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80–804 2013

AMERICAN ENERGY SECURITY AND INNOVATION: 

THE ROLE OF REGULATORS AND GRID 

OPERATORS IN MEETING NATURAL GAS AND 

ELECTRIC COORDINATION CHALLENGES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

MARCH 19, 2013 

Serial No. 113–19 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

STEVE SCALISE, Louisiana 

Vice Chairman 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LEE TERRY, Nebraska 

MICHAEL C. BURGESS, Texas 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

BILL CASSIDY, Louisiana 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

EDWARD J. MARKEY, Massachusetts 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 3 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 5 

Prepared statement .......................................................................................... 7 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 121 

WITNESSES

Philip D. Moeller, Commissioner, Federal Energy Regulatory Commission ...... 8 

Prepared statement .......................................................................................... 10 

Answers to submitted questions ...................................................................... 130 

Cheryl A. LaFleur, Commissioner, Federal Energy Regulatory Commission .... 18 

Prepared statement .......................................................................................... 20 

Answers to submitted questions ...................................................................... 140 

Barry T. Smitherman, Chairman, Railroad Commission of Texas ...................... 49 

Prepared statement .......................................................................................... 52 

Joshua B. Epel, Chairman, Colorado Public Utilities Commission ..................... 64 

Prepared statement .......................................................................................... 66 

Clair J. Moeller, Executive Vice President, Transmission & Technology, Midwest Independent Transmission System Operator, Inc. ................................... 73 

Prepared statement .......................................................................................... 75 

Answers to submitted questions ...................................................................... 154 

Gordon van Welie, President and CEO, ISO New England, Inc. ........................ 85 

Prepared statement .......................................................................................... 87 

Paul J. Hibbard, Vice President, Analysis Group ................................................. 96 

Prepared statement .......................................................................................... 98 

SUBMITTED MATERIAL

Testimony of Todd Snitchler, Charman of Public Utilities Commission of 

Ohio Coordination between Natural & Electricity Markets ............................. 123 

(1) 

AMERICAN ENERGY SECURITY AND INNOVATION: THE ROLE OF REGULATORS AND 

GRID OPERATORS IN MEETING NATURAL 

GAS AND ELECTRIC COORDINATION CHALLENGES 

TUESDAY, MARCH 19, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:04 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Ed Whitfield 

(chairman of the subcommittee) presiding. 

Present: Representatives Whitfield, Scalise, Shimkus, Pitts, 

Terry, Burgess, Latta, Cassidy, Olson, Gardner, Pompeo, Griffith, 

Barton, Rush, McNerney, Tonko, Green, Barrow, Christensen, Dingell, and Waxman (ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Charlotte Baker, 

Press Secretary; Allison Busbee, Policy Coordinator, Energy & 

Power; Patrick Currier, Counsel, Energy & Power; Tom 

Hassenboehler, Chief Counsel, Energy & Power; Mary Neumayr, 

Senior Energy Counsel; Andrew Powaleny, Deputy Press Secretary; 

Chris Sarley, Policy Coordinator, Environment & Economy; Jeff 

Baran, Democratic Senior Counsel; Kristina Friedman, EPA 

Detailee; and Caitlin Haberman, Democratic Policy Analyst. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. I would like to call the hearing to order this 

morning, and we certainly appreciate our witnesses that will be 

with us today. I think we have two panels and I will introduce the 

first panel in just a minute. But the title of today’s hearing is 

‘‘American Energy Security and Innovation: The Role of Regulators 

and Grid Operators in Meeting Natural Gas and Electric Coordination Challenges. And I noticed the clock says 20 until 10:00; it is 

actually 10 o’clock so that is why we are starting right now. But 

I want to welcome all of you here today. 

As you know, EPA recently announced that they were going to 

delay the finalizing of the rule on greenhouse gas regulations of the 

nuke power plants, and I am delighted that they made that decision. I know that one of the reasons they are doing it is that they 

wanted to buttress their legal case. And we have many witnesses 

2 

that will be testifying today about the increased use of natural gas, 

which is coming about for a number of different reasons. One, of 

course, gas prices are very low right now, and the second reason 

is that the regulatory decisions coming out of EPA makes it extremely difficult to use coal. And if they do finalize that greenhouse 

gas regulation for new coal power plants, you will not be able to 

build a new coal power plant in America. 

And those kinds of decisions, whether they are price decisions or 

regulatory decisions, have tremendous impact on the way we 

produce electricity in America. And it is certainly true that generating power from natural gas has many benefits, especially given 

that domestic supplies are increasing and our current prices are 

relatively low. But we are learning that there are some very real 

challenges to integrating more natural gas into the power sector. 

We are pleased, as I said, to have an excellent slate of witnesses 

today who will discuss some of these challenges and describe for us 

how they are meeting them to ensure the continued supply of affordable and reliable electricity. At the heart of the issue is the fact 

that electricity is a 24-hour-a-day, 7-day-a-week, 365-day-a-year 

business with daily and hourly changes in supply and demand. 

This complexity poses challenges to grid owners and operators incorporating more natural gas-fired generation into their system. 

Greater coordination among the natural gas and electric industries 

is needed to ensure that these challenges can be met. 

One challenge is there are certain physical constraints, such as 

whether current natural gas pipeline and storage infrastructure 

will be adequate to deliver increasing amounts of natural gas to 

power plants. But there also are market and regulatory challenges 

in some regions such as scheduling natural gas supplies to match 

up with electricity needs. Many of these challenges are state and 

regional issues as well as federal ones, which is why we will hear 

from those representing these levels of government today. 

The challenges of heavier reliance on natural gas-fired generation have been highlighted by recent cold spells. Electricity demand 

goes up when the temperature goes down, but so does demand for 

natural gas to meet the heating needs of residential customers. As 

a result, regions with a high proportion of natural gas-fired generation see a dual burden on supplies during periods of unusually cold 

weather. We need to take steps to ensure that the lights stay on 

at an affordable rate through cold snaps, as well as other occasional but inevitable events that put a strain on the system. 

America’s newfound abundance of natural gas is a blessing and 

should play an important role in contributing to our energy needs. 

But we need to take steps to properly integrate, and I think the 

fact that FERC has had five technical hearings on these kinds of 

issues within the last year illustrates the importance of the issue, 

and I know they have more conferences scheduled on this as well. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

Two weeks ago, we held a hearing exploring the importance of a diverse electricity 

generation portfolio, one that includes coal, natural gas, nuclear, and renewables. 

One of the lessons from our recent fuel diversity hearing is that we need to avoid 

an overreliance on any one source of fuel for electricity. In my view, natural gas 

3 

complements coal, but should not serve as a replacement for it. Today, we will focus 

on the biggest change in the generation mix in the U.S., which is the rapid growth 

in the use of natural gas to generate electricity. 

I might add that the flip side of our discussion about the challenges of ramping 

up natural gas-fired generation is that coal has a number of advantages that have 

not been fully appreciated by this Administration. To take one example, having an 

extra supply of coal on hand to deal with any contingency is as simple as keeping 

a pile of it on site, a convenience that often seems to be taken for granted. Coal 

remains one of the lowest cost options for electricity generation and is the fastest 

growing energy source worldwide, yet we have allowed EPA to engage in regulations 

on coal-fired power plants without thinking through all of the consequences. 

I do not think it’s realistic to meet the electricity needs of America without the 

use of fossil fuels, nuclear power, and those fuels that provide our base load needs. 

And I hope that maintaining a future role for coal, including new, advanced coalfired power plants, is also a part of today’s discussion. 

It is certainly true that generating power from natural gas has many benefits as 

well, especially given that domestic supplies are increasing and current prices are 

relatively low. But, we are learning that there are some very real challenges to integrating more natural gas into the power sector. We are pleased to have an excellent 

slate of witnesses today who will discuss some of these challenges and describe for 

us how they are meeting them to ensure the continued supply of affordable and reliable electricity. 

At the heart of the issue is the fact that electricity is a 24 hours-a-day, 7 daysa-week, 365 days-a-year business with daily—and hourly—changes in supply and 

demand. This complexity poses challenges to grid owners and operators incorporating more natural gas-fired generation into their systems. Greater coordination 

among the natural gas and electric industries is needed to ensure that these challenges can be met. 

One challenge is there are certain physical constraints, such as whether current 

natural gas pipeline and storage infrastructure will be adequate to deliver increasing amounts of natural gas to power plants. But there are also market and regulatory challenges in some regions, such as scheduling natural gas supplies to match 

up with electricity needs. Many of these challenges are state and regional issues as 

well as federal ones, which is why we will hear from those representing these levels 

of government. 

The challenges of heavier reliance on natural gas-fired generation have been highlighted by recent cold spells. Electricity demand goes up when the temperature goes 

down, but so does demand for natural gas to meet the heating needs of residential 

customers. As a result, regions with a high proportion of natural gas-fired generation see a dual burden on supplies during periods of unusually cold weather. We 

need to take steps to ensure that the lights stay on at an affordable rate through 

cold snaps as well as other occasional but inevitable events that put strain on the 

system. 

America’s newfound abundance of natural gas is a blessing and should play an 

important role in contributing to our energy needs. But we need to take steps to 

properly integrate it into the electricity portfolio. I look forward to learning about 

the best ideas for doing so. Thank you. 

Mr. WHITFIELD. So with that, I yield back the balance of my time 

and recognize the gentleman from Illinois, Mr. Rush, for a 5- 

minute opening statement. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. I want to thank you, Mr. Chairman, for holding today’s hearing which is part two on the diversification of the Nation’s electricity supply, and we will focus on the role of regulators 

and grid operators in meeting natural gas and electric coordination 

challenges. 

As we discussed in the first hearing on electric diversification, we 

know that in 1993 coal was responsible for 50 percent of the electric generation in the U.S. while natural gas accounted for less 

than 15 percent. However, the Energy Information Administration 

reports that in 2012 there was a shift in electricity generation 

4 

away from coal-fired generation, which declined by 12.5 percent 

and caused a cleaner source of electricity including natural gas, 

which increased by 21 percent. 

In today’s hearing, we will hear from federal and state regulators, as well as the electric grid operators about the challenges 

resulting from this shift to natural gas from coal-fired plants in 

electricity generation. We will also hear from two of the FERC commissioners on whether grid operators are prepared for reliability 

issues stemming from the power sector shift from coal to natural 

gas. And we will discuss solutions to better coordinate between the 

two industries through communication and scheduling alignments 

to make sure the grid operators have enough backup generating capacity when gas supplies are tight. Last August, FERC held five 

regional technical conferences where natural gas and electric interdependence issues such as better communications, infrastructure 

concerns, rules, and reliability issues were discussed. 

I understand Commissioners Moeller and LaFleur also participated in a technical conference last month to discuss more regional 

and national issues as they relate to natural gas and electricity 

markets. While there were regional differences in regards to gas 

and electric coordination issues that was brought up in these conferences, work is now being done by regional grid operators to improve information-sharing among the grid operators, natural gas 

pipelines, and electricity generators. 

I understand that another technical conference is scheduled for 

next month in April, where the discussion will focus on whether 

there is going to be more coordination between the natural gas and 

electric industry market schedules in order to achieve greater efficiency for both industries. 

Mr. Chairman, it is important to note that this shift from older, 

dirtier, coal-fired plants to natural gas and supplying the Nation’s 

electricity demand is due more to marketing realities than to EPA 

rules such as the Mercury and Air Toxics rules and a new source 

performance schedule. 

According to CRS, ‘‘the primary impact of many of the rules will 

largely be on coal-fired plants more than 40 years old that have 

not, until now, installed state-of-the-art pollution control. Many of 

these plants are inefficient and are being replaced by more efficient 

combined-cycle natural gas plants, a development likely to be encouraged if the price of competing fuel, natural gas, continues to 

be low almost regardless of the EPA’s rule.’’ 

So Mr. Chairman, I look forward to today’s hearing. I look forward to today’s witnesses on the challenges and opportunities of 

shifting from coal to natural gas in the Nation’s electricity generation. I yield back. 

Mr. WHITFIELD. Thank you, Mr. Rush. At this time I recognize 

the gentleman from Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. I won’t use that 5 minutes. 

I want to take a little bit of my time to welcome a witness from 

the second panel, Mr. Barry Smitherman. He is the chairman of 

the Texas Railroad Commission. That is an elected position in 

Texas, and I was proud to vote for him this past November. You 

remember that when I come to you for favor later on. But he is 

5 

going to testify about what is happening in Texas. We are very 

proud of our home State that alternative energy, wind power, and 

nuclear power—if you want to consider nuclear as an alternative— 

is about 20 percent of our supply for electricity. We have about 50 

percent that is generated by natural gas, which is the main focus 

of your hearing today, Mr. Chairman. 

And the rest of the country is beginning to come to where Texas 

has always been, you know, large on natural gas. But we also have 

about 30 percent of coal power, which I know you are very supportive of, Mr. Chairman. 

This should be a good hearing and we are glad to have our FERC 

chairman and one of the FERC commissioners, and I hope that we 

have a productive hearing. I have still got a lot of time I would be 

happy to yield if somebody else wants to use some my time. 

Mr. WHITFIELD. Does anyone want the balance of Mr. Barton’s 

time? 

Mr. BARTON. I believe Mr. Olson would like to say some nice 

things. 

Mr. OLSON. I would really like to thank my colleagues from 

Texas. I would like to join his comments and I voted for you, too, 

Barry. Good, good vote. You are doing a great job for our State. 

Thank you very much, Joe. 

Mr. BARTON. I will say that before Mr. Smitherman was elected 

chairman of the Railroad Commission, he was appointed chairman 

of the Public Utility Commission, so he has been double-hatted in 

Texas and is truly an expert. And with that, Mr. Chairman, I 

would be happy to yield back. 

Mr. WHITFIELD. The gentleman yields back. At this time I recognize the gentleman from California, Mr. Waxman, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

And Mr. Smitherman, I just didn’t have a chance to vote for you. 

Today, the subcommittee hears from electricity regulators and 

grid operators about America’s evolving electricity generation portfolio. There is no question that a significant transition is underway. 

Renewable energy policies are paying off. We have doubled our 

capacity to generate renewable electricity from wind and solar in 

just 4 years. This has cut pollution and invigorated clean energy 

manufacturing. Last year, for the first time, wind power added 

more electricity generation capacity than any other resource. Nearly half of all new generation capacity came from wind. 

Cheap natural gas is also helping to transform our electricity sector. This market reality is causing some utilities to retire their oldest, dirtiest, and least-efficient coal plants. And new coal plants are 

simply not cost-effective to build today. 

These changes are positive developments. Until carbon-capture 

technologies are developed, burning coal will continue to emit dangerous pollution. We should avoid investments in infrastructure 

that will lock in the worst impacts of climate change or create 

stranded investments that must be shut down before they have 

served their useful life. 

6 

But these changes also create challenges for our electric grid. 

Clean renewable energy sources like wind and solar provide power 

when the wind is blowing or the sun is shining, but not at other 

times. We need dispatchable generation that can be integrated into 

the grid with these intermittent supplies. That is a planning, funding, and construction challenge. 

We also need to be developing and deploying power storage systems that can accommodate increasing generation from renewable 

sources. 

EPA, the Department of Energy, and the Federal Energy Regulatory Commission are working to answer these challenges. But we 

in Congress could help by crafting sensible energy legislation. Two 

weeks ago, we heard from executives from some of the biggest utilities in the country. Entergy, AEP, and Xcel operate in different 

parts of the country with different fuel portfolios. But they all 

agreed that the best way to respond to climate change is through 

legislation from Congress. 

When utilities tell us they are looking for regulatory certainty, 

they are not talking about bills that delay action. They are looking 

for real action and thoughtful policies. They want Congress to establish the rules of the road so that they can plan and invest for 

the future. 

Ideally, this committee will enact a responsible energy policy 

that recognizes the reality of climate change. But as the President 

said in his State of the Union Address, he will act if we don’t. And 

I think he better act, before we fail. Because, chances are we won’t 

act, even though I hope we will. EPA’s proposed carbon pollution 

standard for new power plants is a good first step. It is a standard 

that requires new power plants, whether they use coal or natural 

gas, to keep their pollution below a specified level. The proposed 

standard provides incentives for the deployment of carbon-capture 

and sequestration technologies. And it creates a level playing field 

for fossil fuel-fired generation. 

It was valuable to hear from electric utilities at the last hearing. 

And I am glad that we are hearing from grid operators and regulators today. They have important perspectives. 

But since policies that respond to climate change are a major 

focus of the statements and questions at these hearings, we also 

need to hear from the scientists and technical experts who can inform the subcommittee about the dangers of manmade climate 

change and the closing window for effective action. Two weeks ago, 

I made that request at the last hearing. Last week, Mr. Rush and 

I sent a letter reiterating that request for an additional hearing. 

Mr. Chairman, I urge you to respect this moral imperative and listen to all sides of the issue. 

I thank the witnesses for being here and I look forward to today’s 

testimony. And I yield back the balance of my time. 

[The prepared statement of Mr. Waxman follows:] 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

Today, the Subcommittee hears from electricity regulators and grid operators 

about America’s evolving electricity generation portfolio. There is no question that 

a significant transition is underway. 

7 

Renewable energy policies are paying off. We have doubled our capacity to generate renewable electricity from wind and solar in just four years. This has cut pollution and invigorated clean energy manufacturing. Last year, for the first time, 

wind power added more electricity generation capacity than any other resource. 

Nearly half of all new generation capacity came from wind. 

Cheap natural gas is also helping to transform our electricity sector. This market 

reality is causing some utilities to retire their oldest, dirtiest, and least efficient coal 

plants. And new coal plants are simply not cost-effective to build today. 

These changes are positive developments. Until carbon capture technologies are 

developed, burning coal will continue to emit dangerous pollution. We should not invest in infrastructure that will ensure we suffer the worst impacts of climate change 

or create stranded investments that must be shut down before they’ve served their 

useful life. 

But these changes also create challenges for our electric grid. Clean renewable energy sources like wind and solar provide power when the wind is blowing or the sun 

is shining but not at other times. We need dispatchable generation that can be integrated into the grid with these intermittent supplies. That is a planning, funding, 

and construction challenge. 

We also need to be developing and deploying power storage systems that can accommodate increasing generation from renewable sources. 

EPA, the Department of Energy, and the Federal Energy Regulatory Commission 

are working to answer these challenges. But we could help in Congress by crafting 

sensible energy legislation. Two weeks ago, we heard from executives from some of 

the biggest utilities in the country. Entergy, AEP, and Xcel operate in different 

parts of the country and have very different fuel portfolios. But they all agreed that 

the best way to respond to climate change is through legislation from Congress. 

When utilities tell us they are looking for regulatory certainty, they are not talking about bills that delay action. They are looking for real action and thoughtful 

policies. They want Congress to establish the rules of the road so that they can plan 

and invest for the future. 

Ideally, this Committee will enact a responsible energy policy that recognizes the 

reality of climate change. But as the President said in his State of the Union Address, he will act if we don’t. EPA’s proposed carbon pollution standard for new 

power plants is a good first step. It is a standard that requires new power plants— 

whether they use coal or natural gas—to keep their pollution below a specified level. 

The proposed standard provides incentives for the deployment of carbon capture and 

sequestration technologies. And it creates a level playing field for fossil fuel-fired 

generation. 

It was valuable to hear from electric utilities at the last hearing. And I am glad 

that we are hearing from grid operators and regulators today. They have important 

perspectives. 

But since policies that respond to climate change are a major focus of the statements and questions at these hearings, we also need to hear from the scientists and 

technical experts who can inform the Subcommittee about the dangers of man-made 

climate change and the closing window for effective action. Two weeks ago, I made 

that request at the last hearing. Last week, Mr. Rush and I sent a letter reiterating 

that request for an additional hearing. Mr. Chairman, I urge you to respect this 

moral imperative and listen to all sides of the issue. 

I thank the witnesses for being here and look forward to today’s testimony. 

Mr. WHITFIELD. Thank you, Mr. Waxman. 

That concludes today’s opening statements, and so at this time 

I will introduce our first panel of witnesses. 

We have with us this morning Mr. Philip Moeller, who is the 

Commissioner of the Federal Energy Regulatory Commission. Mr. 

Moeller, we are delighted to have you back with us again. And we 

have also Hon. Cheryl LaFleur, Commissioner, Federal Energy 

Regulatory Commission. I thank both of you for being here. We do 

look forward to your testimony and your expertise in this area. And 

I am going to call on each one of you, recognize you for 5 minutes. 

And there is a little box on the table that, if it works, it will turn 

red when your 5 minutes is up. And I am sure I won’t cut you off, 

but at least you will notice that the red light is on. 

8 

So at this time, Mr. Moeller, I will recognize you for 5 minutes 

and we look forward to your opening statement. 

STATEMENTS OF PHILIP D. MOELLER, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; AND CHERYL A. 

LAFLEUR, COMMISSIONER, FEDERAL ENERGY REGULATORY 

COMMISSION 

STATEMENT OF PHILIP D. MOELLER 

Mr. PHILIP MOELLER. Mr. Chairman, thank you very much. 

Ranking Member Rush, Chairman Emeritus Waxman, and Barton, 

thank you for the chance to testify today. 

My name is Phil Moeller. I am one of five sitting commissioners. 

And I thank you for your attention to this issue because I think 

it is one of the more pressing issues in our country. 

The convergence of the electric industry and the natural gas industry is a result of several factors. It is kind of a good problem 

to have. It just has to be managed as two very different industries 

converge in a way that we want to make sure that we maintain 

the reliability of the natural gas supply and production and of 

course the electricity supply and production as well. 

I always have to point out the most efficient use of natural gas 

of course is direct usage, space heat, and water heat. But the fact 

remains that we are in a major trend pattern right now where we 

are using more gas to make electricity. I ascribe five reasons for 

it. 

First, it is usually easier to site, build, and finance a gas plant 

than other alternatives. Secondly, oftentimes, electric transmission 

is a cheaper alternative for consumers but it is so hard to build 

electric transmission in this country that oftentimes utilities build 

a generating plant instead. The third reason alluded to earlier, we 

have an abundance of renewable power that has been entering the 

grid but it is intermittent nature. It is not always there. You need 

something to back it up, to firm it up. That is almost always a gas 

plant because of its ability to respond quickly. 

The fourth reason, of course, also alluded to earlier, is a suite of 

environmental regulations, air regulations, by the EPA that is resulting in the shutdown and the retrofitting of thousands of 

megawatts of coal plants in this country. 

And the fifth reason is that we appear to have a long-term period 

of moderate to low prices of natural gas. That is coming domestically, quite amazingly, only in the last 5 or 6 years because of the 

new technologies of horizontal drilling and hydrofracking that have 

allowed us to access these resources that we didn’t really even 

know we had 5 or 6 years ago. 

I was honored and privileged to sit on the coordinating subcommittee of the National Petroleum Council, and they put out a 

2-year study about a year-and-a-half ago called ‘‘Prudent Development.’’ I brought the summary along today. It outlines just the 

enormous resources we have in North America on oil and gas, 

again, ones that we didn’t even realize we had a few years ago. 

Now, we as a society may decide to restrict the use of some of 

these new technologies. That won’t be our decision. But if we don’t 

that or even if we do to some extent, technology will only allow us 

9 

to find more of these resources, perhaps extract them and, absent 

a big change, we appear to have a long-term period of stability of 

gas in this country. And that leads to the fact that we will probably 

have low to moderate prices for a relatively long time. 

Well, even despite this, we have had some challenges in our 

country where, at times, there essentially hasn’t been enough gas 

to go around, usually in a cold weather event. My colleague, Commissioner LaFleur, experienced it firsthand in 2004 in New England. A few other examples include some rolling blackouts around 

Denver in 2006, almost a near catastrophe in my home of the Pacific Northwest in December of 2009 when some quick action averted a lot of outages. 

But the event that really brought my attention to this issue was 

the Southwest outage of February 2011, where over 3 million people in Texas, and over 50,000 gas consumers in Texas, New Mexico, 

and Arizona lost service. It was a cold weather event but it wasn’t 

unprecedented. And we had problems essentially on the gas side to 

deliver electricity and then failure on the electricity side to deliver 

gas. 

Again, our staff at FERC and also the North American Electric 

Reliability Corporation put out a great report on that outage that 

describes the industries in quite good detail as a primer, what happened, recommendations for it. So there was a failure to communicate, really, in that event. And I was concerned going into the 

last couple of winters, that because of those failures to communicate, we could have a repeat episode if we had some really cold 

weather. I mean, in reality we have had some pretty warm winters 

the last couple of years, but I am concerned that the system hasn’t 

been stressed under this new regime of moving toward more gas 

to make electricity in addition to the traditional uses of gas. 

So about a year ago, I put out a series of questions to the public 

asking where we should go on this. My colleague, Commissioner 

LaFleur added some, and our chairman gave it a docket number. 

It has been a public proceeding. Our chairman has dedicated enormous staff resources to try to deal with this issue. And as you eluded to, Mr. Chairman, we have had a series of five technical conferences regionally based in August, another one last month, another one next month, another one in May where we are looking 

at the short-term communication issues so that if we have another 

cold winter event next winter that people can talk to each other, 

medium-term issues of getting the markets aligned correctly and 

longer-term issues of making sure we have the right market rules, 

financial rules, and environmental rules to get more infrastructure 

built in this country to deal with the long-term issue of enough 

pipe and supply to customers. 

Again, thank you for giving this issue the attention it is giving. 

That helps us along. We are not sure where we are going on this, 

but I would be happy to answer any questions when appropriate. 

[The prepared statement of Mr. Moeller follows:] 

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Mr. WHITFIELD. Thank you, Mr. Moeller. 

And Ms. LaFleur, you are recognized for 5 minutes. 

STATEMENT OF CHERYL A. LAFLEUR 

Ms. LAFLEUR. Thank you very much, Chairman Whitfield, Ranking Member Rush and Phil, and the members of the subcommittee. 

I appreciate your holding this hearing and the opportunity to testify. 

Since July 2010, I have served as a commissioner of the Federal 

Energy Regulatory Commission. Earlier in my career, I had the 

privilege of serving electric and natural gas customers in New England and upstate New York. That experience taught me firsthand 

how important reliability is to customers in real communities. 

Since joining the Commission, I have made reliability and grid security my top priorities. 

As everyone has said, our Nation is experiencing a substantial 

growth in the use of natural gas to generate electricity. In the past 

15 years, gas used for generation has increased at the rate of 6 percent per year, but in the past 3 years it has accelerated to 10 percent per year more gas being used for electricity. There are several 

reasons for this. The primary one is the increased availability and 

affordability of domestic natural gas, which is leading to sharply 

lower gas prices. In addition, natural gas is the cleanest-burning 

fossil fuel, making it an attractive option for new generation and 

for repowering generation that is uneconomic to retrofit for new environmental regulations. Finally, the flexible operating characteristics of natural gas work well with the Nation’s growing fleet of renewable resources. 

This steady growth in natural gas for generation has led to concerns about the interdependence of the gas and electric markets. 

Because natural gas is generally delivered in a pipeline network 

rather than stored onsite like other generating fuels, it is important that we have both an adequate network of pipelines and operating practices to support reliability. 

At the technical conferences we held last summer in five regions 

of the country, we heard about two basic issues. The first is infrastructure: making sure we have enough pipelines in the right 

places to support both electric and gas reliability. It is not a supply 

issue; we have plenty of gas. It is a pipeline issue. In some places 

the pipelines are constrained in specific regions or localities. 

Since deregulation of the gas network by the Congress several 

decades ago, pipelines have been permitted by FERC based on 

long-term commitments for firm supply. And that system has 

worked well. We have permitted 10,000 miles of gas pipelines in 

the last decade. However, in regions with competitive electric markets, gas generators often don’t enter into the long-term firm contracts but instead rely on interruptible contracts or buying gas that 

is resold by others with firm contracts. This can lead to shortage 

of gas at stress times, particularly in the winter heating season in 

certain regions, most notably New England. 

At the conferences we received a strong message, really from 

folks across the country, that the need for infrastructure is a regional issue that varies by geography, the existing pipelines, fuel 

mix, and the structure of the market. Many regions, particularly 

19 

the mid-Atlantic, the South, and the West didn’t identify a systemic problem with getting infrastructure built at this time. So the 

conference participants urged FERC to work with the regions on 

their issues rather than impose a national solution. And on the infrastructure issue, that is what we have been doing. 

The operators of the markets you will hear from a little later are 

working under our jurisdiction to make sure that their market 

rules and their detailed operating rules support reliable electricity. 

In particular, ISO New England is working on both short-term and 

long-term enhancements to better ensure that it builds fuel security into its generation markets. We have already approved some 

market rules for this winter. 

The second basic issue is operations, making sure that we coordinate the use of the pipelines we have to make sure that we get the 

best use of the infrastructure that is in place. As has already been 

mentioned, we had a tech conference on communications and we 

are working on next steps and have one coming up on scheduling 

to make sure the gas electric days work together to promote getting 

the most value from the pipelines we have in place. We are getting 

quarterly reports on this and in-person reports from all the regions 

at our open meeting so we can follow it closely. 

This issue of gas electric interdependence is not a reason to 

panic, but it is absolutely a reason to plan and do so now. Viewed 

in the larger perspective, it is a byproduct of an American success 

story, which is the growth of domestic natural gas resources. The 

Nation’s generation fleet has historically experienced large turnovers in fuel mix and large building cycles, and they inevitably require adaptations of supporting infrastructure and operations. I believe with diligent and timely effort, we can make this adaptation 

as well, and I pledge to use the authority I have at FERC to be 

proactive in meeting the challenge. Thank you and I look forward 

to your questions. 

[The prepared statement of Ms. LaFleur follows:] 

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Mr. WHITFIELD. Well, thank you, Commissioner LaFleur, and we 

appreciate both of you for giving your statements. 

Last year, we had a hearing before this subcommittee, and FERC 

at that time talked about the importance of coordination between 

EPA and DOE and other agencies regarding reliability issues. And 

we have had EPA before us on many occasions talking about—because they have been very aggressive on regulations. And sometimes you get the impression that EPA is the arbiter for reliability 

issues. But in actuality, that is you all’s responsibility. And I would 

just ask both of you, can you comment on the coordination between 

the agencies? Are we making progress in that regard? And what is 

your personal view about that issue? Mr. Moeller? 

Mr. PHILIP MOELLER. Well, I remember that hearing quite well 

having testified at it. I guess we hear that there is talk going on 

between the staffs at FERC and the EPA. I will have to get back 

to you with more details as to actually the substance of those discussions. We have talked about the 5th year that plants would 

get—they were a year into it. It is effective April 16, 2015, MATS 

that is. Most people think that entities will get another year if they 

are going to be retrofitting. And then there is the question of the 

5th year. The industry has told us that until the federal law is resolved between the Federal Power Act and the Clean Air Act, that 

they are very reluctant to even ask for the 5th year. 

So that plays out differently in different load pockets depending 

on how much coal is going to be retiring. We are practically concerned about Northern Ohio and the timeline there but there are 

other areas. So I would just hope, and I think I have been consistent in urging the EPA that they be very involved with the market operators, two of whom will be on your next panel, so that if— 

you know, the faster you rush a job, the more expensive it is to consumers. So as long as they are engaged and the have some kind 

of a mechanism, perhaps give another extension of time if they just 

can’t get the new generation or the new transmission built in particular load pockets, that is where it gets so complicated. It is about 

physics and it is about the flow of electricity, and it is just not universally the same everywhere. 

Mr. WHITFIELD. Right. Ms. LaFleur, do you have a comment? 

Ms. LAFLEUR. Yes. It is my understanding that there are a couple of things in place. There is a regular monthly telephone conference between the RTOs, the DOE, FERC, and the EPA, and 

then, in-person meetings ad hoc between FERC and the EPA. In 

preparation for this hearing I got copies of a lot of the—what do 

you call them—PowerPoints at the last tech conference, which was 

really a report from the different RTOs on what they are seeing. 

In addition, I initiated, and Commissioner Moeller and I cochaired an ongoing forum between FERC and the state regulators. 

We meet at every NARUC meeting and have EPA there in person 

to hear what is coming out, what is emerging, what do we think 

the issues are. In May of last year we put out a policy statement 

on how FERC would approach the 5th year if anyone came to us. 

We haven’t heard from anyone yet because they are still working 

on their 4th year. But we wanted to be ready so we could hit the 

ground running. 

28 

I agree with Commissioner Moeller that Northern Ohio is one of 

the places that has been identified. I was there 3 weeks ago. I 

know we are going to hear from the Ohio chairman today, and we 

have to work closely on all of those things through these various 

fora. 

Mr. WHITFIELD. Yes. Mr. Gordon van Welie is with us with the 

ISO up in the Northeast and, of course, you mentioned that there 

are a lot of concerns about the Northeast, and I am sure he will 

get to that. But are there any other areas that you all have particular concern about? You mentioned the Northeast; you mentioned Northern Ohio. What are some other geographical areas? 

Mr. PHILIP MOELLER. Well, the Midwest. And you will hear from 

Clair Moeller from MISO later, too. But just the number of 

megawatts that are either being closed down or retrofitted is enormous in a relatively short amount of time. 

Mr. WHITFIELD. Right. 

Ms. LAFLEUR. New England is clearly at the cutting-edge but the 

Midwest and also New York were places that had a lot to say when 

we had our tech conferences. 

Mr. WHITFIELD. And we still have a lot of unknowns out there, 

too, because, as we say, EPA is looking at greenhouse gas regulations. Are they going be applicable to the existing plants? They 

haven’t quite finalized the new construction, so we have a lot of 

question marks out there, a lot of unknowns. 

And at that this time my time is expired, so I will recognize the 

gentleman from Illinois, Mr. Rush, for 5 minutes. 

Mr. RUSH. I want to thank you, Mr. Chairman. Mr. Chairman, 

I have a different line of questions. I am going to begin with Commissioner LaFleur. 

Commissioner LaFleur, in your testimony you cite the lack of 

pipeline infrastructure as your first area of concern in ensuring 

adequate pipeline capacity to support most gas-fired electric generation and other gas customers. Lack of access in pipeline infrastructure is also an issue that I have concerns about. But for me, 

the concerns are regarding the lack of access for minorities and 

women when it comes to jobs and contracts and economic opportunity available in the pipeline industry. 

Specifically, over the last Congress, this subcommittee heard 

from witnesses from all aspects of the pipeline industry, including 

private companies and associations, as well as from federal agencies. And each time, I posed a simple question. Are there women, 

are there minorities who are owners, builders, and operators of 

pipelines in this country and what are their levels of participation? 

Because I can never get a straight answer on this question, I 

drafted language in the Pipeline Safety Regulatory Certainty and 

Job Creation Act of 2011 which calls for a comprehensive GAO report examining the levels of engagement and participation of minority-owned, women-owned, and disadvantaged business enterprises and contractors involved in the construction and operation of 

pipelines in this country. So absolutely no one was surprised when 

the GAO report came back stating that the levels of minority participation in the pipeline industry was so small that it was almost 

negligible. 

29 

Now, I understand this is not your area of expertise, but I want 

you to know that my office will be working with you, reaching out 

to you, and reaching out to FERC in general to work with us on 

establishing strategies for increasing access for minorities and 

women in the pipeline industry. 

As you stated in your testimony, over the next few years we will 

have to build up the Nation’s pipeline infrastructure in order to address the shale oil and gas boom, and make sure the energy is getting to urban areas, rural centers, wherever it is needed at. As policymakers, it is our responsibility to ensure that all segments of 

the population are able to participate in building this critical infrastructure and that all communities have access to the economic opportunities that will be available in the pipeline industry over the 

next decade. 

Mainly, I look forward to working with FERC, engaging FERC 

on this issue, and I would like to ask both of you, do you have any 

responses or any comments to share with this subcommittee, now 

that I have raised this particular issue? 

Ms. LAFLEUR. Well, thank you, Congressman Rush, for bringing 

up an important issue and one I probably haven’t thought enough 

about. I am involved in several organizations for women in energy. 

I actually was meeting with one group of women last night and we 

were talking anecdotally about how they were more women in electricity than in natural gas as an anecdotal impression. And that 

backs up what you are saying. And more of them are on the regulatory legal side than on the construction side. I have also met with 

the American Association of Blacks in Energy, which is 

headquartered here in the city, and that is an issue they are working on. 

We don’t at FERC give out contracts or choose who would construct the pipelines, but there is going to be a period of infrastructure opportunity, so I would be willing as, you know, a citizen in 

the industry to work further with any of the groups to help make 

that happen. There certainly should be opportunities. 

Mr. PHILIP MOELLER. Congressman, I think we want to get all 

kinds of new people into the energy industry. Minorities, women, 

young people—it is an aging industry. There is a great need for 

skilled labor, so to the extent that vocational education can be emphasized again in this country as it once was, that will help on the 

skilled labor side. 

I have tried to go out and be a force for involvement in what is, 

I think, a very exciting industry. I was the guest speaker at the 

annual meeting of the Association of American Blacks in Energy in 

Columbus, Ohio, a few years ago. So I have certainly tried to get 

a greater involvement from everyone in this industry because I 

think it is the greatest industry and it is a great future and great 

jobs. 

Mr. WHITFIELD. Thank you. 

At this time I recognize the gentleman from Louisiana, Dr. 

Cassidy, for 5 minutes. 

Mr. CASSIDY. Yes. And Mr. Rush, I agree with you. This industry 

has tremendous opportunity for folks who are minorities. One of 

the reasons I represent firms in which there is female and minority 

participation, and one the reasons our side is so interested in KeyVerDate Nov 24 2008 12:39 Jun 19, 2013 Jkt 037690 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-19 CHRIS
30 

stone XL is that those 20,000 direct jobs created will be just among 

the working class that are most in need of jobs right now. 

So I agree with you, Mr. Moeller. It is a great opportunity for 

many people. I just wish that the President would sign on to creating those jobs. 

I got asked at a bipartisan dinner last night, actually, put on by 

one of my colleagues. The point was made that EPA is currently 

driving our energy policy. I am struck that you mentioned the potential for shortages in New England and the mothballing, I gather, of many coal-fired plants. This must be billions of dollars worth 

of investments being replaced by other billions of investments, all 

paid by families struggling to meet their current bills. 

So I guess my point being, is that a fair assessment that EPA’s 

environmental regulations are now driving our electrical market? 

Mr. PHILIP MOELLER. It certainly is a factor, yes. 

Mr. CASSIDY. Now, a factor could be 1 percent or it could be 90 

percent. But I gather that these mothballed coal plants, it is 90 

percent EPA. Is that a fair statement? 

Mr. PHILIP MOELLER. I do not know if I would pick a number, 

but—— 

Mr. CASSIDY. Give me a ballpark. I am not going to hold you to 

it. I mean, is it 1 or is it 100 or is it some—where would you make 

it closer to with 100 being the highest? 

Mr. PHILIP MOELLER. Well, it depends on the plant but in some 

plants it is 100 percent. I mean, they are being shut down clearly 

because of air regulations. In other cases, you would probably say 

50 percent because they are being retrofitted. They will still burn 

coal but they are of a right vintage where that investment makes 

sense. And so—— 

Mr. CASSIDY. Now, I am from a natural gas state. I am all about 

natural gas. On the other hand, I am all about having a diversified 

fuel source. It really does seem as if we are putting a heck of a lot 

of our eggs in the natural gas basket for no other reason than EPA 

is driving this. Is that correct? 

Mr. PHILIP MOELLER. That is a major factor. Prices and the access is also part of it, but that is where we are concerned from a 

reliability perspective. If you are dependent on a pipeline and justin-time fuel will supply, it is a lot different than a 60-day pile of 

coal. 

Mr. CASSIDY. Yes, it seems that way. And if you are dependent 

on one plant and the other has been with—the diversified fuel has 

been mothballed, then your whole supply chain is, if you will, just 

in time. Fair statement? 

Mr. PHILIP MOELLER. Yes. If you have more pipeline to access, 

that helps diversify your options. But that is one of the problems. 

Some plants are dependent on one pipe. 

Mr. CASSIDY. Now I am struck, Ms. LaFleur—a good Louisiana 

name—I don’t know if you are but could be. You speak specifically 

of New England and the problems that they have. Will the development of the Marcellus Shale bring some relief there? Obviously, the 

supply is closer. Will further development of that benefit? 

Ms. LAFLEUR. Well, my dad was French-Canadian but there are 

a lot of LaFleurs in Louisiana. 

31 

The fact that gas is being extracted much closer to the Northeast 

in the Marcellus means pipelines have a shorter way to go, and 

that makes the issues we are working on somewhat more limited, 

but the challenge is trying to pipeline that last couple hundred 

miles to the plant because most of the suppliers bring gas to the 

major junction points and then you need to build laterals to specific 

plants. But definitely the supply from the Marcellus helps, yes. 

Mr. CASSIDY. OK. And I also understand that there is a market 

issue in terms of how the New England plants buy their gas. You 

allude to that. I don’t understand it well enough. Could you elaborate? 

Ms. LAFLEUR. Well, in general terms, natural gas and electric 

markets attract capital differently. Pipelines build based on 10- or 

15-year commitments and electricity, because it is a real-time product, is priced in a 3-year forward market or in the day-ahead market. So the generators might not have certainty of their long-term 

future to make a 15-year commitment, which means they are going 

to have to get creative about how we structure these things and get 

pipelines built. 

Mr. CASSIDY. So ideally, a plant in the South, for example, which 

does not have this problem, is it because we already have the pipeline infrastructure or because they are able to enter into these 15- 

year commitments? 

Ms. LAFLEUR. A little bit of both. In some of the vertically integrated states, the state regulators have decided that customers 

should backup the long-term gas contracts. They also have considerably less gas dependency in general so they don’t have the—if 

you made every generator in New England buy a firm contract, 

pretty soon, you would have way too many. You would be having 

customers pay for way too many pipelines. So it is a combination 

of factors. 

Mr. CASSIDY. OK. Well, I am out of time. I yield back. Thank you 

both. 

Mr. WHITFIELD. Thank you. At this time I recognize the gentleman from Michigan, Mr. Dingell, for 5 minutes. 

Mr. DINGELL. Mr. Chairman, your courtesy is appreciated, thank 

you. 

These questions for Mr. Moeller are yes or no, I think. In your 

testimony you state the country is increasing natural gas electricity 

generation because EPA air regulations will force coal-fired plants 

to be retired or retrofitted. Do you believe that the increased availability and the lower cost of natural gas has played an equally important role in our transition to natural gas? Yes or no? 

Mr. PHILIP MOELLER. Yes. 

Mr. DINGELL. Now, it is my understanding that some coal-fired 

plants undergoing retrofits have been granted revised air permits 

and extensions in order to comply with EPA regulations, such as 

Mercury and Air Toxic Standard. For older coal-fired plants that 

will not be retrofitted, do you believe will be necessary to allow 

them to continue operating past the compliance deadline of the 

Mercury Rule in order to maintain reliability? Please answer yes 

or no. 

Mr. PHILIP MOELLER. In some cases, yes. 

32 

Mr. DINGELL. Now, do you believe that renewable electrical generation such as wind and solar should the factored into resource 

adequacy? Please answer yes or no. 

Mr. PHILIP MOELLER. Yes. 

Mr. DINGELL. Would you want to submit for the record an explanatory statement to that, if you please? 

Mr. PHILIP MOELLER. I would be happy to. 

Mr. DINGELL. Now, in FERC’s response to a letter signed by myself and other members of the Michigan delegation, FERC indicated that it was in the process of preparing an environmental assessment on the issue of the Trunkline Mainline Abandonment 

Project. Has the EA been completed, and if not, when will it be? 

Mr. PHILIP MOELLER. I don’t know. 

Mr. DINGELL. All right. 

Mr. PHILIP MOELLER. I will have to check that and get back to 

you. 

Mr. DINGELL. Would you submit that, please? 

Mr. PHILIP MOELLER. Sure. 

Mr. DINGELL. Now, when do you anticipate FERC making the 

final decision on the project proposal? 

Mr. PHILIP MOELLER. I will have to get back to on that. 

Mr. DINGELL. All right. Now Commissioner LaFleur, thank you 

for your presence. In your testimony, you note that more planning 

to address the issue of gas electric interdependence will be necessary. As you also note, there is no requirement that generators 

enter into long-term gas pipeline contracts. Do you believe FERC 

needs the authority to require longer-term contracts? Yes or no? 

Ms. LAFLEUR. I don’t think we need more authority at this time. 

Mr. DINGELL. At the end of your testimony you state that you 

will find ways to use FERC’s authority to address this issue. Do 

you believe that FERC needs additional authority in order to ensure reliability for all of our natural gas needs? Would you please 

answer yes or no? 

Ms. LAFLEUR. No. 

Mr. DINGELL. Mr. Chairman, I note that I have completed my 

questions with 2 minutes remaining. I return them to you with 

thanks. 

Mr. WHITFIELD. Very impressive. Thank you, sir. 

At this time I would like to recognize the gentleman from Texas, 

Mr. Olson, for 5 minutes. 

Mr. OLSON. Thank you, Mr. Chairman. And welcome to the witnesses. Commissioner Moeller, Commissioner LaFleur, thank you 

so much for your time and your expertise. 

With the Administration’s war on coal, service capacity is shrinking in many States across the country. My home State of Texas 

needs five large power plants by 2014, 2015, to keep growing or we 

risk rolling blackouts, as you alluded to in 2011. One way we can 

prevent these brownouts or blackouts from happening is to order 

power plants to keep generating beyond the 24/7 limits that they 

have, keep that power up online. And that is for emergency conditions only, and again these may lead to, you know, power generation collapses. 

Unfortunately, we have got two examples recently where power 

plants have been kept up online and then third parties have come 

33 

back in behind them and sued them for damages. And some of 

these have been seven figures in damages. 

I introduced a bill last Congress that passed unanimously from 

this committee, unanimously on the floor. Unfortunately, it died in 

the Senate, which many, many bills did last Congress. 

But I just want to talk to guys about that. Do you support that 

bill? Is that something viable to adjust this power capacity, power 

shortage capacity we may have in Texas? 

Mr. PHILIP MOELLER. And last year I testified in support of that 

bill in front of this committee. 

Mr. OLSON. I just wanted to make sure something didn’t change 

your mind. Commissioner LaFleur? 

Ms. LAFLEUR. Yes. I support that targeted bill to give relief if 

you are ordered to stay on. 

Mr. OLSON. Great. Commissioner Moeller, you talked about the 

2011 power crisis we had in Texas, basically the wind power crisis, 

and 12 percent of our demand dropped offline almost automatically. 

About 50 power plants were impacted by that. Most importantly for 

Texans, the Super Bowl was in Dallas that weekend, almost got 

canceled because no power could run to Cowboy Stadium. Could 

you please elaborate on what you learned from that incident and 

what advice you can give me for my State to take away from this? 

You have got the report there. 

Mr. PHILIP MOELLER. I will again commend the report that 

FERC and NERC did together on it. It is a great read. It is a good 

primer. It has 32 recommendations, mainly to the legislatures and 

the Public Utility Commissions of those States. And I think they 

are at various phases of implementing those recommendations. To 

me what hit home was that people felt like they either legally 

couldn’t talk to each other or they felt there was a perception that 

they couldn’t talk to each other legally, in addition to a number of 

problems with inadequate weatherization of a lot of those power 

plants. So I think they are on the weatherization. 

The communication set of issues, though, I think is an issue in 

every region of this country. And that is where, I think, we will 

really be pushing over the summer to make sure—we don’t know 

whether we have to take formal action at FERC or informal action, 

but to make sure that when we have another one of these cold 

weather events—it is a matter of when not if—and the systems are 

stressed, and they can be stressed anywhere but New England and 

the Midwest are our top concerns—that the right operators of the 

grid, the electric system, the pipelines, the generators, are all in a 

position where they can share information without a fear of breaking the law so that people’s service isn’t disrupted. 

In the cases of the Northwest in 2009, there was a power plant 

they could have relieved a lot of the problems that was around 

Portland, Oregon, but the utility in Washington State was afraid 

to call that utility thinking they might be violating the law if they 

did. 

So that is what I will be pushing on and I think the rest of the 

Commission as well going into next winter since we have had two 

such warm winters in a row, it is not going to last very much 

longer. 

Mr. OLSON. Commissioner LaFleur, anything to add ma’am? 

34 

Ms. LAFLEUR. I agree that communication was one of the big lessons and that is what we need to work on and have already given 

some guidance as to what is allowed so that people don’t think our 

regulations are stopping that. I think also situational awareness 

between different operators, both adjoining electric operators and 

different gas operators, was a big lesson of that incident. 

Mr. OLSON. Another lesson learned in Texas is we got power 

from Mexico. When that crisis happened, we had to go across the 

border to get that power from another country. And that scares me 

a little bit, that we are dependent upon a foreign nation as opposed 

to taking care of our needs. 

And also, it is not just cold there, I mean cold weather. We had 

the summer of 2011, every city in Texas, every single one of them 

was over 100 degrees the whole month of August. If that happens 

again, with the war on coal, we have tried to get the Las Brisas 

power plant up online, the White Sand power plant, coal power 

plant, Pepco plant shut down. They pulled back because of EPA 

regulations and these lawsuits. We have got to get the legal system 

out of here and let the people do what the people need to do. 

Thank you. I yield back the balance of my time. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

California, Mr. McNerney, for 5 minutes. 

Mr. MCNERNEY. Well, thank you, Mr. Chairman. I thank you for 

having this hearing. I think it is an important and interesting 

issue. 

Ms. LaFleur, you mentioned that reliability and security were 

your top issues. You must be familiar with the San Bruno explosion a few years ago. How typical is the condition of those pipelines 

throughout the country? It seemed to me that it was a combination 

of lack of maintenance or age of the pipes, plus lack of inspections 

to make sure that they were operating. It also seems people didn’t 

have access to the valves to turn them off, and so on. How vulnerable are we to those just due to natural causes? 

Ms. LAFLEUR. Well, I certainly hope the pipelines in San Bruno 

were not typical that, as I am sure you know, both the State of 

California and PHMSA, which is part of the Department of Transportation here, have put out some strong new regulations that require more inspection to make sure that particularly older pipelines in high-consequence areas are maintained correctly. And I 

think our job at FERC is to make sure that we have supportive 

regulation for those gas pipeline requirements. 

Mr. MCNERNEY. So there will be a little bit higher rates for—— 

Ms. LAFLEUR. It is more a matter of we have had a few cases— 

we have some pending so I have to be careful—of how pipelines are 

required to cover additional expenses that might be required for inspection and how that works technically within their tariffs. 

Mr. MCNERNEY. So how vulnerable are our national pipeline networks to cyber attacks? I mean, could a cyber attack result in 

something like that or other types of disruptions, major disruptions? 

Ms. LAFLEUR. I think any major critical network that is run by 

computer systems—and that includes gas and electric—are vulnerable to cyber attack. And that is why both voluntary—and in the 

case of electricity—mandatory standards are very important. 

35 

Mr. MCNERNEY. Well, that is good. So part of the legislation that 

is being considered is to require sharing of information, but there 

aren’t that many advocates for actually requiring utilities to do certain things to protect themselves. So where do you think we need 

to fall on that issue? 

Ms. LAFLEUR. Well, on electric side, we do have mandatory regulations under the Energy Policy Act of 2005. We do regulate that 

at FERC. I think the biggest thing we need in legislation is that 

information-sharing, as well as someone having emergency authority in the case of an emergency. And I think most of the proposals 

I have seen have both of those elements in them. 

Mr. MCNERNEY. But they don’t have standards then for equipment or software? 

Ms. LAFLEUR. I think if I were the queen of the world, mandatory standards would be good. I think getting some legislation 

passed, even the more modest legislation, would help a lot. I think 

information-sharing is the top priority. 

Mr. MCNERNEY. Thank you. Mr. Moeller, you mentioned that we 

need increased flexibility to address the pipeline capacity issue. Is 

this a regulatory or a statutory issue in your opinion? 

Mr. PHILIP MOELLER. Well, it is a regulatory issue primarily. If 

you ask me for statutory recommendations with the intent of getting more pipeline in, I could come up with some. But I think, for 

the most part, people have been fairly satisfied with the process we 

have at FERC for new pipelines. If you cross the state line, you 

come to FERC for a certificate to build it. And it is a public process. 

The routes always get changed and then there is the regulatory 

cost recovery that we handle with. I mean, it could be done quicker. 

Again, if you want recommendations, I can give you those. 

Mr. MCNERNEY. When you say flexibility, do you mean increased 

capacity, more pipelines? Is that what you mean by flexibility? 

Mr. PHILIP MOELLER. I think both operationally and additional 

infrastructure. We clearly need more pipe in New England. They 

are at the end of the pipe; they are more dependent. On the other 

hand, as you will hear from the Midwest later on, there is some 

question as to which power plants that the grid operates are fed 

by which pipes. And I am not suggesting this, but there is no 

equivalent kind of regional oversight of the pipeline network like 

there is on electricity. So the coordination fact, it is just different. 

And that is where we need kind of the communication flexibility. 

Particularly, we get to times when the system is very stressed and 

there is the worry of not enough gas to go around. 

Mr. MCNERNEY. Thank you. Good timing, Mr. Chairman? 

Mr. SCALISE [presiding]. You got it. You hit the number. Perfect. 

I thank the gentleman. I recognize myself for 5 minutes to ask 

questions. 

Mr. Moeller, in response to the chairman, after some questions 

I think you responded specifically about some concerns in northern 

Ohio related to their coal plants. Can you expand on the concerns 

that you have there? 

Mr. PHILIP MOELLER. Yes. And I know we have the chairman of 

the Ohio Commission coming up later so I wouldn’t want to usurp 

his expertise. But we have a zone in northern Ohio where a number of plants are being shut down in the next 2 years. Perhaps 

36 

there is a need for greater either generation in that load pocket or 

more transmission or both. And when the market did—Commissioner LaFleur alluded to the 3-year forward-capacity market and 

new generation did not clear in that market because the prices 

were suppressed by a lot of demand response. There is some concern whether that demand response is actually going to be there 

in the summer of 2015. 

So there are a lot of issues. They come together in the summer 

of 2015 when, of course, the load is the highest and, you know, it 

is something we are watching very closely. 

Mr. SCALISE. Thank you. And you were also talking about kind 

of a concern about regulation, if there is a haste to put regulations 

in place quickly that in order to add more on top that it can actually add to the cost of electricity for consumers. Can you expand 

on what you were referring to there? 

Mr. PHILIP MOELLER. Yes. Well, given the number of megawatts 

in this country and they are spread out around most of the country. 

They are not a lot in the Northwest or the Northeast anymore or 

California. But the number of coal plants that are being retrofitted 

in a short amount time, there is a squeeze on the engineering talent, the skilled labor component. There is some argument they are 

not enough boilermakers to go around. Just the supplied chain gets 

squeezed the shorter that time frame is to try and get it all done 

to meet the regulations. So like any job in your house, if you want 

it done quicker, you are going to pay more. And in this case, consumers will bear that, and I hope that that is kept in mind. 

Mr. SCALISE. Is there any one agency that you are referring to 

in terms of regulation? We see the EPA throwing a lot of this on 

top of industry. Again, you know, when industry talks to us, they 

talk about the added cost that it forces on consumers as they are 

doing this so there is definitely a cost associated with it. Is it EPA? 

Are there others as well that you are referring to? 

Mr. PHILIP MOELLER. No, it is primarily EPA. I am talking about 

the air regulations, and I am not here to bash them but—— 

Mr. SCALISE. We do that, don’t worry. When we hear about a lot 

of the things that they do that, you know, don’t have anything to 

do with improving health or safety, it is more just to kind of put 

burdens to, it seems like, pursue an agenda. And you know this 

isn’t a question to you; this is more things we see in the hearings 

when we have them before us. And, you know, it just seems like 

they keep going in their own direction to pursue an agenda, you 

know, whether it is kind of a cap-and-trade de facto regulation 

when Congress is, you know, has expressed in a number of different ways that that is not the direction that we would like to go. 

And, you know, hopefully I know we have got legislation and many 

of us are supporting to say Congress shouldn’t put some kind of 

carbon tax in place. You know, and maybe we will have more hearings on that. But, you know, to see them going off in their own direction anyway to try and pose regulations that just carry an agenda, there is a cost to that, and I think those costs need to be 

brought up. 

I do want a touch on something you talked about your opening 

statement where you were talking about this revolution in natural 

gas that has come about through hydraulic fracturing, through horVerDate Nov 24 2008 12:39 Jun 19, 2013 Jkt 037690 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-19 CHRIS
37 

izontal drilling, that technology that has allowed us to open up vast 

reserves of new energy here in America. And, you know, of course, 

we hear about EPA looking at trying to get into that and trying 

to regulate what States already do. States do a great job of regulating hydraulic fracturing. It has been very successful, created 

great jobs, but also a great potential for American energy security. 

And of course that is threatened. 

You talked about technology allowing us to find more natural resources. And I do have concerns, you know, that is these natural 

resources are found, that the government regulators themselves 

could impede that innovation, that technology if they do try to regulate it in a way that doesn’t allow us to access those natural resources. So I don’t know if you want to touch on that, if either of 

you, both Mr. Moeller or Ms. LaFleur. 

Mr. PHILIP MOELLER. Well, those will not be our decisions because that is not in our jurisdiction, but hydrofracking and horizontal drilling and the shale revolution, it has been a revolution. 

A few years ago at FERC, the most controversial things we dealt 

with were LNG import facilities. Now they are LNG export facilities. 

Mr. WHITFIELD. And then, Ms. LaFleur, before the clock expires, 

any—— 

Ms. LAFLEUR. Well, I agree that we are going to have to closely 

monitor regulations that come out that might affect gas extraction 

because they could affect gas supplies. It is not something we are 

specifically responsible for. We really just certificate the pipeline 

network. 

Mr. SCALISE. All right, thank you. I think the ranking member, 

Mr. Waxman, is up next. 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

The Nation’s electricity generation portfolio is in the midst of a 

significant transition. We doubled our capacity to generate renewable electricity from wind and solar in just 4 years. And last year, 

nearly half of all new generation capacity came from wind. There 

has also been a large increase in natural gas generation. Commissioner LaFleur, what is the primary reason utilities are increasing 

their natural gas generation? 

Ms. LAFLEUR. I would say the primary—if I had to point to one 

reason—is the reduced cost of natural gas. 

Mr. WAXMAN. Yes. 

Ms. LAFLEUR. I mean, most of the Nation’s coal fleet was built 

when that was by far the cheapest fuel, and now that gas is the 

cheapest fuel, people in the market are responding. 

Mr. WAXMAN. In your testimony you discussed how natural gas 

generation also supports the expansion of renewable energy. Could 

you explain how wind and solar power benefit from the increased 

use of natural gas for electricity generation? 

Ms. LAFLEUR. Yes. Because wind and solar, they don’t consume 

fuel, but they can only operate when the wind is blowing or the sun 

is shining, for the most part, you need quick-ramping resources 

that can fill in when they ramp-down, and because natural gas machines tend to be more flexible, they are well adapted to that filling 

in with wind and solar. 

38 

Mr. WAXMAN. As utilities move from coal-fired generation to 

cheaper, cleaner, and more flexible sources of power, we hear complaints about the retirements of coal-fired plants. Commissioner 

LaFleur, my understanding is that most of the planned retirements 

are the oldest, least-efficient coal plants. These are plants that 

have operated for 50 or 60 years or even longer. Is that right? 

Ms. LAFLEUR. Yes, for the most part. I mean, we are monitoring 

this. We get reports from the different regions of the country, and 

most of the first coal plants to retire are the older, built in the ’50s 

and ’60s, most expensive to run, and for that reason, they were 

rarely operated. It is like if they came up with a new rule that you 

needed some expensive braking system for your car, the first thing 

you would do is put it on the car you drive to work every day. But 

on the car you only drove on vacation, you might say, gee, do I 

want to spend the money on a car I drive once a year? Some of 

these plants were kind of on the edge of the system. 

Mr. WAXMAN. OK. While moving away from the oldest, dirtiest 

generation is reducing our carbon pollution, many other coal-fired 

power plants are going to be installing modern pollution controls 

to reduce their toxic emissions. For the first time, that is going to 

provide tremendous health benefits. This transition in our energy 

sector is important for the climate and for public health. It is a 

positive development, but like all major transitions, it requires 

planning. 

Commissioner LaFleur, in your testimony you said that this is 

the time to plan, not to panic. Do you believe the communications 

scheduling infrastructure issues we are talking about today are 

manageable? 

Ms. LAFLEUR. Yes, I do. 

Mr. WAXMAN. Is this an area where FERC should be promulgating national rules or is regional action more appropriate? 

Ms. LAFLEUR. Well, as I said in my testimony, right now, I think 

the infrastructure issues are better tackled regionally because the 

different markets have different rules. But if we do something on 

either the schedules or on communication, those might lend themselves to national action. 

Mr. WAXMAN. Yes. Well, it sounds like FERC and grid operators 

are doing exactly what they should be doing, identifying the challenges posed by this transition and developing solutions to address 

those challenges while moving away from a coal-heavy energy portfolio to a truly diverse energy portfolio. If we want to prevent the 

worst impacts of climate change, our energy infrastructure will 

need to continue changing in the years and decades to come. 

Commissioner LaFleur, as regional action is taken to accommodate the energy transition we are seeing, in your view, would it be 

prudent for regional planners to anticipate that greater carbon pollution emission reductions are likely to be required in the future? 

Ms. LAFLEUR. Most of the planners, whether they are at the 

state level or at the regional level, do scenario planning. And it is 

probably prudent to model, well, what if there is new carbon legislation? We don’t have that legislation now, so it is not an immediate thing to plan for. But they probably model multiple futures, 

and I think they should. 

39 

Mr. WAXMAN. Well, I would think that they would anticipate not 

having the same do-nothing Congress we have now, forever. And 

even a stopped clock is correct twice a day, so perhaps we will get 

bipartisan support and do something about climate change. And 

that would be, I think ultimately, good. Thank you very much for 

your time. 

Mr. WHITFIELD. At this time, I recognize the gentleman from 

Kansas, Mr. Pompeo, for 5 minutes. 

Mr. POMPEO. Thank you, Mr. Chairman. I want to talk about the 

pipeline permitting process. 

So there was a recent GAO study on this from February of this 

year, February 2013, that talked about the process. And in that report, it said that FERC does not track the time frames for these 

permits being granted. And in light of stakeholder concerns, do you 

think that FERC should be tracking—I will ask you both, yes or 

no—do you think FERC should be tracking the time that permits 

are being granted from application to completion? 

Ms. LAFLEUR. I think we should be aware of that. My understanding of the NGER report is that it said FERC did a pretty good 

job meeting deadlines—— 

Mr. POMPEO. This was the GAO. I am talking about the GAO report that said—— 

Ms. LAFLEUR. Oh, I am sorry. 

Mr. POMPEO [continuing]. That you all are tracking how long it 

takes. They had to go to public records to identify the lengths of 

the permit process, that you all kept no such records? Is that true? 

Ms. LAFLEUR. I don’t want to say something I am not positive 

of, but I think we should know how long our process takes, yes. 

Mr. POMPEO. Great. That is my question. Commissioner, do you 

agree? 

Mr. PHILIP MOELLER. Absolutely. 

Mr. POMPEO. Yes. Now, NGER did a report that said that 20 percent of natural gas pipelines experienced delays of 6 months or 

more, largely because the delays occurred after FERC’s NEPA 

analysis had been completed, which has a 90-day requirement 

under EPAct. Is that statement also correct? 

Ms. LAFLEUR. Yes, it is my understanding that it is. A lot of the 

delays are in the conditions that are put on in the FERC environmental permits that have subsequent conditions. 

Mr. PHILIP MOELLER. As far as I know, that is correct. 

Mr. POMPEO. So a) FERC doesn’t know how long it has taken; 

and, b) it is not complying with EPAct. So in my view, there is 

work that needs to be done in this permitting process. I am actually going to propose legislation that does that. I hope it to be bipartisan. I think it is a good government solution which puts 

cabined risk and allows pipelines to move forward where they can 

have a little more certainty. 

I guess I would ask each of you—I am happy to share with you 

and talk to you and get your input—but Commissioner Moeller, you 

suggested that you had some ideas on how we might do this permitting process more quickly. Would you be willing to share a couple of those thoughts with us this morning? 

Mr. PHILIP MOELLER. Yes. I think the challenge that you alluded 

to is that the resource agencies typically don’t have the accountVerDate Nov 24 2008 12:39 Jun 19, 2013 Jkt 037690 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-19 CHRIS
40 

ability to come back with an answer. We see the same thing in hydropower relicensing. And it is the way the statute is. And if you 

created some timeline of accountability, I think they would be a lot 

more responsive. 

Mr. POMPEO. Do you agree with that, Commissioner LaFleur? 

Ms. LAFLEUR. Yes, I do. I agree both on the problem and that 

we do not control all of the other agencies who have to act to get 

a permit out, and I would be happy to look at legislation. 

Mr. POMPEO. Great. Great. Thank you. I would love to give you 

all more capacity to control those processes and legislation I am 

drafting, I think, will move us along that way. 

I wanted to just say one more thing on permitting that I want 

to talk about. I won’t go through the list of permits. There is a very 

long list of folks who you have got to go please before you get to 

build some of this new capacity. But I want talk about a statement 

that the President has made about NEPA process. He says now 

NEPA process will have to include and analysis of climate change, 

at least as reported in an article in the Bloomberg on March 15. 

From a natural gas infrastructure perspective, it seems to me 

this could be very problematic in terms of extending the timelines 

to get pipelines built. As the lead agency for approving the interstate natural gas pipeline constructions, tell me what you think the 

impact would be if FERC were required to take into account climate change as part of each of its NEPA analysis. 

Mr. PHILIP MOELLER. Well, it is not make any faster. 

Mr. POMPEO. Do have the capacity and resources to do that analysis? Where would you begin? 

Ms. LAFLEUR. I think a lot of it comes down to what is the scope 

of our review. There has been a lot of controversy about does FERC 

review the pipeline it is certificated or the entire lifecycle of the 

gas? And there have been some court cases on that. As long as we 

are working on the pipeline or the project we are looking at, I think 

if new laws are passed, we will incorporate them in our review. 

Mr. PHILIP MOELLER. That is a good statement. We are cabined 

by the certificate in front of us, and that is not something we have 

done and I do not know how we develop that expertise. I would 

leave it to our Office of Energy Projects. 

Mr. POMPEO. Yes, I don’t know how you do either. You don’t have 

the expertise, in fact. Yes or no, do you think you have statutory 

authority to do that today, to consider climate change as part of a 

NEPA project? 

Mr. PHILIP MOELLER. Maybe we should review the court decisions on that before we answer that. 

Mr. POMPEO. OK. I am happy to let you do that. But I would appreciate a response to whether FERC believes or you as commissioners believe you have the statutory authority to consider climate 

change as a part of an interstate pipeline approval process. 

Ms. LAFLEUR. I would also like to get back to you on that. 

Mr. POMPEO. Thank you. I yield back. 

Mr. WHITFIELD. Thank you very much. 

At this time I recognize the gentleman from Texas, Mr. Green, 

for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

41 

And I agree with my colleague that FERC is not prepared to do 

that but there was a bill here last session that was going to give 

FERC the authority to approve the TransCanada pipeline and I 

think your testimony was that you are not prepared to do that either. And so, hopefully, we have problems on both sides of our aisle 

with giving agencies responsibilities that they are not ready for. 

But let me get back to my line of questioning. Both commissioners, welcome and thank you both for being here today. I represent a district in Texas and so ERCOT is our RTO, and I have 

heard that there are some pretty serious concerns about there not 

being enough forecasted power generation to ensure reliability in 

the ERCOT market in the future. Could both of you please speak 

to whether you think that the market structure under ERCOT is 

enough to incentivize the creation of new generation? And if you 

don’t think it is, what can we do? 

And I know our next panel, we have a former Public Utility Commissioner for Texas and also our Railroad Commission Chairman, 

so I will ask him the same question. 

Mr. PHILIP MOELLER. Well, Congressman, thank you for the 

question. 

ERCOT jealously guards its own jurisdiction so that FERC does 

not tread in it, but of course we watch what is going on and we 

have a responsibility on the reliability side, not on the market administration side. 

Mr. GREEN. Yes. 

Mr. PHILIP MOELLER. And you have two very fine public utility 

commissioners in Texas that are debating this very issue of do you 

need a capacity market? What do you do with the real-time energy 

prices because of the reserve margins declining for some of the reasons that have been discussed today? 

As I look to the summer, you know, the summer concerns are 

southern California, Texas, and Boston. They were last summer. 

They are going to be this summer again. If we have a really, really 

hot summer in Texas, you will see this debate probably on a daily 

basis. 

Ms. LAFLEUR. I would add that most of the U.S. markets that 

have gone to competitive electric markets do have some sort of a 

forward market as is being considered in Texas right now, and that 

is for the very purpose of attracting capital for future reliability. It 

is not within our jurisdiction. I feel Mr. Smitherman’s eyes on my 

back, so I will let him take it from there. 

Mr. GREEN. Well, and I appreciate it. And being from Texas, we 

stand shoulder-to-shoulder in protecting ERCOT. I just want to 

make sure—and we did have rolling blackouts in February of 2011. 

And it seemed like I heard that our wind power growth, which has 

been phenomenal in Texas, helped stabilize that situation. Is that 

the information FERC has? 

Mr. PHILIP MOELLER. We can get back to you. But the focus of 

the report was really on the outages as opposed to the role that 

wind had, but I will get back to you on that. 

Mr. GREEN. OK, I appreciate it. 

In light of the increase in natural gas electricity generation, in 

February of 2012 FERC issued a request for comments regarding 

natural gas electric coordination. In August of 2012, over 1,200 

42 

stakeholders attended five regional technical conferences hosted by 

FERC to discuss these issues. What are each of your biggest 

takeaways from those conferences that FERC received? 

Ms. LAFLEUR. I think our takeaway was that a lot of the issues 

are regional in nature but there are some cut-across issues that we 

should work on, particularly communications and scheduling, the 

harmonization of the days. I think another takeaway is that the 

situation is evolving fast so we need to really stay on top of it. New 

England is where the issues are right now, but it is evolving everywhere. And we have heard that in the conferences. 

Mr. PHILIP MOELLER. I would agree that this is an issue everywhere to varying degrees, and the gratifying thing is that a year 

ago, not everybody thought it was an issue. Now, almost universally, people agree that there are challenges out there, and we are 

trying to keep the momentum going at the Commission to keep 

people focused on solutions. 

Mr. GREEN. Commissioner Moeller, after the Southwest outage of 

February of 2011, FERC and the North American Electric Reliability Corporation conducted a study for the cause of the event, 

issuing a report that was issued in August of 2011 that had 32 recommendations for industry and the regulators in an attempt to 

avoid a similar occurrence. What are some of the more important 

recommendations, and is there a plan for enacting these? 

Mr. PHILIP MOELLER. There is a plan. I haven’t had an update 

for a couple of months, but the focus of most of the recommendations was to regulators and legislators in those three States. The 

primary recommendation on the electric side was winterize the system, go into the winter with the same kind of urgency you go into 

the summer in ERCOT. And I think there has been a lot of 

progress, and I think Barry Smitherman can answer a lot of those 

questions. 

Some of the others are tougher, like Arizona doesn’t have any 

storage. We had a conference to try to promote storage, gas storage, 

underground, but that doesn’t seem to be materializing. 

So I expect another report on the status of the 32 recommendations sometime later this year, but it is something I am very concerned about. 

Mr. GREEN. Well, and I only have a couple seconds left, but I appreciate what FERC does and the stability that it does, and I am 

glad you came for our committee. I appreciate it. 

Mr. WHITFIELD. The gentleman’s time has expired. 

At this time I recognize the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I appreciate that, your 

courtesies in recognizing me. 

I would also say to the witnesses here that it was very refreshing 

to hear folks from an agency come in, and on two occasions said 

I don’t believe we need more authority at this time. It is very unusual to hear those comments in this committee at least. 

Also, Ms. LaFleur, I note—and it has been mentioned before— 

but I would note again because sometimes some of the folks on the 

other side of the aisle want to think it is just gas prices that are 

causing a problem, and you did acknowledge in your written testimony on page 2 that it is repowering older fossil generation that 

43 

is uneconomic to operate or to retrofit for new environmental regulations when talking about the shutdown of coal. I do appreciate 

you recognizing that it is this combination. 

And likewise, in light of the fact that experts have previously testified in another hearing in this committee that they anticipate 

that gas will rise back up to about $4 by the end of the year, and 

that at that point coal once again becomes competitive on pricing. 

Would you not acknowledge that at that point if we get to that 

point—and there is some speculation there—but once we reach that 

point, that then it would be predominantly the new environmental 

regulations that are shutting down our facilities, our coal facilities? 

Yes or no? 

Ms. LAFLEUR. I don’t see it exactly that way, no. 

Mr. GRIFFITH. All right. 

Ms. LAFLEUR. OK. 

Mr. GRIFFITH. But it is still a major concern and you having acknowledged that and I appreciate that. 

Ms. LAFLEUR. Absolutely. 

Mr. GRIFFITH. You know, I thought it was interesting somebody 

else brought up the cyber attacks, and apparently in 2012, we had 

a series of cyber attacks on gas pipeline companies and so forth. 

Do recall seeing that information? 

Ms. LAFLEUR. Yes. 

Mr. GRIFFITH. And the concern was, I mean, they might have 

been trying to steal some information on how to do the fracking because we have been so successful on it, but also there were concerns that there were cyber attacks on the valves and the on-off 

switches, basically. Isn’t that correct? 

Ms. LAFLEUR. It was on the energy management system that 

regulates the pipelines and that opens valves and runs compressors 

and so forth, yes. 

Mr. GRIFFITH. So theoretically, a successful cyber attack could 

close down or open up gas pipelines, close down ones we don’t want 

closed down and open up ones we don’t want opened, isn’t that correct? 

Ms. LAFLEUR. Yes. Theoretically, yes. 

Mr. GRIFFIN. Now, I am no expert on using the computer, but I 

was sitting here when that question was asked and I started looking for, you know, attacks and cyber attacks, et cetera, on coal facilities, and the only thing I could find were EPA attacks on coal. 

I didn’t find anything about foreign powers. Have you run across 

any instances where it appears that foreign powers are attempting 

to figure out ways to disrupt our supply of coal? 

Ms. LAFLEUR. There have been cyber attacks on the energy management systems that turn plants on and off. And like FERC, cyber 

attacks are fuel-neutral. They would mess up whatever was being 

turned on and off. I am not aware that I remember of any specifically at a coal unit. 

Mr. GRIFFITH. But I do think that in regard to your concerns 

about the pipelines, you previously indicated that one of the concerns was getting the pipelines to the facilities and so forth and 

that it was a whole lot easier to have a supply of coal sitting there 

on the ground than it was to have the natural gas automatically 

44 

show up when it was needed at the power plant. Didn’t you indicate that to us earlier? 

Ms. LAFLEUR. I think I said that was what was different about 

gas, that it came in a pipeline, yes. 

Mr. GRIFFITH. And so if an energy production plant had a supply 

of coal and it was a coal-burning plant, it would be less likely that 

for a few hours or even for a day, that somebody could affect that 

supply of energy at that power plant than it would be if somebody 

did a successful cyber attack on our pipeline. Isn’t that true? 

Ms. LAFLEUR. Certainly, the coal pile doesn’t have the cyber risk, 

but I think you could still affect the energy management system 

that turns the plant on and off. I mean, we need to guard against 

these risks wherever they are. 

Mr. GRIFFITH. All right. I do appreciate that as well. 

In regard to the natural gas supply, we are already having trouble getting the pipelines there. Do you think that there needs to 

be a redundancy built in on those pipelines? I know that you don’t 

want to charge the customer too much and you don’t want to have 

too many pipelines, but at the same time, don’t you think we would 

need more than just one pipeline to the facilities to make sure that 

if something happened to one supply that there be another supply 

readily available, if we are going to put all of our eggs in that basket or in one of those baskets? 

Ms. LAFLEUR. Well, I am not even sure I would use the word redundancy. You need a robust grid, a robust network of more than 

one source of supply in different regions and localities. Yes. 

Mr. GRIFFITH. And it is always a little bit dangerous to put a 

huge percentage of your energy into one fuel source. It is always 

better to have multiple sources available to supply the electricity 

for the American citizen, isn’t that true? 

Ms. LAFLEUR. Yes, I believe that. 

Mr. GRIFFITH. And so it would be ill-advised for our country to 

completely eliminate coal as an energy source in light of the fact 

that we have the world’s greatest supply of coal. Wouldn’t that also 

be true? 

Ms. LAFLEUR. I think we are much better off with the coal plants 

being retrofitted, as the vast majority of them are, than losing all 

of them. 

Mr. GRIFFITH. I thank you, and yield back. 

Mr. WHITFIELD. At this time I recognize the gentleman from New 

York, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chairman. Thank you for this very 

interesting topic today. And let me welcome Commissioner Moeller 

and Commissioner LaFleur, and your expertise is very helpful in 

this discussion. 

And further, Commissioner LaFleur, let me thank you, as a representative in upstate New York in the capital region in Mohawk 

Valley, for your prior service before your commissioner status. It 

was much appreciated then and much appreciated now. 

Commissioner LaFleur, the pipeline capacity issues in the Northeast region appears to be a greater constraint on natural gas distribution than in other areas. We have had a lot of focus on that 

today, but I am primarily concerned about the Northeast. And are 

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marily a matter of needing to speed up the investments in natural 

gas infrastructure? 

Ms. LAFLEUR. I think it is more of an investment issue. I mean 

pipelines are harder to build in urban areas but we have had a 

number of them built. So I have confidence that they will be constructed if the investment comes forward. 

Mr. TONKO. And in terms of the investment, what, if anything, 

could be a response to that? What could enhance the investment 

opportunity? 

Ms. LAFLEUR. Well, ISO New England, I think they will talk 

about, is working on ways in which to structure the generation 

markets to motivate the generators to build in more fuel security 

to invest or increase their commitments to pipelines or other dual 

fuel commitments or other gas storage. We do have LNG storage 

in the Northeast, other ways of getting fuel security. So it is pricing the fuel security into the generation I think is the big response. 

Mr. TONKO. Thank you. And as utilities have reduced their coalfired generation, we have seen reductions in carbon pollution from 

the energy sector, and increased natural gas generation is one factor in this drop of carbon pollution but it is obviously not the only 

factor. So Commissioner, would you agree that state-level renewable energy policies have helped to reduce emissions from the 

power sector? 

Ms. LAFLEUR. Yes. I think they are driving a lot of renewable investment including in upstate New York, as you know. If you drive 

up near Niagara Falls, you just see windmills as far as the eye can 

see. 

Mr. TONKO. Absolutely right. And as a result of their renewable 

energy policies, States like New York and Colorado and California 

are displaying a significant amount of renewable generation capacity. So to both commissioners, which state policies would you note 

have been the most effective in deploying renewable energy? 

Ms. LAFLEUR. I think that renewable portfolio standards are certainly starting to be felt. We don’t regulate it, but I would point 

to Texas but also other States. You mentioned upstate New York 

has a lot of wind. Some of the States have very effective small solar 

policies. States as diverse as California and New Jersey, which 

clearly have different weather, have very heavy penetration of 

home- and business-level solar, and the programs they have in 

place appear to be very effective at getting those done. 

Mr. PHILIP MOELLER. Congressman, I am not really an expert on 

all 29 different renewable portfolio standards throughout the country, but I think the ones have been most successful are the ones 

that have adequate transmission infrastructure to make sure that 

that power can move around from, typically, where it is generated 

to where it is consumed and have the kind of flexibility that don’t 

overly favor one or two sources. 

Mr. TONKO. And I would assume that the upgrades in interconnection are important in that regard? 

Mr. PHILIP MOELLER. They are vital, absolutely important. And 

it is usually difficult to site this transmission so that is part of the 

challenge as well. 

Mr. TONKO. And to the policy area, which federal policies would 

you suggest have helped deploy renewable energy? 

46 

Ms. LAFLEUR. Well, certainly, right now, the Production Tax 

Credits are having an impact on investment in that area. I also 

think federal R&D, as well as private R&D, has helped bring down 

the cost of some of the technologies. 

Mr. PHILIP MOELLER. I go more toward market access in making 

sure that the transmission infrastructure is there to move the 

power around. And there are a variety of things we could talk to 

you later about that could promote that. We are doing an exercise 

at FERC, Order 1000, which is an attempt to make the planning 

better on transmission. 

Mr. TONKO. Thank you. And Mr. Chair, I note my time is expired 

so I yield back. 

Mr. WHITFIELD. Thank you. 

At this time I recognize the gentleman from Illinois, Mr. 

Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you. And Mr. Chairman, it is great having 

you here. 

Ms. LaFleur, you mentioned many coal-fired power plants have 

been retrofitted. Can we retrofit a coal-fired power plant to an existing plant to address site greenhouse gas rule or regulation? 

Ms. LAFLEUR. I am not an expert on that but I think it is much 

harder than scrubbing things out of the stacks. 

Mr. SHIMKUS. It is impossible. There is no technology right now. 

The cost would triple the amount of infrastructure costs and the 

electricity required to run this was probably about 30 percent of 

the generation capacity of a power plant at this time. So that just 

goes into the emissions, kind of the whole debate, what is toxic, 

what is not is not, just that debate. And it does segue into this fear 

on reliability because, as we have this debate and concern about 

environmental rules and regulations, the pulling off of generation 

should be of major concern. Is that correct? 

Ms. LAFLEUR. Well, in the case of other EPA regulations, like 

when we worked on Mercury and Air Toxics, as the rules become 

final, we had to work at FERC and with the EPA to make sure we 

had the coordination and flexibility that was needed to make sure 

we protected reliability. If there are other suites of regulations, 

that will be equally necessary. 

Mr. SHIMKUS. Well, let’s talk—and Commissioner Moeller, you 

are more than welcome to chime in, too. 

We know based upon MACT that anywhere from 50 to 70 

gigawatts of coal-fired generation may be retired over the next decade. That is a lot, with 90 percent coming within the next 5 years. 

So this next 3- to 5-year window aligns with the compliance deadlines for EPA’s Utility MACT Rule in places like the Midwest. 

Some of this coal-fired generation will be replaced with natural 

gas-fired power plants and that is part of the debate of having 

them and also getting the natural gas in the pipeline siting. 

From your perspective—and this is for Commissioner Moeller— 

would you agree that the short compliance time frame for EPA’s 

Utility MACT rule is compounding reliability concerns for regions 

heavily relying on coal such as the Midwest and the mid-Atlantic? 

Mr. PHILIP MOELLER. Yes, I do. You bet. 

Mr. SHIMKUS. It is just a matter of numbers, isn’t it? 

47 

Mr. PHILIP MOELLER. Well, the environmental benefits are coming. The question is, if you squeeze them on too tight a timeline, 

there can be reliability challenges that are probably going to land 

in our lap. So that is why I have urged the EPA to be flexible if 

certain areas need a little more time, to give it to them. 

Mr. SHIMKUS. It is reliability that segues into cost, too. And an 

unreliable grid is a costly grid, wouldn’t you argue? So from the individual consumer’s point of view that if the reliability of the grid 

becomes uncertain and there is a risk premium then paying for reliability, that will get passed onto the individual consumer, would 

it not? 

Mr. PHILIP MOELLER. It will, depending on the market structure, 

in different ways. 

Mr. SHIMKUS. Given your background as a state public utility 

commissioner and now your experience at FERC, do you believe 

having a diverse range of fuel resources available to generate electricity is important to provide affordability and reliable service to 

customers? 

Mr. PHILIP MOELLER. Yes. I have never been a state commissioner but optionality is always good. 

Mr. SHIMKUS. And I understand that FERC does not have jurisdiction over generation, but would you agree that an overreliance 

on any one particular fuel source could be problematic from a reliability perspective? 

Mr. PHILIP MOELLER. Yes. 

Mr. SHIMKUS. Thank you, Mr. Chairman, and I yield back my 

time. 

Mr. WHITFIELD. The gentleman yields back his time. I would like 

to recognize the gentleman from Colorado, Mr. Gardner, for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman, and I welcome the 

commissioners to today’s hearing. Thanks for being here to share 

your expertise. 

And Chairman Moeller, I wanted to talk to you a little bit about 

some of the comments made in your testimony. You talk a little bit 

about traditional base load generation will be needed to firm renewable energy resources. We hear a lot of talk about that, whether it is wind, solar, what backup will be needed. Is there a percentage that you can give me of that base load generation so, for instance, if you have a megawatt of wind production, what percent 

of firming base load would you need for that 1 megawatt of wind? 

Mr. PHILIP MOELLER. Well, it depends on the wind because your 

home State of Colorado has some really good wind and—— 

Mr. GARDNER. I live on the Eastern plains so—— 

Mr. PHILIP MOELLER. Your chairman can talk about it later, but 

because of the characteristics of how it comes off from the Rockies, 

it is really good wind. So they don’t have as much of a challenge 

firming it—they still have a challenge. Another area that, you 

know, might have a capacity factor of 20 percent, you know, that 

means that 80 percent of the time you have to back it up. So wind 

quality differs. 

Mr. GARDNER. So for every 5 megs, you need 4 megs of base load 

in that instance? Is that one way look at it? 

Mr. PHILIP MOELLER. Yes. Right. 

48 

Mr. GARDNER. OK. And then, talking about pipeline issues, talking about production of natural gas, we have in Colorado several 

cities that are banning hydraulic fracturing. We also are hearing 

rumors that there may be a statewide initiative to ban hydraulic 

fracturing. If they go that direction, is there an interstate commerce issue that FERC would have to look at based on this transition to natural gas power generation? 

Mr. PHILIP MOELLER. Congressman, I don’t think it would be in 

our jurisdiction to do that, but I am sure someone would be thinking about it. 

Mr. GARDNER. And I would love to hear your further thoughts on 

that and perhaps maybe even somebody in the Council’s office talking a little bit about that issue specifically. When it comes to the 

EPA, we have seen a growing, sort of, decisions by the EPA when 

comes to things like LNG export facilities where EPA is asking targeted questions in their environmental assessments and analysis 

on pipelines and whether or not an LNG facility would require additional pipelines. Is the EPA consulting with FERC when they are 

requiring an analysis of pipeline need or capacity? 

Mr. PHILIP MOELLER. I don’t believe so. I will get back to you, 

but they certainly have submitted comments for the record on the 

environmental analysis. 

Mr. GARDNER. OK. And then I think Mr. Pompeo may have 

touched a little bit on this, but do you have an average time that 

it takes to site a pipeline in the U.S. on private land? 

Mr. PHILIP MOELLER. We might but I would have to get back to 

you on that. 

Mr. GARDNER. That would be great. And if you could get back to 

me on the federal land as well, do you have that answer of the top 

your head? 

Mr. PHILIP MOELLER. OK. 

Mr. GARDNER. Perfect. And then, are you working on ways—and 

you can follow up with me on this as well—working on ways that 

FERC can improve upon the time it takes to site a pipeline? I think 

that is an important conversation with those answers in mind. 

Mr. PHILIP MOELLER. Well, I have a lot of confidence in our Office of Energy Projects. They are doing the best job they can under 

the given circumstances and statutory responsibilities, as I alluded 

to earlier. One way to speed up the process would be to create some 

timelines and the accountability that come with timelines on the 

resource agencies that a pipeline is also dependent on getting permits from. 

Mr. GARDNER. OK. And do you believe that coal still plays a role 

in our electric generation and that it would be unwise to move too 

quickly to natural gas if there is no infrastructure if it is not currently supported? 

Mr. PHILIP MOELLER. Well, coal is still an extremely significant 

part of our electricity mix and will be for the foreseeable future. 

Mr. GARDNER. Mr. Chairman, I yield back my time. 

Mr. WHITFIELD. The gentleman yields back the balance of his 

time. Thank you. 

Well, I believe that is it. Commissioner Moeller and LaFleur, 

thank you all again for your testimony and we look forward to your 

providing the additional information that was requested. And you 

49 

all are dismissed at this time. But we do look forward to working 

with you as we move forward. 

I would like to call the second panel of witnesses. On the second 

panel today, we have Hon. Barry Smitherman, who is the chairman 

of the Railway Commission of Texas. We have Hon. Joshua Epel, 

who is chairman of the Colorado Public Utilities Commission. We 

have Mr. Clair Moeller, who is executive vice president, Transmission and Technology for the Midwest Independent Transmission 

System Operator. We have Mr. Gordon van Welie, President and 

CEO of ISO New England. And we have Mr. Paul Hibbard, who 

is the vice president of the Analysis Group. Todd Snitchler, who is 

the chairman of the Public Utilities Commission of Ohio, was 

scheduled to be with us, but because of an unexpected development, he is not here today. 

So welcome all of you. Thank you for agreeing to come and testify. And Mr. Smitherman, we will begin with you. 

Each one of you will be given 5 minutes for your statement, and 

the little red light will come on when your time is expired. So we 

thank you for being with us, we look forward to your testimony, 

and we welcome your expertise as we try to deal with these significant issues. 

So Mr. Smitherman, you are recognized for 5 minutes. 

STATEMENTS OF BARRY T. SMITHERMAN, CHAIRMAN, RAILROAD COMMISSION OF TEXAS; JOSHUA B. EPEL, CHAIRMAN, 

COLORADO PUBLIC UTILITIES COMMISSION; CLAIR J. 

MOELLER, EXECUTIVE VICE PRESIDENT, TRANSMISSION & 

TECHNOLOGY, MIDWEST INDEPENDENT TRANSMISSION SYSTEM OPERATOR, INC.; GORDON VAN WELIE, PRESIDENT AND 

CEO, ISO NEW ENGLAND, INC.; AND PAUL J. HIBBARD, VICE 

PRESIDENT, ANALYSIS GROUP 

STATEMENT OF BARRY T. SMITHERMAN 

Mr. SMITHERMAN. Thank you very much, Chairman Whitfield, 

Ranking Member Rush, members of the committee, including my 

good friends from Texas. 

My name is Barry Smitherman. I am the chairman of the Texas 

Railroad Commission. I was electing statewide last November with 

74 percent of the vote, apparently receiving at least two votes from 

this room. 

The Railroad Commission of Texas was created by an amendment to the Texas Constitution in 1891, and we are the oldest regulatory body in Texas, one of the oldest in America. While we no 

longer regulate railroads, we have for almost 100 years regulated 

the oil and natural gas industries. We also regulate intrastate pipelines, surface mining for lignite, and natural gas utility rates. 

I am also the former chairman of the Public Utility Commission, 

as you heard earlier, which regulates the electric and telecommunications industries. In that capacity, I was a member of the ERCOT 

Board of Directors, which is the grid operator for most of Texas. 

I am honored to be the only person in Texas history to serve as 

commissioner on both the PUC and the Railroad Commission. I am 

also the chairman of the NARUC Gas Committee, although I am 

not appearing in that capacity today. 

50 

Today’s hearing focuses on natural gas and electric coordination 

challenges, and my focus in these comments will be on upstream 

production issues. In analyzing these two issues, we must keep in 

mind two significant developments. The first of which is been 

touched upon is that EPA, under this Administration, has 

ramroded through a suite of anti-fossil initiatives led by six new 

greenhouse gas rules, which effectively make it impossible to build 

a new coal plant in America. 

Texas has refused to comply with these sweeping EPA regulations, and therefore, EPA has rejected our permitting authority 

through the first-ever imposition of a Federal Implementation Plan, 

or FIP. The Texas Attorney General has assured me that he will 

challenge these greenhouse gas rules in the U.S. Supreme Court if 

it is granted. 

When I last appeared before this committee, I spoke of the CrossState Air Pollution Rule. CSAPR is the successor to the Clean Air 

Transport Rule, and had it been implemented in early 2012, it 

would have caused the premature closing of several coal-fired 

power generation plants in Texas. Such closures would have increased the likelihood of rolling blackouts last summer and this 

coming summer. Fortunately, Texas and the other litigants were 

successful at the Court of Appeals for the District of Columbia 

when the Court vacated CSAPR by concluding that the EPA had 

exceeded its authority. 

I could talk about the remaining rulemaking initiatives, but I 

would prefer a focus on the second development, which is actually 

very positive, timely, and quite fortuitous. We now have abundant 

supplies of natural gas in America. Through horizontal drilling and 

hydraulic fracturing techniques developed by the private sector, we 

have seen a 180 degree turnabout from just 5 years ago. In late 

2008 it was believed that were running out of natural gas in America. And in fact, the price was very high, over $12 MMBtu, and several firms were considering importing LNG. 

Today, America is awash in natural gas. And whether it is a 100- 

year or 200-year supply of natural gas supply of natural gas, we 

have a lot of it, and Texas is leading the way. We produce almost 

20 Bcf of gas per day, which is about 30 percent of all U.S. production. The Barnett Shale, for example, has produced 12 trillion cubic 

feet of gas and we believe there are 44 trillion cubic feet of gas remaining. 

The importance of this is that electricity prices in many parts of 

the country are driven by the price of natural gas. For example, in 

Dallas, where Chairman Emeritus Barton is from, you can get electricity for less than .05 a kilowatt hour, .05 a kilowatt hour. That 

is 1/3 of what the price was 5 years ago, almost directly related to 

the cheap price of natural gas. 

However, I must point out that there are potential storm clouds 

on the horizon, whether it is potential endangered species listing, 

which would take prime gas-producing areas off the table; new 

source performance standards; new fugitive methane emissions requirements; frac-water-use studies and possible restrictions on supply and disposal; overly onerous permitting requirements to fracture oil on federal land. The list goes on and on and we could potentially kill the goose that lays the golden egg. 

51 

In conclusion, I would say new nuclear power construction is prohibitively expensive, renewable power is variable and not yet scalable, and coal-fired power plants are under constant attack from 

the EPA. Natural gas is the only fuel source that makes electricity 

today, at scale, with reasonable prices to the consumer. 

However, let’s be clear. Without hydraulic fracturing, this incredible supply of natural gas disappears, and prices for both gas and 

electricity will skyrocket and our economy will stop dead in its 

tracks again. Thank you for the opportunity. 

[The prepared statement of Mr. Smitherman follows:] 

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Mr. WHITFIELD. Thank you. 

And Mr. Gardner, I will call on you to make some comments 

about our next witnesses. 

Mr. GARDNER. Thank you, Mr. Chairman. And I would just like 

to welcome Chairman Epel to the committee. I have worked with 

the chairman on a number of issues over the years, and as chairman of the Public Utilities Commission, he has jurisdiction over 

not only some of the regulations that we are talking about here 

today but also taxicabs and all kinds of other fun stuff in Colorado. 

But certainly appreciate your work as chairman of the Colorado Oil 

and Gas Conservation Commission as well, and welcome to the 

committee. Thanks for sharing your expertise with us. 

STATEMENT OF JOSHUA B. EPEL 

Mr. EPEL. Well, thank you Congressman. Thank you, Chairman 

Whitfield, Ranking Member Rush, and members of the subcommittee for the opportunity to testify at today’s hearing. 

My name is Joshua Epel. As the Congressman mentioned, I am 

the chairman of the Colorado Public Utilities Commission. Prior to 

my appointment to the Commission, I was chairman of the Colorado Oil and Gas Commission, so I understand a little bit of the 

issues, and we are sort of the baby brother to the Railroad Commission. 

The State of Colorado began to diversify its source of electric generation in 2005 when it adopted its Renewable Energy Standard 

through a valid initiative. Subsequently, the Colorado legislature 

increased the renewable energies requirement twice with bipartisan support. The Colorado legislature also adopted minimum 

standards for electricity savings through energy efficiency resulting 

in a decrease in the amount of fossil fuel necessary to meet the 

electric demands of Colorado. 

In 2010, the Colorado General Assembly did something extraordinary. It passed the Colorado Clean Air-Clean Jobs Act. Representative Gardner was a supporter of the Act. What made the 

Act remarkable and instructive for today’s hearing is the Act mandated that the State’s largest investor-owned utility undertake a 

process of significantly reducing its coal usage in Colorado. And 

most importantly, certainly to me, is the legislature did not mandate the fuel mix. It left that decision to the Colorado Public Utilities Commission. 

The decision adopted by the Commission, and ultimately approved by EPA, is instructive on a way to meet the challenge of 

natural gas and electric coordination and also to meet the potential 

EPA regulations for existing generation sources. 

First, the Air Quality Control division, our regulatory agency in 

Colorado, was instructed to aid the Commission. And second, it was 

the Commission that determined the correct mix of fuel switching 

to natural gas, plant retirement, and retrofitting of existing coalfired units. 

The plan adopted by the Commission will allow our largest utility to be in compliance with the Regional Haze Rule, the Mercury 

and Air Toxics Rule, and reduce greenhouse gases by 30 percent by 

2020 from 2005 levels. By the very nature of the plan, the cost will 

65 

be reasonable and ensure that we have safe and reliable electric 

generation in Colorado. 

A central element of this plan is Colorado has made a conscious 

decision to switch some generation, not all, from coal to gas. We 

are assured that we will not have a conflict with electric and gas 

generation because Public Service Company of Colorado signed a 

10-year long-term contract with the gas producer in Colorado. 

Now, at this point, I have got to be fair to the other regions. Colorado is unique. We have a surplus of gas and we also have an existing pipeline infrastructure that allowed that signing of a longterm contract. But this program does not come without cost to Colorado. The estimated price tag of Clean Air-Clean Jobs is around 

$900 million. Colorado will also be required to make additional infrastructure changes, and as was asked in the previous questions, 

assured the safety of the gas distribution system. 

As the members of the subcommittee know, an additional challenge for the electric generation system are the EPA’s rules for existing sources. I believe Colorado’s approach provides a lesson on 

how to address existing and future rules. However, to be successful, 

key principles must be observed. 

The Clean Air-Clean Jobs Act enabled Colorado to meet numerous federal air quality requirements. And because the Commission 

selected a suite of controls, fuel switching, and plant retirements— 

and what we did was we examined the entire fleet of Public Service 

Company. If each generation plant were controlled individually, it 

would have been prohibitively expensive and politically impossible. 

By being technology agnostic, Colorado selected the right balance 

of fuel switching, retirements, and retrofits to provide both the necessary reductions and keep rates reasonable and the system safe 

and reliable. 

Finally, implementation of the Renewable Energy Standard in 

the Clean Air-Clean Jobs Act is a major investment. As EPA develops its new rules for existing sources, if Colorado is not given credit 

for this investment, it will be penalized unfairly when compared to 

States that have not taken early action. 

Thank you for the honor of representing Colorado before this 

subcommittee, and I will be pleased to answer any questions. 

[The prepared statement of Mr. Epel follows:] 

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Mr. WHITFIELD. Thanks very much, Mr. Epel. 

Mr. Moeller, you are recognized for 5 minutes. 

STATEMENT OF CLAIR J. MOELLER 

Mr. CLAIR MOELLER. Thank you, Chairman Whitfield, Ranking 

Member Rush. Thank you for the opportunity today to present before this committee. 

I am Clair Moeller, the Executive Vice President of Transmission 

Technology for the Midwest ISO, or MISO. We are a nonprofit public interest organization charged with operating a wholesale market 

in the States we serve, as well as ensuring reliability to the consumers. It is important that we guard both the reliability and consumer cost as we work our way through those issues. 

My task as a planner for the Midwest ISO is to be the early 

warning system to ensure that consumers have both low cost and 

high reliability at the end of the day. To protect that, we look towards various scenarios about how the effect of changing policies 

might reduce reliability or increase costs for our customers. 

Recent economic and regulatory pressure is having the effect of 

reducing excess capacities in the Midwest. Historically, we were 

blessed with an excessive capacity which frankly made the reliability job fairly easy. These pressures, we believe, by the end of 

the day will have reduced our coal fleet by approximately 18 percent. That will bring our required reserve margins to their minimum level. 

The low cost of gas, in addition to these regulatory pressures, are 

what are driving those retirements in the older coal fleet. Almost 

90 percent of the resulting fleet will have to be retrofitted to comply with the rules. Our concern at that point is accommodating 

those outages simultaneously as we reach the end of the compliance period. 

It is important to note that the gas industry and the electric industry have grown up very differently. The flexibility that we require on the gas industry is simply not part of the design requirement of the historic gas infrastructure. So our best friend in the 

electric business is a simple cycle combustion turbine because it is 

very fast and very flexible. It is the hardest thing for gas pipelines 

to manage because it changes their pressure so quickly and has the 

prospect of having an unannounced start. 

So the two industries have different requirements in terms of 

flexibility, and part of the friction between the two industries that 

we are working our way through is about how to manage the flexibility that, for example, renewable portfolios have caused electricity 

markets to need to be more flexible. We are trying to reflect that 

need for flexibility into what we are asking the gas industry to do. 

The mismatch between the electric industry and the gas industry 

is both the infrastructure, its design—the gas infrastructure is designed around long-term firm contracts with fairly slow changes in 

terms of what the off-takes are. The electricity now has a 5-minute 

market; we re-price electricity every 5 minutes. Gas typically has 

a day that closes around nine o’clock and you wait other day in 

order to make significant changes. So it is both the pipeline capacity needs to be engineered to accommodate the flexibility, and the 

market rules need to be engineered to accommodate the flexibility. 

74 

In that regard, the MISO is working with the FERC, our state 

commissions through an organization of MISO states, which is essentially a representative from each State that we serve, the loadserving entities, which at the end of the day have the interface 

with the customers, the gas pipelines who have been very accommodating in terms of beginning this conversation, as well as a gas 

suppliers. So we can look to what these issues are in aggregate in 

the hopes of achieving a single solution that both protects consumers from unnecessarily high costs and maintains the reliability 

of the system, which after all is a public safety matter that we all 

must guard. 

With that, I look forward to your questions. 

[The prepared statement of Mr. Moeller follows:] 

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Mr. WHITFIELD. Thanks very much. 

And Mr. van Welie, you are recognized for 5 minutes. 

STATEMENT OF GORDON VAN WELIE 

Mr. VAN WELIE. Thank you. Chairman Whitfield—— 

Mr. WHITFIELD. Be sure and turn the—— 

Mr. VAN WELIE. Yes. Thank you. Chairman Whitfield, Ranking 

Member Rush, and members of the subcommittee, thank you very 

much for the opportunity to appear before the subcommittee this 

morning. 

My name is Gordon van Welie. I am the president and CEO of 

ISO New England. Today, I plan to highlight the serious operational challenges facing New England’s power system. In the past 

decade, natural gas has become the predominant fuel used to 

produce electricity in New England. However, the limitations of the 

current market design and the consequent inadequate fuel arrangements by natural gas and oil-fired generation, have led to serious 

reliability threats to the bulk power system. Therefore, we are moving at an urgent pace to develop short- and long-term plans to address these issues, primarily through changes to New England’s 

wholesale electricity markets. 

New England has seen a major shift in its generation suite, from 

a diverse mix of oil, coal, nuclear, and natural gas generators, to 

a system with more than half of the region’s electricity being produced by power plants using natural gas. In addition, we are observing the retirement of coal and oil generators and the introduction of a diverse set of renewable and demand resources. 

Wholesale electricity prices are now primarily driven by natural 

gas-fired generation. The natural gas and electric industries operate under different structures but are increasingly interdependent. 

Electricity supply and demand must be balanced on an instantaneous basis and problems on the electric system require immediate 

action, often through the operation of fast-responding gas generators. However, if generators have not contracted for gas prior to the 

electric operating day, the gas system may not be able to respond 

to the real-time instantaneous demands of the electric system. 

For power grid reliability to be maintained, we need to have adequate levels of fuel inventory within the region either through storage, or reliable transportation arrangements so that the electric 

sector is ready to respond whenever called on by the ISO. Those 

arrangements should be incentivized through changes to the wholesale electricity market design so as to provide strong economic signals for generators to perform when needed. It is likely that this 

will result in incrementally higher wholesale prices in order to pay 

for the improved reliability that we seek. 

New England cannot access the full benefit of the domestic shale 

gas deposits because of pipeline constraints leading to New England from both the West and the South. Interstate national gas 

pipelines operate under a business and regulatory model that requires a long-term, firm commitment by the pipeline customer. Because the current wholesale electricity market design does not provide gas generators with the necessary performance incentives, we 

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86 

sure that they have an adequate and reliable fuel supply for the 

output of their facilities. 

The region has historically relied on its oil and coal generation 

to provide fuel diversity and offset the operational risks associated 

with the constrained gas transportation system. However, the confluence of low wholesale market prices, high oil prices, and increasing environmental costs is causing its generators to retire and/or 

limit the output of fuel inventory that they carry. Thus, our dependence on gas generation is poised to increase, and our operational options are becoming more limited. 

The New England States are studying the ability of the natural 

gas pipeline system to set aside both heating and electric market 

demand in the region. These efforts are intended to provide information to policymakers and market participants on a range of possible solutions to deficiencies in natural gas infrastructure. 

This winter, New England did not experience record or sustained 

cold temperatures or unusually high demand for electricity. However, wholesale electricity prices rose significantly during this period because of physical constraints moving the lowest price natural gas into New England. During that period, as well as during 

a significant winter storm in early February, ISO operators had to 

cope with multiple instances where generators could not get fuel to 

run. Our experiences this winter lead us to conclude that the status quo is not sustainable. 

ISO New England is working with the New England States and 

its stakeholders to develop market changes to provide the economic 

incentives necessary to ensure that generators have adequate and 

reliable fuel supplies. Additional flexibility in the natural gas industry would also help address the challenges of increasing interdependency between the two industries. The gas sector could assist 

with reliability efforts if gas supplies provided generators with additional opportunities to obtain fuel outside of normal business 

hours, and if pipelines would offer more flexible scheduling, additional services, and provide real-time information on the status of 

the pipeline system. 

In the long-run, it would be helpful for the Federal Energy Regulatory Commission to improve the operational alignment between 

the electric and gas systems. 

In conclusion, we recognize that we have to address these issues 

with a sense of urgency. Discussions are underway with our stakeholders and we will be making multiple findings at the FERC over 

the next 12 months to address the many components of our action 

plan. 

Thank you and I look forward to your questions. 

[The prepared statement of Mr. van Welie follows:] 

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Mr. WHITFIELD. Thanks very much. 

And Mr. Hibbard, you are recognized for 5 minutes. 

STATEMENT OF PAUL J. HIBBARD 

Mr. HIBBARD. Thank you. And good morning, Chairman 

Whitfield, Ranking Member Rush, and members of the committee 

for the opportunity to testify before you today. 

The challenges associated with coordination of natural gas and 

electric markets is particularly important from both the perspectives of electricity and natural gas users throughout the U.S. and 

from the perspectives of reliability and cost. So considering these 

issues now is both appropriate and very well-timed. 

So let me summarize my view on coordination issues with just 

five key points. First, we shouldn’t forget the benefits of improved 

coordination and we should focus on it. As a former chairman of 

the Public Utility Commission in Massachusetts, at a time when 

natural gas prices were both very high and very volatile, I want to 

emphasize the consumer rationale for better coordination. 

The emergence of shale gas has dramatically lowered the cost of 

living and doing business across many States and has generated 

significant economic benefits. When considering coordination challenges, this should be front and center. We need to improve coordination because that will allow electric ratepayers to realize the 

benefits that our expanded domestic natural gas resource base represents. 

Adding new gas-fired generating capacity to a region can lower 

costs, expand use of a domestic fuel, provide environmental benefits, and facilitate the integration of variable, renewable resources. 

Improving the stability and efficiency of electric gas market transactions must thus be viewed not as a challenge but as an opportunity. 

The second point I want to make is that power grids can be operated reliably with a significant reliance on natural gas with a critical caveat that I will mention in a minute. Heavy reliance on natural gas-fired generation does not, by definition, diminish the reliability of power grid operations. New and efficient gas-generating 

technologies can provide numerous reliability advantages. They are 

relatively easy to develop and site, can be built in various sizes and 

configurations, and can be located close to where electrical load is. 

They offer the ability for continuous operation, faster startup, and 

faster response to grid-operated dispatch instructions over many 

competing resource types. 

Finally, as our States seek to integrate vast amounts of renewable resources, gas-fired power plants offer the best physical operating characteristics for managing the variability associated with 

these sources. 

The third point I want to make—the critical caveat—is that natural gas infrastructure must be sufficient to meet the coincident 

demands of heating, industrial processes, and electric generation at 

all times. In the time frame of short-run transactions between electric and natural gas markets, the prevailing profit motives of market participants are extremely effective at overcoming short-term 

supply and transportation issues, but they simply cannot overcome 

physical constraints on the flow of gas. 

97 

In summary, gas infrastructure is or will become increasingly 

constrained, particularly in the winter. Where pipeline and LNG 

infrastructure is sized primarily to meet winter heating demands, 

there is limited space on the region’s pipelines to carry gas for electricity generation during cold winter conditions. Addressing this is 

the fundamental challenge of the coordination issues before us 

today. 

Forth, given these circumstances in regions with inadequate natural gas infrastructure, grid operators and regulators must focus 

on relieving these infrastructure constraints, and in the meantime, 

ensuring reliable operations in the face of constraints. Grid operators need to ensure that under adverse power system conditions, 

including constraints on the flow of gas for power generation, there 

is sufficient capacity to reliably operate the system. 

There are a number of tools operators can use to accomplish this, 

such as retaining non-gas units needed for reliability, requiring 

switching at units that have dual fuel capability, dispatching resources that otherwise might be uneconomic, calling on demand-response resources and activating operating procedures where necessary to avoid power disruptions. 

In addition, regulators and grid operators can take actions to relieve prevailing constraints in the longer-term through regulatory 

orders and market structures that promote development of dual 

fuel capability, enhanced demand response, or investment in new 

natural gas transportation infrastructure where it is economic. 

Finally, in regions that currently have adequate natural gas infrastructure, operators and regulators must not let down their 

guard. Their decisions and actions are key to appropriately planning for avoiding such infrastructure constraints in the future. 

In short, regulators and grid operators play vital roles roles in 

advancing the coordination of natural gas and electric markets, and 

promoting the development of needed natural gas system infrastructure and in managing the reliable operation of power systems 

in the face of gas supply constraints. Given the potential economic 

reliability and environmental benefits of expanded use of natural 

gas in electric sector, the efforts of regulators and grid operators 

in this area should receive heightened attention and effort. 

So with that, again, I want to thank you and look forward to 

your questions. 

[The prepared statement of Mr. Hibbard follows:] 

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Mr. WHITFIELD. Thank you, Mr. Hibbard. 

And I will recognize myself for 5 minutes of questions. 

Mr. van Welie, recently, the New York Times wrote an article 

about the power shortages in the Northeast, and I know Commissioner LaFleur, in her testimony, pointed out the Northeast as an 

area of concern, as did you in your testimony. Now, the New York 

Times article focused a lot on nuclear power, and I would ask—of 

course you have got the Vermont Yankee plant, you have got the 

Indian Point plant. Both of them, there are groups trying to shut 

them down. If that occurred, what impact would that have upon 

the Northeast and its ability to generate enough electricity? 

Mr. VAN WELIE. So both New York and New England have got 

market mechanisms for replacing that capacity if those two nuclear 

generators were to retire. So I cannot predict with precision what 

will replace it. It does seem like the most economic resource to replace at capacity would be additional gas-fired generation, so it 

would create additional stress on the gas system. 

Mr. WHITFIELD. Well, do you have any concerns about blackouts 

or brownouts in the immediate future? 

Mr. VAN WELIE. We do. We got dangerously close this winter and 

hence, we are moving with a sense of urgency. I think it is all 

about making sure that in this transition period, we will have to 

rely on oil and coal generation and LNG imports in the region. And 

so the reason I say that is it is going to take 3 to 5 years to build 

new pipeline into New England. So we are going to be in a situation where we have to optimize the use of existing infrastructure 

within the region, and so we are working closely with our stakeholders to try and identify intra-mechanisms to bridge this transition period. 

Mr. WHITFIELD. Yes, and we also appreciate in your testimony 

your setting out some specific things that needed to be done, which 

we appreciate your setting that out as well. 

Mr. Epel, in your testimony—I was trying to find it real quick 

here—you made a comment—and I may be paraphrasing. Maybe I 

can find it real quick. But you made a comment that ‘‘Congress and 

EPA must acknowledge that it is the exclusive province of the Utility Commission to determine the mix of strategies to achieve standards at EPA.’’ And recently, we had three forums on the Clean Air 

Act and regulators came in from all over the country, and many of 

them expressed some concerns about their flexibility. So would you 

elaborate on this just a little bit? 

Mr. EPEL. Certainly. Thank you, Mr. Chairman. 

My concern is I believe we have to have a bifurcated system for 

EPA or the Congress to establish what are the goals, what are the 

targets. But really, when it comes down to who is going to have the 

capability of making decisions, looking at the entire system, for example, with Colorado, what plants should be retrofitted? Which 

ones should have fuel switching? How much energy efficiency can 

we utilize? That is really the expertise of the state commissions or 

the regional bodies. And that is a complex equation not only of the 

air quality impacts, but the financial impacts. How much infrastructure has to be built? 

I think really it is the state commissions or the regional bodies 

which have that intricate understanding of the system. And so neiVerDate Nov 24 2008 12:39 Jun 19, 2013 Jkt 037690 PO 00000 Frm 00110 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-19 CHRIS
105 

ther Congress or EPA really can delve into that level of detail. 

They certainly can say here is the goal, here is the slope of how 

quickly it has to be achieved, but when it gets down to the real 

nitty-gritty of economically making these decisions so we balance 

both the environmental needs and the financial consideration of 

the State, I think that is really where our expertise lies. 

Mr. WHITFIELD. OK, thanks. 

Mr. Smitherman, are there any other States that EPA has issued 

a Federal Implementation Plan for other than Texas? 

Mr. SMITHERMAN. Not that I am aware of, Mr. Chairman. 

Mr. WHITFIELD. OK. And of course you all won your flex permit 

case, and you also won the Cross State Air Pollution Control case 

as well. Is that correct? 

Mr. SMITHERMAN. We did. The 5th Circuit ruled that the EPA 

had acted in an arbitrary and capricious manner with regard to our 

flex permitting program. 

Mr. WHITFIELD. Yes. Now, you testified regarding wind power, 

subsidizing wind power, and you talked a little bit about wind generators bidding negative prices into the ERCOT and how that distorts the system. Would you just briefly explain this negative pricing? 

Mr. SMITHERMAN. I will. Just to give you a quick snapshot, for 

the first 2 months of this year we have had 39 percent natural gas, 

38 percent coal, 11 percent nuclear, and 11 percent wind. That has 

been our power mix. With the PTC in effect, wind basically can 

offer in at negative prices. And because we run a market-dispatch 

model, the cheapest generation, which is wind and nuclear, is dispatched first. So when the wind is blowing, it creates negative 

prices, basically pushing off of the dispatch curve occasionally gas 

and coal. 

Mr. WHITFIELD. OK. Thank you. My time has expired. 

I recognize the gentleman from Illinois, Mr. Rush, for 5 minutes. 

Mr. RUSH. I want to thank you, Mr. Chairman. 

I would like to go out on a line and just ask each witness a simple question, and maybe each of you could answer with a yes or no 

because I do have a follow-up question. 

Do you think that the transition from coal-fired power plants to 

natural gas is mostly a positive development or a negative development for our Nation? 

Mr. SMITHERMAN. Well, Mr. Rush, I think we need a balance. We 

need a portfolio as we have in Texas because if gas prices were to 

rise back to their 2008 levels, then coal would provide a hedge 

against that. When gas prices are low, then gas is the right thing 

to dispatch. So if you put all your eggs in one basket, you run the 

risk of having not a portfolio but a situation which doesn’t give you 

any options. 

Mr. RUSH. Mr. Epel? 

Mr. EPEL. Mr. Rush, I would say in the affirmative the transition 

to utilization of gas is a net positive for society and certainly for 

Colorado, but as Chairman Smitherman said, we do need to keep 

that diverse portfolio. 

Mr. RUSH. Mr. Moeller? 

106 

Mr. CLAIR MOELLER. I apologize. I am going to have to not take 

a position. Our not-for-profit independent status precludes me from 

choosing between fuels. 

Mr. VAN WELIE. So I think the evidence in New England has 

been that the transition to natural gas has been a beneficial thing 

for the region, both from an economic and an environmental point 

of view. I think to Mr. Hibbard’s earlier point, it is vital that we 

make sure that the fuel infrastructure can support that gas generation. 

Mr. HIBBARD. And I would agree as well, that given the economic, environmental, and reliability benefits, the transition is a 

good one. 

Mr. RUSH. Mr. Moeller, in your testimony, you expressed some 

concerns about the impact of expected coal plant retirements and 

retrofits on the MISO reserves of electricity generation capacity. 

When MISO briefed the Committee’s staff, they focused on the winter of 2016. By that time, most of the retirements would have occurred. MISO said there was a ‘‘potential shortfall’’ of 11,700 

megawatts of generation capacity at that time. 

And I know your job is to keep the lights on and that means considering the worst-case scenario. I can appreciate that, but I want 

to make sure that the Subcommittee gets a realistic picture of some 

of the resource adequacy situation in MISO. So I would like to ask 

you a couple of questions about it, about this potential shortfall. 

MISO’s suggestion assumed that 3,000 megawatts of new gas capacity would be available in the next 3 to 4 years. That seems to 

be kind of low. Would you consider that to be a conservative assumption? 

Mr. CLAIR MOELLER. That conservative assumption is based on 

people who have requested to interconnect new gas-fired generation 

to the MISO transmission system. 

Mr. RUSH. As I understand, the MISO’s calculation doesn’t count 

any new wind capacity, is that right? 

Mr. CLAIR MOELLER. Wind capacity in our market, should the 

owner of the wind choose to count it, gets a 12 percent capacity 

credit for its participation. 

Mr. RUSH. Wind is an intermittent resource but it is also the single-largest source of new generation capacity last year, a calculation that doesn’t account for any new wind capacity. I may be missing a piece of that puzzle. The MISO analysis also assumes that 

almost 19,000 megawatts of natural gas generation would not have 

the fuel to operate in the winter of 2016. That is significantly more 

than the entire ‘‘potential shortfall.’’ 

We heard a lot today about the challenge of making sure that the 

natural gas infrastructure is adequate. Do you have any comments 

about the adequacy of the shortfall? 

Mr. CLAIR MOELLER. Yes, sir. The point I was attempting to illustrate in that conversation was that the majority of the gas-fired 

generation in the MISO market was constructed around a summer 

utilization and it did not purchase firm transportation for their gas. 

In July and August there is typically sufficient gas and gas transportation to meet those requirements because it is not coincident 

with the heating load. Our concern is that as we move towards 

107 

using that gas in the winter periods with the competition for heat 

load, it is unclear how much that capacity would be available. 

So our conversation was it is clear that 100 percent of that capacity won’t be available. It is probably also true that zero of that 

capacity will be available, but at this point in time as we discuss 

with the gas pipe suppliers, it is unclear how much of that gas we 

can count on to be there for us in the wintertime. The New England situation is a harbinger of problems we seek to avoid, and so 

that conversation was to point out how large the problem might be, 

frankly, sir, to peak people’s interest so that we can get the solution in time. 

Mr. RUSH. Thank you, Mr. Chairman. 

Mr. OLSON [presiding]. The ranking member yields back. 

The chair recognizes the gentleman from Ohio, Mr. Latta, for 5 

minutes. 

Mr. LATTA. Well, thank you very much. I appreciate it, Mr. 

Chairman. And thank you very much for our panel and I am sorry 

this is one of those days we have two hearings going on at the 

exact same time. But we appreciate you being here and joining us. 

If I could just go back to Mr. Smitherman. I found your testimony very interesting. Now, you say on page 1, ‘‘however, because 

the Federal Government and EPA continue to set unreasonable 

roadblocks to diverse fuel production, the natural gas industry is 

challenged to boost supply enough energy for the Nation.’’ And then 

you go on to state that ‘‘the EPA has implemented such onerous 

restrictions on the ability to build new coal-fired coal plants that 

it has greatly impacted fuel supply in Texas and the Nation.’’ When 

you are talking about these onerous restrictions, I am just curious, 

have you heard of the EPA doing any cost-basis analysis for the 

State of Texas, how it would affect you all? 

Mr. SMITHERMAN. Congressman, I am not aware of any analysis 

that they have done with regard to the State of Texas, though 

when they put forward many of these regulations, they proffer a 

certain cost-benefit analysis, and not surprisingly, the benefits, in 

their minds, always outweigh the cost. 

What we have challenged is, what is the cost of failed reliability? 

What is the cost of not having enough electricity, of the lights going 

out? And that is a real possibility if we prematurely close down 

some of our coal-fired power generation plants or we limit the ability to recover natural gas. Either of those could lead to shortages. 

Mr. LATTA. Well, and we were talking about looking at those 

issues, and especially we were here talking about coal-fired plants, 

especially where I am from, the State of Ohio, up in the northern 

part of the state, where we are well over 60 percent coal-fired. Anyway, as Republicans have said back in 2008, we all want to have 

an all-of-the-above energy policy that takes in clean coal, natural 

gas, nuclear, hydro, and all of the alternatives. But we want to 

make sure that they are out there for the people because in a question like what could be going on here, especially when the EPA is 

not doing any cost-basis analysis and we’re not really sure of the 

impacts, when you are starting to close down these plants, whose 

is going to pay for this in the very end? 

Mr. SMITHERMAN. Well, in regulated markets if you are retrofitting these coal plants to come into compliance with everything 

108 

except carbon capture, which is another technology altogether, then 

the ratepayers are going to pay for them. If you are talking about 

in deregulated or competitive markets, then you are going to see 

many of these plants close down, which is going to end up giving 

us a fuel mix which is heavily weighted toward natural gas, which 

is great if natural gas prices stay low and the supply remains high. 

Mr. LATTA. Well, and again, in the State of Ohio we have been 

very fortunate with the presence of the Utica Shale—and actually, 

recent geological surveys indicate they are actually moving farther 

across the State, which is great, but you are right, we have to have 

that blend out there. 

And the thing I worry about is in my district, I have 60,000 manufacturing jobs. We have to have base load capacity to make sure 

that when the big machines go on in the morning or at night, they 

stay on. We also want to make sure that folks can compete in the 

global market. 

Mr. Moeller, if I could just move over to ask you—you were talking about some things up in the Northeast, but what about in the 

Midwest? When you are looking at heating taking precedence over 

electric generation, should the two compete for natural resources? 

What do you think about the Midwest and how things could be impacted? 

Mr. CLAIR MOELLER. So we have got a very complicated situation 

in the 21 different interstate pipelines that serve the Midwest region. Each one of those pipelines has a different set of facts and 

circumstances in terms of how constrained they are, but all of them 

were constructed on a subscription basis around residential heat 

load. So we continue to be concerned that as we begin to rely more 

on gas more in the winter months, we will see conflicts around 

competition for that gas pipeline capacity. We are trying to understand what that conflict might look like across those 21 gas pipes 

to see with the cost to consumers might be. 

Mr. LATTA. Thank you very much. 

And Mr. Chairman, I yield back. 

Mr. OLSON. The gentleman yields back. 

The chair now recognizes the gentleman from California, Mr. 

McNerney, for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

You know, I have heard this morning and today a lot about pipeline infrastructure being inadequate or needing flexibility. I haven’t 

heard anything about storage. Is storage a viable option for local 

utilities? Can they build storage for natural gas or is there some 

reason why that is not on the table, whoever wants to answer it? 

Mr. CLAIR MOELLER. Historically, there has been some natural 

gas storage in local distribution companies in the form of small liquid natural gas. 

Mr. MCNERNEY. All right. 

Mr. CLAIR MOELLER. There are also geologic opportunities to 

store it, but they are not universally available across the entire 

country, sir. 

Mr. MCNERNEY. Mr. van Welie? 

Mr. VAN WELIE. Sir, I presume your question was with regard to 

electrical storage. 

Mr. MCNERNEY. No, no. 

109 

Mr. VAN WELIE. Oh, fuel storage? 

Mr. MCNERNEY. Natural gas storage. 

Mr. VAN WELIE. Yes. I think the most practical solution, at least 

for our region in terms of fuel storage, is LNG. And there are some 

large LNG facilities around the region, and I think that ultimately 

the solution is a combination of pipeline and storage because one 

has to think of the possibility that a pipeline could be compromised 

in some way and you need to be able to ride through that event. 

And one way of dealing with that is through local storage. 

Mr. MCNERNEY. Is storage more expensive than pipelines? 

Mr. VAN WELIE. Typically, yes. I think LNG from some of the 

numbers that I have seen—it is the energy required in order to 

compress and liquefy the gas that makes it relatively expensive 

compared to gas in the pipe. 

Mr. MCNERNEY. OK. Thank you. So what would be the best way, 

then, Mr. van Welie, to get the flexibility you need for reliability 

from natural gas? 

Mr. VAN WELIE. So I think it depends where you are, and if you 

are in a restructured wholesale electricity market, such as exists 

in New England, what we need to do is to make sure that the incentives for our generators are such that they will seek reliable 

fuel supplies. They will then have a number of options open to 

them. 

So, for example, if we have created a strong performance incentive for them and they are out there looking for reliable fuel supply, they could choose to put in dual fuel infrastructure, a tank of 

oil, and switch from gas to oil if their gas system becomes constrained or they can enter into a contract, bilateral contract, with 

an LNG storage provider to draw gas from the LNG storage facility, or contract with the pipelines for no-notice service or phone 

service from the pipes. 

So I think the starting point in solving this problem is to have 

the generators feel like they have to have adequate fuel in order 

to meet the call from the—— 

Mr. MCNERNEY. So in other words sort of a free-market approach 

with the right incentives? 

Mr. VAN WELIE. That is right. We won’t dictate what their solution is; we just want them to produce electrical energy when we 

need them to. 

Mr. MCNERNEY. Mr. Moeller, I think it was you that mentioned 

there was a conflict between when certain natural gas pipelines are 

only approved to deliver during certain periods of time. Does that 

sound familiar? 

Mr. CLAIR MOELLER. No. I was commenting about the fact that 

gas pipelines are constructed typically based on a subscription form 

of service where the original owners of the gas capacity have typically been residential heat loads. And so the pipe has been sized 

based on the original use. And typically those original users—it is 

20 years gone by since those pipes have been constructed. So it is 

unclear in terms of how much capacity is available during what 

times of the year to supply this new use. 

Mr. MCNERNEY. So that wasn’t a contractual issue more as a 

physical capacity issue? 

110 

Mr. CLAIR MOELLER. Yes. It is two issues. One is the physical 

issue and the other is a contractual issue, and because they are 

both fairly opaque, it is a little hard to figure out what the actual 

fact circumstance is. 

Mr. MCNERNEY. Do you have the resources to make that work 

better? 

Mr. CLAIR MOELLER. We have engaged with the natural gas pipelines that serve our region, and they are working with us to answer 

those questions. 

Mr. MCNERNEY. OK. Mr. Epel, you mentioned that you felt that 

Colorado was ahead of the curve on these issues. What has given 

Colorado that sort of wherewithal to get into that position? 

Mr. EPEL. Congressman, this is actually driven by the voters of 

Colorado. Our renewable energy portfolio is really adopted by a balanced initiative, which the legislature then enhanced. And there 

has been a consistent desire for Colorado to have as much fuel diversification as possible. We spend quite a bit of time on energy efficiency also to reduce overall fuel usage, but it really comes from 

the voters of Colorado. They have spoken pretty clearly on this 

topic. 

Mr. MCNERNEY. OK, thank you. 

And I yield back, Mr. Chairman. 

Mr. OLSON. The gentleman yields back. The chair, in applying 

the gavel-in rule, recognizes himself for 5 minutes. 

And first, I would like to welcome all of you for coming but a 

very special welcome for the chairman of the Texas Railroad Commission, a man I voted for this past November, Chairman Barry 

Smitherman. And as they say in College Station, Texas, home of 

the fine Texas Aggies, howdy whoop. 

Commissioner Smitherman, this question is for you. As you discussed in your testimony, Texas very clearly has reliability challenges ahead of it, starting as early as next year when resource reserve margins could slip below the 13.75 target that ERCOT has. 

And while FERC works to address the impacts of increasingly depending on natural gas, would you agree that on the other side of 

Washington the EPA is working to help make it all but impossible 

to build any new coal plants that would diversify our power 

sources? 

Mr. SMITHERMAN. Certainly, Congressman Olson. It is great to 

see you. 

You referenced earlier in your remarks a couple of projects which 

have been taken off the table in Texas because they were unable 

to meet new federal greenhouse gas regulations. So what that 

leaves us with in Texas is maintaining the current coal fleet and 

hoping that generators will add additional combined-cycle gas. It 

looks like we are going to get a couple of new projects built that 

are going to be combined-cycle, but probably going forward, that is 

the only type of generation that we will see built in Texas. It will 

be combined-cycle gas. And with that we are trying to design a 

market to incent additional generation, but we essentially have 

found ourselves with only one tool in the toolbox. 

Mr. OLSON. And what tool is that, sir? 

Mr. SMITHERMAN. That is modifying the market designed to 

incent new natural gas-fired generation. Since we will not get any 

111 

new coal plants built, we will struggle to maintain the existing coal 

fleet operational and I think it is almost impossible to build new 

nuclear in Texas. 

Mr. OLSON. Yes, sir. I understand all of that. And you heard my 

exchange with Commissioner Moeller in the previous panel about 

the incident on February of 2011, this cold incident—the freezing 

that was across our State and also the extreme heat wave we had 

in the State as well in August of that year. The February 2011 

event has been held up for a while now as a clear example of the 

interdependence of the electrical and natural gas industries and 

what can happen. The systems only run into trouble. Would you 

say that Texas had learned from that incident, and if so, are the 

steps you have taken alongside with the PUC and ERCOT so they 

can be shared nationwide? 

Mr. SMITHERMAN. We have learned a number of things. One, that 

communication among all the agencies is incredibly important. So 

we have a task force today that meets regularly to investigate and 

communicate issues of fuel supply, of weatherization. In fact, one 

of the things we required after that event was additional weatherization on the bowler level, to make sure that these plants are prepared for extraordinarily cold weather, and to encourage firm gas 

supply contracts to our power generating stations. And if we know 

that a firm supply contract is not in place, that the ERCOT grid 

operators do not count on that unit to be available during those periods of time. 

We are also working on demand response initiatives and other 

things to give us a few additional tools. But I think it is important 

to be mindful of the fact that that was a very, very cold weather 

event. And for the most part, power generation plants in Texas are 

designed for summer heat, not for sub 32 degree temperatures for 

3 straight days. 

Mr. OLSON. And one final question, this is taking a page from 

Chairman Emeritus Dingell’s playbook, but I am going to ask a 

question for all of you as an answer of yes or no. Starting with you, 

Mr. Hibbard, on the end there, yes or no. As things stand now, do 

you see the need for a full FERC rulemaking on the topic of gas 

electric coordination, or is a focus on regional action and clarification of the existing regulations enough? Yes or no please, sir. 

Mr. HIBBARD. I think FERC’s approach looking at the issue regionally is correct. 

Mr. OLSON. And Mr. van Welie? 

Mr. VAN WELIE. I think it is yes and no. So I think most of this 

can be handled regionally, but I think there are certain issues that 

Commissioner LaFleur indicated could be looked at nationally. 

Mr. OLSON. Yes, I guess I should rephrase that. Regional or 

FERC regulation? Mr. Moeller? 

Mr. CLAIR MOELLER. Regional. 

Mr. OLSON. Regional. Mr. Epel? 

Mr. EPEL. Regional. 

Mr. OLSON. Mr. Smitherman? 

Mr. SMITHERMAN. Texans can take care of Texas. 

Mr. OLSON. Amen, brother. And one more, Mr. Hibbard, regional? It sounds like you are regional as well? OK. Well, there you 

go. So five for five. It looks like I am out of time. 

112 

I yield back the balance of my time and recognize the gentleman 

from New York, Mr.—no. The chairman emeritus slipped in here 

behind me. Mr. Dingell, are you ready to ask questions, sir? 

Mr. DINGELL. If you let me get my feet under me first. 

Mr. OLSON. OK. Then, we will move on with my colleague from 

Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. And I know some of my 

questions of our chair of the railroad commission that his earlier 

hat was on the Public Utility Commission. I can’t make the same 

statement that I voted for him last fall, but I did vote for his mom 

a few times. But, Barry, it is good to see you, and I know as a railroad commissioner, you have a different hat on in the Public Utility 

Commission, and I appreciate all your work on the PUC because 

at one time— and you heard my questions earlier—we are proud 

in Texas to have ERCOT. And we have never had a reliability 

issue. And I know we have been rationing it on what we can do. 

We don’t one of burden ratepayers too much, but you also don’t 

want to have some of the incidents that we have. And believe me, 

in D.C., we protect ERCOT on a bipartisan basis. 

You talked about expansion of coal plants in Texas, and I know 

EPA, when they did the Carbon Rule, it was for future plants, not 

current plants on sequestration for coal. In all honesty, I can’t 

imagine building a coal plant unless you actually did, like we did 

in Texas, with lignite right over it. The economics seem like with 

natural gas, if you have access to natural gas you wouldn’t build 

a coal plant even if the EPA extended that rule to coal plants. Is 

that true? 

Mr. SMITHERMAN. Well, first, let me say I would hope that you 

would have voted for me because I didn’t have a Democrat in my 

race. So let’s remember that we have a lot of Monmouth coal in 

Texas. And actually, today, Monmouth coal is economic when compared to gas at $3.80 gas prices. So we want to make sure that we 

keep those units running. And that was really the thrust of our 

pushback on CSAPR. 

Mr. GREEN. Well, and congratulations because that was a part 

of summer of our hearings over the last few years on the transport 

rule which never made sense to me, and I grew up there. And the 

wind comes from the south. At certain times of the year it comes 

from the north, but I never knew it went to Indiana. Be that as 

it may—— 

Mr. SMITHERMAN. Me neither. I think the important thing is to 

maintain the optionality. Remember in our market, not only did we 

run a competitive wholesale market, but we also have communities 

and co-ops like San Antonio and Austin, as well as fully regulated 

companies on the periphery of the ERCOT market. And for them, 

having the optionality to build new coal, even if it is Powder River 

Basin coal, could be an important consideration. 

So we want to make sure that we don’t have such onerous greenhouse gas regulations that building new coal, unless it has CCS, 

is completely off the table. Gas prices are low now. That is great. 

We are long gas; it is terrific. And I would just remind, though, 

that gas prices have gone from $1.99 to $3.80 over the last 2 years. 

I think they will stabilize somewhere in the, you know, 4 to 5.50 

range. At that point, it becomes probably a break even for coal. So 

113 

again, having that balance—and we have a really nice balance 

right now. I think it is important for consumers. 

Mr. GREEN. OK. I know when you talked about nuclear—and we 

would have gotten our nuclear loan guarantees in South Texas— 

we only have the two plants, Glen Rose and South Texas—so except for financial problems of one of the investors who was Tokyo 

Power—and after Fukushima, Japan, what, are you going to send 

us $125 million? But I know nuclear needs to be part of ours along 

with our success in natural gas. 

I am curious because you had both hats on, both on the Railroad 

Commission and the PUC. Is there a market structure that we can 

do under ERCOT that working both with your example from the 

Railroad Commission with regulation of oil and gas in PUC, to 

have that reliability we have become accustomed to in Texas? 

Mr. SMITHERMAN. I would say several things in support of, one, 

we need an upstream supply, robust supply, of all the resources; 

two, we need to build midstream infrastructure, pipelines, and 

transmission lines. And then we need to continue to tinker with 

the market design to incent new generation. 

You know, the ERCOT market is like an airplane ride. You take 

midcourse corrections along the way until you get your destination. 

You don’t put it on autopilot. And I am confident that the current 

commissioners are doing that. 

Mr. GREEN. Well, and I understand. I have been through Eagle 

Ford, and seeing the amount of gas we are flaring, of course, nothing compared to what they are doing in North Dakota. So that infrastructure is really important because I know those producers. 

We would rather have somebody buying that gas then it would be 

just flaring it. So the pipeline is important. Mr. van Welie, in New 

England how many LNG import facilities—I am well aware of the 

one in Boston Harbor, that has been a debate in our committee for 

many years. Are there other LNG facilities in New England? 

Mr. VAN WELIE. There are two buoys in the ocean off Boston, 

which are—and I don’t think they have ever been utilized, maybe 

once— but the other one that is sort of a dominant resource for the 

region is in New Brunswick in Canada. 

Mr. GREEN. OK. 

Mr. VAN WELIE. So it is owned by Repsol. And they have 10 BC 

of storage just across the main border. 

Mr. GREEN. About a dozen years ago I kept hearing the Austin 

to Boston connection with natural gas. Is there not enough pipeline 

capacity to send some of that Eagle Ford gas, instead of flaring it, 

up to Boston? 

Mr. VAN WELIE. That is the basic problem. So the pipelines from 

the West and the south are fully utilized. 

Mr. GREEN. And there is not enough new subscriptions. You 

know, people won’t build a pipeline unless they have customers. 

And if you want to expand a pipeline, you need to have those customers committed to that because, you know, it is an investment. 

And is there not enough potential expansion for those to expand 

those pipelines where we have the natural gas? 

Mr. VAN WELIE. Yes. So there is a regulatory, what I call a regulatory conundrum here. On the one hand you have the electric sector and the wholesale markets where generators are thinking 

114 

short- to medium-term at best. So year-by-year, sometimes day-today, the pipelines, they will only build the pipe if they get somebody to commit to them for 15, 20 years. So how do you actually 

make those two business models work together? It is—— 

Mr. GREEN. Mr. Chairman, one last question. How long is that 

LNG—— 

Dr. BURGESS [presiding]. The gentleman’s time has expired. And 

the only reason I point that out is because you do have chairman 

emeritus who is waiting patiently to question. 

Mr. GREEN. Far be it from me to stand in the way of—— 

Mr. DINGELL. This member is not complaining. 

Mr. BURGESS. This member is complaining. 

Mr. GREEN. Well, if I could just say—you don’t have to answer 

just how long has that LNG import facility been in Boston Harbor? 

Mr. VAN WELIE. Yes, about 20 years. 

Mr. GREEN. You could probably build a pipeline. Thank you. 

Mr. BURGESS. I thank the gentleman for yielding back. 

The chair now recognizes himself for however much time he 

wants for questions. And I do—— 

Mr. DINGELL. You are a good friend and are always remarkably 

courteous. I thank you. 

Mr. BURGESS. Well, I actually recognized myself, Mr. Chairman. 

Mr. DINGELL. Oh, I thought you were—— 

Mr. BURGESS. I referred to myself as chairman because—— 

Mr. DINGELL. Well—— 

Mr. BURGESS. I think there is an aspirational goal involved here. 

I do want to thank the members on the panel who stood with us 

so long today. Mr. Smitherman, and I am going to join the parade, 

I voted for you as well. I voted for myself, coincidentally, on the 

same day. But I am going to ask you, but really the question may 

be one that could be answered or should be answered by everyone 

on the panel. National Geographic cover story this week or last 

week was ‘‘America Strikes Oil.’’ I realize the cover is a little incendiary, a little inflammatory, to coin a pun there. 

But you know, for me was phenomenal to sit in the State of the 

Union Address 3 years ago and have the President of the United 

States wax eloquently over the benefits of fracking and how important that was to our economy and ignore his Affordable Care Act 

which he had worked so hard to get. But I think this speaks how 

important this activity is for the future of our economy. 

In the budget on which will be voting in just a few hours, Chairman Ryan from the Budget Committee has placed a number in the 

budget for the future development of natural gas on federal lands— 

and I realize that is not really Texas but on federal lands—of $11 

billion for the next 10 years. That strikes me as an awfully light 

figure for what really should be a real boon to the American economy. Mr. Smitherman? 

Mr. SMITHERMAN. Well, Dr. Burgess, it is phenomenal what is 

happening in the oil and gas patch these days. And again, it is all 

driven by technology, horizontal drilling and hydraulic fracturing. 

We are now producing 1.5, 1.6 million barrels a day of crude oil in 

Texas. That is more than the rest of the country gets from Saudi 

Arabia. That number could double or triple within the next 10 

years, and literally, we could be energy secure in America by 2020. 

115 

That will quickly displace imported oil from Africa, from the Middle East, and ultimately from Russia. So America is on the cusp 

of having energy security, and with that, great paying jobs and revenue streams that you speak of staying here in America. 

Mr. BURGESS. Now, does anyone else on the panel have a feeling as to whether or not that $11 billion figure from oil and gas produced on federal lands—does that seem high, low, or just about 

right? 

Mr. SMITHERMAN. Let me just say that this biennium Texas, oil and gas severance taxes will be over $7 billion just from Texas private lands. So that seems to me like a low number. 

Mr. BURGESS. Is that $7 billion for 1 year or for 10 years. 

Mr. SMITHERMAN. For the biennium. For 2 years. 

Mr. BURGESS. For 2 years. OK. Does anyone else have a sense? 

Is $11 billion high, low? And again, that is a 10-year figure that 

is calculated in our budget. I rather think those numbers will be 

much more robust. 

Mr. Smitherman, you are correct to point out, and I am in absolute agreement that Texas is unique unto itself. There are aspects 

of the Texas oil and gas production that are unique to Texas because of archaeology. And the efforts that the Environmental Protection Agency to write rules for the entire country recognizing that 

Mr. Epel’s home State of Colorado is vastly different geologically 

from our home State of Texas, do you have a feeling as to where 

those regulations should be written and enforced? Is it at the state 

level or is at the federal level? 

Mr. SMITHERMAN. Certainly, we believe at the state level. The 

Railroad Commission employees and TCEQ employees know the 

underground geology of Texas better than regulators either in 

Washington D.C. or with the EPA. We have been at this for over 

hundred years and I think the proof is in the pudding. The amount 

of oil and gas that we produce and our safety record and our environment stewardship is a real testimony to the fact that we are 

proud of what we do and we want to take every proactive step to 

maintain it. In fact, as you recall, we passed the first Frac Fluid 

Disclosure Rule in Texas 2 years ago. We are on the cusp, and next 

week we will adopt a recycling rule for flow back water we think 

will be one of the first, and some additional well integrity rules. So 

we are actually being proactive. 

Mr. BURGESS. And you bring up an excellent point, although the 

concept of horizontal drilling and hydraulic fracturing was, if I recall correctly, part of that was developed in the Barnett Shale, my 

home county of Denton County, and has been extrapolated worldwide. But the technology changes and the technology that is available today is not the technology that was available 5, 10, 15 years 

ago. And I am grateful that you brought that point up because I 

think Texas and your office, in particular, has been a leader in addressing some of the environmental concerns that have occurred as 

a consequence of this very, very valuable energy source. 

And just to wrap up, all of the economists with the benefit of the 

retrospectoscope were able to tell us that a recession started in December 2007. The area that I represent overlying the Barnett Shale 

had to read about it in the newspaper because we didn’t feel it for 

almost 14 months. Now, yes, the natural gas price eventually came 

116 

down to under $2 as you pointed out, and the effect on the job market was felt. But it was astounding, the economic effect of the 

Barnett Shale in the area of North Texas that I represent, and my 

only wish is we could see that economic benefit be extrapolated to 

the rest of the country. 

And I am going to yield at this point to the chairman emeritus 

of the full committee such time as he may consume. 

Mr. DINGELL. Chairman, I will repeat what I said. You are always very courteous and I thank you for your kindness. 

These questions are for Mr. Moeller. Mr. Moeller, as utilities 

build new natural gas electric generating facilities, they retire older 

coal-fired plants and retrofit other coal-fired plants to comply with 

EPA regulations such as the Mercury Rule. Do you believe that the 

Midwest region will have the capacity necessary, in terms of electrical generation, to meet the demand? 

Mr. CLAIR MOELLER. Yes, sir. 

Mr. DINGELL. Now, is more time needed for compliance under the 

Mercury Rule to give time for new gas infrastructure and generation to be built? 

Mr. CLAIR MOELLER. There may be a small number of projects 

that will require additional time as they work their way through 

the construction process. 

Mr. DINGELL. I would appreciate if you would add some remarks 

for the record later on these two points. 

Mr. CLAIR MOELLER. Yes, sir. 

Mr. DINGELL. Now, sir, in her testimony, Commissioner LaFleur 

said that FERC has been told that the need for infrastructure is 

a regional issue that requires regional solutions. You also noted 

that to keep up with demand, the current system will need to be 

expanded. Given demands for natural gas, both now and projected 

in the future, how long do you anticipate it will take to build the 

infrastructure necessary to serve the Midwest region? 

Mr. CLAIR MOELLER. Typically, construction of the natural gas 

pipeline takes between 3 and 5 years. It will take us on the order 

of 3 years to understand what pipelines we should ask for. 

Mr. DINGELL. Now, do we add also to that some permitting time? 

Because pipelines are not always greeted with vast acclaim when 

somebody comes forward. 

Mr. CLAIR MOELLER. Three years is the quick time and 5 years 

is if there are permitting issues that need to be worked through, 

sir. 

Mr. DINGELL. Now, what will the approximate cost be for this 

new infrastructure? 

Mr. CLAIR MOELLER. Our first guess at that cost would be in the 

range of 3 to $5 billion. 

Mr. DINGELL. Now, who will ultimately bear the burden of these 

costs? The ratepayers, the utilities, or the owners of the pipeline? 

Mr. CLAIR MOELLER. Ratepayers, at the end the day, pay for the 

infrastructure, sir. 

Mr. DINGELL. And that is a standard rule? That just always happens? 

Mr. CLAIR MOELLER. Yes, sir. 

Mr. DINGELL. Thank you. Now, in your testimony you note that 

given the nature of pipeline contracts with utilities, some natural 

117 

gas-fired plants cannot run to provide additional generation during 

certain peak events. Do you believe that there are changes to be 

made to ensure utilities have the contracts in place that provide 

the supply they need to run longer? Please answer yes or no. 

Mr. CLAIR MOELLER. Yes. 

Mr. DINGELL. Would you like to add to that for the record later, 

if you please? 

Mr. CLAIR MOELLER. We can do that, yes, sir. 

Mr. DINGELL. Now, with improved weather forecasting and the 

increased use of wind to generate electricity, do you believe that 

this and other forms of renewable electricity should be included in 

the resource adequacy predictions? Yes or no? 

Mr. CLAIR MOELLER. Yes. 

Mr. DINGELL. And would you submit to us your comments as to 

why this would be so for the record? 

Mr. CLAIR MOELLER. Yes, sir. 

Mr. DINGELL. Mr. Chairman, you have been most gracious. 

Thank you to our panel. 

And I would just like to make one observation. I have been dealing with these energy questions for years and years and years. And 

the free economic system always surprises us by how well it works, 

but it has a lot of other surprises in it for us. And technology seems 

to change under our feet. We find that where we were anticipating 

shortages, we all of a sudden have abundance. Where we anticipated abundance, we all of a sudden have shortages. 

And I just worry constantly about the way things change under 

our feet and how it is that we must act to see to it that we are 

ready when the next set of difficulties comes upon us. Whether we 

get gas lines or cold winters and shutdowns and the gas pipelines 

crater and we have all kinds of troubles, and I am hopeful that the 

nice picture that I see today is one which is going to be as nice or 

nicer tomorrow. 

But having been a little like the dog that backed into the hot 

stove, I am not backing into any stoves hot or cold right now. So 

having said these things, your additional comments for the record 

would be appreciated. Mr. Chairman, I thank you. 

Mr. WHITFIELD. Thank you, Mr. Dingell. At this time I recognize 

the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I appreciate all of you 

all being here today and appreciate the testimony that I have 

heard. 

I think that Mr. Dingell’s comments in regard to the circumstances are always changing is one of the reasons that I feel 

so strongly that we ought not to throw coal out, or treat coal as 

if it were a bad word, because long-term, we know we have got 

plenty of coal. It may be a little bit harder to get out, but if we 

run into circumstances that we need it, it is there. And we just 

need to make sure we have the capabilities when we need it to be 

able to use it. 

Likewise, it is great that we have natural gas at fairly reasonable prices and that, you know, do anticipate one of our—in a previous hearing some of you may have heard this earlier—witness indicated that they thought it was going to actually hit $4 by the end 

of the year. At that point, coal does become competitive again. And 

118 

then the question becomes, you know, who wants to use it and are 

they going to be allowed to use it by regulations? 

And I would ask you all—and I don’t care who wants to volunteer to answer this question—but we hear a lot about retrofitting 

some of the coal plants, which is a good thing and some coal plants 

are fairly new. In light, though, of some of the new regulations that 

are out there, notwithstanding some comments this week that the 

White House may back off of some of the greenhouse gas regulations in regard to power plants, how likely is it that you all would 

anticipate that your power producers are going to be anxiously 

looking to find ways to retrofit coal plants in light of the uncertainty that is out there with what they might have to do with CO2? 

Do you want to start, Mr. Smitherman? 

Mr. SMITHERMAN. Yes. Congressman, you raised a great issue because that is the unknown. You could retrofit to capture SO2, mercury, particulate matter, everything else that goes up that flue except for CO2 and then find yourself 5 or 10 years from now having 

to make a major retrofit to capture carbon or it be cost-prohibitive 

and you just have to close the plant down and then you have lost 

all that capital. 

Mr. GRIFFITH. Does anybody disagree with that? 

Mr. Moeller, did you want to make an additional comment on 

that? 

Mr. CLAIR MOELLER. In the Midwest with traditionally regulated 

States, the generation owners in conjunction with their regulators 

have committed to retrofitting 54,000 megawatts of the 66,000 

megawatts on our system. 

Mr. GRIFFITH. OK. Thank you. 

Mr. van Welie, let me ask you this, just because, as Mr. Dingell 

also pointed out, sometimes pipelines aren’t so popular, that LNG 

storage facility just over the line in Canada, is there already a 

pipeline into the States? 

Mr. VAN WELIE. Yes. 

Mr. GRIFFITH. OK. 

Mr. VAN WELIE. There is a pipeline that comes over. 

Mr. GRIFFITH. Because we had had some difficulty getting the 

pipelines across the Canadian border of late, and I just wouldn’t 

want to see us run into that problem. 

I will tell you that I suspect that some of the natural gas comes 

out of a pool of natural gas that we have been trying in my home 

State of Virginia now since 2004 to get permission to explore and 

figure out what is out there. And many geologists have told us that 

natural gas the Canadians are getting offshore is in a pool that 

stretches all the way down to northern North Carolina, which covers a big chunk of Virginia in that patch. We would love to have 

you have a source of American natural gas from just offshore. If 

you don’t want to do it in Massachusetts, we are glad to do it Virginia. 

Mr. VAN WELIE. We would be happy to have you build a pipe. 

That would be great. 

Mr. GRIFFITH. And we would love to create jobs for all Americans. 

119 

Mr. Rush asked about minorities earlier, and we just think there 

is huge potential for not only the United States but also for the 

Commonwealth of Virginia if we can get that permission. 

Mr. Chairman, that being said, you know, this has been a great 

hearing, but I believe a lot of questions that I would have asked 

have already been asked and I will yield back. 

Mr. WHITFIELD. Well, thank you, Mr. Griffith. 

At this time I recognize the gentleman from Colorado, Mr. Gardner, for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman. And again thank you 

to the witnesses for joining us today. Chairman Epel, just a couple 

of questions from your testimony and the experiences that we have 

shared. Could you talk a little bit about the long-term contracts 

that you mentioned, natural gas, and how does the ability to enter 

into long-term contracts help with certainty and pricing for utilities? 

Mr. EPEL. Thank you, Congressman. We could not have developed Clean Air-Clean Jobs without a long-term contract. We had 

to take the volatility out. And so when we developed the program 

with this long-term contract, it just gave us that opportunity to 

have the smooth glide path for the next 10 years. And we don’t anticipate any type of rate impact. In fact, we entered into a 

multiyear rate case with Pelletier’s Company of Colorado with only 

5 percent increase in rates for the next 3 years. 

Mr. GARDNER. And, I believe it was Mr. Burgess from Texas who 

talked about just the differences between Colorado’s unique needs 

and Texas’ uniqueness and just the variety of States and the differences between the geography in the mountains versus the 

plains. And so when we came up with the solutions unique to Colorado, I think that is important. 

Mr. EPEL. Yes. 

Mr. GARDNER. And you hear people talk about the single stack 

solutions versus letting a State do a broader whole approach. And 

so I guess what I am leading into is this: when you have a rule 

that allows you to make a decision for a State, that is a better way 

than individualizing, targeting specific sites. Is that correct? 

Mr. EPEL. I agree with you completely. It has to be a system benefit. If we did not look at the full suite of the older plants, the gas 

availability, including the energy efficiency opportunities, the program could not have gone forward. 

Mr. GARDNER. And so Colorado is best-equipped to make decisions for Colorado just as Texas is best-equipped to make decisions 

for Texas? 

Mr. EPEL. Well, I think the basic point is the West is the best 

and I am pleased to brag about it. But absolutely—— 

Mr. GARDNER. I wholeheartedly agree with you. Thank you, Mr. 

Chairman. Yes. And to the point of allowing a holistic solution 

versus stack specific. Would everybody else agree on the panel that 

that is the better way to proceed? 

Mr. CLAIR MOELLER. Yes. 

Mr. VAN WELIE. Yes. 

Mr. GARDNER. Thank you. And you talk a little bit about greenhouse gas reductions. You indicate in your testimony that greenhouse gas reductions must establish targets that are achievable 

120 

through this suite of strategies, tailored specifically to a State and 

the State with vertically integrated utility or by a region in an organized market. Do you think that the proposals we see from this 

Administration have done that? 

Mr. EPEL. You know, we have not yet seen the existing source 

rule which to me is the critical rule that all of us are concerned 

about. I mean clearly, in Colorado, we have addressed Regional 

Haze at least for our industrial and utilities, Mercury Air Toxics. 

This is the biggest wildcard but I think if we have a sensible slope 

and length of time, it is manageable. But that really has to be driven by the State once EPA or the Congress defines that goal. 

Mr. GARDNER. And you talked a little bit about, in addition to 

the cooperation that we have in Colorado, we also had a very cooperative process on our Regional Haze issue in the SIP that we developed bipartisan support, but we have seen now several groups 

in Colorado that choose not to participate in the process despite its 

wide bipartisan support. Wild Earth Guardians National Parks 

Conservation Association have sought to upend the process of the 

SIP that we got through bipartisan efforts. Through the PUC, do 

support the Colorado Regional Haze SIP in its entirety? 

Mr. EPEL. Absolutely. 

Mr. GARDNER. Yes. And then you agree that the Department of 

Justice and the EPA should defend the SIP in its entirety and 

should oppose modifications which could be entering into a consent 

decree if that is what they would end up pursuing that changed the 

balance approach agreed to by the diverse parties involved. You 

would agree that the Department of Justice ought to defend the 

whole thing? 

Mr. EPEL. Well, I am reluctant to ever tell the Department of 

Justice what to do, but I think Colorado did as fine a job as possible on Regional Haze, and clearly, the EPA supported it. They 

have turned around the approval of our State Implementation Plan 

as quickly as possible, I mean, in record time. 

Mr. GARDNER. And did this Administration consultant with— 

Texas, Colorado, I will ask all of you—did the Administration consult with your State before issuing rules like Utility MACT? 

Mr. SMITHERMAN. Not at all. Let me just add, Congressman, 

quickly, SO2, NOx, particulate matter, CO2 down to 1992 levels in 

Texas, in the face of a growing economy without cap-and-trade. 

Mr. GARDNER. Chairman Epel? 

Mr. EPEL. I am not familiar with that. 

Mr. GARDNER. Yes, I understand. Anybody else care to—OK. 

Thank you very much, Mr. Chairman. I yield back my time. 

Mr. WHITFIELD. Well, thank you, Mr. Gardner. And thank all of 

you for your testimony. 

I think everyone agrees that the wildcard is the CO2 regulations. 

And speaking for myself, all of this came about as a result of the 

Supreme Court decision, and there really has not been a national 

legislative debate on this issue. And something that we are going 

to be focused on is drafting some legislation in which we can have 

a national debate on it and let the legislative body decide. 

But the ramifications are big, the uncertainties are big, and we 

are going through great changes today. And so that is why we feel 

121 

like this hearing is so important and to hear from experts who are 

dealing with it in various ways, we appreciate that very much. 

And without objection, I would like to enter into the record this 

statement of our chairman, Fred Upton. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

I would like to thank Chairman Whitfield for holding this important and forwardlooking hearing—one that seeks to proactively address emerging issues resulting 

from the increased use of natural gas in the nation’s electric generation portfolio. 

An ounce or two of prevention now can avoid big problems down the road. 

This country is undergoing a shale gas revolution that is providing the nation 

with growing supplies of affordable domestic natural gas for use in electric generation as well as manufacturing and residential uses. But at the same time, we are 

facing the substantial loss of coal-fired generation capacity that will only accelerate 

over the next few years, especially in the Midwest. Some of these coal-fired plants 

are closing for good, while others will go offline for extensive retrofits to meet new 

EPA rules. 

The rapid replacement of coal with natural gas in the generation mix can be a 

challenge in some regions of the country, and I am pleased that two of our witnesses 

hail from the Midwest and will provide a unique perspective from this region where 

we need affordable and reliable power not just for homeowners and small business 

owners but also for our manufacturers. 

The Midwest is particularly hard hit by the rapid loss of coal-fired capacity—and 

this committee will continue to scrutinize the wave of EPA regulations that have 

targeted coal. And while the Midwest supply of natural gas is plentiful, there are 

issues that need to be addressed regarding its expanded use in the generation mix. 

For example, the Midwest Independent Transmission System Operator (MISO) estimates we will need $2–3 billion in new natural gas pipeline infrastructure by 2015. 

Beyond the infrastructure challenges are the regulatory issues. The natural gas 

and electricity sectors have market and operational differences that may need to be 

reconciled for this transition to go smoothly. 

Again, I would like to thank the chairman for getting out in front of these emerging issues. The shale gas revolution is very good news for the country, but only if 

we are sensible in how we go about integrating it into the electricity mix. This hearing is a great start toward that end. 

Thank you and I yield back the balance of my time. 

Mr. RUSH. Mr. Chairman, I just hope and sincerely wish that 

along with your plans for future hearings, I mean, you know how 

crazy I am about these hearings that we are holding. I wish you 

would also certainly consider a hearing where we will have some 

scientists come in and discuss climate change. 

Mr. WHITFIELD. Yes, well, we have had a lot of hearings on climate change. That is for sure. 

Mr. RUSH. But no scientists. 

Mr. WHITFIELD. Well, over the last 5 years, we have had 22 some 

hearings on climate change with scientists. But thank you for you 

and Mr. Waxman reminding us of that and for the letter that you 

sent. 

Mr. RUSH. We certainly would like to hear from—— 

Mr. WHITFIELD. Thank you. 

Mr. RUSH [continuing]. Some scientists. 

Mr. WHITFIELD. Thank you. 

Thank you all once again for being with us. And the record will 

remain open for 10 days. Some of you made commitments to provide additional information. And we look forward to working with 

all of you as we strive to meet the energy demands of our country 

and make sure we have adequate supply as well. Thank you. 

And with that, the hearing is adjourned. 

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[Whereupon, at 1:08 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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