[Senate Hearing 115-353]
[From the U.S. Government Publishing Office]
S. Hrg. 115-353
THE STATUS AND OUTLOOK FOR U.S. AND NORTH AMERICAN ENERGY AND RESOURCE
SECURITY
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HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JULY 18, 2017
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the
Committee on Energy and Natural Resources
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
26-867 WASHINGTON : 2018
COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona DEBBIE STABENOW, Michigan
STEVE DAINES, Montana AL FRANKEN, Minnesota
CORY GARDNER, Colorado JOE MANCHIN III, West Virginia
LAMAR ALEXANDER, Tennessee MARTIN HEINRICH, New Mexico
JOHN HOEVEN, North Dakota MAZIE K. HIRONO, Hawaii
BILL CASSIDY, Louisiana ANGUS S. KING, JR., Maine
ROB PORTMAN, Ohio TAMMY DUCKWORTH, Illinois
LUTHER STRANGE, Alabama CATHERINE CORTEZ MASTO, Nevada
Colin Hayes, Staff Director
Patrick J. McCormick III, Chief Counsel
Brianne Miller, Senior Professional Staff Member and Energy Policy
Advisor
Severin Wiggenhorn, Senior Counsel
Angela Becker-Dippmann, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Scott McKee, Democratic Professional Staff Member
C O N T E N T S
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OPENING STATEMENTS
Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska.... 1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
Washington..................................................... 2
WITNESSES
Webster, Jamie, Senior Director, Center for Energy Impact, Boston
Consulting Group............................................... 11
Mills, Mark P., Senior Fellow, Manhattan Institute............... 17
Cheney, Stephen A., Brigadier General USMC (Ret.), Chief
Executive Officer, American Security Project................... 25
Coward, Robert, President, American Nuclear Society.............. 34
McGroarty, Daniel, Principal, Carmot Strategic Group Inc......... 40
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Birol, Dr. Fatih:
Written Statement............................................ 5
Responses to Questions for the Record........................ 93
Cantwell, Hon. Maria:
Opening Statement............................................ 2
Cheney, Brigadier General Stephen A.:
Opening Statement............................................ 25
Written Testimony............................................ 27
Responses to Questions for the Record........................ 74
Coward, Robert:
Opening Statement............................................ 34
Written Testimony............................................ 36
Responses to Questions for the Record........................ 79
McGroarty, Daniel:
Opening Statement............................................ 40
Written Testimony............................................ 42
Responses to Questions for the Record........................ 81
Mills, Mark P.:
Opening Statement............................................ 17
Written Testimony............................................ 20
Responses to Questions for the Record........................ 71
Murkowski, Hon. Lisa:
Opening Statement............................................ 1
Webster, Jamie:
Opening Statement............................................ 11
Written Testimony............................................ 13
Responses to Questions for the Record........................ 68
THE STATUS AND OUTLOOK FOR U.S. AND NORTH AMERICAN ENERGY AND RESOURCE
SECURITY
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TUESDAY, JULY 18, 2017
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:35 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. LISA MURKOWSKI,
U.S. SENATOR FROM ALASKA
The Chairman. Good morning. The Committee will come to
order.
We are here today to consider the status of U.S. and North
American energy and resource security, to review our
production, our imports and our exports and where we are as a
country, as a continent, in light of them.
The good news, I think, is that we are in a much better
place today than even a few short years ago. It was not long
ago that peak oil and the need for LNG exports dominated policy
discussions here on Capitol Hill. Prices were high, our
production levels were low and our energy security was at risk
as a result of outside decisions and disruptions, particularly
those in the Middle East.
But I think we have seen that times have changed, and I
would say for the better, due to tremendous innovation and
technological advances, our nation has moved away from energy
scarcity and isolation. We are in the midst of a significant
surge in oil and natural gas production with renewables making
a noteworthy contribution.
We have also taken steps to open up our markets, especially
by lifting the ban on export of domestic crude oil which by all
accounts stands as a smart, timely and beneficial move.
Today we are far more energy secure than at any point in
recent memory, and we have reached a point where energy
dominance, to borrow the Administration's phrase, has become a
real and legitimate policy goal.
We are in a position to export energy to our allies,
lessening their dependence on unfriendly and unpredictable
regimes around the world. That will allow us to create new
jobs, generate new revenues and improve our balance of trade,
while also providing affordable and reliable energy supplies to
countries around the world.
OPEC no longer holds all of the cards when it comes to the
price of oil. Our friends in Europe and Asia have an excellent
new option to reduce their dependence on natural gas from
Russia. This Administration, I think, deserves support for its
efforts to increase access to keep these good trends going.
Alaska is certainly ready to help strengthen our energy
security. We are the most resource rich state in the nation. We
currently account for six percent of the total energy
production in the United States, but we have the opportunity to
do a lot more.
Given recent discoveries both onshore and offshore in
Alaska, along with our long-standing efforts to produce in our
national petroleum reserve, the non-wilderness portion of ANWR
and our offshore Arctic, we can and should celebrate this 40th
anniversary of the Trans-Alaska Pipeline System by agreeing to
refill it. Doing so would help our economy, our budget and our
energy security while at the same time making sure that we
protect the environment.
Of course, oil and gas are just a part of the energy
security picture. We have abundant coal reserves, significant
growth in renewable generation, a large nuclear fleet and a
reliable electric grid. Yet, we should also recognize that some
developments, especially those in nuclear energy, are not as
positive and threaten our long-standing, global leadership in
key fields.
We cannot forget about our mineral security either. It is
routinely ignored but increasingly critical to our future. We
are becoming more and more reliant on minerals for everything
from smartphones and solar panels to advanced defense systems,
but our mineral security has fallen dramatically year after
year. I believe that we have to pay greater attention to this,
and we have to take steps to resolve it.
This morning's hearing is also an opportunity to recognize
our close ties with our neighbors, Canada and Mexico, which
also have dynamic energy sectors. We have long had robust
energy trade with both nations through both electric grids and
pipeline systems. As we look to what the future will hold, we
should consider not only our national security but also our
continental security and the significant benefits that will
provide to us.
I want to welcome our distinguished panel who will help us
understand what is happening in global markets and with
geopolitics, from domestic production and export policies to
potential sanctions on other nations. There is a lot to
consider, to understand and to work through right now.
I thank you all for being here to share your expertise with
us, and I look forward to your testimony.
At this time, I will turn to Ranking Member Cantwell for
her comments.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Madam Chair. Thanks for
scheduling today's hearing on energy and resource security.
As we all know from the Quadrennial Energy Review that was
done in the last Administration about the energy needs of our
country moving forward, enhancements to our electricity grid
for more renewable energy sources and the complexity of dealing
with aged infrastructure and what I would call, probably,
robust commodity competition on our rail lines and the
structure of where energy is developed and moved to, has
created new challenges.
The Quadrennial Energy Review also pointed out the very
important need to protect critical energy infrastructure from
both physical and cybersecurity threats. I believe we must take
this action very seriously in protecting our energy
infrastructure from cybersecurity threats to ensure America's
energy security of the future.
As was just reported last week by the Washington Post, it
is clear now that there were Russian government hackers who
tried to infiltrate a U.S. nuclear power plant. I believe we
need to act and we need to act now.
Our grid and energy networks are under constant
cyberattack. From 2012 to 2016, reported cyber incidents
against U.S. critical infrastructure more than doubled. In
December 2015, suspected Russian hackers infiltrated three
Ukrainian utilities knocking out power to more than 225,000
customers and they did it again to a utility north of Kiev
earlier this year. Recently, the U.S. Department of Energy
described the incident in Ukraine as ``step change in
sophistication and intent of hackers.''
My colleagues and I have repeatedly pressed the President
and Secretary of Energy to take more aggressive cybersecurity
action now. I would also say that our House colleagues need to
get more serious about cybersecurity. As the Washington Post
noted, ``Russian government hackers have already shown their
interest in targeting U.S. energy and other utility systems.''
In fact, the Russians have more than just a passing interest in
infiltrating our grid. Just 10 days ago the Post reported that,
``Russian government hackers were behind cyber intrusive
attacks into the business systems of U.S. nuclear power plants
and other energy companies in what appears to be an effort to
assess their networks.'' This should set off alarm bells across
our government and energy sector and the general public, and I
have requested a secure briefing on exactly what has transpired
in this matter.
In addition, the Christian Science Monitor has reported,
``Cyber spies linked to China's military targeted nearly two
dozen U.S. natural gas pipeline operators stealing information
that could be used to sabotage U.S. gas pipelines.''
Although we have mandatory cybersecurity standards for
electric utilities, natural gas and pipelines are merely
subject to voluntary agreements issued by the Transportation
Security Administration, which has a small staff to oversee
millions of miles of pipelines that transverse the country.
The security of our pipelines is not only important to
prevent attacks, but also to protect the public. DOE's most
recent Quadrennial Energy Review suggested it is important that
we consider whether additional or mandatory cybersecurity
guidelines are necessary for natural gas pipelines given their
increased dependence between the electric and natural gas
sectors.
Now that we see these vulnerabilities that the Russians
have exposed to hacking our grid and the cybersecurity threat,
we need to take additional actions. So I want to make sure that
we are pushing the Administration in helping plan for the
future.
Today, I am sending a letter to the Government
Accountability Office to ask them to conduct an assessment that
the United States must prioritize protection of our critical
energy infrastructure and we cannot afford to wait before we
have a large-scale attack. I hope to get an answer on where we
are with our abilities on pipelines and making sure that our
pipelines are secure for the future.
Madam Chair, we also, obviously, learned from the
Quadrennial Energy Review that we need to continue to diversify
our energy mix and the consequence of climate change that
threatens the well-being and increases geopolitical issues
around the globe. In the G7, they noted the importance of
``reducing greenhouse gas emissions and accelerating the
transition to a low carbon economy as a key contributor to
enduring energy security.'' So I couldn't agree more. There is
alot to do, and lots of changes have happened in the energy
sector. We must prioritize those things that are going to help
us be secure for the future.
I look forward to hearing from the witnesses today.
The Chairman. Thank you, Senator Cantwell.
We will now begin with our panel.
I would mention to colleagues that we had invited Dr. Fatih
Birol, who is the Executive Director for the International
Energy Agency. He has appeared before this Committee many times
and up until yesterday we believed that we had been able to
work a schedule. But he has not been able to work within the
limitations that we had and not without great effort on his
part as well.
I appreciate his willingness to testify. Even though he is
not with us, we do have his written testimony which will be
included as part of the record.
[The information referred to follows:]
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The Chairman. We have a very distinguished panel today.
We will begin with Mr. Jamie Webster. Mr. Webster is the
Senior Director for the Center for Energy Impact at Boston
Consulting Group.
Mr. Mark Mills has also been before the Committee. He is a
Senior Fellow at the Manhattan Institute.
We have Brigadier General Stephen Cheney, who is the Chief
Executive Officer for the American Security Project (ASP); and
Mr. Robert Coward, who is the President of the American Nuclear
Society. We welcome you to the Committee.
Mr. Dan McGroarty will wrap the panel up. He is the
Principal of Carmot Strategic Group.
We would ask you to try to keep your comments to five
minutes. Your full statements will be incorporated as part of
the record.
Mr. Webster, if you would like to lead us off?
STATEMENT OF JAMIE WEBSTER, SENIOR DIRECTOR, CENTER FOR ENERGY
IMPACT, BOSTON CONSULTING GROUP
Mr. Webster. Thank you very much, Chairman Murkowski,
Ranking Member Cantwell and members of the Committee. I
appreciate the opportunity to testify before you today on the
current status and outlook of the U.S. North American energy
security. I appear before you in my role as a Senior Director
at the Boston Consulting Group's Center for Energy Impact and
also a non-resident Fellow at Columbia University.
The United States is undergoing an energy revolution that
is expanding U.S. oil and gas capabilities in all ways, from
production, to pipelines, refineries, storage facilities and
export terminals. This has impacted the global supply balance,
changed trade relationships and lowered prices for consumers.
This increased energy security has allowed the United States to
take a leading role as a global energy supplier.
The U.S. Energy Information Administration has noted that
the U.S. has now, for the fifth year in a row, the largest
natural gas and oil producers in the world. For U.S. natural
gas that production rise began in 2006 and has expanded more
than one-third since that time. In light of this, U.S. energy
security, as it relates to natural gas and the concerns about a
lack of natural gas and the need for imports quickly vanished
as Henry Hub dipped below $5.00 in 2008 and have not risen
above that level, sustainably, since that point.
Since that, since the price decline, the resilience of U.S.
producers has been aided by finding new markets, with U.S. LNG
now being offered for sale on a global basis. Far from
imperiling U.S. energy security, these rising exports are
actually increasing energy security for both the U.S. and the
world. The ready export outlet will allow producers to keep
natural gas flowing into homes and power plants at less cost,
and exports of LNG are providing consumer countries with
another choice of energy supplier, allowing them to negotiate
better pricing and increasing market responsiveness.
The U.S. is now expected to be one of the top three natural
gas exporters in the world by 2020. To meet this there are
expectations of export terminals on all three coasts. Along
with that is a growth in natural gas storage which has expanded
more than a trillion cubic feet in the past 10 years with more
than 20 new fields added.
Oil from the shale region started to grow after production
in natural gas was hit by the lower prices and arguably had its
first significant impact in 2011 when U.S. light, sweet crude
began to replace imported barrels from OPEC's Nigeria. This was
an important energy security turning point as it blunted the
risk of production outages from this country. A reminder that
Nigerian production outages caused by strife in the Nigerian
Delta region were a key factor in raising global oil prices
above $100 in 2008, that summer U.S. drivers paid as much as
$4.72 per gallon for gasoline. This past Fourth of July
weekend, 20 percent of consumers were able to get natural gas--
gasoline for less than $2.00.
There are concerns about the longer-term durability of
North American energy security, particularly as it relates to
oil. Those risks include: high decline rates; oil production in
the shale regions decline by as much as 300,000 barrels a day,
requiring substantial activity to keep going; drilled but
uncompleted wells which are up by over 1,000 wells in the last
year--the lack of being able to actually complete those is
slowing down production growth; and a dependence on the Permian
where most, 60 percent of production growth in the last year
has actually come out of the Permian versus other places.
Now there has been substantial growth in terms of rig
productivity. A rig brought on today delivers 2.5 times as much
productivity as a rig that was brought on in 2014, a credit to
what the United States energy industry is able to do.
The longer-term concern is the sufficiency in the global
context that the U.S. oil is actually still a fairly small part
of the system and a longer-term concern that there won't be
enough investment to keep prices down in the three- to five-
year timeframe.
We've also had extremely strong growth in refined product
and being able to store oil over 100 million barrels a day. One
hundred million barrels has now been put into capacity over the
last several years, expanded storage capacity has also
supported the operational needs for refineries, with refineries
now producing or being able to produce 18.1 million barrels a
day of capacity. This is the fifth year in a row that they've
grown.
The advantage to increased production, pipeline refinery
and storage capacity in the United States is an expansion of
not just our own energy security, but the ability to extend
that to other countries. Add to this impressive mix that the
fact that the United States has the most transparent, frequent
and capable energy data system in the world in the guise of the
Energy Information Administration, and this allows the benefits
of the U.S. to be known and transmitted to all market
participants benefiting and increasing energy security in the
U.S. but also globally.
Thank you very much.
[The prepared statement of Mr. Webster follows:]
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The Chairman. Thank you, Mr. Webster.
Mr. Mills, welcome.
STATEMENT OF MARK P. MILLS, SENIOR FELLOW, MANHATTAN INSTITUTE
Mr. Mills. Good morning. Thank you, Madam Chairman and
thank you, Senators, for the opportunity to testify.
I'd like to begin--I'm going to focus on geopolitics and
security as well. I'd like to begin with, sort of, a mea culpa.
It was about five years ago I published a paper titled,
``Unleashing a North American Energy Colossus.'' And in the
introduction of that paper I suggested that it was time that we
begin to think in different terms and stop talking about energy
independence and think in more of terms of energy influence and
even, I wrote, ``energy dominance.''
Setting aside the fact that that word has gained political
salience, I'd like to say that it is, in fact, obvious that the
reality is America is already dominating global energy markets.
No one in Moscow or Reade doubts that the global price collapse
in gas and oil happened for any reason other than the fact of
this astonishing revolution in the American shale fields.
They're worried not about what has already happened, but what
could yet happen.
Henry Kissinger, who all of us know, is a great statesman
and sometimes the greatness expands with the passage of time
which is a wonderful thing for statesmen. He wrote something
that was, I thought, very insightful in 1999 in his book. He
said, and I quote that, ``Statecraft is the ability to
recognize the real relationship of forces.'' Let me very
briefly summarize some real forces, three real forces of
geopolitics.
The first reality is that oil petroleum is more important
to the global security and to the United States today than it
was at the time of the Epoch setting 1973 oil embargo. The
world consumes 150 percent more oil today than it did then. Oil
is the world's largest traded commodity and the largest single
source of energy supply in civilization today. In fact, 95
percent of all transportation, over 95 percent, is powered by
fuel-burning engines. And 60 percent of all oil is now used
to--for transportation. That share in 1973 was just one-third.
The second reality is that every credible forecast says
that petroleum, and especially these days its hydrocarbon
cousin, natural gas, will be more, not less important in the
coming two decades. This is true, notwithstanding what I would
call a universal affection for alternative energy, political,
universal affection and literally hundreds of billions of
dollars spent over the last four decades trying to replace oil
and natural gas as primary sources of the world's energy. There
are simply no prospects for reducing today's already enormous
consumption of global gas and global oil, never mind reducing
the increase that will come as the world's economies expand.
Really the only debate today, at the fundamental level, is how
big the increase will be, not whether or not there will be an
increase in global consumption of oil and natural gas.
The third reality is, of course, the wild card that no one
expected a decade ago or, in fact, I'd even say, expected five
years ago, which is the emergence of the technology that we now
call the shale revolution. The United States is now not just a
major player, but also a major exporter and a growing exporter
in world markets for both oil and natural gas. I think the
magnitude of that revolution is still underappreciated. As much
as we talk about it and hear about it, it's still fundamentally
unappreciated.
Let me put it in this context. The quantity of energy and
the velocity with which the amount of energy produced by the
shale fields of America that secured in the past decade is the
largest, single increase of energy supply to the world that has
ever occurred in history, period.
I'll put it in domestic terms. The increase in domestic
energy production, the shale fields of the United States over
the last 10 years is 2,000 percent greater than the subsidized
increase of combined increase of wind and solar in the United
States. This is an astonishing transformation of energy markets
which is still, I think, profoundly underappreciated.
And the world has been doubly impacted by the shale
revolution. It's not just that the United States can export
fuels; it's that we have taken hundreds of billions of dollars
of purchases off of global markets. This has deprived oil
exporting nations of literally trillions of dollars and most of
that depravation has been borne by OPEC nations and by Russia.
Now as cheap domestic gas has also triggered a profound
increase in domestic and foreign direct investment in
manufacturing in the United States. Over the next several years
we'll see the effect of that as something on the order of $160
billion in private capital and foreign capital has been put
into over 200 chemical manufacturing plants in the United
States that are slated to come online over the next few years.
This will have profound economic and geopolitical implications.
What comes next? Let me, again, context what comes next
briefly in two ways.
First, the EIA and the IEA, but in particular, the Energy
Information Administration's two-decade forecast still sees the
shale fields supplying 600 percent more net new energy to
America than wind and solar combined. And that forecast from
EIA assumes that over the next two decades the shale industry
can only do as much as it did in the past single decade. I'd
like to go on record here saying that that is almost certainly
going to be an underestimate. Shale will do more. The reason it
will do more is because of the information revolution that's
now underway.
There's a lot of discussion about how old industries of all
kinds from groceries and transportation and car rental, hotels,
are being impacted by analytics and big data and machine
learning, Internet of Things. The 80 percent of our economy is
tied up in the old part of our economic infrastructure which is
being unleashed and revitalized by the new information
revolution.
Why would it not be the case that algorithms, if you like,
won't unleash more productivity of the shale fields? I will
tell you that not only are they likely to, they're already
beginning to and in fact, one can argue they'll have a bigger
impact there for the very simple reason that the shale industry
has so far, to use an awkward phrase, is a least digitalized of
our old economy.
So the--let me conclude by quoting from Dr. Birol, who
recently said in an interview that we are now witnessing the
second unleashing of the shale expansion of the United States
in shale production. And he said then it was price that would
determine how fast that new production would grow.
I'd like to respectfully disagree with half of what he
said. The data are already in. The shale industry is in big
resurrection mode from new technologies and from what Jamie has
just said about the improvement in productivity, but we have
just begun to see what will happen is information technology
unleashes the second shale revolution, what I've called Shale
2.0.
I think the only question is not so much what the price
will be, is the extent to which policy helps or impedes the
unleashing of the second shale revolution.
Thank you very much.
[The prepared statement of Mr. Mills follows:]
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The Chairman. Thank you, Mr. Mills.
Brigadier General Cheney?
STATEMENT OF STEPHEN A. CHENEY, BRIGADIER GENERAL USMC (RET.),
CHIEF EXECUTIVE OFFICER, AMERICAN SECURITY PROJECT
General Cheney. Thank you, Chairperson Murkowski and
Ranking Member Cantwell and members of the Committee for
inviting me to testify at today's hearing.
The American Security Project was founded in 2005 as a
bipartisan initiative to tackle long-term challenges from a
national security perspective, not encumbered by political
bias. Our founders, Senators Kerry, Hagel, Hart and Rudman,
asked to host the retired general and admirals to join ASP
because their only interest was the security of our country.
Our Chairperson, former New Jersey Governor, Christine Todd
Whitman, and our entire board share a strong belief that energy
security for the United States and how we produce energy is a
national security issue of preeminent importance.
My role in today's hearing will be to offer a perspective
of a national security professional. Having spent over 30 years
as a Marine I know that, for the military, assured access to
energy is a prerequisite to any operation. In the last 15 years
the military has learned the hard way that energy should not be
taken for granted. Our supply lines in Iraq and Afghanistan
were a constant target for insurgents. In response, all four
services have taken significant steps to both increase energy
efficiency and reduce their single source dependence on
petroleum fuels. Our country can learn a lot from our
military's experience.
Before we can discuss where we are in energy security, we
have to understand what we are asking. Energy security is
generally defined as the ability to have uninterrupted access
to energy resources at an affordable price. That's a start, but
I don't think it's enough because of the indelible link with
global affairs.
Our nation's concept of energy security was defined in the
American mind by the two oil crises of the 1970s. To ensure
that nothing like that ever happens again should be our goal in
building energy security; therefore, I would propose that we
define energy security as the ability of a country to define
its interest overseas independently from how it uses energy
domestically.
More importantly, energy security must not mean energy
independence in the sense that all energy used in the United
States comes from within its borders without international
trade. In today's globalized world, this is neither attainable
nor desirable. Even domestically-produced energy sources are
subject to fluctuation in global commodity markets. We must see
energy security in today's world as where countries, businesses
and people share and compete in the global marketplace. In
today's globalized world, if one country doesn't have security,
their neighbors and allies don't have security either.
Finally, I will argue that we must see energy security as a
long-term process, not as a moment frozen in time. Some
policies and actions could build security today while harming
our future security. Climate change is already affecting
security both at home and around the world, so we must make
sure that we take the greenhouse gas emissions from energy into
account less we trade increased energy security today for a
warmer, more unstable world in the future.
Thinking long-term, this way also means that we must invest
now in scientific research and development into the next
generation of energy technology. Factoring together each of
these variables, my message to you Senators is that the current
status of North American energy and resource security is good,
but the outlook is hazy.
There are few threats to America today that could stop our
access to global energy markets, but I am concerned that there
are emergent threats that could undermine our future security,
if not addressed soon. Moreover, we must guard against bad
policy that could undermine our future security.
Our amazing increase in the production of oil and gas has
given us some breathing room and the opportunity to invest in
other long-term sources of energy. We cannot sit back and revel
in our success with fossil fuels. We should not let our
expertise in nuclear energy atrophy and ought to be pursuing
small modular reactors. We ought to be continuing to support
the rapid proliferation of renewables of all kinds to include
wind, solar and biofuels. We ought to take advantage of this
remarkable progress made in metallurgy and science to pursue
fusion energy. We have seen far too many countries rely on a
sole source of energy and look what has befallen many of them,
not the least of which, perhaps, are Venezuela and Nigeria.
We have a golden opportunity in front of us right now and
we need to capitalize on it.
Thank you.
[The prepared statement of General Cheney follows:]
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The Chairman. Thank you.
Mr. Coward, welcome.
STATEMENT OF ROBERT COWARD, PRESIDENT,
AMERICAN NUCLEAR SOCIETY
Mr. Coward. Chairman Murkowski, Ranking Member Cantwell,
members of the Committee, thank you very much for the
opportunity to testify today.
I am here in my role as President of the American Nuclear
Society. Our society is dedicated to the peaceful use of
nuclear science and technology. Our 11,000 members come from
all sectors of the nuclear energy community: utilities,
suppliers, national labs, universities, government agencies.
We commend the Committee on its bipartisan work to
modernize U.S. energy research and development and production
policies.
The focus for today is energy security, and by energy
security I'm going to agree with Brigadier General Cheney, what
we really mean is resiliency. I'm going to focus on the
electricity and the electricity grid since that's my main area
of experience. And for the grid, energy resiliency is a simple
concept. Independent of whether the sun is shining, the wind is
blowing, the coal pile is stocked or the natural gas pipeline
is flowing, we have confidence in our ability to deliver
electricity to the grid.
If you think about the Polar Vortex in 2014 in the
Northeast, coal piles froze, natural gas pipelines were choked.
Without the nuclear plants that remained online, we very likely
would have faced widespread blackouts.
Nuclear power plants refuel every 18 to 24 months, so they
don't rely on just-in-time fuel delivery or specific weather to
operate at full power. Over the past 15 plus years, U.S.
nuclear plants have operated over 90 percent of the time.
Typically shutting down only for long-planned refueling. This
is truly the definition of resilient.
Resiliency also extends to stability and predictability of
pricing and cost. A nuclear power plant can accurately predict
the cost of the power it will produce for every day of the
coming year and, often, for multiple years.
Nuclear power plants also help anchor the electricity grid
in the U.S. Grid operators rely on nuclear's roughly 20 percent
share of power production to maintain stability as electricity
demands rise and fall throughout the day. A crucial attribute
as intermittent sources become a larger percentage of our
generation portfolio.
Energy security also demands that we generate power in ways
that preserve our resources and protect our environment. This
is where nuclear power begins to truly stand out.
Nuclear power accounts for about 60 percent of all U.S.
non-emitting electricity generation, emitting essentially no
greenhouse gases or pollutants. Yes, nuclear power generates
used fuel and other waste, however, those are small in volume,
contained in space and can be handled and disposed of with
safe, non-hazardous methods.
Nuclear power plants also have a high energy density, very
small, physical footprint. For example, the electricity
generated from a 1,000-megawatt power reactor which typically
sits on about 1.5 square miles would require about 50 square
miles of solar panels or a wind farm over about 300 square
miles of wind turbines.
Finally, the U.S. nuclear power sector contributes to our
national security, a factor sometimes as misunderstood as it is
important. Almost all nuclear power programs around the world
trace their technology back to U.S. origins. For decades, our
role as the worldwide leader in nuclear technology has enabled
us to positively influence the nuclear safety and non-
proliferation norms of the world.
Right now, dozens of nations are building nuclear power
plants or actively considering adding nuclear to their
portfolio for all the same reasons I described for us. These
countries are going to proceed whether we participate or not.
If U.S. suppliers cannot compete in this geopolitically
significant marketplace, our competitors in Russia and China
will and they will win. And it is unrealistic to think that
U.S. suppliers can compete in world markets without a healthy
nuclear power program here at home.
Nuclear power is the ultimate, strategic, long-term asset;
however, we increasingly find ourselves in a tactical, short
attention span, ``what have you done for me yesterday'' world.
As leaders and policymakers, we cannot allow our long-term
energy and national security interests to be determined by how
much electricity costs on a spot market at two a.m. on a Monday
morning.
Resilient, reliable, non-emitting and clean power plants
are shutting down. We must be strategic.
With that goal in mind, we recommend Congress consider the
following strategic directions: support the current U.S.
nuclear fleet--they are vital U.S. assets; equalize the level
of subsidies, tax credits and regulatory costs for all non-
emitting sources and fund continued R&D to extend the life of
these valuable facilities; continue and expand support for the
development of small modular and advanced reactor systems;
continue to invest in the development of the next generation
workforce and the research and development infrastructure at
our national labs and universities; demonstrate forward
progress on fixing our broken nuclear waste policy; and last,
improve our nuclear export regulations and financing
opportunities to ensure that U.S. nuclear manufacturers and
suppliers can be competitive in the international markets. It's
important.
I thank you again for the opportunity to speak today,
commend the Committee for its leadership in nuclear technology
policy and I look forward to answering any questions.
[The prepared statement of Mr. Coward follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Coward.
Mr. McGroarty, welcome.
STATEMENT OF DANIEL McGROARTY, PRINCIPAL,
CARMOT STRATEGIC GROUP INC.
Mr. McGroarty. Thank you.
My thanks to Senator Murkowski, Ranking Member Cantwell and
members of the Committee for the opportunity to take part in
the hearing this morning.
I am Principal of Carmot Strategic Group, an issues-
management firm based here in Washington, DC, and strategic
resource issues are a core element in my practice.
By way of disclosure, I advise Texas Mineral Resources,
Graphite One, American Manganese and Rio Tinto, companies that
are working to develop new sources of metals and minerals
ranging from copper and graphite to cobalt, manganese and rare
earths.
I also run the American Resources Policy Network, a virtual
think tank that focuses on all aspects of domestic non-fuel
resource production, and I consult to the Institute for Defense
Analyses, which supports the Department of Defense on issues
related to strategic materials and resource security. In my
testimony today, the views I express are my own.
The focus of today's hearing, the outlook for U.S. and
North American energy and resource security, offers a starkly
differing portrait. On the energy side, as we've heard, the
emergence of a vibrant oil and natural gas sector after
generations of energy dependence, a resurgence so remarkable
that we are now seeing the U.S. transformed into an energy
exporter. On the hard-rock side of the resource sector, the
picture is dramatically different, a deepening dependency on
foreign supply for more and more metals and minerals.
According to the most recent USGS Mineral Commodity
Summary, the United States is now 100 percent import-dependent
for 20 metals and minerals, up from 19 a year ago. Meanwhile,
there are now 50 metals and minerals for which we are more than
50 percent import-dependent, compared to 43 just one year ago.
That's roughly half the naturally-occurring elements on the
Periodic Table.
As for where our metals and minerals come from, the USGS
map shown here, the heat chart, shows which nations provide the
minerals for which the U.S. is more than 50 percent dependent.
Of the 50 metals on that list, China is a significant supplier
of 28. That's up from 21 just one year ago. As just one
indicator of our resource reliance on China, in the 206 pages
of the current USGS report, the word ``China'' appears 384
times.
Let me share with the Committee a quick snapshot of the
degree of our dependency. We are 100 percent dependent for
graphite and manganese, needed in the lithium-ion batteries
that power our electric cars as well as the drones flying over
Iraq, Afghanistan and our southern border. We're 100 percent
dependent for the rare earths used in wind turbines and in our
F-35 Joint Strike Fighter. We're 100 percent dependent for the
indium that conducts heat from our fingertips to our touch
screens and enables our special operators' night vision
goggles. We're 99 percent dependent on gallium needed for solar
panels as well as missile defense radar. We're more than 80
percent dependent on imported rhenium used in jet fighter
turbines and more than 70 percent dependent for the tellurium
used in solar panels and for the cobalt used in EV batteries
and jet aircraft super-alloys. And this, in spite of the fact
that the U.S. is resource rich, blessed with known resources of
dozens of the critical metals and minerals that are shaping our
21st century.
Without in any way diminishing the dangers of our resource
dependency, I do want to note some positive developments taking
place, largely in the area of process improvements that point
to the ability to extract minerals from unconventional sources.
I'm talking about reclamation programs supported by the
Department of Energy and the Critical Materials Institute to
extract rare earths from coal deposits, from waste piles left
behind by prior mining and to advance recycling efforts to
recover metals from eWaste. Add to that, projects backed by the
Defense Logistics Agency to encourage domestic production of
metals and minerals needed for advanced weapons platforms.
But in a $4 trillion federal budget, spending more than $10
billion each day, every day, the collective funding for these
innovative efforts amounts to just a few hours of federal
spending at a time when state-backed enterprises from China and
Russia are focused on locking up metals and mineral deposits
worldwide. On a geo-political level, a resource war is
underway, but for the U.S. the battle has not been joined.
If we are serious about ensuring U.S. military power and
reviving American manufacturing, we must reverse the deep
dependency on foreign metals and minerals and treat American
resource security with the same seriousness and one would hope,
the same success, as our approach to American energy security.
Thank you.
[The prepared statement of Mr. McGroarty follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Mr. McGroarty, thank you. I appreciate your
comments there just in reminding us some of the daily uses that
we all take for granted and the vulnerability that we have.
I would like to start off my questions this morning focused
a little bit on oil, and specifically, to the oil export ban.
It has been a couple years now, 19 months exactly, since we
lifted the domestic ban on crude oil. There was a lot of
discussion at that time about what may or may not come about
were we to roll back that policy that had been in place for
decades.
There were some who said, nobody is going to want U.S. oil.
There were those that predicted that the price would skyrocket
if anybody did actually buy it. But instead what we have seen
are prices that have been relatively moderate, even as our
exports have now topped over a million barrels a day, just in
some recent weeks.
I guess I would direct this to you, Mr. Webster, and to
you, Mr. Mills, in terms of where we are with the opportunities
that we have as oil exporters and the international benefits
that then come to it. Mr. Webster, you certainly referred to
that. But again, there was a lot of speculation that there was
going to be, not a doomsday scenario, but that some of the
fears that have been talked about were going to materialize and
19 months, perhaps, is not enough of a test case for us. Do you
see this moving forward into the out years in terms of
stability of prices and, again, just the opportunities that
come with developing these alliances with other nations that
are eager to receive our oil?
Mr. Webster?
Mr. Webster. Thank you, Chairman Murkowski, for that
question and thank you for, I know you worked on this issue
quite a bit when it was coming up. I remember your speech at
the Brookings Institution some years ago to, kind of----
The Chairman. We dared to raise the issue.
Mr. Webster. Yes.
The Chairman. And low and behold.
Mr. Webster. I will answer your question on has there been
enough time. I think there actually has been enough time, that
this has been fantastic for U.S. producers, U.S. consumers and
the concerns that this would really hamper U.S. refiners and
cause them to stop investing and there would be a real loss is
belied by the recent EIA report that refinery capacity in the
United States has actually grown again. And so, this is despite
the view that, you know, the concern that some had at the time
that we'd be exporting our resource and leaving us in a worse
spot.
We're exporting, as you said, more than a million barrels a
day at times to as many as 26 countries per the EIA. Prices and
the differentials that are required to allow exports but still
allow refineries to take on that oil have been there, so you
have seen a lot of oil go in other places.
The interesting thing is that it has given both domestic
and international refiners a greater range of choice.
Refineries don't just use one particular type of oil, so they
can now more tailor make their slate of oils. That's why you're
starting to see, actually, an increase in crude oil imports
back into the United States as they are blending that increased
production out of the United States, crude oil which is quite
light, as you know, and blending it with other, sort of,
material from other countries.
This has been a benefit in that this extends U.S.
production to other countries. And obviously, at least in my
opinion, any oil that comes out of the United States is
generally more stable than just about any other, sort of, oil
in terms of that going forward.
So I think it's been extremely positive.
The Chairman. Mr. Mills, do you care to comment?
Mr. Mills. Let me agree with Jamie and also thank you for
your leadership on this. It was those of us in the community
who thought we should export oil were, seemed to be a minority,
even on both sides of the political aisle for quite a long
time.
I think it's unequivocally the case that the experiment of
19 months has demonstrated the benefits overall for consumers
everywhere, not just America. We've helped stabilize the world.
Let me answer the question about what could be done next,
where could we go? I think we have untapped opportunity to do
far more. We're now a larger exporter of crude than five OPEC
nations, four or five OPEC members. We could become one of the
largest, by that I mean North America, one of the largest
exporters of both crude and natural gas in the coming decades.
This would be astonishingly impactful and very beneficial,
not just to our security but to our economy and to the world
because we play a role in, not only stabilizing prices, we're
now, in effect, half of the throttle. It used to be OPEC was
the entire throttle on oil prices. We now, we have our hands
firmly on the wheel and one foot on the gas pedal as well which
means that oil prices are going to be range bound in the future
by American behavior.
We could change the game, not just by helping the shale
industry by getting out of the way, so to speak, but there's a
lot more to be done yet. I mean, I'm saying the obvious to you
but when you think of a combination of what Alaska can yet do
and has not been unleashed to do, what the Gulf of Mexico is
just starting to do and the new leases that the nation of
Mexico has granted to foreign entities to begin producing from
the shallow waters, the very productive shallow waters that
they own. If we add to that the rest of the Atlantic Coast and
the other conventional deep-water capacities we have which are
getting better, this combination in the United States, I think,
is reasonable to think in terms of, not just increasing a
little bit, we could double, triple and quadruple our exports
of oil and natural gas. This is profoundly impactful.
And it doesn't mean, and I'll state for the record because
when you, when one is bullish about oil and gas the implication
is that one doesn't think that we should pursue alternatives
for oil and gas. The reason in my opening remarks I pointed out
the realities is that realities are what they are.
Airplanes in the world fly on oil and they will for a long
time. Most cars, even if Elon Musk is astonishingly successful,
even more successful than he's already been, most cars will
still burn oil 20 years from now. The world needs lots of oil
and gas. We can do both, and we can generate the economic
foundation if we're doing the alternatives by having cheap
energy in the primary areas. And that's where all the United
States, and in particular, unleashing that trapped oil that I'm
very familiar with in Alaska that needs to get down in that
pipeline and get into world markets.
The Chairman. Thank you both.
Senator Cantwell.
Senator Cantwell. Thank you, Madam Chair.
Gentlemen, I think in a different decade we would be here
talking about supply disruptions and challenges, but today we
are here and the issues of supply disruption now take a new
twist and turn and that is the issue of cybersecurity.
Brigadier General Cheney, you mentioned this. How much do
you think we need to think about upgrading our security of our
critical infrastructure as it relates to these recent attacks,
both internationally and domestically?
General Cheney. Well Senator, thanks for your question and
there is no doubt cyber is a huge threat, a threat to our
security, threat to our energy sources.
As you well explained, there's been multiple attacks on all
of our grids and if we just put our head in the sand and don't
put the funding toward it or the research that's needed to
counter these, it's going to get worse, significantly worse. If
the Administration reduces funding to those opportunities that
we have to counter cyber threats, then they're just going to
get worse.
So this is a tremendous threat to our national security,
and it's worldwide. The military sees it every day, and that's
why we created Cyber Command. We put our best and brightest
over there to counter those threats. When you see what can be
done to the grids worldwide and can be done here, it's a
tremendous national security threat. So perhaps I'd rate it
almost at the top.
Senator Cantwell. Okay. So, what do you think are some of
the things that we should be doing to pursue better alignment?
Some of the things that are being done right now are, you know,
voluntary. And what do you think we should be pursuing?
General Cheney. Well, of course the vast majority of our
utilities are privately owned in this country and enforcing
upon them to do the research and then necessarily help to
counter cyber threats is not the way to go about doing that.
I think you need to fund that from the federal level. You
need to do research and development on cyber. You need to have
a healthy Cyber Command that's looking at these threats and you
need to assist all the utilities in the country in countering
these threats. DHS needs to be involved. They need to be
robustly funded to counter the threat that's there.
Senator Cantwell. One of the things that Senator Murkowski
and I were able to do is have a discussion in the Pacific
Northwest when we were out there looking at a variety of grid
issues, both in Alaska and Washington. The State of Washington
has gone to a great degree in getting the National Guard to
also plan on a response side so there is a response mechanism
to cyberattacks.
Do you think that is a wise----
General Cheney. It's absolutely wise.
When you look at any catastrophic event that happens in
this country, for instance, Superstorm Sandy, Katrina, they all
become joint events. The Army, Navy, Air Force, Marines, Air
Guard, the National Guard, all respond to those events. And I
don't think you can segregate cyber from that type of
catastrophic event where there's something that's going to
happen. You have to have the Guard involved. They have to be
planned.
If all the power went out in your state, it's going to be
chaos. You need the Guard to help put that chaos down or
assist. So, undoubtedly, they have to be involved. And I think
all of the Department of Defense needs to be involved.
Senator Cantwell. Thank you.
Thank you, Madam Chair.
The Chairman. Thank you, Senator Cantwell.
Senator Cortez Masto is not here.
Senator Heinrich.
Senator Heinrich. General Cheney, I want to follow up on
the question that Senator Cantwell brought up and take it one
step forward because, kind of, there are the challenges
inherent to managing a grid today where we have cyber threats
that simply were not at the top of our mind when we designed
this architecture and designed it for reliability and
oftentimes don't upgrade the software on some of these controls
because we just like it running the way it runs.
I say this as somebody who was somewhat exposed to these
things growing up in a utility household where my dad was
responsible for a lot of that reliability.
Have you thought about the next step of how changing the
grid architecture itself moving from the 1970s, 1980s model of
one-way generation as we get more distributed energy resources
into that grid whether that is distributed generation, whether
that is storage in exchange for, maybe, new transmission or new
substations, et cetera, how that will impact the resiliency of
the grid and what we should be thinking about as that natural
evolution occurs?
General Cheney. You know, Senator, great question.
I think there's no doubt and I hear my contemporaries
talking about oil and the future of oil, but you need to
diversify your source of energy here. I mean, you can even look
at Saudi Arabia today and they're thinking long, long-term that
somehow they've got to wean them off this oil economy. The same
thing applies to our infrastructure. The same thing applies to
bases and stations.
When I was a Base Commander down at Paris Island, we relied
entirely on the local grid. If that grid went out, we had an
alternative backup, an oil-fired power plant that would
temporarily provide us power. But if we had a long-term source
of our own power, as is being developed in the DoD today with
net zero programs in the Air Force and Army at a huge number of
bases, Fort Bliss, Nellis Air Force Base, what they're doing is
going to a case where they would produce more power than they
can consume and not have to depend on the local grid in case
that goes down. It's a tremendous security issue. Your base
would shut down if that was the case. So you have to diversify
and these are some of the ways you can do that.
Senator Heinrich. Right. We saw that just a few years ago
with Kirkland Air Force Base as we saw gas come offline,
natural gas losing pressure and having to shut down, doing
millions of dollars of damage as we lost that source of energy.
And you mentioned Saudi Arabia. I don't think you have to
look to the other side of the world to realize how much things
are changing, and a lot of it has to do with economics.
You look at New Mexico and we have a chunk of that Permian
Basin production. But at the same time, when you look at the
electrical generation side of the scale which has seen more
change than the transportation side, we are seeing two and
three cents power from solar PPAs and from wind farm PPAs that
are driving this change and driving an awful lot of economic
development as a result.
Which brings me to a question for you, Mr. Coward, because
as you mentioned there are a lot of nuclear power plants that
are currently shutting down because of economic conditions,
because the reality is we do live in a spot market. And I don't
know how you make ten cents power function in a four-cent spot
market.
So what are we doing to make the U.S. nuclear fleet more
economically competitive at a time when you are seeing it
undercut by a factor of two or three from other generation
sources?
Mr. Coward. Well, I think, if you look at the industry, got
together, to use a phrase, about a year and a half ago, two
years ago and said, we're going to leverage the experience, the
insights, the knowledge of all of us in the industry and work
together to identify all the various opportunities to be more
efficient, more effective, eliminate non-value work. That
program is working right now and we're seeing the costs go down
some. There are still regulatory costs which the industry
believes are higher than they need to be.
I think the simple fact, I'll just cut to the end, I think
the simple fact is a nuclear power plant can put power onto the
grid. A reliably, well-run plant can put power onto the grid.
It goes over the fence at about three cents a kilowatt-hour.
When you add T&D, all the overhead from the utility system,
that's how it gets to ten.
It's competing right now with natural gas plants which are
somewhere in the teens and it's competing with wind which is
getting a little bit, which is getting about 2.3 cents a
kilowatt-hour tax credit.
And so, you know, you mix all that together and the reality
is in the end, I'll be honest, a nuclear power plant is not
going to compete with----
Senator Heinrich. We can all play the levelization game,
but you also get a benefit having to do with your insurance
that is substantial. And so, if levelized everybody was going
to say, okay, this is the future. Why aren't you attracting
more investment?
Mr. Coward. I think we're not attracting more investment
because it is difficult for nuclear power to be the low-cost
provider in a low-cost decision market. We don't believe the
decision should be made on low-cost today. We believe decisions
should be made on a strategic, longer-term, diversity,
resiliency, security basis and that, just like some people buy
an Accord instead of a Civic, that there are reasons to still
promote a nuclear power program, that the value is there
overall.
Senator Heinrich. I think that is a tough sale to the
consumer.
Mr. Coward. We know that.
The Chairman. Senator Heinrich, thank you.
And my apologies, Senator King, I skipped right over you.
Mea culpa, mea culpa. It is now to you.
Senator King. I will find a way to get back at you,
Senator.
[Laughter.]
Thank you very much. No problem at all.
I have to note that I think every single one of you have
mentioned EIA somewhere in your testimony and the data that was
provided. The current Administration budget cuts EIA.
We have also had quite a bit of discussion about energy
reliability and the grid. The budget cuts the Electric Delivery
and Energy Reliability Office in the Energy Department by 40
percent. So I just note those data points in terms of our
consideration of this budget.
The Chair and I were at a conference this morning on the
Arctic. Arctic sea ice has declined by two-thirds in about the
last 15 years. I was in Greenland this time last year and saw
what is happening there where the retreat of the ice sheet is
accelerating in ways that no one imagined, even five or six
years ago. There is a cost to this.
General Cheney, I want to complement you on your testimony.
You were balanced, and you talked about the costs and the
benefits. I suggest you and Mr. Mills have lunch together and
talk about that because the growth of the fossil fuel
dependency is not an unalloyed good. We are going to spend a
lot of money dealing with the consequences of climate change.
We are going to be building walls. They may not be in Mexico,
but they are going to be sea walls all up and down the coast of
this country that are going to be incredibly expensive.
And this is after spending most of my adult life in energy,
my conclusion is there is no free energy lunch. Everything has
a consequence. Everything has a result. Everything has a cost.
I just think that is something we have to really focus on.
Mr. Webster, a specific question. You mentioned about LNG
and I understand the shale revolution, natural gas has been
enormously beneficial to New England and to Maine. Here is my
concern. Unrestrained LNG exports, explain to me how that
doesn't relate, result, in higher domestic prices.
I am a country lawyer from Brunswick, Maine, but if you
drastically expand the sales and the demand with the supply
somewhat constant, although I understand it is growing, there
seems to me, increases in prices are inevitable.
Mr. Webster. Thanks for your question, Senator.
So there is some concern that prices might rise marginally
because of exports. That was said, I think, in the first export
application that was put in some years ago that I think that
first one was that they might rise as much as six cents.
With the rise of the Marcellus and the production growth
that you've seen out of the Marcellus, you do have a lot of LNG
export that can go elsewhere. The difference is that because of
the increased cost on liquefaction, transport and then moving
it to whatever market you're talking about, that price is still
fairly cheap back here in the United States.
Senator King. It is about----
Mr. Webster. Sorry.
Senator King. ----between $2 and $3 a million BTU?
Mr. Webster. That sounds about right. That sounds about
right, Senator, yeah.
Senator King. And you think that is enough? I mean, I hope
you are right.
Mr. Webster. Yeah.
Senator King. I don't know the answer but it just concerns
me that we are not--there have been economic studies, but we
are reaching a point on exports where there could be a more
significant effect.
Do you share that concern that there is some point?
Mr. Webster. Actually, the more global concern right now,
certainly over the next several years, is actually the concern
that from a market standpoint that there's far too much natural
gas in the world than actually it's looking for places on where
it can actually find a home.
You know, you've got increased exports out of the U.S.,
increased exports out of Australia. The demand that was
expected in a couple of different countries is not quite----
Senator King. Well Australia is one of the cases that
worries me because they went into exports in a big way and
their domestic price increased very substantially, something on
the order of 100 percent.
You are not concerned? Do any of you want to comment on
this problem? Is it not a problem? I don't understand how you
drastically increase the demand for a product and don't
increase the price and the market doesn't increase.
Mr. Webster. I'll pass that on to Mr. Mills because I know
he has something on this as well.
But certainly, we've also increased, again, we've also
increased production more than a third just in the last few
years.
Senator King. So----
Mr. Webster. So you are right, you're increasing demand.
Senator King. If you increase demand and increase
production, I understand, you will end up with a similar price.
Mr. Mills, are you worried about this at all or do you
think we do not even have to consider the domestic effects?
Mr. Mills. First Senator, I want to thank you for the
opportunity to have lunch with the General. It would be a
pleasure.
[Laughter.]
I suspect we'd probably have a lot of similar views--or
more similar than dissimilar when you speak in five-minute
bytes.
I would say the fundamental--I don't have deep concerns
about it, the short answer is.
Australia did some structural things which, I would hope,
we wouldn't do with respect to expanding domestic use of
natural gas.
The real, the underlying question, you're absolutely right,
if you have a limited supply and demand rises, you end up
getting price increases. This is, sort of, Economics 101. It's
a given.
The real question at the, sort of, high level of extraction
is how big is the supply? If the supply can expand faster than
demand, obviously.
Senator King. Right.
Mr. Mills. Right?
So the real question is looking at global markets, to
Jamie's point right now, where the supply has expanded much
faster than demand. This is why LNG prices and gas prices are
in free fall globally, to everybody's benefit, except Putin and
Cutter.
Our capacity to produce gas is so astonishing, I think it
really has not been fully appreciated, not by this Committee,
but in general. It is so astonishing and there's so much
natural gas capacity, so much untapped capacity to produce it,
that, I think, this really changes the game, not just the way
you describe worrying about price pressures. But I think it has
not been factored into how we think about alternatives.
My point about being bullish on oil and gas is not that's
what we should use, that's what we are using.
Senator King. Right.
Mr. Mills. There are, just as you correctly said, that
there are, sort of, limits to, you know, what can happen in
reality, this is the physics of energy are what they are.
Oil is a very dense fuel. It's very good for flying
airplanes with. It's much better than a battery for a car. It
will take a lot of money, a lot of time, to beat it. So, the
reality is that low cost energy is a benefit, not an alloyed
benefit, but it is an overall benefit because we need new
technologies.
So, I would just----
Senator King. As long as we also consider the externalities
of the costs of climate change, for example.
Mr. Mills. Well----
Senator King. And those sea walls and other costs that we
are going to have to bear.
I am out of time. Can I just ask one question for the
record, Madam Chair?
Mr. McGroarty, a question for the record and I think you
touched on this in your testimony which, by the way, was very
good and very sobering.
Do we have the minerals? Is this a case of us having to go
abroad because they do not exist in this country? And if we do,
what are the barriers to us being able to reduce our dependency
on oversea sources for these critical minerals?
If you could give a written response on that?
Thank you.
Thank you, Madam Chair.
The Chairman. Thank you, Senator King.
Know that we might actually get that on the next round,
because I would like Mr. McGroarty to speak to that.
We skipped over you already, Senator Cortez Masto, so now
back to you.
Senator Cortez Masto. Thank you. I appreciate that. And I
apologize, excuse me, I have a Banking Committee going on at
the same time.
I am going to ask that question because I am from Nevada
and mining is very important in our state and we tried to----
[Inaudible comment from witness]
Exactly, so listen--rare earths, as you well know, we tried
to mine it and it was cost prohibitive. And I have watched over
the years as China has taken the lead on this.
In Nevada, as you well know, the innovation in clean energy
is crucial. We have Tesla there. We have drones. This new area
for renewable energy solar, hydroelectric, geothermal, is key.
So I was going to ask you the same question. What do we
need to do? What are the barriers? How do we address this and
is it too late for us to start looking at how we start
investing in these metals and minerals that are going to be
important for our clean energy future?
Mr. McGroarty. I hope it's not too late.
We certainly are resource rich. Now, I'll be careful on
that and say, do we know that we have resources, known
resources, for many of these metals and minerals? And the
answer to that would be yes.
Do we know if they're economic or not? That's a different
question, partly because of the barriers and the complexities
of funneling capital and finding that out. Right?
Part of that is the permitting process which is, kind of,
sprawled and is notoriously lengthy and opaque. And I would say
the cost of that is higher for us as a country when the metals
and minerals are critical and strategic, when there's, you
mentioned, Senator, Nevada, the Gigafactory, for instance,
right?
If you're looking to build EV batteries, you're going to
need lithium. We know that from lithium-ion. The irony is
lithium is the least in terms of volume. Why it's named that is
a good question.
Graphite, manganese, nickel, cobalt, okay? We have deep
dependencies in all of those.
And then the question is, to the extent that they come from
countries where there is political uncertainty, possibly
instability, where they are ranked very low in terms of, you
know, Freedom House indices of whether they're free or not
free. So, are we comfortable importing from those countries
over time? The answer should be, if we could substitute our
own, no. We should pursue the substituting of our own.
Are we giving leverage to the Chinese, to the Russians and
others? I cited on the heat map there this growing, rapidly
growing, dependency on China which is mining these metals and
minerals. So, the question is going to be we're in the midst of
this technology revolution. We're going to need this stuff.
I think we'd all like to see the United States
manufacturing more of this, that we need, as opposed to being
purchasers of it and then dependent for a price, dependent for,
you know, geopolitical gamesmanship that could be played in the
future of those kinds of things.
We do it. We are fortunate in contrast to many other
nations where they're as dependent on these technology metals,
but they do not have the resource underneath their land in
order to remedy their dependency.
We, I think, are in a different place. The Committee is
working on that, particularly on critical and strategic
materials to create more incentives.
I mentioned a few small programs where this is happening.
There are some very interesting things going on with some
government support, you know, this idea of extracting rare
earths from materials adjacent or associated with coal deposits
is a remarkable thing, right? And the Department of Energy is
working on exploring that right now.
The same thing with, I am not at all opposed, I'm not only
for primary mining. I'm not opposed at all to reclamation work
from, you know, waste piles that have been sitting around for
generations or recycling, to the extent that we can efficiently
and effectively, reclaim metals and minerals, half of the
Periodic Table sitting in our iPhones, like micro amounts. Can
we figure out a way to do that effectively and efficiently?
Those are mines. Those are urban mines. And our dependency
is so deep we have to get these materials from all of the
above, new mines, reclamation, recycling, you name it.
Senator Cortez Masto. I know my time is up, and thank you
for the conversation.
Your testimony was sobering. It is an area, I think, I can
hear from my colleagues, we would love to have further dialogue
and discussion on how we try to ensure that we are leading the
country in some of these, mining that is necessary for the
future of our technology and renewable energy and where we
would want to lead here in this country.
So thank you.
Mr. McGroarty. Thank you.
The Chairman. There is just such a codependency between the
future for our renewables, and not just our renewables but in
all aspects of economic growth, and these critical minerals.
So, I appreciate that.
Senator Cassidy.
Senator Cassidy. Can I defer to----
The Chairman. I am sure that Senator Hirono would be
anxious to accept that deferral.
Senator Hirono. You are actually on my list ahead of
Senator Franken, but if Senator Franken is being deferred to by
Senator Hirono, who has been deferred to by Senator Cassidy--
[Laughter.]
Senator Franken, you are up.
Senator Hirono. I will go.
Senator Franken. You will go?
Senator Hirono. Yes.
The Chairwoman recognizes me, so fine.
I was intrigued by Mr. McGroarty, with your testimony
because while we have all these rare minerals, it is, sort of,
that we have gotten to a position where we have not really
exploited what we have. Why was that? Is it because it was just
so cheap to get all of these materials from outside of our
country? What? Why did we allow this to happen?
Mr. McGroarty. I think there is, yeah. We can blame Milton
Friedman for that, right, I think, to some extent.
I think what I would like to see added back into that
equation is the potential dangers or costs associated with--
that come from geopolitics, where, you know, it's always nice
to have something for the cheapest possible price, but there
are certain things where, Senator, you referenced the fact that
we were mining for a period of time some rare earths out of the
Mountain Pass Mine in California. It, you know, did not make
it. It went bankrupt. Again, we're back at 100 percent
dependencies.
There are active efforts to remedy that and not all rare
earths are created equal. So I wouldn't go into all the details
as to why that particular deposit might not have been optimal
for what we needed because there are 17 rare earths and, you
know, you need to be specific about which ones you're after.
But we, I think, a large part of it and this is something
that this Committee knows well, but perhaps needs to be
communicated far beyond this Committee, an understanding that
our manufacturing might, our technology development is
dependent on access to these things if we are going to win. You
know, there's tremendous genius in America and a lot of
innovation and inventiveness, but we need the materials, the
materials science, in order to make those products here and
make those advances here.
Senator Hirono. I think that you describe an interesting
scenario because for a state like Hawaii, I mean, we talk about
depending on sources outside of our state for some very basic
needs--such as in Hawaii we were the most oil-dependent state
in the entire country for electricity.
I want to ask, General Cheney, since 2006 Hawaii has cut
its annual use of petroleum by 41 percent, or 20.2 million
barrels, while renewable energy grew from 9.5 percent on the
electricity side of the market in 2010 to 26.6 percent in 2016.
The State of Hawaii has the most ambitious goals toward 100
percent renewable and alternatives for our electricity. I would
like to see a similar transition in the transportation sector.
General Cheney, what policies do you recommend to
accelerate the transition to electric vehicles or advanced
biofuels that you referred to in your testimony?
General Cheney. Senator, congratulations on your progress
on using renewables. I think it's remarkable.
And you'll see tremendous progress, particularly in the
Midwest, with the use of wind energy states that are coming now
upwards of 40 percent of their energy provided by wind. So they
certainly recognize the advantages of it, as you have as well.
When I heard Mark talk a little bit about aviation and
their dependence on fossil fuels for their energy, FedEx has,
at one time or another, fueled all their airplanes with biomass
developed fuels. The United States Department of Defense has,
at one time or another, put biomass fuels into almost all their
aircraft. So there are ways to do this using biomass instead of
just using straight fossil fuels that were not developed
through biomass. That's one distinct way to encourage
development on the biomass side of the house. The price of
biomass fuels is coming down dramatically. And you will see
this.
The same thing applies on the hybrid and battery side of
the house. My biggest concern when I was an Executive Officer
of an Artillery Battalion in the desert was where's the next
gas station? If I had some source of renewable power or a
hybrid energy which would get us off that tether of fossil
fuels which General Mattis said when he was in Iraq. He said,
``Please get me off this tether of fossil fuels'' because the
logistic trains were being attacked universally. There are much
better ways to get off that tether. So certainly the Senate and
Congress can help us with that.
Senator Hirono. So, there are ways that we can move much
faster in terms of the transportation sector and the reliance
on renewables and alternatives in the transportation sector
because we seem to be doing a much better job of it in
producing electricity for consumption, electrical consumption.
But on the transportation side----
General Cheney. It's not the same.
Senator Hirono. It's not the same. If you wanted to move
faster toward that kind of reliance on alternatives and
renewables because we care about things like climate change. I
would welcome any further ideas that you would have to
incentivize to move in the transportation sector.
I am running out of time; five minutes goes by awfully
fast.
Thank you.
Thank you, Madam Chair.
The Chairman. Thank you, Senator Hirono.
It looks like Senator Cassidy is prepared to defer to our
colleague from Minnesota, Senator Franken. Everyone is
generating good will this morning.
Senator Franken. Well thank you, Madam Chair and thank you
to the Senator from Louisiana.
I was struck just now, General Cheney, when you talked
about this tether to fossil fuels, to diesel fuel, I think,
mainly for generators.
You know, I used to do USO tours. At that time there was
both Walter Reed for Army and Bethesda for the Marines. You
would go to Walter Reed and there would be guys who had lost
limbs, et cetera, TBI, and ask them what they did and they,
very often, were truck drivers. You go to Bethesda and those
guys got shot up in places like Fallujah, but what it was is
the supply line. I know that when I talked to the military,
they talked about solar, trying to make tents out of solar so
that you don't have to rely on the more efficient, even more
official generators could save lives.
So when we are talking about security, I think that the
first two gentlemen seemed to be talking mainly about domestic
fuel production, but General Cheney, you have a different point
of view. Can you elaborate on how increasing short-term energy
security via increased fossil fuel production can have
negative, long-term impacts on energy security?
General Cheney. Well, I think I mentioned in my testimony
and certainly in my written comments that this increase has
given us breathing space now so there's obviously an advantage
here, but long-term, I think we need to recognize we can't
continue to rely entirely on fossil fuels.
The number one consumer of fossil fuels in the country and
maybe the world is the Department of Defense, and they know
this and they recognize it and they're searching for
alternative ways to source their energy. And they know that
now.
One quick comment about the soldiers who were in those
logistics trains. Those young men and women got shot up too,
so, I mean, they were in combat. They were on the front lines.
Senator Franken. I understand that.
General Cheney. I mean, they gave their lives for us to
supply the fossil fuels to support our troops.
Senator Franken. Yes, so much was IEDs though, yes.
General Cheney. Yes, precisely.
So I mean it, long-term, overreliance on this abundance,
overabundance of fossil fuels is not a good thing. The DoD
needs to diversify. Any good commander needs to know he has to
have alternative sources of all things, let alone fossil fuel
or energy.
You will see that in terms of, also you mentioned the
tents. Forward operating bases that are supplied their
communications and electronics are, their energy, is supplied
by solar arrays instead of having to hike batteries up there or
diesel fuel to supply the generators. So there are ways for
this to be done.
Senator Franken. Well, I want to talk more about climate
change and the Department of Defense because you are right
about the Department of Defense using Algol fuels and other
non-fossil jet fuels.
This is from the report to Congress from the Department of
Defense in 2015, ``Climate change is an urgent and growing
threat to our national security contributing to increased
natural disasters, refugee flows and conflicts over basic
resources such as food and water. These impacts are already
occurring and the scope, scale and intensity of these impacts
are projected to increase over time.''
General Cheney, I know that last week you spoke about the
threat that climate change poses to national security at a
House Science Committee Roundtable. Can you tell this Committee
how the Department of Defense should be preparing for climate
impacts and more broadly, how Americans should be thinking
about the link between energy decisions and national security?
General Cheney. Sure. Clearly this is a longer conversation
than we have time for here, but I'll try to boil this down very
quickly.
As I mentioned last week, I put it into two categories,
strategic and tactical. And when they said it's the number one
threat, when you go back to Admiral Locklear in the Pacific
Command, he was looking over his whole area of operation and he
said catastrophic weather like Typhoon Haiyan is becoming much
more common and he's got to respond to those. Climate change is
a contributor. He recognized the threat.
Refugee crisis, Bangladesh, foot and a half rise in sea
level gives you 30 million refugees, not coming here, but
they're going somewhere else in Asia.
Senator Franken. It is destabilizing.
General Cheney. Hugely destabilizing.
That's the strategic side of the House, the Sahel in
Africa. When the temperatures there start to rise to 140 and
150 degrees Fahrenheit, those refugees are headed to Europe. If
they think they have a migration problem now, just wait. So,
that's the strategic side.
On the tactical side, our bases and stations that are on
the coast are going underwater. Norfolk is the prime example,
our largest Naval base, which gets closed dozens of times a
year now because of flooding, both from rain and sea level
rise, is really having a problem with that. We're going to have
to talk about relocation of our bases and stations that are on
the coast, and I can delineate a number of these. The DoD
understands that and looks at that and General Mattis, and now
Secretary Mattis, has looked at that and said he understands
climate change. He recognizes that as a threat. It's been
written into the Quadrennial Defense Review before. Again, when
you're talking long-term, strategic threat and where you're
going to have instability, and in short-term, the tactical
side, what bases and stations are going underwater and what you
have to do to adapt to move those.
Then getting to your other question about fossil fuels, the
mitigation side of the House, get off your dependence on fossil
fuels. Stop contributing CO2 to the atmosphere. Stop making the
problem worse.
Senator Franken. Thank you.
Thank you, Madam Chair.
The Chairman. Thank you, Senator Franken.
Senator Cassidy.
Senator Cassidy. Thank you, all.
Now, General, just to be clear, as we speak of needing not
being tethered to fossil fuel on the front line, it is not to
say that a transport truck would not be by fossil fuel, I
presume you just mean the electricity for the tents providing
the power?
General Cheney. Senator, not so. You could have hybrid
vehicles for sure.
Senator Cassidy. Now that presumes that we continue to
fight only in deserts. If we are in an overcast area to have, I
can only imagine, if you have something with, I don't know, 50
troops and are in an overcast environment, you would need,
probably, fossil fuel, correct?
General Cheney. Well, like I said, if you had batteries
that were recharged and they worked on a hybrid, just like
Volvo stock----
Senator Cassidy. It really does seem, though, a lot of ifs
involved with that for something which absolutely needs
certainty.
Mr. Mills, I enjoyed your testimony because you point out
some certainties that we actually, since the Arab oil embargo,
have become more dependent upon fossil fuel. I will note,
however, that we have actually decreased global greenhouse gas
emissions in the United States as we transition from coal to
natural gas. Fair statement?
Mr. Mills, this is a little bit far afield, but I found
your testimony very realistic if China, which gets 63 percent
of its electricity from coal, converted to natural gas, any
idea what the impact that would have upon global greenhouse gas
emissions?
Mr. Mills. Well, it would be a dramatic reduction in global
gas, carbon dioxide emissions, for very obvious reasons.
Senator Cassidy. As well as SOX and NOX, et cetera, right?
Mr. Mills. Well, the air would get a lot cleaner in China.
I've been to about a dozen cities in China, its particulate
emissions are pretty severe.
Senator Cassidy. I have actually seen graphs that show the
SOX and NOX blowing from their coastal power plants falling on
to Oregon, Washington and California. So not just globally, but
locally, it would make our West Coast a little bit cleaner too.
I just see that because you point out that for the
foreseeable future petroleum and natural gas will be more, not
less, important.
I also like, now I will agree, that if we absolutely, that
we produce, if we become energy secure, less dependent upon
other countries, perhaps we need fewer troops committed to the
Middle East to protect sea lanes. That would be something that
would save a lot of young people's lives if we were not having
to commit our troops to protect sea lanes for the sake of oil,
if Israel develops Leviathan, as they appear to be, then that
would, of course, insulate Israel from some of the shock.
I also liked your point, Mr. Mills, the degree to which we
develop LNG exports, this is implicit in what you were saying,
and perhaps Israel and Azerbaijan and others develop their gas
exports, Russia is weakened. Isn't that a wonderful thing? That
in itself might forestall some conflict. I think we can all
agree upon that, right?
Mr. Mills. You bet.
Senator Cassidy. So that is a tectonic plate, as you
mentioned that is almost amazing.
Now, somebody, I think I was told that Senator King was
concerned. Do we have, oh, here we go, enough gas to fuel this,
but Mr. Webster and Mills, perhaps you all followed up?
I am told we have at least 93 years of proven,
technologically, we can get it, natural gas reserves which more
than enough insulates us from price increases even if we
continue to export.
Fair statement, Mr. Mills?
Mr. Mills. I think it's fair and it's, in my view, an
understatement of the magnitude of the resource that will be on
tap through technology.
Senator Cassidy. Now, I would argue that if we are going to
increase our security through that subtle power you speak of in
your testimony, of undermining the Russians' ability to come
after us or to go after Europe by choking off their natural gas
and if we are going to help China reduce their global
greenhouse gas emissions by substituting natural gas for coal
and thereby improve our West Coast environment as well, we
actually need to do more exportation, more exploration of
natural gas. Would anybody dispute that?
[Panel shakes heads no.]
I think that is, kind of, almost so self-evident.
Mr. Mills. Sure it is.
Senator Cassidy. So whatever we do with renewables which is
laudable, the reality is we are going to have more of an impact
upon global greenhouse gas emissions and our international
domestic security by increased development of our natural gas
as well as facilitation of that export. That is energy
security.
I yield back. Thank you.
The Chairman. Thank you, Senator.
Senator Manchin.
Senator Manchin. Thank you, Madam Chairman.
Thank all of you.
I am so sorry. Sometimes our meetings run over and we are
in different areas at different times, but I am glad to be
here.
We are introducing what we call the Appalachian Storage
Hub. With all the newfound gas we have, with the wet gas we
have especially in the Marcellus/Utica shale, now the
Rogersville coming on and then West Virginia, Pennsylvania,
Ohio and maybe even Kentucky too, hooking these up with a
storage hub that basically would move some of our critical
energy products that we have, which are now mostly located in
the Southwest and giving us more opportunity and I think, more
national security also because we are not in the path of a
hurricane and we are pretty much protected by the mountains. So
we think it would be a great opportunity. I don't know if you
all know anything about that or have looked into that and what
your opinion might be on moving that forward.
Yes, Mr. Mills?
Mr. Mills. Senator, you put your finger on something that's
critical for the grid and also for general domestic energy
security of the Northeast, which is starved for storage
capacity, as you well know. Adding a gas storage capacity, both
wet and dry gas, is probably the single most important and
simple thing that can be done to increase domestic reliability
on the grid which is becoming increasingly gas centric.
If you look at the total amount of generation growth
forecast for the next decade in the United States and in the
Northeast, gas turbines are the go to. And you don't want to be
dependent just on pipes, you need to have storage, 100 percent.
Senator Manchin. Well, if we can get you all--can we get
any written statements in support of that because we are
working with the Department of Energy. I think they feel the
same thing, but coming from the expertise that you all have
would be tremendously helpful, sir, tremendously helpful.
Mr. Mills. Be happy to do that, Senator.
Senator Manchin. Next, speaking on reliability, in West
Virginia we have been blessed with everything, but we are an
all-in energy state. Everybody thinks it is all about just coal
and just fossil, but really, we are trying everything that we
can, but the baseload. There is a study being done by
Department of Energy on the reliability of the grid.
And I am so sorry, I am sure you might have talked about
this previously with other Senators, but I am very much
concerned about that because I remember the Polar Vortex. I
know we almost went down, especially the PGM system was very
razor thin of collapsing. With more dependable, reliable,
affordable coal plants coming offline, have you all looked at
the critical factor that we have there and the jeopardy that we
are putting into the grid system?
Mr. Mills. Well, let me make an observation that was in the
news with respect to South Australia which echoes the direction
that a lot of people hope the grid will go.
As you know they have had several blackouts, one very
recent. And the news and the Wall Street Journal said it was
because we were exporting, they were exporting natural gas.
That's not the reason the blackout occurred; it's because that
part of Australia has 40 percent of its electricity currently
coming from wind turbines. When you have wind subside, you have
to have other capacity. If you can't import it and the import
capacity is limited because the magnitude of the drop, you do
rolling blackouts.
The answer that Elon Musk has proposed is to build a
battery plant which is good. Batteries work. I ran a battery
factory for a while. I know a little bit about batteries. But I
would like to point out that in order to store half a day of no
wind in South Australia, Elon Musk would have to build 150 of
the battery plants he's planning to build and he's building one
which he says will be three times bigger than the world's
biggest utility battery plant. And South Australia, I'll note
for the record, has about one-third of the population of the
grid of the Washington, DC, area.
So, when you begin to think about these energy solutions,
scale matters and that's where storing gas and building more
gas turbines actually matters.
Senator Manchin. Well, uninterruptible power, I mean, and I
have understood it for a long time and tried to and a lot of my
colleagues on both sides of the aisle, but on my side of the
aisle, sometimes are in disagreement, but they just don't
understand where the electricity, where it comes from. And it
has to be uninterruptible.
The only two things you have uninterruptible in the United
States or in the world that I know of, is coal and nuclear.
Everything else is interruptible. And the only third one that
has surpassed or is equal to coal is natural gas, even though
that is interruptible, but you are still in jeopardy.
All of the renewables, God bless them, we like it. We like
wind, solar, we like it all. So when people tell me they want
everything on renewables, I say just tell me what five hours of
the day you want your power, and I am happy to oblige you. I am
happy to take care of you because that is what you are going to
get and nothing more than that.
But in some parts of the country, unless that system, that
grid can back it up, they are in great peril and they don't
really realize it.
So we are looking at how do we continue to have a
dependable, reliable delivery system? We need people like
yourself speaking out in common sense until--see, I believe in
my heart that we are going to find, eventually, commercial
hydrogen, which is water vapors. I keep believing that. And
maybe it will happen in our children or grandchildren's lives.
There is going to be some magical, clean green that
everybody's happy with. But until you get to that day, you have
to be in the real world. And the real world is you better have
so much reliable power and coal is going to play a major part,
30 percent or more, for the next 20, 30 years. Do you all agree
with that?
Mr. Mills. Senator, coal use globally, as you know, is
going up----
Senator Manchin. Oh, it is not going down.
Mr. Mills. Let me just echo your sentiment.
Everyone agrees it would be nice to have different forms of
energy. We need them at scale in reliability. In the world I've
worked in for decades, as a physicist and looking at the
physics of energy, we used to call that the search for
unobtanium.
[Laughter.]
Senator Manchin. Unobtanium. Makes sense.
Anybody else want to comment?
General Cheney. If I----
Well, Senator, what this has done is given us breathing
room to pursue alternative sources of power. And I know Bob
would certainly agree, small modular reactors, for instance,
are possible----
Senator Manchin. You are talking about nuclear, nuclear
reactors, right?
General Cheney. You can do that.
Senator Manchin. Yes.
General Cheney. Long-term, and I know some people laugh at
fusion energy, but when you go outside and look at the sun,
it's there. It can be done if you've got the right amount of
research in it. And I think this is the time now to start
investing long-term in some of those other sciences while we've
got that ability to have an overabundance of oil and fossil
fuels.
Senator Manchin. Yes, Mr. Coward?
Mr. Coward. What I would add, Senator, just is, you know,
obviously I have not seen the DOE study, but I think this is a
very important, critical subject for our entire economy and
standard of living, the continued, you know, every time you
flip the switch, it comes on.
What I would suggest is, as we all move forward together,
my organization, myself, we support the classic all-of-the-
above. We should be pursuing all energy options. But as we go
forward in the spirit of contingency, reliability, confidence,
we need to make sure we don't inadvertently allow ourselves to
make overly optimistic assumptions.
And the one, the example I'll give you is in the last
several years the energy storage industry has moved forward by
leaps and bounds. A tremendous accomplishment, it's great for
the country. Absolutely wonderful.
I'm also the principal officer, I lead MPR, a leading
specialty engineering company in the power industry. We were
critical with our customer AES in delivering and building the
largest battery energy storage facility in the world in
Southern California. It went online in February. Its capacity
is measured in tens of megawatts, tens of megawatt hours,
alright? Which means that you take a large nuclear or coal-
powered power plant and the largest battery storage, energy
storage facility in the world, it handles minutes of capacity
of that facility. So even though energy storage has--or an hour
maybe.
So even though energy storage has made great progress and I
think it will continue to make great progress and it is a
definite critical part of our infrastructure going forward, all
of us have to make sure that the pace at which we assume
technology development will occur is appropriate so we don't
wake up one day and be disappointed.
Senator Manchin. Well, West Virginia is happy to continue
to provide the power that keeps the East Coast lit up.
[Laughter.]
If they shut us down, they are all going down, okay?
[Laughter.]
And it made it very difficult for our little state to
produce the power we produce, but we have done it cleaner and
better and made more advancements in the last 20 years than had
ever been done in the history of the world. We still get the
living crap kicked out of us every day by Washington.
Unbelievable.
Mr. Coward. Senator, I live in Virginia and I----
Senator Manchin. I want to flip the switch every now and
then and just say, hey, how did you like that?
[Laughter.]
Mr. Coward. I live in Virginia and I know that Virginia is
one of the largest energy importers in the country, and we
thank West Virginia.
Senator Manchin. Well, we are happy to do it. We like to do
the heavy lifting, and we will continue to do it.
Thank you, Madam Chairman, I am so sorry.
The Chairman. Thank you, Senator Manchin.
I just have to say, I love these conversations.
[Laughter.]
I truly do.
When I think about our energy potential, when I think about
what it is that we have and how we are able to supply it.
Senator Manchin, I have had an opportunity to go to your
little state and see your all-of-the-above. We recognize the
great contributions that come out of Nevada when we are talking
about minerals.
I talk about Alaska all the time, but you know, when we
think about diversity of energy supply I think it is important
to recognize that within this country we have a diversity of
supply based on our enormous geography and recognizing where we
each can be those experts, those suppliers, those real drivers
to our local, state and national economies. I think that that
is quite significant to recognize.
You know, as much as contributes from the Gulf of Mexico,
they talk about being the energy bread basket. Okay, that is
one energy bread basket, but I think this is important to
recognize that we all have so much to contribute in so many
different areas. And oftentimes, we are just limited by the
technologies that allow us to do a little bit more.
Mr. Mills, you mentioned the digitalization of energy in
your testimony. Dr. Birol also mentioned that in his written
testimony. I should note for the record, he was actually here
for a few moments. I really appreciate him making that effort
to try to join us, but his schedule was very, very complicated
this morning.
But you think about that, the technology that we know today
is what we know today, but the advances that we have made in
the past 20 years, as has been noted by many of you, has just
been nothing short of remarkable, beyond imagination. Think
where we are going to be 10 years from now, 20 years from now,
and particularly within the space of the renewables. I think we
have so much that we can build out given, again, advancements
in technologies.
But I come back to our hardcore reality, and that is not
meant to be a pun on words, but so much of this is going to
depend on these resources, these mineral resources that will be
required to build out these technologies of the future.
For years we have talked about our vulnerability as a
nation on oil. We still have that vulnerability when it comes
to the Department of Defense and this extraordinary reliance on
that fossil fuel. But I don't want us to go the same direction
with our minerals as we used to be with our oil. So this needs
to be an eyes wide open.
I have advanced my critical minerals bill. It is actually
part of our energy bill that I am hopeful we will have an
opportunity to advance on the Senate Floor shortly.
But how do we do more?
This is a question for you, Mr. McGroarty, in terms of
building the awareness that we have this increasing dependency.
It is kind of tough to move forward sometimes unless people
recognize that this is a problem for us, but that we do have
solutions here. I think federal permitting reform is one of the
things that we need to be looking at, but how do we build a
growing awareness?
I don't want to limit this to just Mr. McGroarty because,
General Cheney, when we think about the implications, again,
from a national security perspective, making sure that those
who are part of this supply chain, understand that we have got
to address this aspect of it as well.
We are going to have to conclude the hearing here because
we have a vote that is coming on, but I would like to have a
little conversation about how we do more on the awareness of
this as a dependency issue.
Mr. McGroarty?
Mr. McGroarty. Yup.
Senator, it is really interesting to think, first of all, I
mean, what we're up against is we have, we live in this
marvelous world where so much of the things that we rely on
every day seem to be magic and they just, kind of, happen. You
know, there's a cloud and stuff goes up to the cloud and
things, you know, energy moves to where it's needed and so on
and so forth.
I think we forget the physicality of things. Now the
physicality of things is rooted in material science, and it's
rooted in materials. So I think what this Committee does, what
these kinds of programs do, but more of it is to remind people
that we're now using a far larger portion of the Periodic Table
than we ever used in the history of mankind and we have to be
attentive to where these materials are coming from. We're very
fortunate. We're very blessed that we have these resources
here.
I would say too, in some respects, it seems to me a very
simple thing that government can do is even just an indication
that you can send a signal to a market that there's a desire to
source some of these products domestically and that that will
have an effect.
I mean, and I don't mean to, I'm not casting dispersions on
things done or not done, but for instance, I'm very focused on
the Gigafactory, figuring out where they're going to get their
materials domestically for a variety of different reasons,
jobs, national security, but also, you know, if you think about
it today, we're getting the bulk of our cobalt comes from DRC
Congo. We can't be comfortable about that because we're not
comfortable about that it's getting refined and smelted in
China, creating leverage there where if we need graphite we're
100 percent dependent on graphite. We need manganese; we're 100
percent dependent on manganese. We need lithium, a lot of that
is coming from a triangle in South America which is prone to
instability over time.
So, figuring out how we could substitute with American-
sourced materials is important, but the simplest way to do that
is for someone to say we want American-sourced materials. We
see that as a positive and communicating that clearly is a
market signal that would cause capital markets to look around
and say, well, who could that be? Where would that come from?
You know?
I sit here and I see the states and I think about, you
know, Senator Franken is gone, but I could mention nickel and
cobalt and there's Minnesota, on the upper part of Minnesota.
The Chairman. We have graphite.
Mr. McGroarty. Pardon?
The Chairman. We have graphite.
Mr. McGroarty. You have graphite. I was about to mention
that. Thank you.
[Laughter.]
The Chairman. Yes.
Mr. McGroarty. So we have all of these different options.
Gosh, there's some lithium in Nevada that could be just making
a very short trip to the Gigafactory.
We lived and experienced the bad and the good of where our
oil comes from and how we needed more of it for decades and the
better part, you know, and how that skews national security and
military strategy. I just don't think we're caught up yet in
terms of this transformation that's happening in the rest of
the Periodic Table and how much of it we need. And the stuff
isn't fairy dust, you know?
The Chairman. Anybody else want to weigh in there?
I appreciate that, Mr. McGroarty.
Mr. Mills. Senator, if I could add the elephant in the room
with respect to mining in the United States.
Early in my career I was, I worked for a Canadian mining
company and spent time on the border of Alaska, the Northwest
Territories.
Canada mines a lot of its minerals. It's easier to open a
mine in Canada than it is in the United States. That shouldn't
be the case. So the elephant in the room is EPA and how we
regulate. It's typically not the states, but it can be.
Until we make an affirmative decision that we care about
having mining here, I know if you talk to capital markets
people would invest in mining. They'll tell you unequivocally,
hold a hearing on it, and I think you will hear every one of
them tell you the same thing. The capital risks are high
because of the regulatory delays and uncertainty. As long as we
keep that in play we'll continue to source rare earths and
everything else from other nations.
We provided 70 percent of the world's rare earths 20 years
ago. As my colleague has just said, we now do zero. It's not
because we ran out of rare earths. It's not because we don't
have the technology to do it. We have some of the best miners
on the planet and the best technology and the safest. But we've
made an affirmative decision not to do it. I think that's a
mistake.
The Chairman. Well, I agree, and it is a concern.
I think the statistic was that the United States ranks dead
last or we are tied with Papua, New Guinea, in terms of the
length of time it takes to permit a mine in this country. I
think you are right. There has been a policy directive
direction that has taken us on that path.
But I think it is something that we need to critically look
at and evaluate because our situation is such that more and
more we expect, without question, that these resources are
going to be made available to us. And it seems that more and
more these resources are coming from places that would not
think twice about perhaps squeezing us a little bit.
Recognizing that vulnerability is something that, I think, we
must address and we must consider from a broader policy
perspective.
Senator Cortez Masto, we have a vote going on, but thank
you for staying throughout this very important hearing.
I know that many of my colleagues, not only some of those
that were coming in and out, we have had a little bit of
preoccupation with another subject matter this morning, so I
apologize for that. But know that you all have cleared my head
and given me focus in the energy space, and I greatly
appreciate that.
Thank you for your participation this morning and for your
ongoing leadership in these important areas.
We stand adjourned.
[Whereupon, at 12:22 p.m. the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
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