[Senate Hearing 116-372]
[From the U.S. Government Publishing Office]
S. Hrg. 116-372
THE IMPACTS OF COVID-19 ON THE
ENERGY INDUSTRY
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HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
JUNE 16, 2020
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the
Committee on Energy and Natural Resources
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-918 WASHINGTON : 2021
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming JOE MANCHIN III, West Virginia
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah MARIA CANTWELL, Washington
STEVE DAINES, Montana BERNARD SANDERS, Vermont
BILL CASSIDY, Louisiana DEBBIE STABENOW, Michigan
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
CINDY HYDE-SMITH, Mississippi MAZIE K. HIRONO, Hawaii
MARTHA McSALLY, Arizona ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee CATHERINE CORTEZ MASTO, Nevada
JOHN HOEVEN, North Dakota
Brian Hughes, Staff Director
Lucy Murfitt, Chief Counsel
Tristan Abbey, Senior Policy Advisor for Strategy and Economics
Renae Black, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Brie Van Cleve, Democratic Senior Energy Advisor
Darla Ripchensky, Chief Clerk
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
Manchin III, Hon. Joe, Ranking Member and a U.S. Senator from
West Virginia.................................................. 2
WITNESS
Nalley, Stephen, Deputy Administrator, U.S. Energy Information
Administration, U.S. Department of Energy...................... 4
Turk, David M., Acting Deputy Executive Director, International
Energy Agency.................................................. 10
Jacobson, Lisa, President, Business Council for Sustainable
Energy......................................................... 17
Macchiarola, Frank J., Senior Vice President, Policy, Economics
and Regulatory Affairs, American Petroleum Institute........... 41
Roberts, Jackie, West Virginia Consumer Advocate, and President,
National Association of State Utility Consumer Advocates....... 51
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
American Exploration & Production Council:
Statement for the Record..................................... 122
American Fuel & Petrochemical Manufacturers:
Letter for the Record........................................ 126
American Gas Association:
Letter for the Record........................................ 128
American Public Gas Association:
Letter for the Record........................................ 130
American Public Power Association:
Statement for the Record..................................... 134
America's Power:
Statement for the Record..................................... 139
Biotechnology Innovation Organization:
Letter for the Record........................................ 142
Electric Power Supply Association:
Statement for the Record..................................... 146
International Association of Drilling Contractors:
Statement for the Record..................................... 155
International Liquid Terminals Association:
Statement for the Record..................................... 157
Jacobson, Lisa:
Opening Statement............................................ 17
Written Testimony............................................ 19
Responses to Questions for the Record........................ 104
Large Public Power Council:
Letter for the Record........................................ 160
Louisiana Mid-Continent Oil and Gas Association:
Letter for the Record........................................ 166
Macchiarola, Frank J.:
Opening Statement............................................ 41
Written Testimony............................................ 43
Responses to Questions for the Record........................ 111
Manchin III, Hon. Joe:
Opening Statement............................................ 2
Murkowski, Hon. Lisa:
Opening Statement............................................ 1
Nalley, Stephen:
Opening Statement............................................ 4
Written Testimony............................................ 7
Response to Senator Barrasso's question regarding temporary
federal royalty relief..................................... 70
Response to Senator Barrasso's question regarding nuclear
fuel imports............................................... 72
Responses to Questions for the Record........................ 91
National Rural Electric Cooperative Association:
Statement for the Record..................................... 168
Roberts, Jackie:
Opening Statement............................................ 51
Written Testimony............................................ 53
Responses to Questions for the Record........................ 117
Solar Energy Industries Association:
Letter for the Record........................................ 171
Turk, David M.:
Opening Statement............................................ 10
Written Testimony............................................ 12
Responses to Questions for the Record........................ 101
THE IMPACTS OF COVID-19 ON THE
ENERGY INDUSTRY
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TUESDAY, JUNE 16, 2020
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:07 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. LISA MURKOWSKI,
U.S. SENATOR FROM ALASKA
The Chairman. Good morning, everyone. The Committee will
come to order. We are here today to discuss the impacts of the
COVID-19 pandemic on the energy industry with a special focus
here in the United States.
Though every layer and every facet of American society has
seemingly been affected, oftentimes dramatically, by the
pandemic, it is clear to me that as Chairman of this Committee
the energy sector has suffered acutely and uniquely. Energy is
the foundation of our economy. Limits on business, travel and
social activities in an effort to contain the virus have had
far reaching consequences for our nation's energy producers in
terms of fossil fuels, renewables, and advanced technologies,
such as nuclear power. The resulting decline in demand can be
found just about everywhere. Less flying means less jet fuel,
less driving means less gasoline and diesel, less commercial
activity means less electricity, less consumption means less
production and less investment today means less development
tomorrow. So, for a producing state like Alaska, less
production and less investment and less development are pretty
ominous signs over the horizon. That is why I hope, truly, the
demand has been paused, rather than destroyed.
Energy is, all at once, a finished product, a feedstock, a
raw material, an input, an output, a value added good, a
natural resource, a tradeable commodity, and a precious asset.
It is critical infrastructure and emergency reserves, financial
collateral, and competitive exports. And let's not forget it is
also a source of high-paying and high-skilled jobs in its own
right. All these factors are why the American energy sector is
well-positioned to accelerate our nation's economic recovery.
Take the oil industry. Less than five years ago we repealed
the outdated ban on American oil exports. In short order, we
saw our nation flip from a net energy importer to a net energy
exporter, a truly generational shift. Today production has
fallen. Prices are erratic. Stakeholders in the sector are
justifiably worried about their family's futures. But the
oversupply and low prices that we have seen may also
incentivize new businesses to be created. We are seeing reports
that many companies are looking to make their supply chains
more resilient by shifting more of their necessary
infrastructure and capital back home to the United States. That
has been a point that my friend and colleague, Senator Manchin,
continues to raise. I also continue to believe that Congress
should revisit its many mandates to the Department of Energy to
sell off hundreds of millions of barrels of crude oil in the
coming years. The Department's recent purchase of some 120,000
barrels is a step in the right direction, but I think we need
to do more than just inch forward in the right direction. We
need to refill our strategic stocks when the prices are low,
and as prices rise we are missing a great opportunity. It is
not rocket science to figure out that you buy when the prices
are lower.
Our panel of witnesses today is uniquely qualified to
comment on some of these matters. We welcome representatives
from the Energy Information Administration (EIA), the
International Energy Agency (IEA) and private sector officials
covering oil, natural gas, electricity, renewables and clean
energy sources. For those interested in supply chains, we also
have a hearing scheduled for next week on minerals' role in
forming and strengthening them. That is another topic that has
really come to the fore during this pandemic, and it rests at
the intersection of the important work that is being done
today.
With that, I turn to my colleague, the Ranking Member,
Senator Manchin, for your comments.
STATEMENT OF HON. JOE MANCHIN III,
U.S. SENATOR FROM WEST VIRGINIA
Senator Manchin. Thank you, Madam Chairman, and thank you
for convening this hearing to discuss the impact of COVID-19 on
the energy sector. I would be remiss if I did not first
acknowledge the more than 117,000 Americans and 88 West
Virginians who have lost their lives to COVID-19. I know
everyone in this room is heartbroken for their friends and
loved ones and continues to keep them in their thoughts.
I wanted to welcome our panel of distinguished witnesses
and give a special thank you to Jackie Roberts, who serves both
as the President of NASUCA, the National Association of State
Utilities Consumer Advocates, but also as our West Virginia
Consumer Advocate. She fills some big shoes and is doing a
great job--I have all the greatest respect for what you do to
keep everybody honest and make sure that we are taking care of
the citizens and not putting undue burdens on the citizens of
West Virginia.
No sector of our economy has gone unscathed, and today's
witnesses will help the Committee begin to take inventory of
the devastation of the energy sector from the workers to the
businesses to our international standing. In a matter of
months, we have gone from record low unemployment to the
highest rate since the Great Depression. Between March and
April, the energy industry has lost 1.3 million jobs. That is a
13 percent drop that essentially wipes out all industry-wide
job growth in the last five years. We have seen job losses
across the board nationwide from clean energy with over 620,000
lost jobs to the motor vehicle sector and the traditional
energy sector which includes mining, fuels and electricity.
Just in my State of West Virginia, 9,400 jobs in the energy
sector were lost, two-thirds of which are traditional energy
jobs. These job losses are impacting each of our states and our
constituents are hurting.
Many Americans can't keep up with their bills and they are
having to choose between paying their utility bills and putting
food on their table. Most states and many utilities have taken
steps to prevent utility customers from being disconnected for
non-payment. The middle of the pandemic is not the time to cut
people off from critical electricity, gas or water service. I
look forward to hearing from Jackie as the President of the
Association of Utility Consumer Advocates about what assistance
customers need and what state regulators are doing to protect
customers in the short- and long-term.
Energy markets have also taken a hit. U.S. energy
consumption is expected to drop 5.7 percent in 2020. We saw
historic lows, even negative prices, for domestic oil. Domestic
production is also down in response to global market dynamics
and decisions from international players that resulted in an
oversupply of crude oil in the market. We also saw energy
projects halted and put into limbo because of labor loss or
supply chain disruptions. Just as our country was weakened by
our lack of domestic medical equipment production, in the
energy sector, it was weakened by insufficient domestic
manufacturing of critical energy components. I have been
focused on this issue as increasing our domestic energy
manufacturing seems like it is a good way to create jobs while
also shoring up our supply chain. It is a win-win in my book.
The COVID-19 pandemic has also brought into sharper focus
the importance of science and technology to help us solve
today's challenges and capitalize on tomorrow's opportunities.
Today the Department of Energy (DOE) and the national labs are
putting their supercomputers to work to understand the
Coronavirus and screen drug compounds to expedite vaccine
development. There is more that labs can do, like using
CO2 to decontaminate N-95 masks and other PPE at the
National Energy Technology Lab (NETL) in my home state in
Morgantown, West Virginia. I have been pleased to see Secretary
Brouillette in support of using the labs to help the nation
respond to this pandemic. This work is critical to guiding
American technology advances and ensuring that we have the
scientific and technical capabilities to seize opportunities
and address our most pressing problems whether that be a
pandemic or climate change. I spoke with Dr. Birol, again, just
within the last few weeks and he stressed the importance of
enacting legislation like our bipartisan American Energy
Innovation Act as part of our recovery. It is still a great
piece of legislation, and we have not given up on it yet.
The Chairman. That is right.
Senator Manchin. We are expecting a 14 percent drop in U.S.
CO2 emissions from the energy sector in 2020. That
will be the largest drop ever in our history, but emissions
will begin to bounce back as our country reopens.
Our bill provides over $24 billion in authorizations for an
energy innovation roadmap to advance critical technologies like
CCUS and energy storage with needed research and development
but also with deployment dollars to get these technologies in
the ground. We have the bipartisan framework in our energy
bill, and I believe that good work can be complemented with
additional targeted investment in light of the changes in the
intervening months to help our energy sector recover, that put
people back to work and also advance our clean energy goals.
With that, I appreciate every one of you for coming today
and appearing and helping us through this most difficult of
times. I look forward to hearing from you--your views and also
impacts to the consumers and global markets and a lot, lot
more. Thank you.
The Chairman. Thank you, Senator Manchin, and thank you for
your continued advocacy and push on our energy bill. I think
you and I recognize that, particularly as we are looking to
assist our economy with recovery, this is ready-made for
action. We just need to get around one hurdle and, hopefully,
we will be on our way. But thank you for that continued
support.
Let's now turn to our witnesses and, as we have been doing
these past several weeks, it is a bit of hybrid hearing. Just
as there are some members present, there are members who are
participating telephonically, by Webex and our witnesses are
kind of split on that too. So for those of you who have joined
us in person today, thank you, and for those who are with us
online today, we appreciate that you are taking this time to
join this important conversation.
We are led off this morning by Mr. Stephen Nalley. Stephen
is the Deputy Administrator for the U.S. Energy Information
Administration. We welcome you back to the Committee.
On the line we have Mr. David Turk, who is the Acting
Deputy Executive Director for the International Energy Agency.
We welcome you, David.
Ms. Lisa Jacobson has been before the Committee before.
Lisa is the President for the Business Council for Sustainable
Energy. We appreciate you being here with us.
We also have Mr. Frank Macchiarola. Frank is the Senior
Vice President of Policy, Economics and Regulatory Affairs for
the American Petroleum Institute. Many of us remember him from
his time here in the Senate.
Then as Senator Manchin has noted, Ms. Jackie Roberts is
with us as the President of the National Association of State
Utility Advocates.
We welcome each of you. We would ask that you try to keep
your comments to about five minutes so that we can engage in
the conversations back and forth. Your full statements will be
included as part of the record, and we will go in the order in
which I have introduced you. We will begin with you, Mr.
Nalley.
STATEMENT OF STEPHEN NALLEY, DEPUTY ADMINISTRATOR, U.S. ENERGY
INFORMATION ADMINISTRATION, U.S. DEPARTMENT OF ENERGY
Mr. Nalley. Chairman Murkowski, Ranking Member Manchin and
members of the Committee, good morning. I appreciate the
opportunity to testify about the U.S. Energy Information
Administration's assessment of the impact of COVID-19 has had
on energy markets. My testimony reflects EIA's latest forecast
from our June ``Short-Term Energy Outlook,'' or STEO, that was
released last Tuesday.
COVID-19 mitigation efforts have resulted in reduced
domestic and worldwide economic activity which has caused
unprecedented changes in energy supply and demand patterns. For
overall context, EIA's June STEO forecast is 7.4 percent
decline in U.S. GDP in 2020 which is largely related to COVID-
19 mitigation actions. We rely on inputs to our model from IHS
market forecasts for U.S. GDP and Oxford Economics for a global
GDP. As we all know, travel restrictions and stay-at-home
orders have greatly impacted the energy economy, most notably
crude oil and petroleum liquids. EIA forecasts the domestic
consumption of petroleum liquids will decline in 2020 with
gasoline consumption falling almost 13 percent and diesel
falling 10 percent. We believe the most significant declines
have already occurred and the consumption will recover over the
next 18 months; however, we do not expect consumption to return
to 2019 levels by the end of 2021. Similarly, global
consumption of petroleum and liquid fuels will decrease by more
than 8 million barrels per day in 2020 and most of the decline
has already occurred.
U.S. crude oil production which reached an all-time high of
12.9 million barrels per day in November 2019, fell to 11.4
million barrels per day in May 2020. We forecast the decline
will continue until March 2021. Globally, we forecast that
supply will fall by almost 6 million barrels per day in 2020,
mainly as a result of voluntary cuts by OPEC and its partner of
countries. Given these changes, we expect global liquid fuel
inventories to grow by 2.2 million barrels per day in 2020, on
average, with inventory builds having peaked in April of this
year. Concerning prices, Brent crude oil averaged $29 per
barrel in May compared with $18 in April as some OPEC producers
voluntarily deepened their production cuts beyond the initial
April 12th agreement. We expect monthly Brent prices to average
$37 per barrel during the second half of 2020 and rise to an
increase of $48 per barrel in 2021. EIA expects upward pressure
on prices to increase as inventories decline in 2021.
COVID-19 mitigation activities have also affected natural
gas and electricity markets. Reduced U.S. manufacturing along
with lower LNG export have lowered our forecasts of U.S.
natural gas consumption in 2020. We expect a four percent
decline in U.S. natural gas consumption and a three percent
decline in production. Although we forecast recovery in 2021,
we do not expect U.S. production and consumption to return to
2019 levels during the forecast period. EIA expects weaker
natural gas demand will cause relatively low prices in 2020,
but the rising demand into next winter will force upward
pressure on prices. We forecast that the U.S. benchmark Henry
Hub natural gas spot price will rise to an average of $3.08 per
million BTU in 2021 compared to $1.75 in May of this year.
In looking at electricity, our June ``Outlook'' reports 5.7
percent less electricity consumption in the U.S. in 2020 when
compared to 2019. We expect all sectors to purchase less
electricity this year with the biggest percent declines
occurring in the commercial sector. We expect milder
temperatures in 2020 to reduce residential heating and cooling
demand and more than offset increased activity from stay-at-
home measures that have already been in place. We forecast
electricity prices across all retail sectors will vary little
in 2020 from their 2019 level.
Our ``Outlook'' also reports that U.S. coal production will
fall by 25 percent in 2020, the result of both decreasing
demand for U.S. coal exports and declining coal-fired electric
power generation.
In closing, the uncertainties in the current environment
are especially challenging. EIA will continue to update our
monthly STEO forecast to reflect evolving energy market
conditions. Our next STEO is scheduled to be released July 7th.
We will also continue to provide a comprehensive portfolio of
data and analysis reports to inform policymakers, market
participants and the public at large about important energy
trends and issues.
Chairman Murkowski, Ranking Member Manchin and members of
the Committee, thank you for the opportunity to present this
information today. This concludes my testimony.
[The prepared statement of Mr. Nalley follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Nalley.
Let's now go to our screen to hear from David Turk at the
IEA. Mr. Turk.
STATEMENT OF DAVID M. TURK, ACTING DEPUTY EXECUTIVE DIRECTOR,
INTERNATIONAL ENERGY AGENCY
Mr. Turk. Chairman Murkowski, Ranking Member Manchin and
distinguished members of the Committee, thank you very much for
the opportunity to appear before you today. I wish we were
there in person, but at least we're here virtually. I'm very
pleased to be able to share with all of you our very latest
data and analysis from the IEA on the impact of COVID-19 on
energy markets. Put simply, the COVID-19 pandemic has created
the biggest shock to global energy systems since at least World
War II. So let me run through some of our numbers.
We estimate that global energy demand will fall 6 percent
in 2020, the equivalent of losing the entire demand of India.
Advanced economies are expected to see the biggest declines
with demand falling 9 percent in the U.S. and 11 percent in the
European Union. All major fuels and technologies are affected.
Our very latest numbers just released earlier today shows that
oil demand is expected to fall by 8.1 million barrels per day
for 2020. That's an 8.2 percent drop, the largest in history,
before recovering by 5.7 million barrels per day in 2021. Coal
demand will fall 8 percent, electricity demand will fall 5
percent, natural gas demand falling 4 percent, renewables have
been the most resilient of all the fuels so far and the only
energy source that we expect to grow in 2020, although, I
should say, at much lower levels than we forecast before the
crisis.
Global energy-related CO2 emissions are set to
fall by almost 8 percent in 2020 reaching their lowest level
globally since 2010. This would be the largest decrease in
emissions ever, nearly 6 times the decrease we saw in the 2009
financial crisis. But this decline, of course, comes on the
back of many premature deaths and economic trauma around the
world. History has also shown that unless there are smart and
concerted recovery efforts around the world, more on that in a
minute, emissions can be expected to come roaring back just as
they did in 2009.
Now let's look at our latest investment numbers from the
IEA. At the start of 2020, global energy investment was on
track for record growth of around 2 percent from 2019. After
the COVID-19 pandemic brought large swaths of the world economy
to a standstill, global investment is now expected to fall 20
percent. So we had predicted a 2 percent increase, now we're
looking at a 20 percent decrease. This is almost $400 billion.
Global investment in oil and gas expected to fall by almost a
third in 2020. Power sector spending is on course to decrease
by 10 percent. Energy efficiency is also suffering. Estimated
investment in energy efficiency is set to fall by an estimated
10 to 15 percent.
Now let me take this opportunity to again thank Chairman
Murkowski for being a leading member of our Global Commission
for Urgent Action on Energy Efficiency. Thank you very much,
Chairman, for all your leadership in that very important group.
So, distinguished members of this Committee, you can see
that we truly have a historic shock to the global energy
system. But our story is, of course, far from finished. What
happens next will be absolutely critical. Countries around the
world are planning and enacting economic recovery plans that
will shape country's energy infrastructure for decades. On
Thursday, just two days from now, we will be releasing our
``World Energy Outlook Special Report on Sustainable
Recovery.'' This special report, which I predict will be our
most impactful analysis of the year, will provide actionable
recommendations across the energy system on how governments
could put energy and sustainability at the heart of stimulus
plans to boost economies, to create jobs and build more modern,
resilient and clean energy systems. With its boundless human
ingenuity, rich resources and track record of successful
innovation of new technologies, the United States is extremely
well-positioned to continue to lead the world in the
development and deployment of energy technologies that can help
ensure a secure, affordable and sustainable supply of energy
for decades to come.
Chairman Murkowski, Ranking Member Manchin, distinguished
members of this Committee, thank you again for the opportunity
to be with you today and thank you for your continued support
and partnership for the International Energy Agency. Thank you,
Chairman.
[The prepared statement of Mr. Turk follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Turk, and know that we will be
looking with great interest at this report that will be coming
out on Thursday as we work to consider what comes next in this
next round of recovery and support. I think the suggestions
that we might be able to learn from will be helpful to us as we
craft some additional policy here.
Ms. Jacobson, let's turn to you and your comments from the
Business Council for Sustainable Energy. Welcome.
STATEMENT OF LISA JACOBSON, PRESIDENT, BUSINESS COUNCIL FOR
SUSTAINABLE ENERGY
Ms. Jacobson. Chairman Murkowski, Ranking Member Manchin
and members of the Committee, thank you for the opportunity to
testify today. On behalf of the Business Council for
Sustainable Energy (BCSE), I would like to express our
appreciation for this Committee's longstanding, bipartisan
work. Founded in 1992, the Council is a coalition of companies
and trade associations representing energy efficiency, natural
gas and renewable energy sectors. BCSE is pleased to have a
small business partner under its banner, the Clean Energy
Business Network.
Today's hearing is of critical importance as the COVID-19
health crisis has touched every American. We've tragically lost
over 117,000 American lives during this pandemic and, in an
effort to save lives, the nation is taking unprecedented
measures to keep individuals and families safe. In my testimony
today I will underscore three main points: the U.S. energy
workforce was expanding pre-COVID-19 and now the sector is
facing economic challenges and dramatic job losses, the Federal
Government can take actions to provide near-term relief and
clean energy industries can be drivers of the economic
recovery, and the Federal Government has a role to play with
policy support.
Clean energy sector employees range from utility,
construction and manufacturing workers to contractors,
installers and technicians to building managers and service
providers. While some workers have received essential status
during the pandemic, others, especially workers in the
residential sector, have seen their business activity halted or
dramatically curtailed. Many clean energy workers have made
significant contributions to maintain safe, secure and reliable
power and energy services to customers during the pandemic and
they continue to do so. Utilities, grid operators and
manufacturers adopted sequestering policies for essential
workers. Construction workers, electricians and engineers
stayed on the job building large-scale energy projects. HVAC
technicians worked to maintain and update critical systems in
health care, nursing homes and other public facilities. These
contributions had an impact. Our country had the electricity it
needed at a scary and uncertain time.
The U.S. energy sector supported 6.8 million jobs at the
start of 2020. Clean energy sectors supported over 3.4 million
jobs and were poised for significant growth. Updated research
released yesterday covering energy efficiency, renewable
energy, clean vehicles, grid and storage and clean fuel sectors
shows that 620,000 jobs were lost since early March. With
energy efficiency and renewable energy workers being the
hardest hit with 500,000 job losses. While the rate of job loss
slowed in May compared to April and March, over 27,000 jobs
were shed last month. While the rate of--well, let's shift to
other economic impacts. Project construction and permitting has
been delayed, financing has been slowed, and supply chains have
been disrupted.
Given the diversity of clean energy sectors, a range of
policy solutions are being considered. The objectives are to
provide market stability in this uncertain period and to spur
investment in jobs for economic recovery when the time is
right. The Federal Government took an important step in May
when the IRS provided continuity, safe harbor relief to
accommodate COVID-19 delays for projects eligible for the ITC
and the PTC. I want to thank Chairman Murkowski, Ranking Member
Manchin, Senator Wyden, Senator Cantwell, and other members of
this Committee for urging the Treasury Department to act. And
there are other adjustments to the current law that would
provide market continuity and enable the tax incentives on the
books to be utilized. Direct pay mechanisms for the ITC and PTC
to make the tax provisions refundable is an example and to
provide immediate relief to vulnerable families and
communities, funding for low income home energy assistance
programs should be expanded.
Looking to economic recovery, BCSE members urge action on
the American Innovation Act this year. In addition, the mission
critical Facility Renewal Program, is an example of a proposal
that would leverage federal grant funding with private sector
capital to put energy efficiency workers back on the job,
providing upgrades to schools, hospitals, military bases and
other mission critical buildings.
Looking at the tax code, a number of measures could be
implemented to incentivize resilient infrastructure,
transmission upgrades, microgrids, renewable energy, energy
efficiency and other clean energy investments. In early June
over 800 contractors and manufacturers signed a letter to
Congress to improve and expand the current Section 25C tax
credit for homeowner energy efficiency improvements.
These are just a few of many proposals that clean energy
sectors are considering to put people back to work and build
back better. Thank you.
[The prepared statement of Ms. Jacobson follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Ms. Jacobson. We appreciate that.
Let's go now to Frank Macchiarola at API, the American
Petroleum Institute. Welcome, Frank.
STATEMENT OF FRANK J. MACCHIAROLA, SENIOR VICE PRESIDENT,
POLICY, ECONOMICS AND REGULATORY AFFAIRS, AMERICAN PETROLEUM
INSTITUTE
Mr. Macchiarola. Thank you. Chairman Murkowski, Ranking
Member Manchin and members of the Committee, the subject of
this hearing, Impacts of COVID-19 on the Energy Industry, is an
important one and I thank you for the opportunity to testify
today on behalf of the oil and gas industry.
The COVID-19 pandemic has fundamentally altered our way of
life and our nation's economy. Each and every person and
business has been impacted by the outbreak of the Coronavirus,
and our industry is no different. The conditions created by
COVID-19 present substantial business and operational
challenges for the oil and gas industry, including an
unprecedented market imbalance, significant commodity price
declines and heightened efforts to maintain continuous
operational integrity in the face of the pandemic. First and
foremost, COVID-19 is a human crisis in the communities in
which we work and live. In response to the pandemic, our
industry donated more than $100 million to relief efforts,
including support for local food banks and hospital systems as
well as supplies of personal protection equipment, medical
gear, hand sanitizers and disinfectants to health care
providers on the front lines of fighting this virus.
Across the United States, the oil and gas industry has
stepped up during this challenging time. However, several
factors came together to put an enormous strain on our
workforce and, in fact, our overall energy security here in the
United States. Some of these factors were the result of long-
term trends while others were the result of changing conditions
rapidly. At its core the commodity price decline we experienced
was the result of an oversupplied market and, more importantly,
a swift and steep decline in demand for oil. On the supply
side, after ramping up to a record production level during a
demand decline, Saudi Arabia, along with other OPEC+ nations,
including Russia, finally agreed to reduce supply after
pressure from the Administration and Congress.
By early June U.S. producers had responded significantly to
market signals by lowering production by 2 million barrels per
day from the highest levels of mid-March. While the supply
response was helpful, it pales in comparison to the historic
drop in demand. Global demand for April was estimated to be the
lowest month of oil demand in nearly 20 years. While recent
weeks indicate a rebalancing in the markets as economies open
up and as demand returns, this downturn still continues to have
an impact.
This unprecedented market disruption has created
significant challenges for the oil and gas industry. As
Chairman Murkowski noted in her opening statement, ``American
energy has suffered acutely and uniquely.'' But this crisis has
not altered our values. Free markets and private enterprise
serve as the foundation of America's oil and gas industry and,
as such, we are not seeking industry-specific financial relief.
In other words, we don't want a government bailout.
With respect to broader efforts, we supported the CARES Act
which provided economic stabilization across the United States'
economy to maintain systemic liquidity and to provide continued
employment. On the operational side, we worked with government
agencies to ensure continuity of operations by designating our
workforce as essential and to provide regulatory flexibility
for non-compliance. We also work to support EPA's fuel waivers
under the Clean Air Act and to support the Energy Department's
use of existing authorities to effectively manage the Strategic
Petroleum Reserve. It's also important to note that we make
clear what we're against. We discourage retaliatory trade
measures that could further disrupt global markets, and we
successfully opposed a petition before the Texas Railroad
Commission to impose mandated supply constraints on oil
producers.
As recent weeks have shown, the most effective way to
address this market disruption is through economic
stabilization and a safe and swift return to robust economic
activity. While several unique factors during the COVID-19
pandemic created unprecedented conditions, our industry has
experienced difficult times before. The resilience and
innovative spirit that define America's oil and gas industry
throughout our history remains alive and strong. We see it in
the essential workforce that continues to deliver the energy
and products that America needs to keep us moving forward. As
America recovers, the oil and gas industry remains committed to
providing our nation--and billions of people around the world--
with the affordable, reliable and cleaner energy that will make
better years to come.
Thank you for the opportunity to testify today and I look
forward to your questions. Thank you.
[The prepared statement of Mr. Macchiarola follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Macchiarola.
Ms. Roberts, welcome to the Committee. We appreciate your
comments this morning.
STATEMENT OF JACKIE ROBERTS, WEST VIRGINIA CONSUMER ADVOCATE,
AND PRESIDENT, NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER
ADVOCATES
Ms. Roberts. Thank you. Chairman Murkowski, Ranking Member
Manchin, distinguished members of this Committee, I'm Jackie
Roberts. I'm the Consumer Advocate for West Virginia and
President of the National Association of State Utility Consumer
Advocates. Consumer Advocates represent the interests of
utility customers in state proceedings, federal proceedings
before the FCC and in state and federal courts. We are obliged
by law to do so.
There are a couple takeaways, I think, that are important
to note today. The first is that utilities are essential
services. Without utilities we don't have homes or apartments
to live in and that includes not only electricity, gas,
telecommunications, but water. LIHEAP, increase in LIHEAP
funding has been very helpful but it's not just help for the
low income that is necessary for consumers. With about 160
million people in this country that live paycheck to paycheck,
we're seeing many consumers that have never missed a utility
payment that now can't. I understand that the relief packages
provided to citizens were to help in this gap between being
unable to work and returning to work, but unfortunately, the
timing of residents and customers receiving this aid has caused
many not to be able to pay their utility bills, their rent or
their mortgages. As a result, there are increased revenue
shortfalls for utilities which, that harm not only the
utilities but harm the customers that eventually must pay those
bills. We need to have data-based, evidenced-based solutions in
working with utilities and customers to get through this time
of economic strain.
The second takeaway that I think is so important is that
the return to work does not mean that we have achieved economic
recovery. There is a lag between when people return to work,
how they return to work, whether they return to work and when
utility moratoria for shutoffs should end. We're not there yet,
and I don't think we're going to be at a point anytime soon
where the moratoria should end. Each state knows its utilities
and knows its customers well. We appreciate Congress not
issuing national moratoria for utilities. Consumers advocates
do this work every day, negotiating between customers and
utilities. We know how to do this, and we believe that state-
based moratoria are the best way to handle the customers' and
the utilities' needs.
LIHEAP, as I said, is important and the increases in LIHEAP
are essential to low income customers and the lifting on some
of the caps for LIHEAP are important, but we also need help for
customers that are just out of work and have no money. Direct
support to utilities for these customers is something that
could be considered. Utilities also suffer from lost revenues
from not receiving the payments from customers. For some
utilities this is a, this presents a liquidity problem where
they just don't have sufficient revenue to operate their
businesses. This is most likely to occur, not for the investor-
owned utilities but for public power and co-ops where the
customers actually own the utility. Relief for those types of
utilities is going to be important and we need evidence-based,
data-based solutions for providing that relief, and they will
vary from state to state and utility to utility.
Broadband is also essential for customers, especially in
this time of telecommuting and medical telecommuting. It's
essential that we have broadband service. The digital divide in
many states, West Virginia is one, is real and severe. Many of
our residents have no access whatsoever to broadband and that
is a problem that will affect the recovery of the economy.
Tax normalization resulting from funds, customer funds,
held by utilities could be a solution to help bridge the
economic gap between customers and utilities. Excess deferred
income tax credits from the Tax Cuts and Jobs Act must be
returned under normalization, tax normalization, rules at a
certain rate. So going forward there are hundreds of millions,
if not billions of dollars the utilities are holding that are
undeniably customer money. Access to that customer money might
be a way to help bridge the gap between a customer's inability
to pay and the utility's need for revenues.
I thank you for considering customers and realizing the
importance of utilities. One other thing I'd like to say in
closing is that water utilities do not receive any LIHEAP
funding and if you think electricity is essential, water is
particularly essential, especially in this time of a health
crisis. So thank you for the opportunity to testify, and I look
forward to answering your questions.
[The prepared statement of Ms. Roberts follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Ms. Roberts. We so appreciate the
perspective that you are providing to the Committee from the
consumers. It is absolutely key to the discussion here. So, a
good range. I appreciate all that you have contributed this
morning.
As I mentioned, well, it was actually you, Mr. Nalley, you
pointed to the report that will be coming out with regards to
the updates. I think you said July 7th you are going to have an
update from EIA. Again, it was Mr. Turk that said there would
be a report out on Thursday. So know that the work that you are
doing in these spaces really does help to inform us. It is
important that we are not only looking back but also that we
are looking forward as much as we can look forward at this time
with continuing uncertainty. We don't know whether there is
going to be another surge or a wave so that could throw all of
your predictions out. And Mr. Macchiarola says that while the
oil and gas sector is hanging in there, you are somewhat used
to the volatility that comes with those markets, but we all
know that you can sustain certain periods of uncertainty and
volatility but when it continues for a long period of time,
that is when things really get rocky and difficult to predict.
What I would ask for is some conversation, probably with
you, Ms. Jacobson and Mr. Macchiarola, in terms of those things
that we should be considering in this next iteration of
economic recovery, relief, stabilization, whatever it is that
we are calling it. Ms. Jacobson, you had indicated some areas
where you think that from a regulatory perspective it certainly
helped and some tax provisions as well, but I would ask both of
you in terms of the relief that we provided under CARES,
including the PPP, the Paycheck Protection Program, and the
Main Street Lending Program, do we need to be doing more on
that side to help going forward, again, looking at the
recovery? Or is there more that we should consider in addition
to what you have already provided in your testimony? I don't
need you to repeat that, but if there is more, I want to try to
understand how we can be responsive in this area.
Ms. Jacobson, let's go to you first.
Ms. Jacobson. Thank you.
You know, I think you're right. I mean, the energy sector,
just like all parts of the economy, especially, you know, all
the focus mostly on small businesses right now, things like the
Paycheck Protection Program were essential and when it was
being developed, we didn't have clear information about what
the needs were and then Congress and the Administration
appropriately acted to make adjustments. We might still need to
make adjustments, but we made, we did a number of surveys since
early March of our own membership and asked them about PPP and
when you look at the Bureau of Labor Statistics (BLS) data you
see, in particular, that construction workers and small
businesses in those sectors participated heavily in the PPP
which also overlap with residential energy efficiency and other
clean energy workers. So we think there's a high participation.
You can't see it directly through the BLS data, but we can make
some assumptions.
So if we look at the job losses that we've experienced in
those parts of the clean energy economy, when PPP does
transition, we could anticipate some challenges there. I think
we all need to work together and see if additional adjustments
should be made. But I'll just say, you know, in my written
testimony I call out a particular testimonial from someone who
responded to our survey, thanking Congress and the
Administration for making the adjustments to PPP that you did
recently. It made a world of difference for those companies.
So, thank you.
The Chairman. Let me ask you, Mr. Macchiarola, from the oil
and gas sector, perhaps not so much PPP, but the Main Street
Lending Program, I hear very loud and clear that the interest
is not to have industry-specific financial relief. But in terms
of those things that Congress can weigh in on to help
facilitate all industries, how might the oil and gas sector be
benefited moving forward?
Mr. Macchiarola. Thank you for your question, Chairman
Murkowski.
I think it's critical as Congress looks at the next phase
of economic stabilization, again, to provide for stabilization
across the economy. From our perspective in the oil and gas
industry, the most important thing that Congress could do is to
help get demand back which really means help get the economy
back in a safe and swift fashion because from our perspective
that was the number one driver of prices and the significant
impact that the industry felt was really a result of demand. I
would also say we appreciated the Department of Energy
effectively managing the Strategic Petroleum Reserve. We
thought that was smart using their existing authorities that
they had. Finally, EPA providing flexibility with fuel waivers.
But in terms of asks going forward, our major request would
be, essentially, do no harm, to prevent short-term measures
that are, you know, may be put in place with good intentions as
solutions that have long-term impacts. What I'm talking about
there are things like punitive trade measures or tariffs or
production quotas. We think that's the wrong direction to go
in. We really appreciate the leadership of Congress and the
Administration in not heading in that direction.
The Chairman. We appreciate that, thank you.
Let's go to Senator Manchin.
Senator Manchin. Thank you, Madam Chairman.
Ms. Roberts, I am really grateful for the advocates, the
consumer advocates, like yourself, because it is so important
for our system to have a balance. I support including $900
million in energy utility assistance.
Ms. Roberts. Great.
Senator Manchin. For low income customers in our CARES Act
and allowable expenses under the Paycheck Protection Program
that was included into the CARES Act, the data coming in so far
from April-May shows skyrocketing non-payment of utility bills.
I was interested in what you had said also that the deferred
income tax balances on utility books due to the corporate tax
reductions in the Tax Cuts and Jobs Act, that Congress should
eliminate the tax normalization rules. How much money is it--
you said ``billions of dollars''--they are holding?
Ms. Roberts. Well, I know in West Virginia it's hundreds of
millions.
Senator Manchin. That the utilities are holding. They have
that money.
Ms. Roberts. Because they're limited in how they can return
that customer money to customers----
Senator Manchin. Could it not be used to offset the non-
payments?
Ms. Roberts. It could be if they weren't limited by tax
normalization----
Senator Manchin. Gotcha.
Ms. Roberts. We used a lot of the money to, in some cases,
reduce rates. We established a fund for low income people, for
veterans, for those who are on medical equipment.
Senator Manchin. But there has always been a surplus of
money that they have never used all of the money that is set
aside for the normalization, right?
Ms. Roberts. No, all the money as a result of the Tax Cuts
and Jobs Act has not been used. There is still money available,
but the tax normalization rules prevent it from being used
sooner than on a normalized basis.
Senator Manchin. We are going to bring that to their
attention. It is not in our jurisdiction, but we will bring it
to the attention of Finance. It is so interesting to find out
that there are ways of helping. And also, the thing that you
said that I did not realize, I don't know if the Chairman did
or not, that LIHEAP is not for water.
Ms. Roberts. No, it's not.
Senator Manchin. Never has been.
Ms. Roberts. Or for our telecommunications.
Senator Manchin. Yes.
Ms. Roberts. You're correct, non-payments are skyrocketing
and part of that has to do with the timing of the relief that's
come.
Senator Manchin. Yes, I know, it has been----
Does anybody else want to comment on that or--what we are
talking about there? This is to all of you. What policy
solutions are needed to strengthen U.S. energy manufacturing up
and down the supply chain? We are seeing that we know we had a
deficiency for our COVID-19 response as far as our medical
equipment and testing and all that because most of it was done
overseas. But now we are finding out a lot of the energy
projects are not being able to be----
Do you all have any idea on that as far as what we could
do? Mr. Nalley, you might be able to speak to that or Ms.
Jacobson? Either one of you?
Ms. Jacobson. Thank you very much for the question.
Senator Manchin. Have we known that we have had most of the
critical manufacturing for our energy fleet coming from
offshore?
Ms. Jacobson. Yeah, we have currently and, you know, now
and before the COVID-19 pandemic, we have a global energy
marketplace and yes, supply chains have been disrupted. I can
speak anecdotally, you know, from the surveys that we've done,
this is a top issue for the companies and industries that I
work with, and they're trying to adjust and manage and be
strategic going forward. But there are some really important
public-private partnerships that the Federal Government already
is looking at. And when I think about things like the American
Energy and Innovation Act or, you know, the Surface
Transportation bill, there are many opportunities to create
market demand, combining that with programs through the
Department of Energy like the Advanced Manufacturing Office or
things like new tax incentives to promote manufacturing here at
home.
So we're, kind of, in a whole new reset moment on this
conversation with incredible urgency. I think you're very
appropriately going to be focusing on supply chains next week.
I look forward to hearing how the witnesses respond because
things are evolving in real time. But I think there are current
tools that we already utilize that can be explored again and
perhaps expanded. And again, I think close interaction with
industry is going to be very important at this time so we make
sure that whatever Federal Government attention and resources
are put to bear that they're done appropriately and
strategically in the current environment we're in.
Senator Manchin. Thank you, Madam Chairman.
The Chairman. Thank you. Thank you, Senator Manchin.
Senator Barrasso.
Senator Barrasso. Thank you, Madam Chairman. I want to
thank you and I want to thank Ranking Member Manchin for
holding this important and timely hearing today.
The COVID-19 pandemic has affected every aspect of modern
life. As nations close down around the world in an effort to
slow the spread of the virus, economies around the world ground
to a halt. Demand for energy as a result, slowed significantly,
reduced demand for electricity, transportation fuels which
power the modern world. In the early days in the pandemic an
oil price war between Saudi Arabia and Russia led to massive
oversupply of crude oil on global markets. Oil prices tanked.
Crude oil storage facilities filled up. On April 20th of this
year, oil prices actually traded in the negative. Over the past
few months I have encouraged the Secretary of the Interior to
provide lease extensions to provide royalty relief and
suspension of production for oil, gas, coal, soda ash
producers, on federal land. This form and these forms of
temporary relief will help provide a measure of certainty and
will help operators weather this devastating time. So the
question, Mr. Nalley, how will temporary federal royalty relief
and suspensions improve the outlook for oil and gas producers
on federal land?
Mr. Nalley. Senator Barrasso, thank you.
In most of our modeling, our forecasts are based upon
current rules and regulations, so I don't really have anything
to offer today in terms of what proposed legislation might do.
Senator Barrasso. The question of allowing some of this
sort of thing, in terms of the specifics of providing royalty
relief, how will that improve the outlook for production? Will
these companies then say, well this will allow me to continue
to produce because it is not going to cost them as much? How do
you see that, rather than just from a legislative standpoint?
Mr. Nalley. I'd have to get back to you with--our folks
could take a look at that and we could get back to you with
that information.
Senator Barrasso. Alright.
[Information regarding temporary royalty relief follows.]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. The EIA recently released its annual
report on uranium production. I want to focus on that now, if I
could. The report shows 2019 production of American uranium was
down 89 percent from 2018. Wyoming has led the United States in
uranium production. The outlook for our nation's uranium
production, I believe, is dire. We need to reverse this
alarming trend. That is why I have supported immediately
establishing the Department of Energy's Uranium Reserve. It is
something that they have proposed.
Absent immediate action from Washington to increase uranium
demand, does the EIA expect American uranium production to
recover?
Mr. Nalley. So I would agree with you that the production
in uranium is, you know, at record lows and we don't have any
forecasts on that built into our Short-Term Energy Outlook. We
do provide two reports annually and a quarterly report to help
answer those questions.
Senator Barrasso. In April of this year, the Department of
Energy identified how Russia has weaponized its energy supplies
in an effort to undermine America's energy and our national
security interests. We have known it all along and the
Department of Energy is now identifying it, saying that Russia
is behaving in that way. Due to Russia's illegal trade
practices, Congress previously capped Russian uranium imports
at 20 percent of our nuclear market. The caps are set to expire
at the end of this year, 2020. I am working to extend it and
reduce how much Russian nuclear fuel can be used in our nuclear
power plants in the United States, so we are not increasingly
dependent upon Russia as they undermine our market in an effort
to give them a bigger market share.
The Energy Information Administration provides valuable
market information to develop our national uranium policies.
Mr. Nalley, what data does your agency provide to inform policy
decisions about nuclear fuel imports and how does this play
into it?
Mr. Nalley. So again, it's on an annual basis as the
nuclear import data comes out. We can get that information, you
know, back to your staff or you.
Senator Barrasso. I would appreciate it if we could get all
of that information from you.
[Information regarding nuclear import data follows.]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. Thank you. Thank you, Madam Chairman.
The Chairman. Thank you, Senator Barrasso.
Let's turn to Senator King.
Senator King. A couple of questions. I will start with Mr.
Nalley about the duration of what we are talking about. This is
not a recession in the sense that the financial crisis of 2008
was a structural issue. This was, essentially, a pause, we hope
it was a pause, in demand. And so, I understand I am asking you
to predict two different things: one is whether we are going to
go into a second wave and a further constriction of demand and
also what are the long-term economic effects. But it seems to
me that it is possible that once we get a vaccine or we are
otherwise out of these woods, that demand will spike back
rather rapidly.
I just saw this morning we had a 17 percent increase in
retail sales just in this past May. Talk to me about how long
this is going to last and is this going to be a V-, an L-, a W-
shaped, recovery that we are talking about?
Mr. Nalley. Well, good morning.
So I think the uncertainty that we're all dealing with is
the most challenging. We, you know, are using underlying
forecasts for IHS markets, for U.S. GDP and Oxford economics
for a global GDP. And so, you know, modeling, we use as, you
know, sort of, foundational pieces in our modeling. We have
really great people taking a look, paying attention to all the
issues and all the trends that are going on. And as you said,
some of the things with the second wave are those types of
things, we're really looking for signals that were coming,
other sources to make sure that we're capturing this right. We
have, you know, people working very hard to make sure that we
are, you know, getting this just right each month. And as I
said, we put out a new STEO forecast in July. So we will
update, you know, our forecast at that point based on the best
information we have then.
Senator King. Do you see the job losses as job losses or
job vacancies? In other words, after we get out of this, the
undermining of the economy that we are enduring right now, will
those jobs come back or are they jobs that are going to be
permanently lost because of changes in design of the workforce
or other factors? In other words, are these jobs--we talk about
them being lost--are they lost or are they merely on hiatus for
some period of time until there is a recovery?
Mr. Nalley. Right, so EIA's forecast and data are really
focused on supply and demand patterns and we collect very
little and publish very little information about jobs. I'd
actually defer to other panelists to comment on----
Senator King. Let me go to Ms. Jacobson then. Are we losing
jobs or are we losing companies? And respond to my question
about whether these are job losses or temporary job losses?
Ms. Jacobson. Right, well, I mean, I completely agree we're
in a very uncertain environment, but I think when we're looking
at the data in terms of the residential energy job losses,
things like renewable energy and energy efficiency workers, I
think it depends on a number of factors, but primarily when
customers and households feel that it's safe to have
technicians and installers and contractors in their home to do
work. And you know, that is a very variable and unpredictable
thing.
You know, I wanted to share with you, Senator King, I
received a testimonial from Mid Maine Weatherization as part of
some surveys we did in anticipation of this hearing. It's not
exactly clear the moment in time that they put this forward
but, you know, here we have, you know, a small business, a
weatherization, energy efficiency business saying, we've been
unable to work. If our business loan is denied, then we will
unfortunately lose our business. So in addition to the factors
of when it is appropriate from a health perspective to continue
this kind of work, there's also the business cycle and the
business model challenges and those benefit, as we discussed
before, from things like the Paycheck Protection Program and
other measures.
Senator King. I was going to follow up and ask, I wonder if
that company availed themselves of the Paycheck Protection
Program.
Ms. Jacobson. Right.
Senator King. I think you mentioned that had been effective
in helping many of these businesses to weather this abrupt
downturn.
Ms. Jacobson. Yes, and as I also mentioned, I think there's
a little concern about what might happen when the 24 weeks end.
So I think we all need to watch that closely. You know,
clearly, clean energy sector broadly, 70 percent of employees
are employed by small businesses. So things like the PPP are
critical.
Senator King. I agree. Thank you.
Thank you, Madam Chairman.
The Chairman. Thank you, Senator King.
Let's go to Senator Lee. Morning.
Senator Lee. Good morning. Thank you very much, Madam
Chair. Thanks to all of you for being with us and your
willingness to inform us today.
Mr. Macchiarola, I would like to start with you. In oil
fields, well shut-ins typically occur under circumstances that
are less than ideal and something big or something of a last
resort because this is an indication that, you know, in many
circumstances, it is not possible to continue to coax a well
back into production. So flow from the well is halted, and the
well is capped. Can you tell us why a well shut-in could be so
catastrophic?
Mr. Macchiarola. Sure. The data is a little uncertain on
this and we did have a request from your office and are happy
to follow up with you on it as well. I think we do have
evidence of natural gas wells being less productive post shut-
in and there was a concern. In fact, one of the concerns we
raised during the Texas proration debate was that, was that
very concern, Senator. That if you shut that, shut-in a well,
you may raise the real possibility that the well is not as
productive when it comes back online. Of course, this was a
significant concern for the entire industry during this crisis.
As I mentioned at the top, we saw levels of demand decline
in April that were down to 20-year lows and we still saw during
that period of time the most productive month of productivity
out of Saudi Arabia during that same period of time. So it's a
big concern. It's obviously alleviated itself somewhat as a
result of economies coming back and demand returning. But it's
an important question that you raise and something that we're
going to look further into, particularly as possibilities of
shut-ins arise.
Senator Lee. But you have definitely seen an increase in
the rate of shut-ins since the beginning of the pandemic? That
is----
Mr. Macchiarola. Yeah. Yes.
Senator Lee. And do you think that extractive companies are
going to need to reinvest in oil well infrastructure in order
for us to have the capacity to return to pre-crisis production
rates?
Mr. Macchiarola. Well, Senator, we're a capital-intensive
industry. So what you saw in a lot of the adjustments during
the COVID period were on short-cycle projects, capital
expenditure reductions there. Longer-term projects you saw, you
know, generally speaking, a degree of less pullback but, you
know, our sense is that, you know, to both your question and
Senator King's, you know, we have a--our industry is one that
has a long-term outlook.
And so, over time as you look out to demand and to
population growth so the next 30 years what we're going to see
global population according to the U.N. grow from about seven
and a half billion people to over nine billion people. Those
folks are going to expand the size of global middle class and
prosperity around the world, and they're going to need energy
to do that. And over 50 percent of that energy is going to come
from oil and natural gas out over the next three decades. And
so, to your point, it's absolutely essential that we make those
capital investments and that we really restore America's energy
leadership. Over the past ten years we've moved from a period
of energy dependence to being the world's leading producer of
oil and natural gas. That's had tremendous benefits for the
United States. And in fact, though we're experiencing a very
difficult time right now, it would be worse for the energy
industry if we had not had this dramatic expansion over that
period of time.
But thank you for your question and happy to follow up with
your staff as well.
Senator Lee. Thank you very much. That is very thoughtful.
Thank you, Madam Chair.
The Chairman. Thank you, Senator Lee.
Senator Cortez Masto.
Senator Cortez Masto. Thank you, Madam Chair and Ranking
Member, and thank you to the panelists, I so appreciate the
conversation today.
Ms. Jacobson, I would like to start with you. Environmental
Entrepreneurs issued a report yesterday that found that an
additional 27,000 clean energy jobs were lost in May 2020
bringing the total COVID-19 related losses in clean energy
workforce to over 620,000. Now more than 5,000 of those clean
energy jobs were in my home State of Nevada. The energy sector
continues to be the hardest hit during this pandemic, and
rooftop solar companies which rely on face-to-face interaction
with consumers to secure future projects are also struggling to
keep projects in the pipeline.
Can you talk a little bit more about the impacts of COVID-
19 on your members and what are they doing to adapt business in
a COVID world? And then secondly, what should we be doing in
Congress? I know you talked a little bit about the PPP program,
but what else can we be doing to help build back that energy
sector economy and boost job growth?
Ms. Jacobson. Yeah, well, thank you very much for the
question and yes, the reporting that's been done on job loss
and the energy sector overall as well as what it's providing in
terms of a view into clean energy sector's job trends has been
so helpful over the past couple of months. So I'm really
grateful for the, to the supporters of that research. I think
first and foremost across the board, and this is true for
businesses in your state too, you know, safety. Number one is
the safety of their employees in whatever, you know, kind of
work environment they're in and whatever current business
condition they're in. So if they are contemplating expanding
the opportunities that they have to work again in homes, then
their number one concern is making sure that their employees
are following all the state and local rules and that they are
protecting both themselves, their families and their customers.
And so, I think there are things that the Federal Government
can do through the State Energy Offices as well as other areas
to help state and locals and tribes understand how they can
help businesses as we reopen, when it's safe to do so.
You know, also they are trying to help their employees
navigate all the support that they might need at a local level
and the Federal Government is helping workers who are either
furloughed or are out of work and then, you know, they're
trying to access the business programs that are available to
them across the board as we've discussed before. In terms of
what the Federal Government can do now to assist those types of
businesses, I mean, for, you know, to talk for a second more
about the residential sector, this is again, energy efficiency
and renewable energy. You mentioned solar installers, you know,
they may be in partnership with utilities and many of those
programs, you know, immediately ceased once the health pandemic
was in full force in early March and they've not resumed. And
that's a big partnership that they have with their utility
programs.
So again, they're in a very constrained environment right
now, but in terms of what the Federal Government can do from a
policy perspective, in terms of immediate relief, if there are
policies that are on the books that were set to expire or have
additional deadlines, you know, within this year or the next 18
months, we should look at them because we've now lost at least
a quarter of business activity. It may be extended. And so, you
know, four things that Congress has already said are important
policies, we want to make sure they can be fully utilized.
And then on the economic recovery side, you know, the last
time we made a big strategic investment like this on a national
level was with the stimulus program after the financial crisis,
and we've seen that, those strategic investments coupled with
partnerships with the private sector and state and local
activity, a great transformation and very significant job
growth and economic activity in the energy sector that came
from those investments.
So I think we need to look at research development and
deployment programs. Again, I really urge Congress and the
Administration to pass the American Energy Innovation Act this
year. We have a surface transportation bill that's pending.
There are many pieces in there that would be very helpful to
send a signal to the marketplace that, you know, clean energy
jobs can be forward-leaning in our recovery and again, we need
to be in an environment when it's safe for business activity to
resume. So I think we need to be talking over these next
several weeks and months about how best to progress.
Senator Cortez Masto. Thank you. Thank you, Ms. Jacobson.
I know my time is up. I will submit the rest of my
questions for the record. Thank you, Madam Chair.
The Chairman. Thank you, Senator Cortez Masto. Yet another
rallying cry for our energy bill. We appreciate that. Thank
you, Ms. Jacobson.
Let's turn to Senator Daines.
Senator Daines. Thanks, Chair Murkowski.
Montana has a very robust energy industry, and it is
struggling. For Montana, it was the perfect storm. Oil prices
drop in the negatives due to Russia and Saudi Arabia
manipulation while demand across the board dropped overall due
to COVID-19. Coal jobs also saw a major hit with a number of
companies having to lay off workers where unemployment was
already an issue. No one was left untouched, whether it is
miners, refiners, pump stations, and energy generators, they
all felt an impact. We have been working with the
Administration to find targeted solutions, but we have still
got a lot of work to do. I think more temporary relief, both
regulatory and royalty relief, for our energy producers is
needed. I also think the quicker we can get people back safely
to work, back to traveling, back to a normal day-to-day
routine, the better it will be for industries across the board.
I do want to focus on a few key issues that are important
to keeping Montana's energy industry working. Mr. Macchiarola,
as you know, this is a historic week for conservation and our
public lands. Passage of the Great American Outdoors Act will
guarantee the next generation of public lands conservation and
the economic benefit they provide for the nation. This week is
also a time to remember a very important link between energy
production and conservation. The Land and Water Conservation
Fund and public land maintenance is funded by energy revenue.
That means that the stronger our energy sector, the more we can
invest in our public lands. However, if the oil and gas
industry is weakened because of COVID-19, foreign price
meddling or because of federal bans on oil production, like
some Members of Congress have advocated for, then our ability
to protect our public land is also weakened. How can we make
sure the U.S. continues to be energy dominant so programs like
the Land and Water Conservation Fund will continue to see
funding year after year?
Mr. Macchiarola. Thank you for your question, Senator
Daines. And just to put some--you use the phrase energy
dominance in the United States. Just to put a perspective, I
think, on what you mean, back in 2008, the last time we faced
an economic disruption we were producing about 6.8 million
barrels per day here in the United States and using close to 20
million barrels a day. At the beginning of this crisis we
produced about 13.1 million barrels per day here in the United
States. That energy security that that provided was essential,
not just in providing for good paying jobs and growth in
employment and the economy but also in our national security as
we faced threats from producers around the world.
You raised the issue of the Land and Water Conservation
Fund (LWCF). In Fiscal Year 2019, the federal revenues from
production of energy were the second largest source of revenue
for the Federal Government. I think the Department of Interior
took in about $11.7 billion. Nearly a billion of that went to
the Land and Water Conservation Fund, important programs of
conservation on trails and national park areas and ball fields.
In fact, in all the states across the country that funding is
essential for conservation measures, couldn't be done without
the royalties and the revenues that are paid as a result of
American energy. So I think you're absolutely right, Senator,
that combination of both being able to restore our standing in
the world, to be able to raise employment and enhance our own
economic security, coupled with the fiscal stability that it
provides for government revenues for those important projects
is just essential.
Senator Daines. Thank you. A follow-up question for you. As
you know, this is a historic week for LWCF, but also there was
another court decision that will have a sweeping negative
impact, not only on energy infrastructure projects, but also
broadband and utility infrastructure. A Montana judge recently
struck down the Army Corps of Engineers Nationwide Permit 12
which is used to safely and expeditiously approve permits for
projects crossing U.S. waterways. I believe an API analysis
shows that over 70 pipeline projects alone would be affected.
One of these projects that may be affected is the Keystone XL
Pipeline which enters the United States in Montana. This
project along with numerous other pipeline infrastructure
projects is hugely important for high-paying Montana jobs and
revenues for local communities. It is a big, big part of the
future for our counties out in Eastern Montana to support local
government, the revenues coming into those counties because of
the pipeline.
What do Congress or the Administration need to do to get
the Nationwide Permit 12 restored so infrastructure jobs can
continue to grow in places like Montana?
Mr. Macchiarola. Yeah, thanks for your question, Senator
Daines.
So an interesting juxtaposition in court cases. You saw the
Supreme Court approve the Atlantic, the right-of-way in the
Atlantic Coast pipeline and a couple of weeks ago, as you
mentioned, you saw the, a Federal District Court in Montana
revoke the Nationwide Permit 12. It's imperative that we
restore the Nationwide Permit 12 with--there are currently
about 70+ infrastructure projects ongoing in the United States.
An assessment of 11 of those projects total about capital
expenditures of around $32.3 billion, that's about half a
million jobs, 150,000 jobs directly on construction of those
projects. It's absolutely essential from an employment
perspective, from an economic perspective, from an energy
security perspective that we get this right.
We hope that, you know, there are successful appeals to
this. We're also going to work with Congress and the
Administration to restore Nationwide Permit 12. We know the
importance of this project in getting Keystone over the finish
line. It's absolutely essential that we invest in our energy
infrastructure here at home. It is essential, again, for our
energy security. It's essential also for our economy, but it's
also essential for our environment as well. That, those
projects are critical for the use of American energy with the
highest standards around the world of environmental
stewardship. And so, I would, you know, urge Congress to
restore the Nationwide Permit 12 and we will be working
vigorously with the Administration----
Senator Daines. We talk about shovel-ready projects. One
judge just grabbed the shovels out of the hands of American
workers for 70 different pipeline projects. Thanks for your
comments.
Chair Murkowski, I have a couple more questions that I will
submit as QFRs.
The Chairman. Great. Thank you. We appreciate that.
Let's turn to Senator Hirono, please.
Senator Hirono. Thank you, Madam Chair.
This is for Lisa Jacobson. In the face of the pandemic and
the reality of the growing costs of climate change we need to
look for opportunities to build a stronger, cleaner economy. In
May, Hawaii Electric announced it is negotiating contracts for
460 megawatts of renewable energy and three gigawatt-hours of
energy storage projects to help replace fossil fuel plants on
the islands of Oahu, Maui and on the Big Island. But not all
states have taken Hawaii's steps to becoming 100 percent
renewable energy to save residents money in the long run.
Unfortunately, we do not have a similar long-term national
plan.
In your testimony you detailed the job losses in the clean
energy sector and corporate expansion of federal support for
research, development, and demonstration at DOE to support
private investment in clean energy sectors and resilience. How
quickly could clean energy businesses start rehiring if
Congress prioritized support for clean energy in an economic
recovery bill?
Ms. Jacobson. Thank you very much for the question.
You know, I think it will be different for different
programs and different segments of the energy economy in terms
of how quick the impact will be but, you know, I think,
generally speaking, across the Business Council's membership
we've received about 150 different types of policy proposals
that would be helpful both in immediate relief and different
phases of economic recovery. And we've gone through and have
tried to characterize as best we could. And I would say many of
those do fit into the one- to two-year timeframe.
So we did immediate relief which are things like, as I
said, you know, looking at the laws on the books and if we need
to, for market stabilization purposes, provide a delay in a
phasedown or an extension in a deadline because those
particular policies couldn't be utilized, well then, we need to
look at that and do so quickly. That will send a very strong
signal to the market. And then, in the research, development,
and deployment arena there are different types of efforts.
There are some things where we have programs that have proven,
a proven track record or we have experience from the American
Recovery and Reinvestment Act that we can get a lot of economic
benefit and jobs quickly, but we should look at those programs
first, especially if they are under existing authority. And
then, the private sector is watching, you know, urgently with
everybody to see when it's appropriate to get moving again.
And you mentioned, of course, clean energy and the
environmental imperatives that we face. So strategic
investments across the energy sector are essential, but I'm
very appreciative of this Committee's interest in looking in
clean energy industries, in particular, as we think about the
policy landscape for economic recovery and renewal.
Senator Hirono. Is the level of funding in the American
Energy and Innovation Act--which you said that we should pass
as soon as possible--that the Senate was considering in March
sufficient given the economic crisis we now face?
Ms. Jacobson. I think the American Energy and Innovation
Act is a foundational set of policies. We know it is, you know,
the process that went into it, its strong, bipartisan support,
the breadth of technologies and industry sectors it would
impact, you know, is quite remarkable and extremely valuable at
this time. I think, you know, we're at a point now though where
whatever benchmarks we had in terms of investment, we need to
reassess given the conditions on the ground and the business
environment we're in. So I know that many of the proposals that
BCSE members have shared with me provide, you know, enhanced
and expanded investments in existing policies and programs that
work, you know, looking for ways to use the tax code to drive
market change with the private sector.
So you know, we're in a game-changing moment. And so, you
know, what we were looking at a year ago we might need to do
much more to stimulate the energy economy in the months and
years ahead.
Senator Hirono. One more question. You have called for
Congress to increase funding for LIHEAP, and we are seeing
losses at the utilities because of lower demand, et cetera, in
the commercial sector. So how high is the need among customers,
consumers, for assistance with utility bills that you and other
utility customer advocates are seeing across the country and
are there other things Congress could do besides increasing the
funding for LIHEAP? What else can we do to make it easier for
people to get help with their utility bills in addition to, as
was said, increasing the funding for LIHEAP?
Ms. Roberts. Thank you for that question.
The LIHEAP is critical for low income customers but let's
step back a second and say, what is the issue here with
customers not paying utility bills and the effect on utilities?
It's really a cashflow problem. Customers will have to pay
their utility bills. They're not being forgiven their utility
bills. There are moratoria. So we will take all the LIHEAP
money we can get and we will administer all the LIHEAP money
that you would allow. But we also need money for customers that
never were on LIHEAP, have always paid their bills and they
just aren't working now. So those are two areas that are
important.
Helping the customers also helps the utilities because it
helps their cashflow and it helps them recover from the really
high levels of arrearages they're seeing now, and I hope that
answers your question.
Senator Hirono. Thank you, Ms. Roberts.
I have two more questions that I will submit for the
record, Madam Chair.
The Chairman. Very good, thank you, Senator Hirono.
Let's turn to Senator Cassidy. I am told that your video
may or may not work, but hopefully we can hear you.
Senator Cassidy. Yes, I hope you can hear me.
The Chairman. Yes, we can.
Senator Cassidy. Can you see?
The Chairman. You are good, Bill.
Senator Cassidy. Great.
Obviously, the demand destruction that was discussed
earlier has had an incredible impact upon energy states. I am
told there has been $40 billion in capital expenditures cut
across energy businesses and in two parishes in Louisiana there
were 25,000 jobs lost related to drilling in the Outer
Continental Shelf, and I could go on.
Mr. Nalley, EIA projects demand will recover quicker than
supply but that U.S. production will decline until next spring.
How much further production does EIA forecast will be taken
offline by domestic producers, and related, which basins are
most vulnerable to further production cuts?
Mr. Nalley. I appreciate the question.
I'll have our staff get that information and get back to
you.
Senator Cassidy. Okay.
If there is a resurgence of COVID-19 cases later this year,
what impacts does EIA think that will have on crude inventories
and oil prices, assuming that the storage levels are still
higher than pre-COVID and oil prices still lower the next year?
Mr. Nalley. Alright, well, I think one of the difficulties
in the modeling forecasting of this, particularly in the short-
term, is things like that, is there a resurgence or not? And
so, you know, we're looking at all those things. Our folks are
paying attention to all the signals and using the underlying
principles of, you know, GDP and trying to make sure we build
that into our models to make sure we do the best of forecast
through next year. But there's nothing in there, in our current
forecast that has a second wave or, you know, to answer that
question.
Senator Cassidy. Well, it seems like you need to do that
sort of thing, just because all the public health folks are
saying that is a risk. I am not chiding, I am just asking,
because it does seem that would be necessary.
Another question, Mr. Nalley. The natural gas market has
not been as hard hit as the oil market, but I am told EIA still
expects natural gas production to decrease by two percent in
2020. What are your overall thoughts on the future of the gas
market and how will the decline of crude oil production affect
associated gas production? And then related to that, if there
is a decline in associated natural gas production, what will
happen to dry gas basins such as the Haynesville? Do you expect
those to increase their production? So your overall thoughts in
the future. What is the impact of decreased associated gas
production and if you see decreased associated gas production,
do you see an increase in production from dry gas basins?
Mr. Nalley. Well, we expect U.S. dry gas production to
decline on average about 87.--89.7 BCF per day in 2020 from the
2019----
Senator Cassidy. That is dry gas?
Mr. Nalley. I'm sorry?
Senator Cassidy. That is dry gas production or overall gas?
Mr. Nalley. That's dry gas.
Senator Cassidy. Gotcha.
Mr. Nalley. So what we expect, like you said, the
production declines further into 2021 to an average of about
85.4. So we can get some information back to you and your staff
about the individual areas.
Senator Cassidy. Okay.
Mr. Macchiarola, I understand there tends to be, when we
talk about offshore oil and gas production, a general breaking
in point for older versus newer offshore, deepwater wells, and
obviously that factors into the discussions of royalty relief,
et cetera. Can you comment on what those break-even points are
for older versus newer wells?
Mr. Macchiarola. Yeah, so, Senator, as a trade association
we often don't get into discussions of price, but what I can
tell you is as you, as a general matter, as you enter into more
frontier areas--the costs associated with that deepwater
production usually tend to be more costly than areas in
shallow, and then over time those costs recede. But costs in
general have a number of factors associated with the basin that
you're in, the overall cost profile that you have, the service
and supply arrangements that you have, your debt profile.
With respect to your question on royalties, though,
Senator, it's a bit tricky because on the one hand we set up
royalty relief back in a time where we wanted to enhance
production. I'm thinking of the Deep Water Royalty Relief Act
that this Committee was responsible for, in fact, and that was
a time, again, when we were trying to enhance energy production
here in the United States. Fast forward to the situation we
were in most recently, we did not want to increase
productivity, we wanted to rebalance the market. The imbalance
between demand and supply was quite significant during this
period of time. But we also recognized that producers and
operators of U.S. companies were struggling, in part because of
market conditions and in part because of oversupply activities
on the part of OPEC+ nations.
And so, I think it made a lot of sense for the Department
of the Interior to look at existing authorities that they had,
both with respect to questions of relief, as well as questions
of extensions of leases. Ultimately, as I noted at the top, we
did not advocate for royalty relief, but we appreciated the
Administration, really across the board, looking at their
existing authorities to be able to mitigate what was really an
energy crisis. I think about EPA and their fuel waivers. The
Department of Energy on the Strategic Petroleum Reserve.
Senator Cassidy. So if you could wrap up, because I know I
am way over time.
Mr. Macchiarola. Sure.
And then to your point, the Interior looking at individual
operators and their particular situation with respect to
royalties. So I thank you for your question and am happy to
follow up after the hearing as well.
Senator Cassidy. Thank you. I yield back.
The Chairman. Thank you, Senator Cassidy.
I understand that Senator McSally has asked to defer to
Senator Hoeven at this point in time. So we will go to Senator
Hoeven.
Senator Hoeven. Thank you, Madam Chairman, I appreciate it.
My first question is for Deputy Administrator Nalley, and
it is regarding the Strategic Petroleum Reserve, something I
know that our Chairman has worked very hard on through the
years. I have legislation that is both bipartisan and bicameral
that would authorize purchases by the Department of Energy for
the Strategic Petroleum Reserve. My question for Deputy
Administrator Nalley is, do you agree that filling up the
Strategic Petroleum Reserve would help alleviate some of the
supply concerns that we see right now in the oil markets?
Mr. Nalley. I'm sorry, I didn't hear the last part of the
question.
Senator Hoeven. That passing this legislation and filling
up the Strategic Petroleum Reserve would be a good idea to help
alleviate some of the supply challenges we have right now in
the energy market.
Mr. Nalley. Alright. So I would actually defer to some of
the policy parts of the Department of Energy to respond to that
question.
Senator Hoeven. Alright, then I would ask Mr. Turk that
same question, as far as his thoughts on it.
Mr. Turk. What's going on around the world is many
countries are taking advantage of the price being low to fill
up their strategic reserves and certainly companies are with
their commercial reserves. So just a few numbers for you from
other countries. For China, our implied stock calculations show
1.2 billion barrels of crude oil stocks at the end of May. This
year alone, January to May, that's 200 million barrels that
they've added. India was fortunate to have some available
strategic storage capabilities as well and their Minister just
announced that they're adding 20 million barrels to their
strategic stocks in April and May. So certainly countries are
looking at the price points and the opportunity to add to their
strategic reserves. So that's what we see internationally.
Senator Hoeven. Also, Mr. Macchiarola, your opinion on the
same question.
Mr. Macchiarola. Yeah, thanks for your question, Senator.
We thought it made a lot of sense for the Department of
Energy to cancel their planned sell during this, during the
outset of this, the COVID-19 pandemic and then put it on offer
for leasing, ultimately 23 million barrels of capacity in the
Strategic Petroleum Reserve. I believe 15 of that has already
been leased. That made a lot of sense for them to utilize their
existing authorities that the Department had and, you know, to
mitigate against what was, as I noted, a significant imbalance,
a potential real issue with respect to storage down, coming
down the pike. You know, we encourage the Department to
continue to look at this. In addition to the testimony from IEA
regarding the storage response from other countries, I do note
that this issue has been alleviated by both the storage
measures that have been taken, as well as the rebalancing of
demand over this period of time.
I appreciate your question and am happy to look at this
further as well.
Senator Hoeven. Alright. I would like to go back to Mr.
Nalley and ask about coal-fired electric capacity. Obviously we
have seen, and you project, a reduction in coal production and
usage correlating with the COVID epidemic and so forth. My
question would be, do you believe that the early closure of
coal-fired, baseload electric plants that we are seeing will
have a lasting impact on reliability in terms of the grid as
demand returns?
Mr. Nalley. So, as you said, we do show a decline and we
don't think that it will have a, sort of, an issue on, from a
reliability standpoint. There are enough things in place where
plants have to go in and get authorization to do, so we don't
think it has a long-term effect on reliability.
Senator Hoeven. Alright.
And what about the impact, as far as developing carbon
capture, an impact there? I address that one to Mr. Turk, in
our efforts to develop carbon capture technologies.
Mr. Turk. So we certainly view CCUS technology--carbon
capture, utilization and storage--as a critical technology for
the power sector but for industrial applications as well. And
we, we're very pleased to see some real momentum and progress
over the last several years and certainly a big congratulations
to those of you involved in the Senate and the 45Q legislation
which was a real bright spot for CCUS with projects coming
online and really providing an incentive in a very powerful
way.
Candidly, what we're seeing going into COVID is there are
some challenges, there are some new challenges on the CCUS
side. And it's certainly incumbent upon countries who view CCUS
as a priority and, again, we certainly do, as a critical part
of a clean energy future to take that into account as they
craft legislation and look for programs to make sure that
momentum going into the COVID crisis continues and goes forward
coming out of the crisis as well.
Senator Hoeven. And so, by developing CCUS--very important
in terms of addressing CO2, what about not only
utilizing the 45Q or 48A tax credits but what if they were to
be--funded, wouldn't that also help--carbon capture----
Mr. Turk. So certainly there's more room for creativity and
expanding, from our perspective, the 45Q legislation's reach in
a variety of different kinds of ways and from our perspective,
again, given the potential, the real potential on CCUS,
certainly, whether it's the U.S. Government or other
governments and we've heard a lot from other governments very
interested in what's going on in the U.S. on 45Q and some of
the implementation along those lines. So our hope is there's
not only creativity in expansion on the U.S. side but that
others learn from your example as well and put in place some
schemes and systems that will help CCUS along and especially
even more important now in the COVID crisis and coming out of
the COVID crisis.
Senator Hoeven. Thank you. Thank you, Madam Chairman.
The Chairman. Thank you, Senator Hoeven. I don't know if
Senator McSally is back online yet. If she is, we will turn to
you. I don't see her up on the screen yet, so I have one more
set of questions, then I think we will turn to Senator Manchin.
If Senator McSally comes in, we will move over to her.
Mr. Turk, you mentioned the role that I have, and I am very
pleased to be involved with the Global Energy Efficiency
Project through the IEA. Ms. Jacobson, you also indicate in
your testimony that it was in the energy efficiency side that
we really saw probably the most significant, in terms of job
hits out there. Ms. Jacobson, you mentioned that more can be
done with LIHEAP, particularly, that could make a difference in
how we can help with recovery efforts here on the efficiency
side. So a question to you. If there were other areas that we
might be looking to, I would pay pretty close attention to what
is going on with the Weatherization Assistance Program. So your
thoughts on what more we might be able to do. Then I would like
to turn to you, Mr. Turk, from the international perspective,
in terms of some of the areas of energy efficiency that we are
seeing reflected in other countries as they also are seeing
this impact in this COVID or post-COVID environment.
So Ms. Jacobson and then Mr. Turk.
Ms. Jacobson. Thank you and yes, unfortunately energy
efficiency workers, in particular in the residential sector,
have been among the hardest hit when it comes to U.S. energy
job losses. And in terms of the policy ideas that our members
have brought forward, they try to tackle different classes so
it might be, you know, commercial and industrial and things
that we can do at the residential level and there are different
policy tools for different outcomes that we're seeking.
But in terms of, you know, broad-based, in addition to RD&D
and, again, we've talked about the legislation that you've led,
the American Energy Innovation Act before, so in addition to
that, things like expanding state energy programs that are
administered by the state energy offices in partnership with
governors are critical. We know this works, and I'm happy to
engage with your staff with more detail. There are many
programs that can be, again, there may be current existing
authorities or in other cases, you know, we have proven results
so that we can quickly get those programs moving and that will
bring energy efficiency workers back.
You know, there was an initiative that's a relatively new
proposal but builds on that model that tries to address
critical infrastructure in buildings but also takes advantage
of public-private partnerships. And I think no matter what we
do with federal dollars, we need to be looking either directly
or indirectly to be leveraging private capital. So I encourage
that. There are also small business retrofit programs in the
efficiency sector that are being considered. So there's a--and
then finally the tax code. I mentioned one, just one, of many
tax provisions that industry feels would help get energy
efficiency workers back on the job.
The Chairman. Great. Thank you.
Mr. Turk, your comments?
Mr. Turk. Well, first, Madam Chairman, let me certainly
reiterate our thanks from the IEA side for your leading role in
the Commission on Urgent Action for Energy Efficiency. And as
you know the recommendations from that Commission are coming
out next week. So we very much hope that those high level,
actionable recommendations that you and your other members of
the Commission put together are incredibly helpful here, and I
think incredibly timely report to come out.
Secondly, as you also know and I think others, members of
the Committee, certainly globally we weren't doing as well on
efficiency as we should have been going into the crisis. The
efficiency improvements, our economy globally is still getting
more efficient but it's not nearly at the rate we were
improving just a few years ago. So we had some efficiency
challenges going into the crisis and we're seeing some
challenges, as I said, on the investment side, 10 to 15 percent
less investment in energy efficiency we're expecting this year
in 2020 because of the COVID crisis. Now the good news here is
exactly what my fellow panelist just said, certainly with
stimulus programs, economic recovery programs. And when I use
that term, I don't just mean our country is going to do one
stimulus program and move on. It's all the related legislation,
the tax legislation, procurement, all the other kinds of
things, including in your excellent American Energy Innovation
Act. But energy efficiency has a huge number of jobs associated
with it and done right, especially building up and scaling up
existing programs, can be hugely beneficial, especially on the
jobs front, but the economic growth and then building toward
the energy future we all want.
One area in particular is certainly buildings. Buildings
have a huge amount of improvement. We have made improvement
over years, but there's a whole lot more improvement and
potential there, very cost-effectively. So there's a real
opportunity to scale up those efforts, in particular.
Thank you.
The Chairman. Great. Thank you for that.
I have one final question here, and this is directed to
both you, Mr. Nalley, and Mr. Turk. We have thrown some numbers
out here and some percent of decline and some projections out
there, but we recognize that the EIA and the IEA, you know, you
come before this Committee quite frequently because the work
that you do is really key to us understanding our global energy
markets. It has been noted that there are, oftentimes,
differences between the estimates, for instance, for declining
U.S. oil production that are published in your respective
agencies. The question is, what explains the differences
between such estimates and what is the limitation in terms of
the data that is available to you, specifically on the question
of U.S. oil production declines?
Mr. Nalley, if you want to take it first?
Mr. Nalley. Well, I'd, I think we would actually have to
get back to you, Senator, with the comparison of those numbers.
I know IEA issued a report today in trying to take a look at
those and what the differences are and particularly in those
areas.
The Chairman. And as to limitations in any data that you
might have available to you, is that something that the
Committee needs to be aware of or working on?
Mr. Nalley. I don't think there's any limitations currently
in comparison of the IEA's data, no.
The Chairman. Okay.
Mr. Turk, your comments?
Mr. Turk. Well, first of all, let me certainly emphasize
that we have a huge amount of respect for EIA. I worked at the
Department of Energy for several years before taking up this
post at the International Energy Agency, and our acronyms are
quite similar and usually our data is very similar as well.
There are some differences as you said, Madam Chair, Chairman,
including our estimates for oil being slightly greater declines
in 2020 compared to the EIA data. And when we look at the
numbers, the real difference there in the forecast can be
explained by various assumptions that we use, and EIA uses, on
timing of the reversal of production, shut-ins, as well as
investment levels and drilling completion activity going
forward. So there are some differences there as we look at the
numbers and crunch the numbers respectively.
To your second question on the limitations in the data,
coming from the U.S. side, the official consolidated monthly
data for U.S. production is currently available only through
March and certainly March was a long time ago. March seems like
several lifetimes ago during this pandemic, at least to me, it
certainly does and certainly one part of that is the complex
nature of the U.S. oil landscape. So you've got numerous
upstream, downstream, midstream players, expensive inter-
regional, international trade so the production estimates are
certainly challenging, but certainly from our end, we're a data
and a numbers organization, as you know, from the many times
Dr. Birol has testified before your Committee and the better
numbers, the more timely numbers policymakers can then base
better decision-making on.
So we'll continue to work with our EIA colleagues certainly
and more than happy to continue being as helpful as we can to
this Committee, in particular.
The Chairman. Thank you, Mr. Turk, for your very helpful
response there.
Let me turn to Senator Manchin for any final questions that
he might have.
Senator Manchin. I just have one question, and this is to
Mr. Turk or Mr. Nalley.
Since nuclear power plants are still operating, the need to
refuel these plants has not gone away. Refueling takes place
about every 18 months and requires temporary crews of about
1,000 traveling contract workers. Nuclear power plants in the
U.S. have been taking steps to mitigate risks for their
permanent staff by halting travel, expanding telework,
canceling events and testing essential staff for Coronavirus.
But for refuels, temporary contractor workers must work onsite
and often perform functions that require close proximity to
others. So my question would be what actions are other
countries taking to mitigate risk associated with nuclear power
plant refueling operations and have you seen any differences
between countries, how they have safely dealt with refueling
operations, particularly practices that appear to be working
very well and being very effective?
So Mr. Turk, if you might want to take that first?
Mr. Turk. Thank you very much, Ranking Member Manchin, and
certainly I know my boss, our Executive Director, Dr. Fatih
Birol, enjoys his conversations with you as he enjoys his
conversations with the Chairman as well. So whatever we can do
to help you and your staff going forward, we're here for you.
As we look at nuclear, we put out a piece not too long ago,
in fact, just a week ago, last week, last Friday. Nuclear
plants are performing quite well during the lockdowns from an
operational viewpoint around the world. They have provided that
electricity, that baseload electricity, the electricity that's
so important for the medical responses, so important for
teleworking, so important for this video conference capability
as well. So from an operational standpoint, nuclear has
performed quite well.
The issue that we're particularly worried about and we've
done some significant analysis of this last year and we're
looking into this further as well, is really the decision of
advanced economies for lifetime extensions. And I'll just leave
you with one data point on that front. Without the investment
to extend the life of the existing fleet, our analysis shows as
much as two-thirds of nuclear power capacity in advanced
economies could be gone by 2040. So that's a huge amount of
baseload power, huge amount of carbon, low-carbon, carbon-free,
baseload power as well and something that we've tried to bring
attention to also.
Senator Manchin. Mr. Nalley, if you have anything else?
Mr. Nalley. I don't have anything else to add. I mean, we
can take a look and we would be happy to work with your office
and your staff to----
Senator Manchin. Anything you can supply to us or give us
information on what is happening around the world, we would be
very much interested in and very helpful.
Mr. Nalley. We certainly will.
Senator Manchin. Thank you so much. Thank you all for your
appearances today and your testimonies. Thank you.
The Chairman. Thank you, Senator Manchin.
I want to thank our witnesses. I think that this has been a
good hearing. We had good input from members and good input
from our witnesses.
Mr. Nalley, you have indicated that you have some responses
that you will get back to colleagues. We will look forward to
that. I know several have asked that questions be submitted for
the record, so we will await those responses as well.
But know that as we move forward here in the Congress in
addressing what this next round of relief might look like, the
efforts to stimulate the economy and allow us to move to a more
robust and healthier environment, we need everybody
participating in this. So having this discussion, not only
about the numbers, but what is happening in the industry and,
certainly, the consumer view, has been good input for the
Committee here this morning.
I appreciate all that you have provided us and thank you
for the contributions.
With that, the Committee stands adjourned.
[Whereupon, at 12:03 p.m. the hearing was adjourned.]
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