have outside groups come in and gin up the 

scare tactics and other things why people should be frightened and 

opposed. 

I mean, it’s gotten so bad that ironically even in the State of 

Vermont, I think, in its last legislative session, I think the Vermont 

Senate passed a bill out. I don’t know that it’s made it all the way 

through to ban but put a moratorium on more windmills in the 

State of Vermont. We’ve already closed our nuclear plant up there. 

I don’t know how they’re going to do the power generation. 

But again, if we could have a rational conversation about the 

benefits, about not ceding our position as the economic super power 

to China, about real middle class jobs, families sustaining middle 

class jobs and what they mean. And for the most part, there’s always exceptions to the rule, but for the most part, you know, private investment wants to work with local communities to make it 

work for them so that it works for all the parties that are involved 

with it. 

And then in my testimony I talked about the three-legged stool 

government, labor and industry all working together to make sure 

that we’re building safe infrastructure. It’s aesthetically pleasing as 

it can be, as far away from inhabited home sites as it can be and 

keeps the country moving forward. It goes back to everything else 

that’s going on in our country right now. There’s just not, we can’t 

have an honest conversation about what’s important. 

57 

The CHAIRMAN. I would like to think that here at the Committee 

we can help move forward on honest conversations. So thank you 

for bringing that up. 

Senator King. 

Senator KING. Thank you, Madam Chair. 

Sorry about the herkey jerky nature of this. When they call a 

vote we have to go. 

I have a long-term question and a short-term question and perhaps some of this might be for the record. 

The short-term question touches on the question that Mr. Peress 

talked about which is the capacity versus deliverability issue and 

peaking needs. It has often occurred to me that we build energy infrastructure, and this goes for the electric distribution lines as well, 

for the hottest day of the year or in the case of natural gas, the 

coldest day of the year. It is like building a church only for Christmas and Easter and on an off day in April there are not many people there. 

Right now in New England, 57 percent of our electricity is being 

generated by natural gas. My question is where is that going in 

New England? I know we are going to lose at least one nuclear 

power plant and probably one or two coal plants. 

Mr. Peress, you have talked about this. Isn’t there going to be 

a need over the next 10 to 20 years for additional base load capacity? We will talk about peaking after this. 

Mr. PERESS. First of all let me say that what we have seen in 

the markets is that the markets, in particular, New England, but 

throughout the country, they’re getting peakier. That means the 

average load to peak load, that ratio, is growing which suggests 

that base load resources are not what is going to be needed in the 

future. And in fact, there are many trends that suggest that base 

load resources are not what’s needed in the future. 

If you look at my testimony I speak in depth about the fact that 

few, if any, natural gas-fired power plants run as base load resources, less than six percent nationwide. And that’s based on recent EIA data. 

So the question is less about whether we need to install capacity 

to meet base load needs and what are the most cost effective means 

to provide for that flexibility and that deliverability in a more 

peakier dynamic. 

Senator KING. Well let’s transition then into my second question 

which is about peaks. 

Mr. Parfomak, I would like you to comment. What are the practical alternatives to building excess capacity to deal with peaks? 

Are we talking LNG storage tanks? How can we deal with this 

issue of a peak demand in two or three weeks in the year and pretty adequate capacity the rest of the year? Dr. Parfomak, what are 

your comments? 

Dr. PARFOMAK. There are alternatives on the supply side and the 

demand side. And so, as examples in the electric utility world, 

there are programs that have been around for a long time to try 

to reduce peak—— 

Senator KING. Demand response. 

Dr. PARFOMAK. Interruptible power supplies, now the smart grid 

is putting meters on people’s dishwashers and clothes washers to 

58 

turn them off on August afternoons automatically without the consumer having to make a decision and compensate them for that. 

So there are probably a number of ways and maybe more ways 

to be thought of to try to moderate certain types of demand, interruptible rates for natural gas users. But some of them can’t do 

that, so there’s a limit to the flexibility in demand. 

On the supply side, there is that—— 

Senator KING. Well the demand response works for the electric 

side, but it does not necessarily work for a factory that needs the 

gas—— 

Dr. PARFOMAK. Right, some of them can’t do that, right. Some of 

them can stop a shift without penalty and make it up, you know, 

the following week. Some of them can’t. They can’t power down 

that way. 

But in terms of supply there are, of course, use something other 

than natural gas. We talk about it in the vehicle world using electricity to run cars instead of gasoline. We can use other fuels rather than natural gas and we can use electricity for a process, that 

sort of thing. 

Of course, it’s hard to build transmission lines to get electricity 

into some of these regions too. 

Senator KING. But if you charge your car at night there is a lot 

of excess capacity on the electrical transmission and distribution at 

night. 

Dr. PARFOMAK. That’s right. 

Senator KING. A huge amount of excess capacity. 

Dr. PARFOMAK. And that’s again, that’s a practice of capacity utilization and trying to reduce peak loads. 

LNG, as you mentioned is another option, but that presents its 

own challenges. 

Senator KING. Mr. Eisenberg, your clients, your members, will 

pay for this new capacity. Are you concerned about paying for excess capacity? 

Mr. EISENBERG. So I’m not hearing that from my members at all. 

There’s a chart on page two of my testimony that shows our natural gas usage. It’s trending up. It’s about three times higher than 

about any other fuel we’ve got. Manufacturers need always on energy and natural gas can give us that, always has given us that. 

So when our members are looking to invest in these contracts, 

my sense is they’re looking long-term and they’re looking for a secure fuel for a very, very long-term. 

Again, we don’t really hear a lot about rates from them. It’s not 

something that is a top tier issue for our organization because 

they’re handling it at the state level. But what we do hear is that 

they need the pipelines to fix some of the geographic issues, the 

distribution that’s going on there. 

Senator KING. Thank you, Madam Chair. 

I will mention I have a friend in the construction business whose 

family-owned company has been providing temporary permanent 

jobs since 1928, so I understand that discussion. 

Thank you. 

The CHAIRMAN. Thank you, Senator King. 

Senator Hirono. 

Senator HIRONO. Thank you, Madam Chair. 

59 

I thank all of the witnesses. 

Mr. Peress, I found your testimony very interesting and talking 

about excess capacity and the fact that pipeline owners, I suppose, 

operators are paid for capacity rather than distribution or deliverability. 

You noted that there is a potential for gas and electric rate payers to be stuck paying the bill for pipeline infrastructure that may 

not be needed. What is the typical time for payback for pipeline, 

new pipeline, infrastructure to justify the cost of building the pipelines? What is the length of time that they generally look to? 

Mr. PERESS. I don’t know the answer to that question off hand 

because it all depends on what the application and use of that natural gas is and the circumstances in the individual market. But 

what I can say is that customers that make a rational decision to 

sign up to buy capacity for and long-term contracts, make that calculation and that’s what drives their decisions. 

Senator HIRONO. It could be 20, 30, 40 years and so that commitment will also commit the rate payers to paying for basically the 

cost of building the pipeline would go to the rate payers. 

Can you expand on your suggestions for what Federal and state 

agencies should do to support a more accurate forecast of the need 

for new pipelines? 

Mr. PERESS. Yes. What we are suggesting and what the FERC 

is moving forward in doing is to by enhancing coordination between 

the gas and electric industries and by adding flexible services and 

pricing flexible services on the gas side. What they’re doing is 

they’re fostering competition amongst all different sorts of resources to address the individual needs of customers. And to the 

point that the gentleman to my right just made, there are multitude different options and alternatives that customers have to 

meet those needs unless and until there is a mechanism for comparing those and pricing those, then it’s difficult to make those decisions as detailed in my testimony. 

So what the Commission is trying to do is to harmonize and to 

some extent foster competition amongst all those different resources so that we get a better sense of how to make least cost procurement decisions for long lived expensive infrastructure. 

Senator HIRONO. This is something that FERC is undertaking? 

Mr. PERESS. FERC has been moving in this direction through 

several dockets. What they most recently did was asked the industry to try to do this voluntarily. EDF has been deeply involved in 

that, as has the entire industry. 

I can tell you that the progress is going very slow and I will characterize the fact that the pipelines, in general, are not seeking to 

change the current market design. 

Senator HIRONO. Thank you. 

This question is for the full panel. In Hawaii the gas utility, 

which is not the largest utility entity in Hawaii, it’s the electric 

company, has proposed a project to import natural gas using a 

floating offshore terminal and an undersea pipeline to connect to 

its existing onshore pipeline network. 

None of you may be particularly familiar with the details of the 

specific proposal, but can any one of you speak to the performance, 

60 

safety and cost of other natural gas projects using floating terminals or undersea pipelines? Can anybody comment on either kind? 

Dr. PARFOMAK. Actually I can deal a little bit with LNG issues. 

The advantages of using a facility of that type which is not onshore is that two fold. 

One is of safety. It removes the—a large quantity of volume from 

populated areas. LNG at sea presents much, much lower risk to 

surrounding communities than a land-based LNG facility would, 

and LNG doesn’t represent a hazard to the water necessarily because it wouldn’t work to escape it. It would just evaporate or burn 

off, unlike an oil tanker might. 

There are also cost and siting advantages. Obviously it’s a lot 

simpler and faster to develop a turn type system offshore than to 

develop a facility on land where you have to secure the property 

rights and go through a FERC siting process and take a lot of those 

considerations into account. 

The primary cost then is a vessel that’s capable of doing that, 

and that’s considerably more expensive rather than just have a 

thermos which is moving LNG around and re-gasifying it onshore. 

You have to have all of that on a vessel that’s capable of moving 

around. And that, I haven’t done an analysis on the relative costs 

of that. 

But there’s certainly, there have been a few LNG import terminals in Boston Harbor that were terminals that were not used for 

economic reasons but, you know, were sited and approved by the 

Federal Government. 

Senator HIRONO. This is also not an inexpensive proposition be- cause our gas company is looking to spend some $200 million in 

order to set up this system. 

Thank you very much, Madam Chair. 

The CHAIRMAN. Thank you, Senator Hirono. 

Senator Franken. 

Senator FRANKEN. Well, thank you, Madam Chair. 

I am very concerned about the safety and integrity of our pipelines in the face of climate change. In coastal regions enhanced 

storm surges from sea level rise threaten the stability of existing 

infrastructure and elevates the risk of pipeline corrosion from sea 

water intrusion. In the Northern Great Plains extreme precipitation can lead to land subsidence that damages pipelines and causes 

devastating leaks and spills. And as I am sure the Chair of our 

Committee could tell you, in Alaska thawing permafrost can severely impair pipeline foundations. 

But what concerns me the most is that many pipelines in the 

U.S. were designed, of course, without considering the impacts of 

climate change. In fact, according to several Federal studies many 

of the pipelines in Alaska that sit on permafrost were designed 

using climate conditions from the 50’s, 60’s and 70’s during which 

time we did not have as clear an understanding of climate change 

as we do today. 

Mr. Black, you say in your written testimony, and I quote, ‘‘The 

pipeline industry believes it is important we’re proactively improving pipeline safety.’’ How does your industry consider climate 

change as you build new pipeline, or for that matter, repair existing pipeline? 

61 

Mr. BLACK. Thank you, Senator. 

Any new and existing pipeline today needs to consider its operating environment. They need to understand the possibility of local 

flooding, of erosion and to take those issues into account whether 

it’s in the design of the pipeline or the protection of an existing 

pipeline. So they’re required right now to assess those risks, and 

if there’s any hardening that needs to be done, to do it. 

We had the flooding in Hurricane Sandy in that area the pipelines continued to operate in that environment. The only issue 

there was the power was cut to terminals and to pipelines, but the 

pipelines continued to operate safely. And then afterwards, learned 

lessons to be ready for the next time to make sure they’re ready. 

Senator FRANKEN. Thank you. 

Mr. Peress, how can we make sure that our pipeline infrastructure is prepared for the impacts of climate change? 

Mr. PERESS. The PHMSA, the Pipeline Hazardous Materials 

Safety Administration, actually has initiated a fairly significant 

proposed rulemaking to address safety for the interstate pipeline 

system. And in fact, one of the focal points of that is enhanced 

threat identification and enhanced data acquisition. It’s a positive 

step forward that PHMSA is taking but far more needs to be done. 

One of my fellow panelists spoke about safety management systems that are evolving and advancing in the context of threat identification, and it is important for the agency to continue to focus 

on this aspect. And really this is the first time in certainly recent 

memory, if not ever, that they have brought these sorts of programmatic elements to the interstate pipeline system, outside of 

just the most populated, densely populated areas. So it is happening but more needs to be done. 

Senator FRANKEN. Thank you. 

Mr. Eisenberg, I appreciate the discussion in your written testimony regarding the important role of steel in pipeline construction. 

In a recent study the National Association of Manufacturers found 

that natural gas pipeline construction contributed to 1,085 jobs at 

iron and steel mills. 

By the way, Mr. McGarvey, I was a member of a multi-employer 

plan as a writer in the writer’s guild and as an actor on TV, so I 

know those are jobs. Jobs are jobs. I, kind of, I got a little PO’d 

during the whole Keystone discussion about, ‘‘They’re just temporary jobs.’’ Well yes, of course, every job in construction is a temporary job. 

Anyway, I am back to you, Mr. Eisenberg. As you may know 

much of the iron ore or taconite that is used in domestic steel production comes from the iron range of Minnesota. Unfortunately for 

many years now our home grown steel has had to compete with illegally dumped steel from China. While I am happy the government has recently been successful in combating illegal dumping by 

imposing new tariffs on Chinese steel, we need to do more. Mr. 

Eisenberg, do you agree that we should be using domestic steel in 

new pipeline construction and not illegally dumped steel from 

China? 

Mr. EISENBERG. Well, we obviously are concerned about dumping 

as well. Our trade team, led by Linda Dempsey in my office, we 

actively engage with groups like the Iron and Steel Institute, the 

62 

Aluminum Association, who are doing their best to try to level the 

playing field here to make sure that U.S. manufacturers have robust trade remedies available to them. We’re hopeful that it will 

work itself out. There were some positive—there were some impacts there. 

The good news is that you mentioned that our study had a thousand jobs. Well, those are real numbers based on real pipelines and 

real jobs, so we’re still creating the jobs here. There’s a lot of upside in building more pipelines for the iron and steel industry. 

We’d obviously like to see as much of that in the United States 

as we can. 

Senator FRANKEN. I obviously would like to see as much of that. 

So your answer is yes. You prefer American steel. 

Mr. EISENBERG. We officially do not have a preference on that. 

I apologize. Our trade folks can follow up with you on that. 

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Mr. EISENBERG. But obviously we are concerned about dumping, 

and we’d like to see trade remedies taken. 

Senator FRANKEN. Well, I am sorry you do not have a position 

on that, and I think we should be using American steel in our pipelines. 

Thank you. 

The CHAIRMAN. Thank you, Senator Franken. 

Senator Lee. 

Senator LEE. Thank you, Madam Chair, and thanks to all of you 

for being here today. 

I am increasingly worried about the politicization of infrastructure projects. What we are seeing has allowed increasingly vocal 

anti-development environmental movement that has set its sights 

on run of the mill pipeline infrastructure projects. 

This does not represent everyone in the United States. It does 

not represent even most who are concerned about the environment. 

It is a fringe movement, but it is a fringe movement not to be ignored. It recently killed the Northeast Energy Direct Pipeline and 

the Constitution pipeline which would have supplied natural gas to 

a number of states on the East Coast. 

Now Utah is one of the fastest growing states in the country. Our 

population is expected to double by 2050. There are not a lot of 

states that can claim that particular distinction. 

I am generally worried that the endless litigation that we are 

seeing and the political pressure campaigns that we are seeing 

waged by anti-development, fringe activists will inhibit Utah’s 

growth by preventing the construction of necessary pipeline infrastructure. 

Without that and other types of infrastructure, you cannot have 

growth, growth that Utah would otherwise be experiencing. 

So, Mr. Eisenberg, I would like to know. How can Utah grow if 

we cannot provide heat and reliable electricity for residents, particularly for our new residents moving into the state? 

Mr. EISENBERG. Well, and I would add the manufacturing sector 

as well, right? I mean, we are the foundation of communities and 

we need the energy as well. 

I mean, we all, kind of, get what’s going on here. But there’s a 

group of people right now meeting in Atlanta to try to figure out 

how to make this process more difficult, the pipeline siting process, 

the permitting process more difficult. That’s not going to change. 

There are—it’s just the world we live in. 

It’s unfortunate because the FERC process that generally 

through laws, through the Energy Policy Act of ’05 and ’07, has 

gotten some remedies that will allow it to move a little bit quicker 

than some of the big infrastructure projects. But it’s two steps forward and one step back and now we’re dealing with some of these 

challenges that some of the folks in the industry are saying are 

adding years to the project. We just want to see them get done, 

right? 

We have a real—we have a math problem. We need, we’re going 

to need, a lot more energy for the power sector and for industry in 

Utah and elsewhere over the next decade. We just need the pipes 

in place. You can regulate them. Do whatever you need to do, but 

65 

let’s get them built so that we don’t have a real log jam for us. Because otherwise, you don’t have manufacturing. 

Senator LEE. No, I think that is right. 

Well, in addition to that, we have government regulations like 

the Clean Power Plan and MATS that are forcing a transition away 

from coal-fired electric power generation to natural gas. 

The same groups that forced the transition to natural gas are 

now successfully scuttling the chief way to transport natural gas 

which is by pipeline. In other words, without pipeline infrastructure you cannot rely on natural gas as a way to generate electricity. 

Mr. Eisenberg, I am at a loss over this one. 

Mr. EISENBERG. We are as well. I mean, manufacturers need 

base load generation. We need power, right? And that generally 

comes from fossil fuels or nuclear power. And obviously there are 

other things taking up an increasing portion of the grid, but that’s 

it. That’s where you get base load power from. 

We’re losing our nuclear power plants, we’re losing our coal-fired 

power plants and now we’re having this existential discussion 

about whether we need natural gas. We need natural gas in the 

manufacturing sector. We don’t have much left after that to keep 

us going, and if we don’t have it, we’ve got a real problem. 

Senator LEE. Yet this problem is particularly acute in states like 

mine where the majority of the land is owned by the Federal Government. Other people in other parts of the country are dealing 

with a lot of regulatory hurdles, but those hurdles are magnified. 

They are compounded to a very significant degree in a public land 

state like mine. 

In Utah, business looking to build a pipeline should expect to 

deal with some combination of the Advisory Council on Historic 

Preservation, the Bureau of Indian Affairs, the Bureau of Land 

Management and the Army Corps of Engineers in addition to the 

EPA, the Fish and Wildlife Service, the Forest Service and the Federal Energy Regulatory Commission. 

Mr. Black, could you walk me through what a permitting process 

in the West looks like and how this process could be improved, particularly within public land states like mine? 

Mr. BLACK. Well thank you, Senator. 

You’re right. There’s a lot of agencies that we need to work with, 

and we’re ready to do that but we hope we can do that in a timely 

manner. 

Pipelines are subject to many of the same requirements as other 

Federal agency actions in the West such as a NEPA review or permitting across Federal lands, like you said. In practice, a pipeline 

has a minimal impact on the environment. A recent NEPA review 

of a large pipeline project found that the alternative would have 

less impact, the pipeline alternative would have less impact than 

all alternatives including no action. That’s because the energy demanded by the public will reach market by some other mode, by 

truck, by train, pipeline, barge. They don’t have barges in Utah, 

and pipelines have the least environmental impact. 

The Federal workers at local offices in the West are, as we understand, generally working hard to complete that review work. We 

see permit reviews slow down when maybe Washington outside 

66 

forces get involved and/or when local field offices don’t have the resources to process those applications. 

One recommendation is just to make sure those local field offices 

have enough resources, enough leeway to make the decisions that 

we need to be made to get those pipelines sited in Utah and elsewhere in the West. 

Senator LEE. Thank you. 

Thank you, Madam Chair. 

The CHAIRMAN. Thank you, Senator Lee. 

Senator Warren. 

Senator WARREN. Thank you, Madam Chair. 

Last month the Massachusetts Supreme Judicial Court ruled 

that the state is not on track to meet its legal obligation to reduce 

carbon emissions from fossil fuels. And while Massachusetts has 

been a leader in deploying renewable energy, the Commonwealth 

continues to rely on fossil fuels for the majority of our power. 

We think the path forward is clear. Massachusetts will need to 

aggressively expand renewable energy generation and increase conservation to meet our carbon emission goals. And yet, in New England big new pipelines have been proposed to bring natural gas 

into the region. 

Now, state leaders like Attorney General Moira Healy, have 

questioned the need for these new pipelines and she has said and 

I quote here that, ‘‘the region is unlikely to face electric reliability 

issues in the next 15 years and additional energy needs can be met 

more cheaply and cleanly through energy efficiency and demand response.’’ 

In fact, even the gas pipeline companies have testified to FERC 

that a long-term shift toward renewable energy calls the economic 

viability of new pipeline infrastructure into question. 

So Mr. Peress, the trend toward cleaner forms of energy is just 

a fact. Given this trend away from fossil fuels, is investing in new, 

high capacity natural gas infrastructure a smart, long-term investment for New England? 

Mr. PERESS. The evidence suggests that in New England it is 

not. And just to clarify the record, when Kinder Morgan canceled 

the Northeast Energy Direct project, they canceled it because they 

did not get enough customers to sign up to commit for that capacity 

over 20 years. It had absolutely nothing to do with opposition. 

And of course, the reason they couldn’t get those customers to 

sign up for that capacity is because both the grid and state energy 

policy in New England and in Massachusetts are moving more toward more dynamic renewables, more energy efficiency and the resources that Attorney General Healey, through a detailed analytical analysis found to be the most cost competitive reason. 

Senator WARREN. Let me pick up on that point about how it is 

that these pipelines are financed. 

Traditionally they are financed by the companies that are actually going to burn the gas, industrial manufacturers, gas distribution companies, gas-fired plants, who enter into long-term contracts 

with the pipeline company. The companies finance the pipelines because they analyze the projected gas use over time and decide that 

the costs of the pipeline are more than offset by the subsequent 

67 

savings in gas prices that they are going to get from adding this 

new capacity. It is just basically how markets work. 

Mr. Peress, have these companies been willing to pony up to 

cover the costs of big new pipelines in New England? 

Mr. PERESS. They have not been willing to do so in New England 

because they found that it’s not in their economic interest to be 

paying for pipeline capacity every day when their needs are limited 

and only during certain specific periods of the year. 

Senator WARREN. Right. 

So these companies are saying they do not want to pay because 

they are not sure that these pipelines make any economic sense, 

but they would sure be happy to see the pipelines if the state 

would make the electricity customers pay the cost of these new contracts. 

Now in Massachusetts, the Department of Public Utilities authorized the electric utility companies to finance these new pipelines on the rate payers’ dime even if they otherwise made no economic sense. The Department said the electric utilities could pass 

the cost off to Massachusetts families, who do not have the option 

to say no. 

Mr. Peress, does it make sense to force families to pay for these 

pipelines when we might not need them and no one else is willing 

to pay for them? 

Mr. PERESS. A 1.2 billion cubic foot pipeline would cost customers 

$14 billion over 20 years. And that’s money that’s paid for by people, by businesses and otherwise, under a scheme that tries to impose those obligations on someone other than the beneficiaries of 

that pipeline capacity. That, in our view, is the definition of a bubble, imposing costs on captive entities that are not the beneficiaries 

of that, those costs. So we would suggest that it does not make 

sense. 

Senator WARREN. Alright. 

And it is also very anti-market, I should add here. I appreciate 

your testimony. 

Energy costs are a big deal in New England and throughout the 

country but giant pipeline companies that cannot make an economic case for these projects should not be allowed to force someone else to pay for them. As places like Massachusetts work to 

modernize our energy system and try to keep the prices affordable 

for families and businesses, it is urgent that we upgrade aging infrastructure and invest in clean technologies of the future. But we 

should keep the focus on that, not on a big giveaway to the oil companies and gas companies. 

Thank you, Madam Chair. 

The CHAIRMAN. Thank you. 

I am so tempted to engage in debate. I do not know how we focus 

on the aging infrastructure if we cannot make sure those companies that build the pipelines have the certainty that they need to 

do exactly that. 

I have already done second round. I want to give my colleagues 

an opportunity. 

Senator King, you were next up if you would like to ask a second 

round of questions. 

68 

Senator KING. I think to clarify this discussion there is a project 

or, I do not know quite how to characterize it, a proposal in New 

England that the taxpayer or the rate payers of the utilities take 

up the burden of the capital cost. The argument is that the pipeline 

has become, essentially, part of the electrical system because so 

much of our electricity is generated with natural gas. 

I think that is what Senator Warren is talking about. The real 

question is who bears the risk? 

The CHAIRMAN. Right. 

Senator KING. I think Senator Warren’s point is if the private 

sector is not willing to, does that tell you something about it? 

In fact, our Maine Public Utilities Commission staff studied this 

question and just last week recommended against the state committing funds to the underwriting of the pipeline because they 

found it uneconomic. 

I do not know the details of that study, but our commission will 

be looking at it. The issue is whether these costs should be borne 

by the customers or by the electric rate payers and how the risk 

is allocated. 

The CHAIRMAN. Right. 

Senator KING. It is not an easy question. 

The CHAIRMAN. Yes. 

Senator KING. And clearly we need the infrastructure, but are 

there other ways to skin the cat other than building an entirely 

new pipe, such as LNG storage, demand response, again because 

of the problem of, in some cases, in New England anyway, we have 

enough capacity today. But we will not have enough capacity in 

January and how do we deal with that? 

The second question is what will we need in 20 years? I do not 

want to close the door to new infrastructure if, in fact, the demand 

in New England for natural gas continues to decline. That gets us 

to the question is what is our energy mix going to look like in 20 

years? So it is not an easy question. 

If you guys can find a question buried in there somewhere, you 

are welcome to it. [Laughter.] 

Dr. PARFOMAK. Senator, the point you raised and the comment 

you made is a really insightful one. The notion that, to what extent 

is the natural gas system becoming part of the electricity system? 

And that’s the interdependency issue that I raised in my testimony. 

Something FERC has been very, very interested in and has spent 

a lot of time thinking about in the context, in particular of New 

England, where it’s particularly evident, but in other places. And 

most of the, I shouldn’t say most of them, the major driver of future demand for natural gas growth is expected to be the electric 

power sector. And so, clearly, anything that happens in the electric 

power sector to reduce its requirements for natural gas in the future will mitigate the needs, especially peaking needs, for natural 

gas infrastructure as well. 

So I just say that to point out that things like electricity storage, 

the efficiency of renewables, the requirement for natural gas to 

firm up renewables, all of that has a direct relationship to the 

issues that we’re discussing today. 

Going forward I mentioned earlier that this is, it’s getting more 

complicated. The interdependency between electricity and natural 

69 

gas, especially in certain parts of the country like the Northeast, 

are yet another level of complication that I personally have to pay 

a lot of attention to. 

If somebody comes up with an incredibly efficient electricity storage mechanism it could change this discussion radically, really affect how natural gas develops going forward and where it needs to 

go. 

Senator KING. But one of the problems is we are all trying to predict the future and the only thing we can say with certainty, that 

we will be wrong. [Laughter.] 

But if we bet that there will be new alternatives and changes 

and then there are not, then we end up with an infrastructure 

shortage and particularly given the length of time it takes to permit new infrastructure. So there are no easy answers here. 

But I think what I want to do is have more data and more understanding about long-term electricity demand. You mentioned, I 

think, Mr. Eisenberg, a 40 percent increase in demand nationally 

over the next 20 years. 

Mr. EISENBERG. Next decade, actually. 

Senator KING. Next ten years. But then you have to get underneath that and say, okay, when is that happening and what is the 

necessity for additional infrastructure? 

I keep coming back to this Christmas and Easter and the church. 

Could you build a tent on Christmas instead of building a church 

that is empty two-thirds of the time? 

Mr. EISENBERG. I mean, the only thing that I think is worth adding to that is that the manufacturing end user is fundamentally 

different than the residential end user. And I think we, sort of, get 

caught up in, you know, families and homes and we absolutely 

should be but manufacturers use of energy is very, very, very different. And so our gas needs are going to be pretty consistent. So 

if you want us there, we need the pipes. I mean, it’s really that 

simple. 

All the new, you know, there’s so much new manufacturing coming to the United States because of natural gas and because, particularly, of the feed stock elements of natural gas. But where is 

it happening? It’s happening in the Gulf. It’s happening in 

Texas—— 

Senator KING. But the test of that is whether your members are 

willing to step up and sign 20 year take or pay contracts. 

Mr. EISENBERG. Completely agree. 

Senator KING. To support the building of the infrastructure. 

Mr. EISENBERG. Agree. 

Senator KING. That is the issue. Thank you. 

Thank you very much, Madam Chairman. 

Fascinating hearing, thank you for calling it. 

The CHAIRMAN. Yes it is very good, thank you. 

Senator Hoeven. 

Senator HOEVEN. Thank you, Madam Chairman, and thank you 

to our witnesses. 

Today’s hearing focuses on the importance of oil and gas infrastructure and the ways in which energy is transported from the 

places where it is produced to where it is consumed. While energy 

70 

moves via truck, rail and barge, pipelines are the most efficient 

and the safest way to transport oil and gas. 

One highlighted example. In North Dakota in September 2011 

we were supplying almost a third of the natural gas we produce, 

36 percent. The State Industrial Commission set a goal to get that 

down to nine percent by 2020. We are currently now down to ten 

percent. So we have gone from 36 percent down to ten percent and 

we produce 1.0 million cubic feet of natural gas per day. The biggest barrier that we had was building gas gathering systems and 

also then building the intrastate pipeline and then building the 

interstate pipeline because we not only wanted to capture that gas 

and get revenue for it, it also is better environmentally than flaring. So the key for us is getting through these barriers to building 

the pipelines whether it’s gas or oil or other products. 

I will start with Mr. Black. To what extent does current Federal 

regulatory policy discourage this private investment? I mean, to 

what extent does it discourage it and what are the one, two or 

three things we can do to encourage that private investment, get 

it going? 

Mr. BLACK. Well, you’re right, Senator, that it was a success 

building those additional pipelines to capture that gas that had 

been flared in North Dakota. There’s economic value that helps the 

people of North Dakota and then those who would be consuming 

that product. And of course, it’s further downward pressure on 

prices which helps consumers. 

On the liquid pipelines we face issues as well of serving new 

areas, and we know there are benefits locally including North Dakota, your state, when we get additional pipelines built. 

We need Federal Energy Regulatory Commission, FERC, policies 

that continue to encourage pipeline construction. We watch that 

closely; we need the federal agencies that need to give lands permits and construction permits to do that on a timely basis; and 

then we need states where liquid pipelines are sited under to make 

decisions timely. 

A key issue in your state and you know well, Sand Piper Pipeline 

going east to the—through Minnesota, that would be a tremendous 

outlet for Bakken to get to market and would help consumers and 

workers in many places. But that process has really been lengthened beyond how it should be. And that has been, frankly, distorted. 

We need states to make those decisions in order to help the 

Americans benefit like they can from pipelines. 

Senator HOEVEN. Talk for a minute about some of the new safety 

features because isn’t it the case if we can empower this investment and build the new gathering systems and pipelines, we are 

going to have new technology that is going to increase environmental safety? 

Mr. BLACK. Well, as you said the pipeline is the safest mode. The 

product isn’t going to get to market if the pipeline isn’t built. 

And like you said, rail, pipe—rail, truck, barge, some other mode. 

There are increased fatalities, increased releases associated with 

other modes, and we need to get them sited. 

71 

Senator HOEVEN. So you would say building a pipeline is a win 

in terms of more energy, a win in terms of jobs and a win for the 

environment because it is the safest way to transport energy? 

Mr. BLACK. Yes, Senator. 

Senator HOEVEN. Alright. 

Mr. McGarvey, would you give me your thoughts in turn, and I 

appreciate your efforts to help us build the necessary energy infrastructure. Your thoughts both on what has to happen with Federal 

policy in this area, not just pipelines but transmission lines, road 

and rail. We need it all to have the energy infrastructure to move 

this energy safely from where it is produced and cost effectively to 

where it is consumed. What has to change, in your opinion, in Federal policy? And what are the ramifications for the work force? 

Mr. MCGARVEY. Well, I would say, Senator, and it’s crossed the 

line, Senator Warren just left, but we’ve been trying to get windmills permitted off Cape Cod and Martha’s Vineyard for 20 years. 

We’re ready, willing and able to build those. Can’t seem to get 

those built or permitted either. 

Again, I think it’s going to take people on this Committee, that 

the Chairwoman has talked about this Committee working together to come up with sensible, long-term energy policy. There’s 

been some legislation that’s been passed on the permitting infrastructure from the United States Senate, the House, and I believe 

the President signed it. 

There needs to be predictability on, you know, investments that 

the private sector is going to make, on work force development that 

we can participate in that drives the middle class, growing middle 

class economy in the United States. 

And my great fear, as this energy revolution happens for us in 

the United States, if we’re not able to take advantage of it, you 

know, again, we’re going to cede our economic super power status 

to China because I don’t see them getting bogged down in the discussion, in the environmental concerns, in looking out for the planet that we do. And rightfully so in the United States and looking 

at the long-term interest of the American people and in my case, 

the construction industry work force, both union and non-union. 

They all need jobs in the United States. 

So policymakers, I think, have good ideas. I think it’s coming to 

the middle, sitting down and putting together good, strong, longterm energy policy for the United States. 

I’m hopeful with the leadership of this Committee and the people 

on this Committee that they can be a catalyst to work with the 

next Congress and the next Administration to really get it done because I think we’re missing a golden opportunity if you look 

through from the industrial revolution forward. Here’s this opportunity for this generation in the United States. Really take advantage of our natural resources and get that lift that our economy so 

desperately needs. 

Senator HOEVEN. And you see it as a significant job creator for 

the people you represent? 

Mr. MCGARVEY. I will just tell you, Senator, you know, the job 

opportunities in the oil and gas sector and petrochem manufacturing it comes. 

72 

I mean, we never, sitting at a bargaining table arguing with people over the cost of wages and fringes in those industries because 

they’re profitable industries when they get their infrastructure 

built. They’re willing to pay. There’s no lowest common denominator where we’re scrounging for a fifty cent raise here or taking 

a ten cent cut back there. 

These industries pay. And if you look across the United States, 

I just looked at some statistics yesterday about different age brackets and what the medium income is for people in those age brackets, it’s unbelievable when you compare them to oil, gas and 

petrochem in construction. 

When we’re talking about where the middle class jobs in the 

United States are, they’re in these industries. These people are 

willing to pay those prices and there’s more than tens of thousands, 

hundreds of thousands of Americans who want to take advantage 

of the opportunities to get into the middle class through those industries and through those occupations. 

Senator HOEVEN. And that energy production makes us competitive in other key sectors, right, like manufacturing, construction, 

all those other industry sectors that create good jobs as well, 

wouldn’t you say? 

Mr. MCGARVEY. Without question we’re going, we’re building a, 

right now, 50 miles from here we’re building a gas and LNG export 

terminal for Dominion. I’ve got 2,500 people on that site. 

Senator HOEVEN. I see. 

Mr. MCGARVEY. Right now we’re going to build the Shell Franklin Cracker. There’s another cracker we’re looking at in West Virginia. There’s another one in that loop that Senator Manchin was 

talking about. 

Three crackers, potentially $20 billion of investment within 50 

miles of each other that will create somewhere in the neighborhood 

of 2,500 high-paid, permanent jobs and about 20,000 construction 

jobs over a three or four-year construction period. The opportunities are endless. 

Senator HOEVEN. Good to hear. Thank you, Mr. McGarvey. 

Thank you, Madam Chairman. 

The CHAIRMAN. Thank you, Senator Hoeven. 

I would like to thank each of you for your comments. What you 

have provided the Committee here today, I think, it has been very 

informative as Senator King has said. Very instructive. 

I think we heard very clearly that when it comes to the jobs side 

of it, these energy jobs are good for families, good for our communities and good for the country. 

I think we recognize that trying to divine the future is not easy 

around here, but Mr. McGarvey, you speak about putting together 

a longer-term vision, a view of our energy policy for this country. 

We have been working as a Committee, I think, very constructively to try to move the ball on that and have advanced an updated energy reform piece of legislation that has moved not only 

through the Committee strongly but through the Senate strongly. 

We would like to go to conference on that so we can actually do 

more than just talk about how we move it through a process, but 

actually see some of these changes enacted into law. 

73 

It does not solve all of our problems, not by a long stretch of the 

imagination, but when you recognize that we have not done anything to update our energy policies for close to nine years now, you 

have to get started somewhere, sometime, and we think that that 

time is now. 

I think reminding folks that we are not done with this yet, that 

we need to go to conference and we need to work things out with 

the other body so that the President has something that he can embrace that will be good for the whole country. 

A little bit of a self-serving comment here toward the end, but 

I think it does speak to the need to make sure that we are updating our energy policies on a more frequent basis, something that 

we just simply have not done. And when you don’t do it, you get 

behind. 

Thank you for giving us a little bit of a forward look and what 

you are doing to help us in this decision-making process. 

With that, the Committee stands adjourned. 

[Whereupon, at 12:13 p.m. the hearing was adjourned.] 

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Æ 


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