areas of how we get there. to be successful we'll have to work together to improve infrastructure, to modernize and secure our grid, and to prepare for the widespread electrification of the transportation sector. we're facing some of the biggest challenges of our time, and one industry, one technology, can't tackle all those challenges alone. it's simply not realistic. that's why tom and i have decided to call it aggressive collaboration. it's about creating intentional solutions so we can all benefit. the partnerships we're forming now will help change the conditions and marketplaces we need to transform the energy landscape. the conversation isn't just about a wholesale replacement but a major upgrade where literally everyone in this room has a role to play. there are so many opportunities to prosper in the solar decade. making sure industries have the tools to meet the challenges head on. one of the important ones for us

is the workforce. we're going to create -- we have already created hundreds of thousands of jobs and we'll need skilled workers to continue to enter the industry. it's also our opportunity to make sure that all americans regardless of -- >> we'll leave these earlier remarks from the u.s. energy association conference to return to live coverage now. this is live on c-span3. [ applause ] >> thank you. thank you, barry, for inviting me, and more importantly, thank you for where i fall on the agenda, which is if i had to follow the piece de resistance, tom kuhne, i'm not sure how sheila would have introduced me. i'm grateful i'm here with you after lunch. i'm going to look for a clicker somewhere. here it is. this is a really exciting time

to be in the energy industry, as tom said. it's particularly really interesting to be the new leader of the american gas association, an opportunity for which i'm very grateful. we had tremendous potential. we have a lot of work to do. we have a lot of challenges ahead of us. but we have an incredible story to tell. and that's what i'm going to share with you this afternoon, now that i've moved to the afternoon to get away from tom. first of all let's just talk about supply. if you look at that graph, you can see supply increasing quite dramatically in recent years, obviously brought about through innovation and technology. the potential gas committee which reports on our reserves, our technologically recoverable reserves, issues a report every two years. they released their report at aga sometime in the middle of 2018. since they lasted reported in 2016, reserves have gone up 20%. i asked the lead author out of

the colorado school of mines, when you're back here at aj in two years, what do you think you'll tell us? he says, one thing i'm definitely going to tell what you it's definitely going to continue to increase. i can't tell you how much because we have so many places left to look. from a supply question, that's certainly different from when i was at the department of energy back in the second term of the bush administration when we were living under a time of scarcity and looking for natural gas and all kinds of corners in the world and every place you will never go on vacation. and we were looking to expedite the import infrastructure and make new friends. now we're exporting to our allies and turning around that inasmuch as t infrastructure. you look at that map, where there's significant growth, the marcellus, the utica, and a place that was really striving for needed economic development, and natural gas is delivering on that promise, all across towns and cities in ohio and

pennsylvania, west virginia, that had previously relied on the steel industry and sometimes the coal industry and now they have a completely new set of opportunities. so supply is not the problem. productions is not the problem. if you look at every year, over the past four or five years, production continues to creep up. we're producing, as everybody has talked about earlier this morning, more than we ever have before. that gray band, where we were in 2009 to 2016, so the dramatic increase in production is just incontrovertible. if you're not producing the gas, you're part of the supply chain. overall the natural gas industry today supports 4.1 million jobs in this country. and of course we're consuming more than we ever have before. today, the natural gas industry, the ldcs that i represent, we supply natural gas to 179 million americans in their home. think about that number.

that's more people than voted in the last election for both candidates combined. so if you don't think we have a constituency, you're wrong. go to any one of those 179 to try to take away their gas, they'll come at you with something fairly pointed. but we're not stopping at 179 million americans. we add a new customer every in my opinion of every day. so those that would like to write the obituary of natural gas just fundamentally don't understand the practical realities of how vast we are, how many people we serve, and the network that we have to deliver this every day. so where is the growth coming from? certainly we're seeing growth in the industrial sector, in the residential sector it's fairly flat, that's actually a good story. i'll talk to you about that in just a couple of minutes. the power sector, the industrial sector is seeing tremendous growth. prices, for any of you that have

natural gas in your house, you probably rejoice every time you get your utility bill. prices are low and because of abundant supply, they'll remain low. that has challenged some of my colleagues in the room, that low price is making us very attractive for power and other industries that rely on us for feedstock, but for the american consumer that's a very good story. by the way, look at those prices up there, again, that gray area of where we used to be. when i think back to 2005, when hurricanes katrina and rita hit the gulf of mexico, of course we saw a spike in gasoline prices but we were able to release oil onto the market and by the time the holidays came around in december, those gasoline prices had come down. my problem, our problem, america's problem, was natural gas. we had no new supply.

we could see cargos turning around and going back to europe which was experiencing a significant drought and they needed to rely on natural gas and we couldn't afford the prices. they were of course price insensitive. we're looking at natural gas prices going up to 7, 8, 12, 13, 14, and that was a shock to the system and we had run out of options. and of course today look where prices are, and we don't see the volatility that is so unsettling to the u.s. economy that is humming along on the foundation of america's energy renaissance and the volatility is ensuring that that growth can continue at a predictable pace because as we like to say, natural gas is now a foundational fuel for this economy and we intend for us to continue to help this economy thrive. it's also good for the american consumer, homes are saving about

$875 on an annual basis. what does that mean? it means that they have choice. they have choice of were to put that savings. they can invest it, save it, go by things which is further stimulative to our economy. natural gas is popular with the consumers, because we're providing them a very affordable fuel source. of course businesses as well that use natural gas as their source of electricity or feedstock are saving a lot of money. since 2009, in the last ten years, american businesses have saved about $120 billion which they can choose to invest in growth in their employees, their technology, all the things that are making this economy hum. of course you all know we're exporting natural gas. i was looking under every rock in every country to import more natural gas. as the shale revolution began to get going, now we're seeing of course we are now exporting gas

to close to 40 countries around the world. we shouldn't underestimate the importance of that. sure, it has an economic benefit to us, it has an environmental, huge benefit to us where we're exporting around the world, that they have a choice of clean natural gas during other dirty fuels they've previously relied upon. there's an int tatangible which every molecule that we sell to one of our allies around the world is a molecule not supplied by president putin or the mullahs of iran. that weakens their power and strengthens our power and it's an important component of how we think about natural gas and our energy markets and our energy position as a country overall. that export of natural gas and of course we're exporting oil as well, we've been exporting refined product for quite some time, that's a really important part of strengthening, to use

tom's word, america's strength. we're a strong and clean american power and that's going to continue to have new dimensions in terms of strength. we have a huge opportunity to be a bigger part of making the energy landscape around the world stronger, cleaner, more reliable and more democratic, small "d," with our molecules going forward. we've seen coal retirements, our friend from mma, i don't know if he's gone, he says, "i don't know if i can sit through your presentation." if you look at this, the dramatic shift is a story with three legs. it is more natural gas, it has enabled more renewable energy and everything has improved because of energy efficiency. all of that has contributed to a more diversified electric sector, one that is now

increasingly cleaner, more reliable, and definitely more energy efficient, and that is doing a tremendous amount to lower our carbon footprint of the electric sector that tom has talked about. it is really quite a compelling story as we look going forward. if we look at emissions, we know that our co2 emissions are now at almost a 27-year low. we look at how our emissions are arrayed. if we look at commercial and residential emissions they total about 7%. i'm intrigued by this ongoing debate that we should electrify everything. tom and i talk about this a lot, electrification makes sense. in some places it doesn't make sense in other places. to give you a sense, if we were to electrify the entire residential sector, so we were to take the methane and the co2 emissions from every home that uses natural gas and electrify it, we would be removing the

emissions that's the equivalent of two weeks of coal generation in china. so if we're trying to scratch an itch of removing emissions, we should start look at this much more holistically. and that's the conversation we like to have with policymakers, that we want to be part of the solution but we're not the only solution. we have to look at this, the transportation sector and other parts. but we are committed, we are all in in reducing our emissions. you can look at that. obviously this is the trend, and we're seeing ourselves down at 27-year lows from the energy sector, as i mentioned. i think it's really important, we hear from our customers, woe want to reduce our carbon footprint, we want to be a bigger part of the clean energy future. my answer to them is, you can, you are, you have been and you will be. we have been able to help our customers, our users, our homes, our businesses, reduce their

carbon footprint in half. and they don't know that. so we have to do a better job of helping them understand the progress that we have made, and they should be proud of that, and the opportunities to continue to bend that curve down through investments in innovation and technology, modernizing our infrastructure, and becoming more energy efficient. so if we look at this, this is the amount of money that the distribution utilities put into energy efficiency. it's about 1.3 billion with a "b" every year. that's not an insignificant amount of money. and you can look at that significant uptick in 2018 and we're forecasting that uptick to continue. on the right hand part of that slide, it's the number of users, so that's the increase in consumption, but that purple line shows the amount of consumption per user, which is fairly flat. so those efficiency investments on the left hand part of that

slide are paying off directly to the right hand part of that slide. more users, more efficient, flat demand, we think that's a good story and that we're button onning down our settlements, we're helping the customer be more efficient, we're providing tighter envelopes, we're applying appliances and allowing them to be an increasingly bigger part of our clean energy future. and we're dealing with methane. since 1990, the methane emissions from the distribution utilities have gone down 73%. what is that mainly due to? it's mainly due to the amount of pipeline we replaced. last year we replaced 18,000 miles of pipeline. we have 42 states that have accelerated programs for us to continue and expand and accelerate our replacement of old pipe, some of which has been

in the ground for decades. we're replacing it with first class modern infrastructure with detection systems brought about by innovation and technology. we invested $30 billion last year in new pipelines. so the 2.6 million miles of pipeline is slowly and increasingly faster, being replaced over time with today's modern pipe with modern detection systems, allowing us to further reduce our methane emissions. and we're not content to stop there. we're going to continue to do that, now we're working with don's group, you're going to hear from don next, and inga, on the interstate pipelines. we heard from mike this morning at api, going upstream and finding ways to systematize how we report on methane and demonstrate not only commitment to doing it but progress in achieving it. so our board just unanimously

proofed a new set of climate commitments. this may be new to many of you in the room. we do have hard copies of this. our industry came together and said we've led, but it's not enough. we're prepared to do more. we're prepared to go above and beyond the expectations. so they've committed to ten new commitments for climate to reduce emissions and then they put forward a recommendation for policymakers of eight principles if we're going to take this on at a federal level. so principals for policy action. we're quite proud of these climate commitments. it was a unanimous vote from the board which shows how committed they are and three of the ten commitments directly address how we're going to further reduce, not status quo but further reduce co2 emissions, methane emissions, and enable the entire system to be far more efficient. so on safety, that's job number one for this industry. we're in people's homes and

businesses and industrial facilities. and so if we don't make that job number one, everything almost doesn't matter. so we've stepped it up. we're now investing $1,000 every second of every day, 365, 24/7, on improving the safety of our systems. that's not just the replacing pipe. it's about first in class drones, ai, big data, predictive of where there might be a problem, we get there first. so safety has really evolved. and it includes additional investments in cybersecurity because that's part of safety as well. we are now, aga is running the downstream natural gas intelligence sharing center. we work very closely with the electric sector. but we just replaced the entire regulatory platform with a first in class virtual data platform where if you're walking down the street and you see something, you can report it, where is before you actually had to be sitting at your desktop to report something. and how often are the people

that are involved in our systems sitting at a desktop? not very often. we've seen the reporting go up 800-fold so we can be smarter and better at looking at things that can jeopardize our system. so let me close with where mike closed his discussion this morning, is that we believe that natural gas is a huge part of our future. the numbers prove it. the forecasts prove it. we believe it is incredible important for a clean energy future. we're integral to it, we're vital to it. but just as importantly, we are a big part of solving the energy trilemma. we define the energy trilemma slightly different. let me see if i can trademark this, but energy stability, energy sustainability, energy afsh

affordability, and the characteristics of what we deliver to those 179 million americans is what we're about. safety first, getting cleaner, being a bigger part of the future and working across the entire supply chain. so our industry is up to it. we like to talk at our board meetings, we talk about we're going above and beyond, and we're on it. so with that i will turn it over to alan. thank you. [ applause ] >> i'll see if there's maybe a question. >> okay. >> i'll refrain from asking any questions just to get us back on track. but if anyone has a question they're burning to ask, please do so. all right. thank you. [ applause ] our next speaker is don santa, president and ceo of the interstate natural gas association of america, an association focused on gas

pipelines. he's headed inga since 2003. in government, he has been a commissioner at the federal energy regulatory commission and a majority counsel for the senate energy and natural resources committee. between the government posts and inga, he worked for a kentucky utility and was a partner in the law firm troutman sanders. his association members may run into a wee bit of litigation now and then over the natural gas pipelines. but there are regulatory initiatives that could address some of those points of conflict. here is don santa. [ applause ] >> great. well, thank you, alan, for the introduction and thanks to barry for the opportunity once again to speak at the usea state of the industry forum.

and, you know, i think the theme of the day has been that it's a remarkable time across the board for u.s. energy. as we think about the combination of our resource base and technology and what has happened with oil and natural gas production, in terms of renewables, what's happening on batteries across the board, the combination i think of technology and innovation, and free markets, is doing wonderful things for u.s. energy and, quite frankly, for global energy. on the natural gas front, you just heard from our good present karen harbor. i think what's interesting is, a lot of what you're going to hear from me, and my guess as too what you'll hear from dina and charlie in the next segment, is very similar. as i look out at the audience, and i know who you are, there are certain people here that your first exposure to the natural gas industry is when we were fighting like cats and dogs

against each other rather than working together. so that's been a remarkable transformation. one of the things i think that has changed is that we're not only talking about natural gas in the context of the united states or north america. we're talking about it globally. one-third of global demand for natural gas through 2040. if you think about the fact that there are 850 million people globally who still lack electricity it's a tremendous opportunity for the u.s. natural gas abundance to contribute to solving that energy poverty issue, in a clean way, and in a way, as karen said, that has multiple benefits for the united states. and also, while on the topic of energy poverty, let's remember, there still are some communities in the united states that are not served with natural gas. and that's an important point in terms of the continued need to expand our natural gas

infrastructure and also, as karen said, the ability to utilize new technology to provide the most efficient gas appliances for consumers. here in the u.s., naturalism gas now counts for 31% of our domestic energy consumption and 35% of the electric generation portfolio, which is a dramatic shift. karen also talked about the dramatic increase in natural gas production. and i looked at it in a slightly different way. you know, for those of us who have been part of or exposed to the industry for quite a while, you may recall that in the mid-1980s, marketable natural gas production in the united states dropped to about 16.9 trillion cubic feet. i think that's probably the 50-year low of marketed natural gas production. in 2018, that number had jumped up to 32.8 trillion cubic feet. think about it, you're doubling.

and as karen said, no end in sight. i think that also, you know, highlights what's important for inga and our members, which is natural gas infrastructure and in particular, transmission pipelines and storage, which are really the key to taking advantage of that natural gas abundance. while we've all got a stake in this, i would say the role of pipelines and the ability to expand pipelines on a predictable basis is a lot of what has enabled us to take advantage of the energy abundance. if you think about it, you've got pipeline constraints, whether it's upstream or downstream, upstream it means the producer has got to accept the lower price and less incentive to produce. downstream it means consumers are paying much more for their energy than they otherwise need to. so there are clear benefits to having an adequate, robust pipeline infrastructure that can respond to market demand. let me now shift to methane and climate change. and the slide features some of

the leaders of the house energy and commerce committee. and we know that earlier this year, the majority on the committee produced their climate framework as a result of some of the outreach that they did last fall. and one of the points that i want to make here is that often, the choice is posed as natural gas or renewables. and i've got to tell you, that's not the answer. the answer is natural gas and renewables, both as you look at the role that natural gas has already played in terms of reducing emissions, and if you look at that complementary role that gas and gas-fired generation can play along with renewables, i think that there is a huge role for natural gas here in terms of providing a cost effective way to integrate more renewables into our system. and then also to pick up on the point that karen made, as we look at downstream, and we look at residential and commercial and industrial consumers, rather

than looking at displacing natural gas, let's look at how we can utilize technology to consume gas more efficiently and achieve our goals and at the same time take advantage of that tremendously robust infrastructure that we've got in this nation and i think is one of our huge advantages. with regard to inga's members and methane, like other associations, our board has made a commitment with regard to methane commission's reductions. our members are participating in a number of the industry efforts, whether it be one future, whether it be epa's natural gas star program, and also the fact that due to the overlap of membership, a lot of our member companies participated in the eeiaga natural gas standibility initiative. on that i have to compliment aga and eei in that they reached out to us at a technical level so we could provide input in terms of how could these measures be

applied and developed to be applicable to natural gas transmission pipelines. i agree with karen that we're moving toward coming up with a common metric that i think will put us in a much better place to document what we are doing, show that we're true on this commitment, and set goals for ourselves going forward. one statistic, to illustrate what has happened on the natural gas transmission pipeline side, if you look at average methane emissions from natural gas compressor stations, between 2011 and 2017, think about it, a relatively short span, they've dropped by 23%. and so i think there are real, tangible benefits here that we can point to. i think one of the things we need to do is pick up on how can we communicate that more effectively in terms of making it relevant, because think about it, the average consumer out there, if you say to them emissions from a natural gas compressor station, they'll say,

a what? we've got to work on how can you turn that into something that somebody's going to look like and say, okay, that's the equivalent of taking that many vehicles off the road or that's the equivalent of planting that many trees or whatever, that will are actually bring it home to people what we have done and what we can do. let me now turn to the natural gas act. the natural gas act of course, as some of you know, is really kind of the holy grail for us. that's the statute under which ferc authorizes the construction of pipelines, the statute under which ferc regulates interstate natural gas pipelines in terms of the rates and conditions of service. there are some in congress who have started to raise questions about the gas act, and in fact have introduced pieces of legislation to examine pieces of it. i think it is very, very important for all of us in the gas space, when i talk about all of us coming together, to defend that statutory structure because of what it has done and what it

has enabled. the gas act is very interesting, it's a new deal era statute. it tends to speak in very broad terms. and part of the beauty of it is it has provided ferc with the ability, operating within that framework, to adapt its regulatory program to the dramatic changes that we've seen in this industry. when the wall was enacted in 1938 and some of the amendments that came afterwards, nobody was thinking about open access transportation. nobody was thinking about the shale boom. nobody was thinking about this. but that framework and providing ferc with the flexibility to exercise discretion has enabled us to adapt so much. this is being questioned, quite frankly, it hasn't been looked at for a long time. we need to go back to the basics, that this framework has served us very well and can continue to serve us very well in the future. for example, there is a bill that's introduced by representative custer of new

hampshire, and it was researched in t referenced in the energy and commerce framework that would take the eminent domain provision of the gas act and say eminent domain couldn't be used on a land that's owned by a municipality, a nonprofit like a land trust, or that is somehow transferred to them via a conservation ieasement. think about how insidious in terms of, ferc does all the right things, looks at alternatives, considers the environmental impacts, landowner impacts, somebody along the route says, let me give a conservation easement to the land trust, go and reroute the pipeline. pick the second best route. what happens then? trumped by that. this is insidious, could do a lot of damage. it highlights the importance of us educating the congress and taking them back to the value of this statutory framework and why it has done so much for us and

why it can continue to do good things for us as we address the next round of energy challenges. let me now shift to pipeline safety, to pick up on another point that karen made. like the gas distribution utilities for the interstate pipeline companies, safety is priority one. it is part of our social license to do business. and we are very much committed to it, that we are committed to the goal of zero pipeline incidents. will we ever get there? i hope we do. but the point is we should be committed to getting to that perfect level rather than accepting something that is less. and also we're very committed to employing technologies and new engineering practices to make our pipeline safer and to avoid incidents. and it's very important that the pipeline safety rules that we've to adhere to, and for the interstate -- for the natural gas transmission pipelines it's the fimsa rules, enable us to

incorporate new technologies and engineering practices into what we do, because there are parts of the pipeline safety regulations that effectively have not been touched since they were first put in place in 1970. so that needs to be updated. my hats off to the reporters at pipeline and hazards safety administration for completing the long awaited natural gas transmission rule last fall, for recently announcing they have completed the storage rule, and also several other rulemakings that i think we're going to see this year. i think that skip elliott and his team at fimsa have done a great job and deserve to be recognized for it. we also have the pipeline safety act reauthorization pending this year. pipeline safety act historically is reauthorized pretty much by acclaim. it tends to -- you know, pipeline safety is bipartisan. we find that the various stakeholders are able to come together on a consensus bill. we hope we can get there this year although it has become

somewhat more partisan. one of the issues that has crept into it, and i think this is indicative of how these issues are cross-cutting, is the methane issue. i have to say, we have to keep our eyes on the ball that this is a pipeline safety bill. there are things that can be done within the context of pipeline safety that can reduce methane emissions and we're certainly committed to doing that. however we don't want this to become an environmental regulatory bill where we lose that focus on pipeline safety. and i think that when things settle down, we will get there. i think that it may take a little bit more time this go-round, that we're actually going to co eventually going to come to that support and do the right thing for pipeline safety. final thing i want to talk about is cyber and physical security. another issue that karen touched upon. and of course this also affects the whole resilience discussion in terms of the resilience of

the gas delivery system, and of course the interconnectedness of it with our electric system. i think it's important, whether you're looking at this from the context of where does the federal -- current federal oversight framework go or for that matter, should congress choose to weigh into it, to avoid overly prescriptive solutions, that given the nature of the threats we deal with here, given how rapidly they evolve, we want to have something that people are not looking in the rearview mirror towards compliance but rather are looking forward towards what they can do to deal with threats. we believe that a well-managed oversight program, structured oversight program can be very effective in mitigating the risks to the pipeline industry by providing flexibility and the ability to rapidly update our practices. and also we are very focused on this interconnectedness with the

power industry. as a matter of fact, last november, during the new york ridex, there was unprecedented participation by the natural gas industry in that. i have to take my hats off to nerc here, it went back to the inception of the exercise, there was a recognition that in the scenarios that were put forth for the tabletop exercise, you ought to recognize the natural gas component and design that in. and then also in both the distributed play exercise and in the executive tabletop that i participated in along with some others that are here in the room, natural gas was a big part of it and also we had a strong participation by members of inga, by some from aga, i know that karen was there for it, and i thought it was a very, very good experience in terms of opening our eyes to some things and at the same time i think on the part of both the electric power industry and on the part of those in the federal government dealing with this, recognizing some of the unique

features of the natural gas system and that that needed to be recognized there. and the effort continues. there are followups to the gridx. here is a term i hadn't heard before in the next a couple of weeks, nerk will be doing a hot wash of the gridx exercise to go back and say, what were the lessons learned and what are we going to do on that? so i think we're very committed to following this through. we recognize that it is very, very important. and i think it's another indication of how, while we represent different segments of the energy industry, we recognize our interconnectedness and are working together. so with that, let me conclude. i think we've got great opportunities, given our abundance of energy and particularly given what natural gas can do to be part of the answers to our energy challenges and our environmental challenges. we also have some challenges to address. and also i think one point that i think has become increasingly apparent to us, as natural gas has become a bigger part of the

broader energy and environmental discussion, we need to do a better job educating about what we do and also putting it in terms that i think become very, very relevant to people. that's something that we and other segments of the industry are very committed to. so with that, thank you very, very much for your attention and thanks again to barry for the opportunity to be here on behalf of inga. [ applause ] >> anyone with any questions for mr. santa about the interstate pipeline business? >> hi. don, hi. great remarks, thank you very much. i wanted to ask you if you could expand on one of the comments you made with regard to the challenges that we see to pipelines, you used the word "insidious" at one point about some of the challenges. so when you think about the atlantic coast pipeline, when

you think about the pipelines not get to go new england from the marcellus, et cetera, what is the best way, how do we chief the right balance between the concerns of environmental and other -- the many more stakeholder groups now and the legitimate needs and the benefits of gas, how do we -- is there a specific ferc or congressional actions that you would endorse or that we could undertake to get that balance right? >> yeah, i'm not sure there's anything, you know, specific. i don't think there's any kind of a rifle shot or a silver bullet answer here. i do think that we need to engage those who are the beneficiaries of the increased natural gas supply and the infrastructure more in that conversation from the very outset, both in terms of the conversation at the national level but also in terms of particular facilities. i think that we need to do everything we can, rebuild faith in the integrity of the system.

if you think about ferc and you think about all that the commission looks at and considers in connection with a certificate application, and the lengths that are gone to to achieve a balance and the reroutings to achieve that balance, i think that's something for most folks, particularly those outside this room who don't deal with it on a regular basis, don't fully appreciate. rather, what they will hear will be an activist group saying ferc is a rubber stamp when in fact it's the farthest thing from that. we need to build alliances with others to make the case that natural gas is part of the answer. some of it came back to that point that i made earlier about the point of this, not natural gas or renewables, it's natural gas and renewables. it would be great if we could have a conversation with other

segments of the industry to stress that complementary nature of what we do in terms of, it's working together and capitalizing on the advantages of each of our forms of energy, we probably can come up with the most efficient, least cost solutions to tackling these problems. great. thank you very much. [ applause ] >> let me introduce two people who will then join me up here. one is dina wiggins, president and ceo of the natural gas supply association, a job she's held since 2014. prior to her ngsa post she was a partner in law firm ballard spahr and served as general counsel to the process gas consumers group, a trade association of industrial natural gas consumers. her legal practice has included much involvement in the natural gas rulemakings of the federal

agency regulatory commission over the past 20 years. charlie reddel is executive, it of the center for liquified natural gas as well as a vice president of ngsa. the center for lng advocates for the lng industry which in recent years is especially focused on exports although lng has a growing role in transportation. prior, he worked at america's natural gas alliance and at a large production company. >> karen, what did you do with the clicker? did you take it? [ laughter ] >> let me get started with the quick question here, natural gas supply business in the united states has been evolving rapidly since the shale revolution.

basically that only got started in the late 1990s, which is not far for a basic industry. how has that sort of reshaped the industry to a fair extent? and how sustainable is that, so much rapid change. one would expect a pause just to catch your breath now and then. >> it's interesting, karen talked about the supply picture. i think the numbers are out there. i don't think it's a big surprise to everyone, but as you mentioned, a number of years ago, the early days of the shale revolution, i was representing industrial manufacturing companies, a lot of whom rely heavily on natural gas. and the producers were telling us about the shale revolution. and a lot of my member companies were skeptical, shall we put that politely, and saying, okay, but we've seen these prices go up and down, and we've seen $15 gas, and it comes back down for a little while, then it goes back up.

they really didn't believe what producers at the time were telling them. i think even the manufacturing companies get it now, that we have been in this world for long enough that we have seen what the reserves are. karen mentioned it, you talk about talking with someone with the potential gas committee. i remember in 2003 i was working on the npc study. at that time the answer to how to supply this country with natural gas was imports, that's how we were going to get the gas we needed. when you look at that chart, you see what the shale revolution has brought to this country, it's really remarkable. and when i talk to people in our member companies, they talk about the technological advances. and there might be something new that they're working on today, but they really believe in the promise of continued

technological advances. these numbers are not static. no one knows what they're going to be the next time the gas committee does their analysis. but everyone expects these numbers to continue to increase. and it really is, as others have said, it's a remarkable story for the american consumer, because it does mean american affordable natural gas. >> part of the story is expanding markets as well. we're now especially using lng for that. the united states now has six operating lng export facilities. the last two started up in the last month. now, that's a bit of a challenge for competing overseas, right? you've got countries like qatar and australia, who are big time competitors in that. but how is that developing, that business of finding those markets? >> great question. there is a global supply race under way. when i talk about lng, it's on a

global level, it's not domestic anymore. you're spot on, australia, qatar, other countries, are working hard to also expand. if you look at sort of the progress that we've made, first export of natural gas in 2016, with one facility, to now six in four years' time, really less than four years' time, we're coming up on their fourth anniversary of their first export, two more new projects under construction, six additional expansions under way. we have a little additional buildouts still to come. you sort of hear lng talked about in waves. the first wave of six projects is where we were all projecting it would be, right about on schedule as to where we expected the first six projects across the first four years. the interesting thing, we'll see what happens in the next four years. we know that almost every one of those six projects that are under construction with the

exception of cooks point project has already taken on some sort of expansion in capacity to produce more lng in those facilities. so the race is absolutely on. you sort of see the continued approval process happening here of projects that are in the queue, receiving their permits and continuing to move on. and don and karen touched on it in their remarks. and what that means in a market opportunity for producers here, but also the impact that it has on emerging countries that are looking to ramp up their use of gas. >> and let's not forget mexico. >> that's right. >> lng exports gets quite a bit of attention, but our exports by pipeline to mexico are also increasing. i think this year, the -- don't hold me to the number but it's somewhere in the five to six bcf range, more like six, that we're expecting to export to mexico. that's another emerging market. because of the abundant supply, we have more than enough gas. our producers' problem right now is what are we going to do with

all this gas we're producing. record production this year is expected, 92 bcf a day. what are we going to do with it? we needs markets. there is lots of natural gas. >> that's an important point. we look at lng, we hear about how much volume there is and how much are we actually going to export. the six projects represent about 7 bcf a day. we're prouducing 92 bcf. it's important to put it in the context of how much that represents. >> that percentage ought to put to rest any fears, if they are left, that it would have any noteworthy harmful impact on domestic prices. >> i would certainly hope so. i'm hoping that is the conversation that we have had and have and have put to bed, just because of the robust supply picture. and australia just pointed out, it's growing, but it's still

overall a relatively small slice. >> the price of gas. >> right, exactly. all you have to do is look at the price of gas. to be perfectly honest, i think a lot of our gas producers would be a lot happier if the price were just a little bit higher. i'm not going to talk about what that ought to be or anything like that. but it is a good story for the american consumer. despite the low prices, i'm sure a lot of you have been in this business long enough to remember the conversations about how low could it go in order to stop the pull on production. and the prices have continued to go down. and the production has gone up. and let me just put one slide up there that will show that production has grown 86% since 2005, and prices have declined 240%. and i have to tell you that when our economists gave me that number, i said, that can't be right, that's crazy, that just no sense.

so she went back and did it again. and yes, she tells me that's the right number. i think that's stunning. >> and it's basic commodity market dynamics that sometimes supply will get ahead of the markets but then the markets grow and catch up. >> right, right, exactly. and the other important part of this i think is that -- and karen alluded to it too, is we used to have weather events. katrina, rita, that would dramatically, at least for a short period of time, affect the price of natural gas. and in our recent weather events, these blips have been pretty much nonexistent. and people tell me that during the hurricane harvey, that went into the gulf coast, again, the problem was what to do with the gas that was being produced, trying to find a home for it. of course there was destruction that played into that. but there was not a blip of any sort of magnitude in the price

of gas. in some places it actually went down. >> let me ask you about the federal energy regulatory commission, it has a big role to play in regulation, especially in the pipelines. right now it's supposed to be a five-member commission, right now it has three members. how is that working out? is that a problem? >> and soon to be two, according to the announcement we heard today. i think that ferc is always strongest when it's at a full complement of five commissioners. i think we're lucky now that at least we have a quorum, as everyone here knows, ferc can continue to act as long as they have a quorum. when commissioner mcnamee steps down, if he steps down before we get another commissioner in there, that's when i will really start to worry. and i'm hoping that the white house and i'm sure that chairman murkowski is keenly aware of this, that not having a quorum

at the ferc is a real problem for us. to don's point, earlier, there have been times in recent years when the pipelines and producers and other sectors of the industry have not always agreed, and which one would that be, anyway, on the need for pipeline infrastructure, and export information, we're all pulling in the same direction. and we really do stand shoulder to shoulder with our friends in the pipeline community, because we knead pipelines and other sources of infrastructure to get our product, our natural gas to market. >> you had agreed to talk a little bit about politics, even though we're in the silly season for that. >> always dangerous. >> the candidates running for the democratic party's nomination have in some cases been awfully critical not only of natural gas but of all fossil fuels. a lot of that may be just

rhetoric which they don't expect to follow through on, but what's been your reaction to what you've heard? >> do you want me to go first? >> sure, i probably have a less complicated answer. there has been an interesting level of concern related to some of the comments, especially when we start talking about things like a fracking ban. and the concern, less from my members and more from the international side of things, with customers actually thinking about supply. so whether there's sort of validity to the desire to ban fracking and what that looks like from a congressional at some point or a legality standpoint is probably saved for another debate. if something like that happens, how do the permits that have already been issued or future permits for additional lng projects, are they impacted by that. there are questions that i don't know that before those statements were put out by those

candidates, was that something that we were talking about? absolutely not. so it has been an interesting dynamic to sort of see the ripple effect overseas as it relates to lng import customers, looking at what's happening from a presidential race here. >> i also think that in part it points out and illustrates a comment that don made, that we as an industry really do need to do a better job of explaining who we are and what we do. we've done some work in polling and things that have sort recently, and one of the takeaways from that is that the public is eager and hungry for more information from and about our industry. when i say our industry i mean the entire value chain, from the well head to the burner chip. we have the responsibility to

meet that request for more information. i'm hopeful as the political cycle goes forward we'll find ways to bring that attention or bring that information to people's attention. i think don's right, who knows what a natural gas pipeline is, who knows how natural gas is produced? i've been in this business a long time, i'm not sure my mother could tell you exactly what i do. it is an affordable, abundant resource. we're not against any other fuel. but in the whole conversation about wanting to mauve to a lower carbon energy future, and i think that's something that there's widespread agreement on, i think we're part of that solution. we're the partner to renewable for getting there to a lower carbon energy future. and that's part of what we need to say and we need to say it better and we need to say it

more often and we need to say it to every audience we can talk to. >> part of the effort to get to a lower carbon is renewable standards and production targets. a lot of them are targets, of course, there's no guarantee they'll happen. but how does natural gas fit into that? >> let me show you -- maybe the map up there shows better, but as this shows, there are a number of states, as you said, number of states and localities and cities that have put together these targets and bans and all of this. i think that some of these efforts miss the point. i think the real point of the conversation should be how do we power this country. how do we heat people's homes, cook food, have hot water,

provide natural gas or other fuels and industrial manufacturing facilities. we've got to power the country. so it seems to me that it's a little short sighted to throw one particular fuel out of the mix altogether. part of it is for us to engage in more conversations about what we do and what it is that we bring to the table. >> let me ask about natural gas supply association, at the end of 2019, was -- announced its support for a broad carbon price. could you talk a little bit about that? there are all sorts of different levels which that could be set, which could be painful or not. it also ties in with the unavoidable thing we're all aware of that natural gas and

coal are in a competition for customers. that such commitment sounds like a big deal. >> i thought it was a big deal, i thought it was even a bigger deal after we announced it and saw the reaction and we had people calling and saying, that was pretty bold. i didn't think it was all that bold. it came, for us, from a conversation that was started in new york and now is in pjm, about what to do with pricing various resources. and others might see it a different way but i will say some resources in the pjm are subsidized. pjm is currently struggling with, in the recent ferc order on it, about how in the past few markets to price in those subsidized resources. there's a lot of controversy on it. i feel sorry for the folks at ferc that have to read all of those rehearing requests that came in in the last couple of days.

but it seems to me that an easier -- not saying that it's easy, but an easier market solution will be to put a price on carbon. we don't get off scot-free on that, as i said before. obviously we're -- we are a fossil fuel, and gas would be -- there will be a price on carbon, somehow, some way, associated with gas, we've got that. but we think that would be one market mechanism that might take away some of the angst that is going on now in some of the organized markets about how to deal with these various fuels. >> now, that would have to come from congress. i can imagine that there would be a lot of concern, people representing their home districts, about what's carbon price do to our citizens, our average people. >> i think in pjm, we think it could come from pjm, not from congress, but one of the things we said was that some of the

money collected from the price of carbon should go to offset some of the potential impact of communities that are impacted by it. so that would be our way to ourn that out. there are a lot of details. i don't want to say we've got the ultimate answer. we've got a lot of questions about what should the price of carbon be. i have no idea. are we going to be involved in that conversation? hopefully we will be at pjm. and other places where that conversation is taking off. but just because it's hard and just because there are no easy answers and just because it will take a while to get there doesn't mean we shouldn't try. and i think we should try. >> there is a plan date to keep prices just and reasonable. are you sure they have a mandate that would allow them to establish a carbon price? or is that still an uncertain

legal matter? >> we did not delve into the depth of that. i would be willing to have that conversation with pjm. i mean i know new york has looked at it. i haven't heard either pjm or new york say defensively they couldn't do it. so i think that is in some ways to be determined. i think ferc has pretty broad authority over the structure and how to implement pricing in the organized markets, or how to approve pricing in the organized markets, so again, just because it's hard, let's not say we can't try it. >> now, let me come back, trade then, the u.s.-china trade dispute is on the minds of a lot of people, and this announcement i guess was just last week in the stage one deal, between the u.s. and china, had included energy sales, in fact, energy

sales high enough that some people, some analysts were asking, would we actually meet those volumes, could we actually meet those volume, but even if we couldn't, that seems very promising for lng. what's your thought on how the trade relations are, possibly maybe kind of sort of starting out? >> i think you summed it up accurately. sorta. i think we were encouraged. i think i'm going to temper my excitement just because the signing of the phase one deal is obviously good news for lng producers or potentially good news for lng producers and why do i say potentially, because china is set to become the largest importer of lng in the world, the largest producer of natural gas in the world, we sort of heard from previous speakers, as well talking about the situation that we have here, what that mean, low cost commodity, an attractive

potentially supplier for china. there was a 15% tariff on all lng into china that elevated the 25%. that did not come off with the phase one trade deal. so that tariff is still in place. what china decides to do in order to satisfy some of the energy purchases that they've made remains to be seen. and i think this is sort of an interesting slide, right? when i talk about this, how much gas that china is potentially ramping up to consume, and it's a large number. when we look at sort of where that is going, 18, something like 27 bcf, large number, then when you look at sort of the cargo situation, so 16, a few 17, a few really sort of ramped up a little bit in the early half, and then that has gone down. so we've had this sort of inverse, where we've got all of the opportunities, six facilities operating, china obviously makes sense as a trade partner from an lng perspective,

but until we sort of see how these tariffs are lifted, or categorical exclusion, however the chinese choose to do that, we don't have clarity into that yet. so i say that obviously some sort of deal is positive, right, talking $18 billion more than what, they're expecting 17 on energy ramping all the way up to $52 billion, more than what they spent in '17, all that's great, we don't know how it is going to be satisfied so the question remain, i don't have any answer to your question, the only thing that i have is another question and what is the chinese going to do, with the phase one part of the deal, but with the tariffs in place, i can pretty confidently say unless china tells the users of the gas to go ahead and they will exclude those tariffs or renew those tariffs, i don't see a whole lot of lng flowing into china. and even once those are lifted i don't see a whole lot of lng

rushing that china. i think it will be a slow build back into china just because of the complexity of the deals, the time that it takes in order to solidify those deals, and then there is really only one supplier right now that has a contractual agreement with the chinese and that's shaneer, so the rest of the companies that are actively working to try to create contracts or buys from u.s. suppliers, i think that even throw there is more positive, there is still a lot of uncertainty and things that need to be clarified. >> i am going to ask, i will ask one last thing. china is trying to increase its energy supplies from all sources basically because of their enormous demand. and lng obviously has some advantages against a lot of their domestic coal supplies. you see photographs of beijing air at times that are pretty

awful. so you've got a motivation there, energy demand and cleaner air. >> yes. >> i would think that that should lead them to want to, if not reduce those tariffs at least insist that they have to bring it in for air quality as well as energy. >> i think that's right. and they're not the only ones looking at that as well, right? you have emerging markets like india, and the folks that are without clean sources of power, and india being sort of a really interesting market opportunity as well, developing these emerging countries, that are working to try to satisfy the paris climate agreement, and the mandate there, asia especially, sort of the broader asian market, really sort of thinking about natural gas as a long-term solution to meeting those requirements of the agreement. so you're right, i think that we

look at china and really think about china from a commercial perspective, but you're absolutely right, from a human and humanitarian perspective, air quality issues that we know that they've got natural gas sort of it, is an interesting opportunity to solve some of those challenges. >> i should add that the photos we've seen of bad air, in new deli, india, and in pakistan, they look as bad as beijing. >> and it is interesting india as well but looking at from an air quality and electricity generation and also from a transportation perspective so used natural gas as well. so a little different than how china is thinking about it. >> is there any chance someone might like to ask a question from the audience? do we have a microphone? hi, great discussion.

i really enjoyed it. so you both talked about the abundance and low prices of natural gas, and the continuing trend lines for both of them, more supplies, continued low prices, and then talked about expanding markets, but from a geographic standpoint, my question is, as we look at new applications for natural gas, for example, i've heard that there is potential in the plastics industry, for natural gas, as a greater feedstock source there. are there other types of applications where you see natural gas beginning to play a role as mar, markets grow. >> absolutely. one that is emerging and i talked about this briefly last year, and the difference from last year to this year, is the international maritime organization, which is really the group that regulates international shipping, puts together some salt cap requirements for vessels, so we're seeing lng emerge as a maritime propulsion fuel, and i would expect that that is sort of really going to continue to

take off. now that the regulations are in place for 2020, and the enforcement aspect of that is a challenge, and fueling infrastructure is still a challenge. and the technology on board the vessel is not. we've got that sofrlged and that, solved and that is figured out and we've seen that applied in case studies. interestingly enough the cruise line industry has really picked up on using lng so when we get into these conversations talking about safety of the fuel itself, put 5,000 people on board a ves thal is unsafe, the cruise line industry isn't going to do something like that so we talk about that as a major emerging market and when you think about new opportunity force natural gas, that is definitely one. >> so bill bloom, consultants, building on that same topic what about road transportation and railway transportation, on shore, to the united states, tremendous gap in pricing between btu between liquid fuels

and natural gas. how do you see that? >> i mean i think rail is probably the most likely sort of, the most likely opportunity that exists right now. in the pricing differential between those two, it's interesting because a few years ago, the big class, we're talk thinking about powering locomotives with lng, and then the price of crude dropped, bottomed out and see saw sort of a major retraction from that effort, and i know that there is still a couple of the railroads that are looking at this, and now we're seeing a shift moving away from using it as a fuel but using the railroad to transport lng, and this idea about following on to that, but the potential opportunity where we have pipeline constrained markets or where we have pipeline constraints in removing the gap at the permian, for instance, where we have all of this sass are, associated gas coming up in production, using rail and natural gas more

efficiently while we're building out pipeline infrastructures, so i think that sort of dynamic will exist. we will see sort of the permits that is being worked on right now, to grant that opportunity to transport natural gas. but that's sort of opportunities that exist there as well. >> i think that is a really interesting opportunity, as you know, and as don and his group very well know, we've tried to get pipelines up through new york, and into the northeast, and they have been thwarted, we can't seem to get through the state of new york. the government does not want us there. and pipelines i think would be the prerch rabble way to move, preferable way to move gas to the northeast but in absence of a pipeline and in the face of demand of power up there, for fuel, for natural gas, i think the lng rail option is an interesting option. glad to see that moving a step along. >> yes, back here. dr. sam hancock of emerald planet, emerald planet tv and i

wanted to ask our two speakers to address the issue, you're talking about india, pakistan, of course there is a number of other emerging market nation, and then on the african continent, with they're going to probably 2 billion people within the next maybe even ten years, so how do we open up those markets, as far as natural gas is concerned, because that could be a tremendous drop in the particularate matter and the greenhouse gas emissions in these nations and they certainly immediate it because i have friends that are literally shutting their businesses a couple of times a week and the schools are closing because they won't send their kids outside. so anyway, if you don't mind addressing that. and thank you for being here today. >> thanks for the question. i think that there's an effort already under way, i think the challenge associated in those emerging markets is always going to relate to infrastructure, and obviously, then sort of what are the federal government, what are the governments looking to do. i know that there are several partnerships between the u.s. government, and india, already,

as well as one in pakistan, that are heavily focused on developing the infrastructure necessary and public/private partnerships, sort of the way that i would expect some of this to advance, and there is obviously sort of determining where is the lowest hanging fruits of opportunity, to move into those markets, with natural gas. so you think about lng, which is more often than not shipped, bringing it into coastal regions and how quickly can we develop the infrastructure to move it in-country. but while we're doing that, already in the areas developing, the infrastructure to support gas there, sort of seeing new technology, like floating lng existing where we can bring a re-gasification on a large vessel and how quickly we can do it rather than brick and mortar

onshore, and floating lng and do it onshore and bring gas offshore in a quicker manner quite frankly, so we're seeing that technology deployed. and i would expect that we will continue, you had touched on it earlier, domestically, technology has continued to evolve on the production side, i would expect that we will see the same sort of follow-on in the receiving side of the lng as well. but that is sort of where i see it going. >> not to take anything away from what the markets might be in countries such as you talked about, i think we also need to keep track of the fact that there are communities here in the united states, what we call the last mile issue, and our current president, from mississippi, this is something that was talked about, how do you get natural gas further, to rural areas. such as where i grew up in north carolina. we do not have natural gas service there. there are people there who would like to have it. they just can't get it. it is the last mile. so in addition to the probably

sexer global issues that are out there i think there are still challenges here in the united states we need to try to find om s some way to address. >> just a comment on the ferc issue, and the market. i like the idea of basically having a price on carbon. and this is where you could make it technology neutral but pjm with not touch that with a ten foot pole and i know i was there, and you need this or congress and with pjm, we're going to have ten dollars like in europe for example on carbon, that is not going to work. and the regulators would have to, the 14 legislate wiers have to agree, to have a mem rum of understanding or yes, congress would have it nationally a carbon price. but i think in theory, it is

perfect. but then you have to undo the subsidy that ohio and new jersey have, and pennsylvania, on nuclear for example. you have to undo the federal subsidy on renewables and then you can have a carbon price where renewables and nuclear would have an advantage, because they are zero carbon and the other ones would pay that carbon price. but i like the idea also of them taking that money back, and spending it on the communities who paid for it. >> thank you. >> you need the lawmakers. >> well, i acknowledge, it is not easy, and based on some of the hearing requests that have come in on the pjm order where all sides are saying that what ferc has said is going to be complicated. maybe if everything is complicated, maybe it giving the carbon price a better path forward than it would have had a few weeks ago. i don't know. you may be right, that it is going to take legislation. i'm not ready to give it up in

pjm. i'm ready to go in there and see what we can do. and we'll see if others are similarly ready. we won't know until we find out. we got to try. got to start somewhere. got to try. >> i thank you both. >> i had a question. >> yes. >> from world bank. we have been talking a lot about hydrogen and hydrogen from gas, using the availability of renewable energy, and so on, but i don't know if this is part of the discussion here, in the u.s. so if someone can give me some pointers, i would be happy. thank you. >> so using gas as a feedstock to create hydrogen, as far as for power gen, i think the answer is yes, it is being discussed, it is being discuss

interestingly enough, with a discussion in europe because they have a little bit of a different standard that they can use in existing infrastructure, so someone has got their hand up and seems like they might know even more about that. there you go. >> hold that question. david will give you the answer. >> okay, well thank you. >> thank you. [ applause ] >> . >> the ceo of the national rural electric cooperative association. he has been in that job since 2016. the rural electric co-op, the association includes more than

900 associations. they also cover a very large percentage of the land acreage of the united states. much more than the more concentrated urban electric companies. mr. mathson has been a principal at the law firm squire patent blogs, based in washington, d.c. from 2001 to 2015, he was a u.s. representative in congress from utah. he served let's see, on, as a member of the house energy and commerce committee. as well as the financial services, transportation and infrastructure, and science committees. prior to entering government service, he worked in the energy industry for several years. and we welcome mr. mathson.

[ applause ] >> all right. good afternoon. there we go. i got one. post-lunch food coma there going. but we got a few people paying attention. listen, i thought i would talk about how food co-ops are, and how it has affected our political advocacy and some of the policy agenda achievements we've had and what we're looking at going forward in terms of policy issues. and finally, we want to take a deeper dive on a couple of particular issues going on at ferc. and so that gives you a little outline of what i want to cover. you have heard in the introduction about electric co-ops. we are different. we're a local organization. we're built by and owned by the consumers we serve in the communities and that gives aus real direct high to communities. we serve 42 million people in america. it is about one in eight. in 48 states. and i think this distinction about co-ops is that we're community builders. i mean we're leaders not just in

terms of being in the community and offering reliable affordable electricity but we're involved in economic development of the communities, and we're involved in many co-op employees and board members are involved in leadership in other organizations within their communities. why am i talking about this? this tie of communities is what makes us different. we deploy balanced research, maybe a lot of the other associations in the audience do as well. and bamtballllots does a lot of on information in the policy arena in washington and it is interesting, based on the polarized dynamic and the gridlock and the lack of things getting done, if you look at the average score for all of the associations, it is dropping because not much is getting done in washington, i'm proud to say that co-ops are actually moving up. and trying to figure out why. and i think one distinction is the fact that we're not of washington. that we are of these communities

back home. and in a town where there is so much spin, and so much fake news, and quite candidly so much lack of trust, that tie-back to the community back home gives us a leg up, if you will. in terms of being genuine when we engage with policy makers and i think that's been manifested itself, in what happened in the year-end spending bill, that went through congress. as you know, in 2019, congress didn't get much done. they lump it all in a big spending bill at the end of the year. we had a real big issue for co-ops. it was an unintended consequence of language that was put in the tax cut of december 2017. it threatened our tax exempt status for any co-op that accepted any government grant money, it be from fema, or be it a broadband grant, and no one intended that. the language changed in the tax cut bill of 2017. no one was thinking about that. but that was the result of that language. and they're saying yeah, it is a tax issue.

how do you get that on a year end spending bill? that's the great excuse in congress. you may an important issue in congress but it is a spending bill, can't go on that there. >> there was 105 corrections and they all wanted to get on the year end spending bill. two made. it and one of them was ours. we called it the rural act. and it was an important issue for us. and i'm not here just to take a victory lap on that but i'm here to tell you in the policy world of today, what we are doing at the rural electric cooperative situation, a priority of mine since i joined three and a half years ago, is we're looking for ways to enhance and expand our capacity in the advocacy arena and i think we're making some interesting progress in the environment we're in washington today. and we approach these from a community basis and a nonpart en is basis, but that's how we got 310 co response ners the house and 57 co-sponsors in the senate

and we got a tax pression pro on a year end spending bill and that is something we're really proud of because i think it reflects the ability to get things done. we're going to capitalize on our political strength going forward, to. we noticed in the presidential elections dating back, that voter turnout in rural areas was not going well. that it was going down. and so in 2016, we initiated a program called co-op to vote, where we encouraged political engagement across those 900 co-ops in america, across those 42 million consumers that own those co-ops, to get engaged. and rural america had a pretty significant role in the 2016 election. we continued that through the midterms. we're continuing that role, organizing right now, for 2020, in terms of making sure that the co-op tive voice and that rural voice is heard. and it's understood. and what we're doing in that regard is we're making sure that candidates know who electric

co-ops are and what they do for their communities and we know about the future, the issues of importance to the future. what are our priorities this year? look, we all know an election here, that congress probably doesn't have a pretty heavy agenda of things to get over the finish line but we will keep an eye on issues that matter us to, more so perhaps in the regulatory and executive branch side, but on the legislative side there will be issues about broadband, mapping and funding for broadband. electric cooperatives are stepping up to the plate to look for broadband in rural america. there is a divide right now, it is a divide. just like electricity eight years ago. the for profit companies don't want to serve these areas because of the sparse populations. electric co-ops are stepping unto the plate. over 100 of our me members are already offering retail broadband service. the latest reverse auction that the draft rules were published by the s.e.c. just recently, we're very happy with most of the provisions of that. and i suspect we will have the cooperatives actively participating in that. so we are always looking at those issues. i know there is going to be a

series of energy provisions, i know the senate energy committee, senator murkowski and senator manchin talked about trying to the move the package, many of those issues are important for us, we will be advocating for that. tax policy, we're looking for ways to simplify with all of the tax incentives that are out there for encouraging different actions, technologies, what not. as not-for-profit tax exempt entities, how does that affect us? is there ways to more efficiently monetize the value of those credits so we participate in those preferences as well. we are interested in ferc county. we're interested in nepa reform. we're interested in esa reform. let me take a step back from that list of issues and look at a tom line issue of how we look at issues in terms of america's electric cooperatives. and that is revalue a policy having flexibility. and that may sound pretty straightforward, but it really does matter to us. flexibility is so key, because

it's very inappropriate to paint all co-ops with a broad brush. we reflect so many different circumstances, across the country. each co-op responds to their own unique circumstances and it is a local control and decision making, it is something that is sort of core to who we are with electric co-ops. as i said, we serve one in eight americans. and you've heard of the rural nature of what we serve. we serve wide open spaces whether it is one, two people per mile and the cost of serving those areas is tough but we don't just serve rural area, we serve a lot of fast-growing communities and metro dc and atlanta and other suburban areas in the country as well, but rural 80 years ago when fdr first electrified rural america, but now, electric -- another thing that drives our policy agenda, is that electric cooperatives serve 92% of all the persistent poverty counties in america. so everybody says yeah, we're concerned about affordable energy, but our members are in a

situation where it really does matter to them. because of the nature of who we serve. these factors make it really important for us to maintain low electric rates while also maintaining reliability. since we were built and belong to the communities we serve, we use a broad portfolio across all of our membership, in terms of serving our consumers. it is a balanced portfolio. a lot of generation options. a lot of energy efficiency, mind behind the meter option, all sources have value in the portfolio and like other electric utilities like i said, there are significant regional differences across our membership in terms of what portfolio mix might look like. and regarding reliability and resiliency, the importance of base load power cannot be overlooked. policy makers can't just wish it away. the flexibility to respond to unique regional and local factors is important as co-ops

meet the energy needs of our consumers in the best way possible and we're seeing that flexibility across our network. we've got micro grids in alaska and arizona, and colorado, we've got a real fascinating deployment of der and storage in north carolina right now, and carbon capture research in wyoming, different place, different programs, make sense for the local community. let me turn to, i said specifically i wanted to talk about a couple of matters at ferc in a little more detail. ferc issued two orders in 2019, that in my opinion, and our opinion at rca will make co-op innovation and our focus on local communities more difficult. first, for direct pjm to adopt a new capacity market design with the minimum offer price rule, that plies to most new capacity investments by electric cooperatives. so if a co-op invests in new generation, storage, efficiency, or other resources, to meet its own needs, pjm, not the co-op, will decide the correct price for the co-op to offer any

resources, and to pjm's annual capacity market auction. that price is too high to clear the market, pjm won't get the co-op credit to reach its capacity needs and the co-op will have to pay pjm for duplicate energy capacity. now, capacity comes from a resource that offers other values besides just capacity. and a portfolio of resources can help manage a range of risks, it can meet environmental goal, it can assure system reliability and resilience, it can support a particular community, and more. the rto markets don't recognize any of those values. the second ruling that concerns us is ferc's order on integrating storage into wholesale markets. look, co-op strongly supports storage. unfortunately, ferc mandated that states and local regulators permit storage on local distribution facilities and behind the retail meter, to be

aggregated by third parties, into the rto markets and we think that goes too far. see, the co-op's goal is to integrate storage into a system, in a way that optimizes the value of that investment with all the other investments in that system. but if third parties can cherry-pick certain of those investments, for their market values it is going to undercut co-op programs, undercuts the potential for broader system values. so we hope ferc will do the right thing on re-hearing. we asked ferc to grant states and local co-ops the control over storage the same way they did with demand response years ago. we've also called on ferc to do the right thing on the penning order on der, while the storage order as many of you know only applies to storage facilities of 100 kb and larger, der ordered that we are expecting this year will apply to all sources, and

syncs. so a light pole is a sync. a toast ser a sync. so if ferc doesn't see the local regulators in the der order, ferc will be regulating all the way to the toaster in your kitchen. but congress didn't give ferc that authority. and for good reason. state and local regulators are accountable to retail consumers. they don't need ferc intruding into their communities with a single-minded focus on expanding the role of rto markets. as i said before, for these policies of ferc and in general, policy makers should be mindful of the need for local flexibility. and ensure that any proposals provide long term capacity and certainty. such an approach will maintain energy diversity for electric co-ops and protect the reliability and resilience an minimize undue economic impact to consumers and it is going to encourage more innovation.

i'll close with this. the co-op business model has a remarkable track record. a lot of successes in the past. a business model, a community orientation, a consumer orientation, has given us successes today in terms of our political advocacy, and to the extent that all, so much action, in providing electricity is more consumer-driven than it has ever been, we've always been consumer driven, that's who we are, because we are owned by our consumers so i believe that we are well suited to meet today's energy needs and we are involved with our members, in ways that are unique to each cooperative in each situation and that is what drives our policy agenda. i'm confident in our ability to succeed. so with that, i'm happy to answer any questions. [ applause ] >> thank you very much for your presentation. my name is amean young, i work

for the environment facility of the work bank group. i have one question for you. you mentioned a lot about in your policy, your sufficiency, regulation, private, et cetera, have you or your association considered zero carbon economy in rural community in the u.s.? >> repeat the last part of that question. >> have you considered a policy to initiate, to incentivize zero carbon, zero carbon economy in the u.s. in the rural area? for example, by 2050, the rural community people, who use renewable energy, use energy, to have this kind of low carbon or zero carbon economy in the u.s.

>> as i said before, we have over 900 members and each of them is individually governed and makes decisions on what type of policies or electric service they want to pursue. so we've had some of our membership who have had that type of discussion. we've had other members who have not. as a national organization, we haven't said this is what you should do, because we are driven by our members. we are a democratic member controlled literally the resolutions that we do is brought by process on all of our members vote og wlan we do as a national association but i will sigh across our membership, there is a diverse level of experience and some of our members have had those discussions along the lines that you raised. >> thank you. >> can i ask another important question? >> sure. >> how many percentage, i mean the members, percentage of the members are doing this kind of a zero carbon economy initiative -- >> i don't know the answer to that question. >> thank you. >> sure you came in on that one,

guys, when i didn't know the answers. or maybe we can. i don't know. >> all right. thanks so much. >> appreciate it. >> thank you. [ applause ] >> our next speaker is david carroll, he is president and ceo of the gas technology institute. and he directs his programs for developing technologies, products and services in the natural gas and related industries. so basically, this is an organization that is really out there trying to create technological solutions. they've, their work has led to nearly 500 products, 750 licenses, and more than 1,300 patents. prior to joining gti, mr.

carroll held various technical and management positions with prax air, liquid carbonic industries and air products and chemicals. he has served on, at a steering committee for the 17th international conference and exhibition on liquefied natural gas in 2015. so let me introduce to you then david carroll. [ applause ] >> thank you. good afternoon, everybody, and thanks for hanging in for the technology lesson this afternoon. i promise it won't be that painful. barry, thanks for the great work you do at the association. and appreciate the chance to be here and what is sort of the annual fwraegrammys of the u.s. energy industry. i think that is coming up on sunday night. so we're here to talk about

today, in fact, we've heard a lot from my friends in the gas industry, over the last hour or so, the tremendous progress that the industries that are represented in this room have made over the last decade. and natural gas clearly has been a big part of that. abundant natural gas supplies have helped reduce u.s. emissions from power generation, revitalized u.s. manufacturing, radically shifted the parameters of energy security, and to a large degree geopolitics. in renewable energy sources, increasingly becoming more economic, and energy efficiency, allows us to milk more and more value out of each molecule or each electron. and this abundance that we are benefitting from today really benefits in part from early stage investments in scientific inquiry and technology

development that's focused on a long-term objective. a long-term vision. for example, in the '80s and '90s, george mitchell, the father of shale gas, combined his vision with work that was supported by the u.s. department of energy, in programs run by gti and in cooperation with the industry, and produced a dramatic impact. today, similarly, the role that sensors and big data and super computing, the role that they're playing in helping us tremendously rank up crude oil production and gas production in the permian has really put this nation in a position of being able to export crude, and disrupt the long-held norms of international trade, and related geopolitical power dynamics. so first, gti, for decades, we worked very closely with the

energy industry, particularly the gas industry, focused on key problems that needed to be solved to help bring value to the end consumers and create opportunities for the industry. things like increasing the productivity of gas production, and reducing its environmental footprint, reducing methane emissions, across the value chain. enchancing safety and reliability, and of course, promoting energy efficiency, in both industrial applications, and in the home. but as technologists, we're also curious at gti about how the next wave of innovation is going to shape this energy landscape. so over the last few months, our team led by our senior vice president at gt. paul paul, bti paula gant, many of you know from her plans in

washington, worked on key training exercise, where we focused on key trends of our customers in the markets they serve, and how those pressures are going to change ha what they need to do over the next decade and beyond. in short, we have a lot of work to do together. that's sort of the punch line here. but i show two graphs here. they might be a little hard to see. but in essence, the story is this, we've made a lot of progress as a nation decarbonizing, gas replacing coal, more solar and wind, greater energy efficiency, but we as a world are nowhere near where we need to be in order to meet the challenges set forth in the paris cop 21 accords. and i will point to the chart on the right. it's an access, the axis on the

left is basically per capita consumption of energy in will watt hour, in the right is co2 emissions. where you can see in the global size of community at that time, in 1990, where we are in 2018, bigger economy, bigger consumption, and standards of living are rising. that is only a good thing. . iea has looked at stair scenarios, stated policies and current policies and that's the tan and the blue and if we keep doing what we are doing and we start doing what we say we are going to do we end up in the blue or the tan circles. where we need to be is in the green circle. so we have to have four times bigger global economy, with less co2 emissions. meanwhile people are using more and more energy to fuel their higher standards of living.

it's a big challenge. do i have you depressed enough yet? so what we've done at gti, we've looked at some of the technology pathways to try to develop the tools and give the industry and the energy producers potential ways to get there. and building on, not just what we're going to do in the next ten years, which is more like a continuation of what we've done, which is really good stuff, but where do we go from here, to get to post-2030 and beyond? in essence, we're looking at a couple of things. one, we have to figure out ways to use and leverage lower carbon gas and liquid fuels. we have to figure out better ways, lower carbon ways, to make the stuff we're going to need. and secondly, we have to do it in a way that doesn't wreck economies. so you need a transition that is

still safe, still reliable, still affordable, and with all due haste, but also done in a deliberate way, to make sure we're balancing economic and environmental opportunities. so the transition should be designed, should not only protect the planet from the climate crisis, but also to prevent or to protect local communities from economic crises. so looking at the eia projections of global energy demand out to 2050, they're shown there. and really, residential and commercial demand, domestically is, projected to be relatively flat. and the demand for industrial and transportation purposes is continuing, expected to continue to rise. in those area, industrial, and transportation, have proved stubborn to decarbonize. and importantly, out to 2050,

natural gas is still projected, it grow the most of all fuels. it is interesting to note, at least interesting to me, i spoke at an nba class at lee high university just a couple of weeks ago and i mentioned to them that in the year 2000 the combined percentage of fossil fuels and the energy mix was 80%. 80%. hey, what is it, or what was it in 2018? and i heard 30%. 40%. 60%. 20%. it's 81%. so despite all the progress made with renewables and energy efficiency, and the electric transportation and so forth, given the growing global demand and the rush to urbanize and to improve standards of living, we're not even keeping pace, hence the challenge from the

previous slide. so the economy-wide actions we need to achieve deep, deep key carbonization will require investments in in innovation and break throughs in industrial manufacturing processes, as well as heavy transport. so let's talk about some of these, i guess deep decarbonization, post-2030. first is, i'm going to highlight two areas from our research efforts these days. one is methane conversion, natural gas conversion, to lower carbon fuels. making the transportation fuels, the boiler fuels, things that we need, to run this world in a lower carbon way. and secondly, renewable gases. so don santa, when he was here,

from inninga, mentioned gas and renewables. i would submit to you also that gas is renewable. or can be renewable. and in the near term, we're looking at a growing role for renewable natural gas, and that's pipeline quality gas that comes from biomass sources. it's land fills. it's dairies. that's in practice today. small scale. in the future, to make an impact, we need larger, more reliable sources. and for example, gti's u-gas gas fiction technology, efficiently converts wood waste to renewable natural gas to a gasification process. it produces the renewable gas you need and also addresses a growing problem that we're beginning to see in this nation

and frankly other areas that a growing supply of unusable woody biomass, think of the california fire station and the underbrush that needs to be removed and done something productive with. we're also developing novel processes to use methane to make liquid fuels and chemicals, using clean electrons, to drive that process, underpinned by unique catalysts and electriccally conduct tive supports. so what does that all mean? one of the key areas of opportunity that we're seeing right now, in the world, is low carbon aidiation fuels. it is proving to be a nut that is tough to crack. i'm sure you can do it with hydrogen. we have a couple of challenges. >> there and one technology, is cool gtl, that starts with

methane, natural gas, takes more co2 out of the air, mixes it in with that methane to produce a drop in aviation fuel that is lower carbon. we're making that in a plant in chicago, as we speak. on a bigger scale, a technology that we developed a few years ago, called ih squared has been licensed to shell. and shell is building a large scale demonstration plant in bangalor, india, that is now in the startup phase. so when you hear shell talk about renewable aviation fuel, they're talking about gti's ih squared process. speaking of shell, so shell came out with a sky scenario in response to the cop 21 accord, trying to look out in terms of what the fuel mix was going to be. you can see big roles for gas, and other products, and what i

wanted to highlight there was their call-out to hydrogen. back to this gentleman's question earlier. and we are bullish at gti in the role of hydrogen in the future that's produced today, through steam methane reforming of natural gas, but in the future, can be produced in a variety of very clean ways, including a disassociating sea water through electrolysis, with excess power that could come from wind, concentrated solar, even nuclear. so we're excited about that, as a clean fuel, but also excited about it, as a great energy storage medium. so before we get too excited though, let me just point out, in just studying a little bit before the talk, i looked back into some of the gtian, annals

you will and i didn't read the whole thing but i looked at a summary report of a symposium that we hosted on hydrogen in 1978. and it was hot then. it was hot under george w. bush in the early 2000s. seems to be getting hot now. and i think it is going to hit in 2040. so every 20 years. but i do think it represents, it is a real interesting confluence of clean molecules using existing infrastructure, using technologies that exist, and aren't fiction, and i think it creates a real opportunity for the industry and for policy makers, and populations to take advantage of that. so i think there's a big opportunity in hydrogen. let's focus on the second area of focus, and that is human progress. and i'll wrap up here in just a couple of minutes.

as we imagine these low carbon energy systems serving communities across the country, and frankly, across the world, we have to design them to support rising standards of living and that's a good thing. but the energy systems have to be reliable, resilient and affordable. someone mentioned africa earlier. huge population growth. and over the next 20 years, iea forecasts that 600 million africans will go from the countryside into the cities. that's twice the rate of urbanization that china did in the last 20 years. it's mind boggling. so deep carbonized energy systems are going to have to enable job creation and economic growth in the communities in which they serve. and the transition of energy also has to embody the, what we think about when we think of a high standard of living, quality

of life. clean water. clean air. clean cooking fuels. reliable access. so what's the role that the energy storage and transport infrastructure that we have today, the existing infrastructure, what role is that going to play in this broad energy transition? in short, i think it's big. in addition to developing solutions to support the new energy systems, we're asking at gti how we can leverage existing and improve infrastructure. in this regard, we think there is a tremendous opportunity to leverage the existing natural gas network for enhanced energy storage. now, again, we're talking not the next decade, maybe not the next decade after that, but 2030, 40, 50, and beyond. to get to that deep

decarbonization that addresses that one slide that i put up on the right there earlier. so battery energy storage will be critical. but it has limitations. with respect to inter-seasonal storage requirements. for example, you can't really produce a bunch of electrons in the summer and then store them until you need them in the winter. that is what the natural gas infrastructure system is for. when over two million miles of pipe, and then complimented by above and below ground storage, operating across the united states, the gas system is inherently a large scale and pervasive energy storage system that provides tremendous reliability, and deliverability, that is simply unparalleled on this earth. and it's been proven for many

decades. so how will these assets in the natural gas infrastructure and the way it operates, with its efficiency and effectiveness, integrate increasingly more amounts of low carbon gases? like renewable natural gas, hydrogen-rich methane, green hydrogen, and so forth? to realize this potential, we're going to need a robust transportation system, to store and deliver hydrogen, where it's needed. and to do this cost effectively, we're going to have to adapt the existing gas infrastructure system. in the near term, there's already potential for hydrogen to be blended, at small percentage levels. and be injected directly into the pipeline storage and transportation system. over time, some of these systems might adapt to pure hydrogen. it's a big task.

the hydrogen industry to date can be summarized as this. it is produced by expert, and it is consumed by experts. so to bring that to the mass market, we'll create some challeng challenges and opportunities and investments in raleigh-durham at scale are needed to, in r & d at scale are needed to understand the scale and maximum blending amounts that can be safely incorporated into the sm and we do have at gti research under way in a variety of areas there. and we're also, just a couple of months ago, announced softly a partnership with equity, on hydrogen. the electric power research institute. and it is a collaborative development to advance lower carbon technology, fuels an processes. across the integrated value chain. and when you think about it, it's a natural collaboration.

with the connection to the large electricity generators and the grid operators and gti with its long-standing record of working with pipeline companies an distribution companies, and the end use. so we launched just a few months ago. and the efforts will be focused on developing low carbon solutions that can be made a reality by 2030, or not much beyond that. because that's about the time that the easy stages, or the easy steps that we can take to decarbonize will already be taken. and we're going to have to do some step changes to make some impact on that deep decarbonization that we all realize will be required. and finally, just sort of in summary, to address the economy-wide challenge of this energy transition, we need an array of solutions, rather than

just a limited set. can't pick winners and losers today, but we need to put a lot of tools and options, get them developed, and get them on the table. i suspect we'll need low carbon fuels and renewable electrons. and we'll need energy efficiency, and battery energy storage and efficient electrification. all working in an integrated manner. innovation will be key to making the transition in a safe, affordable, and reliable way. and given the magnitude of these challenges, cooperation of people in this group, all of the different energy source, will be important, and will be critical in advancing the technologies toward the right solutions, for the energy consumers. one of those solution, whether those solutions are electrons or whether they're molecules. and at gti we're committed to working hard and in partnership with all of you to get to the

right solution. so i thank you for your time. and i'd be happy to take any of your questions. thank you. [ applause ] >> yes, sir. >> thank you. thank you again. firstly, i thank you for your so good, excellent presentation. every day, i'm learning new things. today, i learned one thing. the first time i heard from you, hydrogen can be injected in the natural gas pipeline and be distributed to the household or industry. by the way, that will be very, very dangerous, i mean hydrogen can be naturally burned in the air, but anyway, that's a technology. i have one question for you. your presentation, you mentioned that the biomass, i mean biomass

space, it's gas, versus natural gas, so this is very interesting, and can you you te situation in the u.s. in terms of the price or cost for production of biomass based gas against the natural gas? thank you. >> first, on your first comment, absolutely about the hydrogen. one needs to look at this introduction into the network in a very smart way, very thorough way. at gti we're doing work currently at levels up around 5% to evaluate effects on materials and appliances and the like. so a lot of work to do there. but it offers potential. yes, on the renewable gas side, the biomass side, it is more

expensive. maybe not compared to what gas might have cost 20 years ago but because of shale gas it's more expensive. from i would say three to four times as much to maybe as much as ten times as much. if you look at the learning curves you get from solar and other things what we hope is that over time wan practice and technology advances we will get that more and more competitive. i think we have a dialogue going on here. [ inaudible question ] >> sorry. thank you. this is not a second question but an ongoing discussion. sorry. so personally i work in china, october last year and i will be going there very soon. personally i saw the biogas

consumption in a rural area against a natural gas supply and the prices compared that the biomass gas is about one-third cheaper than the natural gas pipe line supply in china now. they use this farm, pig farm waste to produce the natural gas, biogas. so maybe, you know, in the u.s. it's different but i'm thinking in the future under your association and dealership, maybe nationwide the farms were producing this kind of bio-mass natural gas. that can be pumped into the existing gas line. that will dramatically cut the consumption. >> thank you. that is good to hear there is a good economic example out there. it's being done today in the u.s. a little more expensive.

it's in small percentages now. i think there is an upper bound to how much bio-mass you can actually find to put into the pipe line. everybody wants to convert it into something. but we do think that it can make a material difference coupled with hydrogen, coupled with efficiency. and a traditional natural gas that we can radically decarbonize the gaseous and liquid mix going forward. any other questions? >> i just have a question about hydrogen as a sort of secondary or indirect greenhouse gas. so knowing that hydrogen albeit having a much shorter lifetime indirectly can lead to a greenhouse gas effect and how small molecules are and how easy or not easy to contain i know your technology is still in the nays ent stages but have you done any thinking or research or modeling into the effects that adding so much hydrogen into the

atmosphere might have on greenhouse gas emissions or warming? >> well, thank you for bringing that up. i think that is something we will look into. now, when you look at hydrogen combustion the end result of that combustion is water. right? so you got hydrogen, oxygen, put them together and you got water as a by product. so if you have a highly efficient combustion you should have very minimal releases. that said, sort of a well to wheels kind of analysis on all forms of hydrogen production and introduction would be certainly a worth while and necessary endeavor. thanks for bringing that up, though. okay. thank you very much, everybody. [ applause ] >> okay. our next speaker is the senior

vice president of government and external affairs of the utility technology council which focuses on cross sector interdependencies and critical infrastructure protection efforts. we should be able to network a bunch of cross sector interdependencies here i should think. she was formerly director of government affairs at schweitzer engineering laboratories where she worked with government officials on policy subjects. she was vice president of legal and government affairs for genscape which is a very interesting subject how it was created and grew so fast. it is now a part of the wood mckenzie consulting company. she has been the assistant general counsel for the national association of regulatory utility commissioners where she focused on energy regulatory matters pending before the federal government. so, please, welcome charla arts.

>> good afternoon, everyone. thank you for including utc again in this year's annual state of the energy industry. very happy to be here. very exciting to hear these common themes throughout all the conversations today about grid, energy modernization and energy security. as i was listening to all of the speakers and panelists i kept thinking that common throughout achieving these shared visions of energy security and energy modernization of our infrastructure is the private utility communications networks that underpin these operations and how essential they are. so it is not widely understood in our industry that utilities of all shapes and sizes own and operate their own private communications networks.

i certainly didn't understand this when joy, utc's former ceo, my good friend and now ceo of appa brought me to utc three years ago. but they are absolutely foundational. so increasing the understanding of how essential these private communications networks are for these visions that we share is my goal here today. i'm going to use the page from the utc playbook to describe private communications networks and how they are important in blue sky, so for day-to-day operational reliability how they are important for gray sky events such as natural disasters, hurricanes, etcetera, how they are critical in black sky events, impulse or emt types of situations and to coin a phrase that joy uses a lot, gold sky situations. which are smart grids of the future. smart cities, etcetera.

the utilities technology council has been around for 70 plus years. we represent investor owned utilities, rural cooperative utilities, public power, mostly electric. natural gas and oil pipelines and water utilities. we have international members as well. the reason why we represent this vast array of business models and different types of utilities is because when it comes to their information and technology needs they are usually united and have the same types of needs. so, private utility networks. they are a combination of wire line and wireless. wire line, think copper. increasingly fiber optic. a number of our members have announced plans for major investments in expanded fiber optic networks going forward. if they are wireless they are usually microwave communication systems but also push to talk

mobile radios. think about the radios personnel are using post hurricanes, etcetera. if they are wireless, those wireless systems are dependent on spectrum. spectrum is a naturally occurring phenomenon that is a finite resource. because of this the allocation of that spectrum is overseen by the federal communications commission. an independent agency whose primary focus is not energy security and energy reliability. but i'll get to that later. so these private utility networks are used and we have them because they are supporting mission critical functions. when i talk about mission critical functions i'm talking about such things as real time situational awareness. so knowing exactly how much energy is being moved across the grid or moved through pipe lines. i'm talking about emergency

systems. so emergency power shut-offs, safety systems. i'm talking about teleprotection. the types of operations that must happen in milliseconds that keep lines from over heating, that keep equipment from being damaged. that keep us from having power disruptions. i'm talking about those types of mission critical functions that are essential for personnel safety. so again, in reference to the hurricanes think about linemen and women out in the field needing to know whether or not a line is energized or not so that they can quickly restore power. so again as i mentioned, these mission critical functions, they need to happen basically in milliseconds. and so having access to interference free spectrum is really essential. think about if you would have interference, we can tolerate our cell phone being interfered with. right? that is annoying, yes. but is it detrimental to our safety? probably not. but for these mission critical functions that utilities use

their private communications networks for interference can be problematic. so we have a number of opportunities here with our private communications net works again as i mentioned the blue sky operations that we utilize. those private communication networks are also highly reliable and resilient when it comes to staying on post hurricanes and natural disasters. so for example post hurricane katrina it was utility communications networks that actually were resilient, stayed online and helped the communications sector come back online. so they are very important for increasing the speed and recovery from those natural disasters. we've also recognized how important the private communications networks are for black sky types of events. so the electricity sub sector coordinating council which is the group of 30 electric utility ceos that serve as the primary point of contact between the federal government and the private industry on critical

infrastructure issues has increasingly understood and realized that communications networks and their resilience are really important to critical infrastructure protection. this has come about largely because in almost every national level exercise including grid x which don mentioned not long ago that communication networks could be a real achilles heel for us so the industry has devoted quite a bit of time and attention to developing resilient communications plans, for dealing with black sky types of events. one example is the resilient communications working group that over the past year did a pilot demonstration of how i kind of call it the macgyver project or others in the working group have referred to it as such. it was if we had say an electro magnetic pulse swag and we knew some of our communications capabilities were no longer available to us how would you

enable hydro one to communicate with the new york power authority to communicate with pjm to communicate with dominion to communicate then maybe with alabama power to re-energize the eastern interconnect, right? understanding how you scale that type of network, the interoperability of that network, what type of technology might be available is really important to us continuing to improve and harden our systems. that pilot and carry on work from that effort is ongoing. our former ceo testified on this at a senate hearing in 2018 where this was a realization. so we'll go now and talk a little bit about the challenges. i know i don't have a lot of time. i'll be quick. but as i just described we have some challenges in thinking through the technology available for us for black sky events but we're also facing challenges for blue sky events as well. so for example the -- we are facing a blue sky operational

challenge right now from the federal communications commission in a proceeding focused on six gigahertz spectrum band. that band is utilized by hundreds of utilities -- water, natural gas, actually used by all kinds of critical infrastructure industries because of how reliable it is for their critical operations. right now the fcc has proposed to open up the six gigahertz spectrum band which is previously -- has previously only been opened to licensed holders in the band -- to unlicensed spectrum sharing. so companies that are very interested in this proposal are companies like google, facebook, qualcomm, broad com. right? because spectrum is a finite resource they're looking for areas where they can expand internet types of operations, enhance capacity for these types of operations. now, while this goal and the innovation that will come with it is very laudable, it can't

come at the expense of critical infrastructure industries, interference free reliable communications. so we've been working very closely with the federal communications commission and the big technology companies to help them understand what interference means for us. right now the proposal and the interference mitigations that have been proposed are largely untested. in fact, some of them are just conceptual in nature. as an industry we're really trying to encourage a robust understanding of the technologies involved. how we would ensure that critical infrastructure industries will not be interfered with and can continue to provide reliable operations. another challenge for us is an opportunity as well. in that gray sky scenario situation. right now you'll hear quite a bit about the race to 5g and what 5g will bring to communications and the importance of it. at the heart of the deployment

of 5g is largely electric infrastructure poles. so the deployment of those small cells, etcetera, that are going to enhance these 5g networks make them possible are going to need to partner with electric infrastructure. what we are trying to encourage right now is discussions about how you ensure the integrity of that infrastructure. that you don't over load those poles. that there are safety considerations taken into consideration because we recognize as electric utilities, gas utilities, water yulutiliti as well we will benefit from these networks and let's do it together and think about it very holistically. spectrum as finite resource. and so we'll have to get creative as a country and thinking through how we allocate spectrum as efficiently and

effectively as possible, recognizing the importance of critical infrastructure. as we think about smart meters, smart cities, etcetera, let's bring all the interested parties together to the table at once as we're thinking about in what bands could these operations take place? how are the allocations going to occur so they are weighted in such a way to adequately think of critical infrastructure owners and operators and the needs that they have? there are a lot of annuitants front of us. there are a lot of challenges. it's just extremely important that we think about the nexus between these different sectors, how they are interconnected and related and how we can work together to solve these challenges going forward. with that i'm going to stop and turn it to you and see if there are any questions.

[ applause ] >> thank you, charlotte, for your insight. can you talk about the relationship utc has with the fcc? are you guys leading those conversations? have you involved ferc? >> yes. thank you for that question and apologies for rushing through. i wanted to be cognizant of your coffee break you are about to have. one of the things utc has done over the past number of years is recognize that oftentimes our voice is not really heard at the fcc. we have regular meetings with them and conversations with them. but that we needed to go to our traditional champions if you will and those that understand our industry and understand this intersection and interconnectedness. we've been extremely appreciative of the role that the department of energy and the federal energy regulatory commission and even chairwoman murkowski have played in raising

situational awareness about six gigahertz and its impact to our operation in this particular proceeding. to that end, because we have subject matter expertise in terms of the personnel at the various utility members that we have, and can bring that to bear, we work extremely closely but kind of lead the charge if you will but with our fellow trade association. so appa, e.e.i., nrcea. american gas association, american petroleum institute, all of these organizations are close -- american water works association -- are working very closely with us on a number of these proceedings to kind of show how, you know, how much of the economy cross sector interests are really focused on this proceeding and wanting to have constructive dialogues with the fcc. thanks for that question.

>> hi. elliott rosamund. you mentioned sort of competing uses it sounds like and also that spectrum band width is finite. is there any sort of over arching assessment of whether or not if we look out say 20, 30 years and increasing needs for that band width not just in the utilities industry, in defense, in data centers, in the telecommunications, any sense of if you added up the total band width available whether there is enough room in there for everybody if we can just get the allocation right? >> yeah. i have seen actually one presentation by an organization that we've worked with that shows given the projected spectrum capacity needs of all of those types of applications, right, industries, there is not enough spectrum to go around. so one of the things that we need as a country is a holistic approach to thinking through this issue and we need also,

too, a lot more research and development dedicated to how we can make more efficient use of the spectrum that has been allocated, how we can use different bands that are currently being underutilized or unutilized so they would be suitable for the types of applications and operations we have right now. so the national telecommunications information and information administration, ntia, which is responsible for the allocation of spectrum to federal entities, has been tasked by the president to take a holistic approach at spectrum. i know that a number of the energy trade associations we filed some joint comments to ntia in this proceeding. but again, going back to dee's question one of our challenges really is having more voices at the table outside of the communications sector. i mean, obviously, they are key players and they need to be involved given the investment that they have made in these industries and the global presence that they have.

but when you're talking about this finite resource and all these other industries and applications we need to hear all of those voices. >> all right. thank you very much. [ applause ] >> okay. we now have a ten-minute coffee break. >> taking a short break in the energy conference we'll take this opportunity to look back at part of the discussion from earlier. this morning we heard about the oil and gas industry. the speaker was the head of a lobbying group. when the conference resumes in about ten minutes we'll continue our live coverage here on c-span 3.

>> thank you for inviting me and more importantly thank you for where i fall on the agenda which is if i had to follow the best, i'm not sure how sheila would have introduced me, p.s. to something, something. so i'm grateful that i'm here with you after lunch. i'm going to look for a clicker somewhere. here it is. this is a really exciting time to be in the energy industry as tom said. it's particularly really interesting to be the new leader of the american gas association, an opportunity for which i am very grateful. we have tremendous potential. we have a lot of work to do. we have a lot of challenges ahead of us. we have an incredible story to tell. that is what i'm going to share with you this afternoon now that i've moved to the afternoon to get away from tom. first of all let's just talk

about supply. if you look at that graph you can see supply increasing quite dramatically in recent years. obviously brought about through innovation and technology the potential gas kmcommittee which reports on our reserves, our technologically recoverable reserves issues a report every two years and they released their report at aga sometime in the middle of 2018 and since they last reported in 2016 the reserves have gone up 20%. i asked the lead author out of the colorado school of minds when you are back here in two years what do you think you'll tell us? he said i can tell you one thing i'll definitely tell you is it is going to continue to increase. what i don't know is how much because we have so many places yet to look. from a supply perspective that is not a question and certainly was different than when i was at the department of energy back in the second term of the bush administration when we were living under a time of scarcity and looking for natural gas in

all kinds of corners of the world and every place you will never go on vacation. we were looking to expedite the import infrastructure and make new friends. and now we're exporting to our allies and turning around that infrastructure but you look at that map and where there is significant growth and certainly in the mid-atlantic, appalachian basin, marcellus, utica, and a place that was really striving for needed economic development and natural gas is delivering on that promise all across towns and cities in ohio and pennsylvania, west virginia that had previously relied on the steel industry and sometimes the coal industry and now they have a completely new set of opportunities. so supply is not the problem. production is not the problem. if you look at every year, production creeps up. we're producing more than we ever have before. i think what is interesting is that gray band which is where we were about 2009 to 2016. so the dramatic increase in

production is just a terrific story for every one of our 50 states because if you're not producing the gas you are part of the supply chain so overall the natural gas industry today supports 4.1 million jobs in this country. of course we're consuming more than we ever have before. today the natural gas industry, the ldcs that i represent, we supply natural gas to 179 million americans in their home. think about that number. that's more people than voted in the last election for both candidates combined. so if you don't think we have a constituency you're wrong. and go to any one of those 179 and try to take away their gas? they'll come at you with something fairly pointed. we're not stopping at 179 million americans. we add a new customer every minute of every day. so those that would like to write the obituary of natural gas just fundamentally don't understand the practical realities of how vast we are,

how many people we serve, and the network that we have to deliver this every day. so where is the growth coming from? certainly we're seeing growth in the industrial sector. we're seeing growth in the electricity sector. and the residential commercial sector is fairly flat. that is actually a good story and i'll talk to you about that in just a couple of minutes. but growth across the entire spectrum and certainly the power sector and the industrial sector is seeing tremendous new growth. prices? for any of you that have natural gas in your house, you probably rejoice every time you get your utility bill. prices are low and because of our abundant supply they'll remain low. that has challenged some of my other colleagues in the room. maria mentioned it. that are low price. it certainly is making us very attractive to increase in industries that rely on us for feed stock but for the american consumer that is a very good story. let's look at that. by the way, look at those prices

up there where it used to be. the gray area of where we used to be when i think back to 2005 when hurricanes katrina and rita hit the gulf of mexico of course we saw a spike in gasoline prices but we were able to release oil into the market and by the time the holidays came around in december, those gasoline prices had come down. my problem, our problem, america's problem was natural gas. we had no new supply. we didn't have adequate import infrastructure. we could see l & g cargoes coming across and turning around and going back to europe. that was experiencing a significant drought and needed to rely on natural gas because the hydro had dried up and we couldn't afford the prices. they of course were at that point price insensitive. we were looking at natural gas prices going up to 7, #l, 12, 13, 14. that was a shock to the system and we had run out of options and of course today look where prices are and we don't see the

volatility that is so unsettling to the u.s. economy, that is humming along on the foundation of america's energy renaissance and the volatility is ensuring that growth can continue at a predictable pace because as we like to say, natural gas is now a foundational fuel for this economy and we intend for us to continue to help this economy thrive. it's also good for the american consumer, for the homes that use natural gas to either heat, cook, dry, whatever it might be they're saving about $875 on an annual basis. what does that mean? it means they have choice. they have choice where to put that savings. they can invest it, save it, go buy things which is further stimulative to our economy. so natural gas is pretty popular with the consumers that are using it because we are providing them a very affordable fuel source. of course, businesses as well that either use natural gas as their source of electricity or as a feed stock are saving a lot of money since 2009 so about the

last ten years american businesses have saved about $120 billion, which they can choose to invest in growth, in their employees, in their products, innovation, technology, all the things that are making this economy hum. and, of course, you all know that we're now exporting natural gas. as i said, in 2005, i was looking under every rock and every country to import more natural gas and as the shale revolution began to get going, now we're seeing of course we are exporting gas to close to 40 countries around the world. and we shouldn't under estimate the importance of that. sure it has an economic benefit to us. it has an environmental huge benefit to us where we are exporting around the world that they have a choice of clean, natural gas versus other dirty fuels they had previously relied upon. there is an important geopolitical dividend to this as well, this intangible, which is every molecule that we can sell to one of our allies or markets

around the world is a molecule that is not supplied by president putin or the mullahs of iran. that weakens their power and strengthens ours and we should be darned proud of that. and this industry is and it is an important component of how we think about natural gas and our energy markets and our energy position as a country overall. that export of natural gas and of course we're exporting oil as well. we've been exporting refined product for quite sometime. that is a really important part of strengthening to use tom's word our america's strength. we are a strong and clean energy power and that is going to continue to have new dimensions in terms of strength. of course with global energy demand growing we have a huge opportunity to be a bigger part of making the energy landscape around the world stronger, cleaner, more reliable, and more democratic small "d" with our molecules going forward. we have talked about this already but i think it is important to look at how dramatic and quick our electricity sector mix has

shifted as we have seen coal retirements and my friend from nma who is now gone. rich and i have been friends. he said i don't think i can sit through your presentation. but he is exporting all around the world, so that's okay. but if you look at this, the dramatic shift is a story with three legs. it is more natural gas, enabled more renewable energy, and everything has improved because of energy efficiency. all of that has contributed to a more diversified electric sector, one that is now increasingly cleaner, more reliable, and definitely more energy efficient. that is doing a tremendous amount to lower our carbon foot print of the electric sector that tom has talked about but it is really quite a compelling story as we look going forward. if we look at emissions we know that our co 2 emissions are now at almost a 27-year low. we look at how our emissions are arrayed.

if you look at residential and commercial emissions, they total about 7%. i'm intrigued by this ongoing debate that we should electrify everything. tom and i talk about this a lot. electricification makes sense in some places not in others. to give awe sense if we were to electrify the entire residential sector, take the methane and the co 2 emissions from every home that uses natural gas and electrify it, we would be removing the emissions that's the equivalent of two weeks of coal generation in china. so if we're trying to scratch an itch of removing emissions we should start looking at this much more holistically. and that's the conversation we like to have with policy makers. that we want to be part of the solution but we're not the only solution. we have to look at this, the transportation sector, and other parts. but we are committed. we are all in. in reducing our emissions. you can look at that.

obviously this is the trend and we're seeing ourselves down at 27-year lows from the energy sector as i mentioned. i think it's really important. we hear from our customers we want to reduce our carbon foot print. we want to be a bigger part of the clean energy future. my answer to them today is you can and you are. you have been and you will be. we have been able to help our customers, our users, our homes, our businesses, reduce their carbon foot print in half. and they don't know that. so we have to do a better job helping them understand the progress we have made and they should be proud of that and the opportunities to continue to bend that curve down through investments and innovation and technology, modernizing our infrastructure and becoming more energy efficient. so if we look at this, this is the amount of money that the distribution utilities put into

energy efficiency. it's about 1.3 billion with a "b" every year. that is not an insignificant amount of money. you can look at that significant uptick in 2018 and we're forecasting that uptick to continue. on the right-hand part of that slide it's the number of users so that is the increase in consumption but that purple line shows the amount of consumption per user. which is fairly flat. so those efficiency investments on the left-hand part of that slide are paying off directly to the right-hand part of that slide. more users, more efficient, flat demand. we think that's a good story and that we are buttoning down our systems. we are making the delivery system more efficient, helping the customer be more efficient. we're tightening the building envelopes, providing more advanced, efficient appliances, and allowing them to be able to be an increasingly bigger part of our clean energy future. we're dealing with methane.

since 1990, the methane emissions from the distribution utilities have gone down 73%. so what does that mainly due to? mainly due to the amount of pipeline we have replaced. last year we replaced 18,000 miles of pipeline. we have 42 states that have accelerated programs for us to continue and expand and accelerate our replacement of old pipe. some of which has been in the ground for decades. and we're replacing it with first class modern infrastructure with detection systems brought about by innovation technology. we invested $30 billion last year in new pipelines. so that 2.6 million miles of pipe line is slowly and increasingly faster being replaced over time with today's modern pipe, with modern detection systems allowing us to

further reduce our methane emissions and we're not content to stop there. we're going to continue to do that. now we're working with don's group. you'll hear from don next on the interstate pipe lines. we're working, you heard from mike this morning at api, going all the way up stream and finding ways to systemtize how we work on methane.

you're watching live

coverage here on c-span 3 the forum on the state of the u.s. energy industry hosted by the u.s. energy association. just waiting for them to regroup after their break from a little bit earlier. been hearing throughout the day about wind, solar, coal, and oil and gas industries. expect them to start up again momentarily. you're watching live coverage here on c-span 3. >> hi. welcome back to the 16th annual state of the energy industry forum. we're going to move on to our last panel.

the light is very bright. we're going to move on to our remaining panel. we're very excited. i hope you've had a great day. you'll hear some things repeated from earlier today. but i think it'll be very interesting to reinforce some of the messages about what we look forward to in 2020 with our energy landscape. i'm the director of communications and external affairs here. thank you for joining us today. our next speaker is fred hutchinon the president and ceo of l & g allies. as you heard today l & g had an unprecedented year in 2019 from fids to l & g terminals being approved thanks to ferc and the department of energy. we also found out that australia is now the leading exporter of l

& g. it's unite surpd qatar. we expect to take that top position in a few years if fred has anything to do with it. without further ado, fred hutchinson. [ applause ] >> well, good afternoon, everyone. thank you for sticking with us. i don't know about the rest of you but my low alcohol warning light came on. so i promise to be mercifully brief. i am the founder, president, and ceo of l & g allies. we represent companies exporting l & g, building terminals,

companies in the upstream and associated vendors and contractors. i'm honored to appear at this important event to report on the state of the liquified natural gas industry at the beginning of a new decade. 2020 will indeed be a momentous year for u.s. l & g because it marks the end of the beginning of our nascent industry. by mid year the first wave of u.s. li u.s. liquifaction and export facilities will be fully operational and will have completed development of two large projects in louisiana, two in texas, one in maryland, and one in georgia. it means about 11 billion cubic feet per day of new natural gas demand some 12% of u.s. dry natural gas production in 2019 has been created in just five years. it means that some $44 billion was invested in the six projects

with peak construction employment in the range of 30,000 to 40,000 jobs. it means tens of thousands of americans have found good, permanent jobs up stream of l & g export facilities and thousands more now receive indirect or induced employment. it means that america has joined as steve has said the top ranks of global lng producers in five short years. we've gone from zero to third place behind australia and qatar. as the first wave of uslng peaks later this year we'll be producing 77 million tons per and um. but beyond these impressive statistics, and they truly are remarkable, it means that uslng is literally changing the world for the better. uslng has brought new business models to the global energy market place challenging legacy lng producers who sold their gas under long-term contracts with

strict destination restrictions, expensive take or pay requirements, and pricing mechanisms. uslng has expanded the global availability of natural gas. a truly versatile commodity. as you heard from all the other gas associations today. and in a process drove down spot natural gas prices around the world and in close cooperation and coordination with our allies in central and eastern europe who have built new import terminals and pipe lines uslng has helped poland, lithuania, and other nations break free of the predatory pricing practices of a state owned gas monopolist. poland for example has gone from nearly total dependence on russian pipe line gas to a situation where a new pipe line through denmark to the north sea and expanded lng import infrastructure will soon give it the freedom to walk completely

away from russian gas. talk about a chill development. uslng means other things as well. in the months ahead you'll hear lng allies say a lot more about the environmental, economic, and climate benefits of american natural gas exports. u.s. lng is facilitating coal to gas switching in the electric power sector which is reducing conventional air pollutants such as particulate matter, as well as carbon monoxide in europe, asia, and elsewhere. why is coal to gas switching important? the international energy agency estimates the coal to gas switching in the last decade primarily in the united states and china saved more than 500 million tons of co2, an effect equivalent to putting an extra 200 million electric vehicles running on zero carbon electricity on the road over that same period. according to iea and i quote,

while there is a wide variation of across different sources of coal and gas an estimated 90% of gas consumed a day has lower life cycle, greenhouse gas emissions intensity than coal when used for power or heat taking into account both co2 and methane emissions. on average coal and gas switching reduces emissions by 50% when producing electricity and by 33% when providing heat. in addition to its climate and environmental advantages, u.s. lng is lifting people out of property. it is facilitating the construction of dozens of new, highly efficient gas power plants which will bring electrons to some 1 billion people without electricity. it is fueling industrial capacity which as we all know are essential elements of real lasting economic development. so if the uslng industry never

expanded further, than where we are right now, ours would be an energy success story of enviable magnitude. but we're not standing still. in 2019, two new u.s. lng export facilities and one project expansion took final investment decisions and began construction. while not as large as the first wave these three facilities will produce another 30 million tons per year of lng when they are fully operational in the 2023 to 2025 time frame. that will create another four and a half cubic, billion cubic feet per day of gas demand. this extra liquifaction capacity should catapult the united states to the top spot on the leaderboard by 2025. that means from first, from last to first in less than a decade. but as i said, we're not done yet. not by a long shot.

ferc has authorized 11 more u.s. lng proejts and three project expansions representing a potential 170 million tons per year of lng capacity. it's about half of what the global market is currently. and that could stimulate another 20 to 25 billion cubic feet per day in additional u.s. natural gas production. how many of these lng export facilities will get built? well, obviously i don't know the answer to that question. but i do know that only a few long-term contracts away from taking final investment decisions. the most viable of these projects have their ducks lined up. they have their government permits in hand. they have fully wrapped, lump sum, turnkey engineering procurement and construction contracts in place. they have secured needed pipe line capacity. and they have strong financial

partners with ready access to the requisite equity and debt capital. the only one not in the queue for these companies is enough long-term customers to meet their debt requirements. given the costs of the new facilities it is the rare project which can be financed solely on the owner's balance sheet. the only time this has happened in u.s. history was for the golden pass project in texas, which is a joint venture of qatar petroleum and exxon mobil. every other lng proejt needed project financing. unfortunately that means the bankers who provide these construction loans continue to call almost all the shots and no one should be surprised to learn that said bankers want to know how their money will be repaid over the term of the note. furthermore they insist the debt payments be covered by revenue from what they call credit

worthy counter parties, a requirement which dramatically limits the number of customers considered bankable. so as i stand here this afternoon, this is what separates the known from the unknown about the u.s. lng industry in early 2020. here's the known. we are liquifying and shipping a tremendous volume of u.s. natural gas to more than three dozen nations around the globe, and we are continuing to build additional lng export projects. now for the unknown. future growth of the u.s. lng industry depends entirely on global lng demand and the willingness of lng purchasers to step up and make long-term commitments. the global lng market is fiercely competitive. i should really underscore that. it is fiercely competitive. qatar and russia recently announced ambitious expansion programs and two major green field projects, one in mo

mozambique and the other in canada were sanctioned in 2017. let me outline a few things the federal government can do to help assure the further expansion of the u.s. lng export industry. first we simply must avoid further frictions with our trading partners especially when it comes to tariffs. when those countries retaliate, energy is often in the cross hares. just look at the situation with china. despite the recent pledge to buy more u.s. energy in the next two years, they still have a 25% tariff on u.s. lng. and while the phase one trade deal with china should help our industry, i can tell you from first-hand knowledge that there were several long-term deals with chinese companies to either buy u.s. lng or invest in lng projects that were put on hold more than 18 months ago.

beyond trade the export bank of the united states can create new products to make nonprospect grade bankable and it can fund gas and infrastructure in emerging lng markets. the bank may also be able to help finance lng export projects here in the united states as well. like wise, the new u.s. development finance corporation can help finance construction of lng and natural gas infrastructure in the developing world. the u.s. commercial service and the state department can continue to promote u.s. lng exports through america's global network of embassies and consulates. along with the department of energy, these leaders in these embassies and consulates have identified many good opportunities and they are superb cheerleaders for our industry. the u.s. and trade and development agency can continue to bring lng and gas reverse

trade emissions to houston and to finance early stage feasibility studies in developing countries. finally, all of our federal partners can and should continue to join us in singing the praises of u.s. lng exports, which can significantly enhance the allies, bring millions out of poverty, and bring further growth and prosperity here at home. thank you very much for your time and attention. i stand ready for your questions. [ applause ] >> questions? >> so my drink of choice is a martini if anybody was wondering. [ laughter ] gin.

>> could you talk -- i mean, we're very optimistic. your speech was very optimistic. could you talk a little bit about the challenges like baker hughes' announcement just a day ago, some of the other oil field services companies talking about the slowdown in purchases, they're not, you know, they're not really as optimistic as you are when it comes to lng built out. >> well, we're at a point now in the united states where we've sort of overcome what some of the challenges and hurdles were when i first started lng allies five years ago, which had a lot to do with regulatory approvals in the united states. so you've got a large number of companies that have passed through that test and as i said earlier have really lined all their ducks up. so it really is all about long-term contracts. you know, the production is here. those of you that monitor what happens in the oil and gas

fields know that we continue to flare an ever increasing volume of gas in north dakota and texas and other places for which there isn't adequate pipe line takeaway capability. henry hub prices as far as i know the futures price is at an all-time low now, less than $2. so we have adequate production. we have adequate supplies. yes, the oil and gas companies have been tightening their belts. i think baker hughes and their decision obviously i can't speak to them but i think they -- they recognize what we all recognize, which is that at the moment the challenge is really finding the customers a very soft global market for lng. prices are very low. and that's good in that it's encouraging a lot of coal to gas switching. i just got back from two days in brussels. there's been amazing progress with what, just in the last 18

months, the additional u.s. lng to europe and how coal-to-gas switching has occurred there. but, yeah. look. i'm a glass half full kind of so i am optimistic. look, i think that we're in a short -- at least respect to lng supply and demand balance globally, we're in a bit of an adequate supply period of time. i wouldn't characterize it as oversupply. i characterize it as adequate supply. that's not going to continue indefinitely. these projects take about five years to build and between 2015 and 2019, there was -- there was a drop-off, so it takes -- it takes at least 42 months and it can take longer to build these projects and because we missed a couple of years in the united states and globally, there is a

supply deficit coming. people argue about when that might be, whether it's '21 or '22 but from a long-term standpoint, there's plenty of room for optimism. >> christopher of u.s. department of energy office of oil and natural gas. thank you for your comments. can you comment on the shipping industry, where's the lng shipping industry today, are we moving forward to any shipbuilding going on in the gulf states with revising of the -- whether or not it's -- just like to know where we are in the shipping and tank -- >> i think we're adequately supplied at present. i think that, you know, because there is a lag time, you know, one of the things in the lng

business that is something that i learned that's a little bit astonishing in that one side of the equation, the supply side of the equation, is pretty much fixed. there are a certain number of liquefaction projects around the world, and if you apply a capacity factor to those facilities, you can figure out what the supply can be, and until additional supply is developed, which, again, is all publicly announced and becomes built into the models, it's adequate, it's easy to predict the supply side of things. that demand side of things has been much more difficult generally for people to get right. but obviously, those that are in the tanker business monitor all of this very closely and i would say there may be some short-term periods of shortages but as far as i know, things are pretty much in tune at the moment.

so -- >> any questions? >> not so much a question but a comment. you had listed a nice number of u.s. agencies that could be of assistance to the lng community, but i'd like to suggest that you also consider the u.s. agency for international development. as you may know, usca's had a long-standing partnership with usaid. and one of the things that we're doing is giving the tools and skills to pipeline planners and network engineers to model interconnections and lng port facilities that can bring, particularly in southeast europe, bring an alternate supply of gas to diminish the russian monopoly that currently serves the region.

some of that gas, that alternate gas, u.s. lng, i'm saying it's not only because of southeast europe, but it's a model that's applicable around the world. i think you'll find that usaid has an appetite for this kind of work and may be willing to partner up and talk to you guys. >> well, so it's real interesting that you bring this up because i have been invited to go to -- with usaid -- to thailand the end of march, early april, and participate in a south asia as well as southeast asia mission to help bring some of their government regulators and others kind of up to speed in general on this. so i probably have just disinvited myself from the trip. right? by forgetting either to thank usea or to mention usaid but, look, there's a number -- they are important. there's a number of agencies we work with.

even with all the ones they approved, we still have projects pending at furk. we have new projects coming into the pipeline all the time. today's announcement by mknamy he's not going to serve a second term, leaving us by june 30th with potentially down to subquorum levels is a big concern for us. furc needs commissioners. it needs to remain the bipartisan agency that it's b n been. we love our friends at d.o.e. they're doing a great job of continuing to license and approve these facilities and to promote u.s. lng at every opportunity. so anybody that wasn't on my list, it was purely an oversight. so -- >> questions? thank you. >> thank you. [ applause ] >> our next speaker is joy

diddo, president and ceo of appa, american public power association. most recently joy was president and ceo of utilities technology company. we just heard from sharla arts, saying it right? about spectrum. joy brought that critical issue to the fore an we've written about that. we're very exciting joy is our next speaker. she basically returned home to appa. she spent a huge chunk of her career on the policy team and now she's taken the helm, reins from sue kelly who we all love and going to talk to you about the policy focus for appa in 2020. and we want to thank aapa for allowing us to be the judge for the 2020 innovators award. so, joy, thank you. >> well, thanks to dee, thanks to barry for this partnership. i -- we got utc involved and

usea when i was there and that's been great for them and sharla, you did a great job earlier, and appa, i would venture to say although i didn't double check this, i would venture to say appa has been part of all 16 of these forums in some capacity, so thank you for that long-term partnership as well. so, after four years away from appa, i spent 15 years of my career there prior to coming back, some things do stay the same and as i willis throu list policy issues, many are familiar to me from four years ago. feel a little different but mostly the same. some things are different. i mean, aged four years yet my hair has gotten blonder and my gray has miraculously disappeared. i don't know how that happened. so as i refamiliarize myself with the appa issues, i hope you'll bear with me.

i will answer as many questions as i can, but i also have dez marie waterhouse here. dez, to help keep me straight if i do need some help. so thanks to her as well for being here. so do i have a clicker or do i just say -- oh, right here. awesome. okay. so this is just -- we're going to talk a little bit about the policy issues but hopefully we'll move public power forward as we get to the end. but first, i guess, again, in the spirit of refamiliarizing myself with public power and all of the issues that we cover, i'm going to take the opportunity to refamiliarize you all with public power because we throw out -- we assume that everyone knows everything about the energy industry and the electric -- the electric sector, specifically, and when i came on to appa, you know, almost 20 years ago, and i came from capitol hill and i worked on these issues, the level of complexity in this industry just with the stakeholders, alone, is daunting. so for those of you who may be a

little bit new to the electric sector, i'm going to hit pause and take a moment and tell you who we are. i pulled this definition of public power from legislation and you'll notice there is a typo. it's not my typo, but there is a typo. but it's -- this definition is even a little complex but we can't get around it. we are a political -- we're utilities owned by political subdivisions of the state. such as a municipally owned electric utility and a utility owned by any agency, authority, corporation, or instrumentality of one or more political subdivisions of the state. so what that means is we have formed over the last probably 40 or so years consortium of public power of municipal utilities primarily that get together and build their own generation facilities, handle transmission transactions and participate in wholesale markets. they're typically called joint action agencies so we want to

capture them in the definition. we also do have beyond jurisdictions we have a number of end entities of irrigations in the west, and saltriver project, which is a larger entity in the phoenix area that actually provides electricity and water service so some of th jurisdictions are not limited to municipalities, look like a county-level jurisdiction or just larger than a city or more rural in nature. so we're also not-for-profit. public, community oriented, responsiv responsive. we are subject to federal environmental, endangered species, reliability, critical infrastructure protection, regulation, and we have some limited federal regulation for public power transmission owners. known as frc-lite.

we're relying on other transmission-owning entities to facilitate transmission service that we wur chas. we also purchase more power than we produce. we have generation facilities we own or operation or in some cases jointly own with others in the industry. but for the most part, we are purchasers of power rather than producers of power. of the power that we produce, this is the breakdown. this is from 2017 eia data. 26.6% coal. 18% hiydropower. 4.8% oil. 1.5% other which is we have actually a number of geothermal interests, particularly in california. .7% wind. all right. and then specifically to the american public power association who are our members, so there are actually 2,000

total public power utilities in the u.s. and that includes some of the territories. we have of those 2,000 a little over 1,400 are our direct members but we represent their interests holistically here in washington. we have some very large utilities. our largest, i believe, depending on how you slice it, is still los angeles department of water and power so we have orlando, los angeles, seattle, tacoma, san antonio. some of those larger cities are our members but then we have some -- most of our members, the vast majority, are very, very small. the median size of our utilities are 1,977 meters. not very big. and then we have 14.4% of sales ultimate electric customers. okay. so, what do we care about in federal policy for 2020? this makes me tired coming from

utc where we had a more narrow focus, a hard focus because we were at the federal communications commission which as sharla said didn't care much about what we thought, but this is a longer list because appa is a, what i call a full service trade association. so we represent our members on the vast majority of public policy issues that could ever touch them when it comes to production of electricity. so there's a lot. actually, when i started 20 years ago, it was in the middle of the western electricity crisis, so there was a lot going on back then, but i would venture to say that the complexity of our industry has really increased exponentially even since then. and the list of the issues that we have to cover is kind of demonstrative of that. so just quickly i'll tick through a couple of slides. you know, we believed for a long time and we still believe at appa that climate change policy in terms of legislation or regulation is really should be left to congress, so congress should actually weigh in and

then the, you know, environmental protection agency should implement that policy. rather than trying to reconfigure the existing clean air act. so i will say that this is a really good number. from 2005 to 2017, which is the latest data available. public power utilities, of those generation facilities i mentioned earlier, we've reduced our co2 emissions by 33%. from 2005 levels. that's mostly the percentage of coal facilities that we used to generate from has definitely shifted. we also have a good story to tell on hydropower. we've done more run of the river hydro and innovative things on the hydropower front. we also in order to achieve a more clean energy future and to address climate change when the federal government is creating incentives for clean energy or anything else for that matter for electric vehicles, et cetera, oftentimes those incentives come in the form of

tax, you know, tax incentives. well, we're not-for-profit so we don't pay federal income taxes. so how do we derive an incentive for our customers? so it's basically a parity issue and whenever we see those types of incentives put forward, we want a comparable way, whether it be through a grant, whether it be through another type of tax mechanism that we could -- a transferable credit, et cetera. there are actually a number of bills pending right now that would provide such comparable incentives to us and we've seen comparable incentives in law previously. we have taken advantage of those. in terms of this is another tax issue, a big one for us, in the tax bill that passed in 2017 now, it feels like it was yesterday that that tax bill passion passed and it's 2020. we had a huge victory for public power and, frankly, for all local governments in the municipal bonds or tax-exempt

financing was protected from taxation. there's a long history i could bore you with which i'm not going to but it's the primary financing tool for local government and billions and billions and billions of dollars, $100 billion for electric facilities, is pending that's been developed through tax exempt -- so $100 billion in investments just recently for tax exempt -- has been developed through tax exempt financing. a huge amount of investment has occurred through this tax mechanism or lack of tax mechanism. so we're very pleased that in that tax bill in 2017 that we weren't subject to taxation through taxes and financing, but there were some changes made to municipal bonds or tax-exempt bonds. one was our ability to basically refinance the bonds to get a better rate for the bonds on behalf of bondholders and on behalf of our costs.

that's called advanced refunding, or advanced refunding of bonds. so we're seeking to reestabli-eh that mechanism going forward. so we want to just make those more workable for us again and it does save money for investors and the projects, themselves. then on grid security and grid security funding, public power along with the rest of the industry, and i speak for, i think, everyone in this room who's been involved in these issues, it's a huge focus for the industry to ensure that the grid is safe from physical and cybersecurity threats. as we all know, the reason we have a cybersecurity risk in the first place is because of what you heard from sharla earlier. we layered digital communication technology on top of our grids to make them more efficient to enable them to be more flexible, to have greater situational awareness and to make them more reliable. that was a good thing, but,

unfortunately, the sort of yang of the yin has been we have a cybersecurity risk we're going to have to manage now and into the future so i think as public power we have been a strong partner with the federal government as well as our brethren, rural cooperatives, investor-owned utilities, ensuring we address this risk very, very seriously and we encourage our members to address it seriously as well. we have supported in terms of the legislative front, there's a bill pending that would actually permanently fund activities related to grid security for electric utilities into the future through the department of energy which is a great goal. we have, though, in the interim been able to secure a couple of grants from the department of

energy that appa has been deploying to educate particularly our smaller members who may not be subject directly to both power system, electric reliability standards and cybersecurity standards but really to educate them on their cybersecurity maturity and then also ways that they can protect themselves and manage this risk going forward. so it's been a great partnership. we also participate quite heavily in the electricity subsector coordinating council which you may have heard about earlier that really is a forum for the electric sector and some electric sector ceos to get together with our government colleagues. sector coordinating councils were created for critical infrastructure sector entities after 9/11 to be able to partner with the federal government and really strategize about security matters. and as the cybersecurity issue has come more to the forefront, we've focused in a lot on that.

we still often talk about natural disasters, preparedness, and other physical security matters in those forums. but that's been a great partnership as well. i think has really proven out when we look at the response, the storm response, especially, in the last ten years, think you've seen an improvement in general with, you know, maybe a couple of exceptions. we've seen a lot of improvement in florida. the sector has worked very hard to harden its -- to harden itself but also to work together to have mutufuturmutual aid res to really be prepared. okay. so continue. this is the second slide. again, it's a lengthy list and it does make me little tired, but i promise i'll get some sleep before we get really into this. this is only my eighth day on the job so i'm not completely tired yet, but i'll get there, i'm sure. so the next bullet is, this is really more specific in some ways to public power and rural

co-ops. we are the beneficiaries of -- we pay for it, but we're sort of the priority beneficiaries of federal hydropower, so the big dams like hoover dam, they produce hydropower. we purchase it from the federal government and use it in our electric operations. so the power marketing administrations market that hydropower to us. those entities are often under attack. paid for in total by rates. taxpayers don't pay for them. neither do taxpayers pay for the tennessee valley authority. it seems like with every administration, whether democratic or republican, there's a proposal to sell them off, to change them to market-based rates and it's sort of a, you know, it just doesn't make sense to us because there's nothing wrong here. it's really a solution in search of a problem and we hope that we -- every time it happens, we defend it. we work with the rural co-ops

and beat it back. every year it seems like there's something. so that's the case for the fy 2020 budget. there's some proposals that would seek to have these administrations and tennessee valley authorities sell out their transmission and that's something passed. this is back into the fcc realm. similar we work with utc on this. there's nuances in how it is governed and in the case of public power and rural co-ops, we're exempt from the fcc's pull attachment policies thankfully. we're locally governed as i mentioned earlier. the courts and congress recognized now and understand we're not for profit so we're in it for the benefit of our customers. but there have been proposals,

not the least of which from the fcc recently, that would undo that exemption. ve for very byzantine ways. under the organic communications act statute. and so we're pushing back on that. we're -- there's some -- there's a court case pending that we hopefully will win. we are calling into question new regulation in this regard. back to what sharla was saying, though, about 5g and small cell deployment and electric infrastructure being right for these small cells and while i think we are in the same boat as others in the industry that we appreciate that we're in a technology revolution and 5g is appealing to me and it should be embra embraced, it's really about balancing out that push with the reality of electric reliability. if you have a huge number of small cells on a pole, it weights the poles differently. that analysis has to be done. you cannot deploy any communications technology without electricity, so it makes sense for us to have these

conversations now rather than later. we talked -- you heard all about spectrum policy so i'll just say that we're with utc and the rest of the industry on that as well. in terms of electric vehicles, really i mentioned it earlier, about federal government funding and also comparable incentives for us. if there are tax incentives provided for our brethren to take advantage of and the investor-owned utility segment, we need to have those, but there are some other grants being made available and some legislation that's pending that we would support. but overall, i think we join the industry in recognizing that e leng electric vehicles are come and we want to be part of that solution in terms of providing charging stations ourselves and really integrating them into grid operations. on transmission policy, you heard we're transmission dependent for the most part, so we really do need to have costs at the transmission level be reasonable.

which is really what the law says. unfortunately, sometimes we've seen some of the rulemakings coming through frc or proposals coming through frc perhaps deviating from that reas reasonableness. we watch that very closely and weigh in very heavily when we see proposals to increase transmission rates beyond what we consider reasonable rates. in terms of wholesale markets, this is kind of a downer one. this is one where as many of you know, there's been a long debate about regional markets and their benefits versus their costs. we believe in many cases there's some benefits around being in a wholesale environment, but the costs have been very high in certain areas of the country. and then there has been this longtime plan in pjm, it's a pretty byzantine issue, so i'm not going to try to explain it fully, but the way -- there's

essentially a price floor in pjm for sales into the marketplace. and that proposal has been out there for a long time. we've been concerned with it for a long time because we supply our own power. the generation that we do own and operate, typically we supply to ourselves on site. we're using our own generation. fwe ha if we have access, we sell it to the marketplace. we're using it first for our own needs. sometimes we don't have access. sometimes we're purchasing, right? so in this scenario, you know, it's been a long time debated and there's a proposal put forward by pjm around this minimum offer price rule or price floor in which actually pjm said you should exempt public power utilities and co-ops from this moper, which is what this is known as, so that they can self-supply. right? and they shouldn't have to pay twice for generation. but unfortunately, frc didn't listen to that recommendation from pjm, itself, and from many

others and instead swooped us in into their recent order on pjm's moper. so we are going to be fighting that and i think we just filed our rehearing request this week. so that's very unfortunate. it's going to be hugely problematic for us. so we'll continue to fight that and it's disappointing. in terms of distributed energy resources and storage, we do highly support these technologies and i want to say, in the vain of moving public power forward, really this is where it's at. i think electric utilities and public power, specifically, community owned entities, really want to work with their communities on providing flexibility to customers around distributed energy resources, around renewable energy, clean energy. so we support these technologies. what we don't support is them being regulated, again, at the federal level. these are local and state

issues. not federal issues. so we also have concerns with frc's kind of reach into state and local decision-making. and any -- we really believe any decision-making around these sets of issues, which are really distribution-level issues, that was very clear and it's very clear in the federal power act where those lie, that really states and localities need to be involved in any decision-making around distributed energy resources. so we have concerns about ders participating in rto markets, et cetera. okay. so, whew, one other thing i'll mention, oh my gosh, that was it. the last thing i'll say is what's not listed here is wildfires and it's kind of part of the vain of cybersecurity and resilience, et cetera. the sector is actually taking a look at that through this escc

construct i mentioned earlier. we're having a meeting, actually, next week around this issue, and there has been a move for many years by electric utilities including public power to enhance our ability to manage vegetation, particularly on federal lands but on our rights of way, and that has been blocked for many, many years, but we finally got legislation through and regulation is pending. so we're just going to be encouraging the federal government to kind of get its act together and move forward with that regulation so that we can better manage our vegetation at minimum. but there's a lot to the fires issue and i won't go into too much detail, but we're looking at that as well as a sector. all right. so really, bottom line is, policy should incentivize public power utilities and other utilities to poomove into a fut of greater communication and relationship with our customers.

we already have great communication, but as we all know, the sector is changing. we need more flexibility. utilities are going to be really seen as more of a service in the future. we want to be able to do that. we want to be able to innovate. we've shown great innovation in the past. we've been movers and shakers in the industry when we're allowed to do that. but federal policy should not hinder us from making these decisions on behalf of our customers. so the positive example is what we talked about before on the cyber and physical security and the partnerships there with the federal government is key. they have the intel. they have a lot of the manpower we need to respond. but we have, you know, we have the infrastructure. the detrimental example would be that the frc decision i just talked about. so really want to be here to unleash the capabilities of public power and we're here to, you know, maybe stop some bad ideas and promote good ideas as we move forward.

so it's good to be home. thank you so much. [ applause ] >> we're short on time, but does anybody have questions? >> great remarks, joy. i enjoyed it. i know when you led utc that you and sharla and the whole utc team worked very closely with appa and the other national electricity trade associations, but my question is, there are a number of shared issues here, are there any particular insights from your time at utc that you feel like you're taking back into your job, your new job now, at appa? >> thanks. thanks for that question, barbara. absolutely. i mean, the importance of these technologies and the networks that they we're putting on our grids every day, sensors, all of those things, require a

network that's reliable, communications network that's reliable, and there are entities up here who really don't care about that. so that's a common theme. i'm definitely bringing that. also bringing back some relationships i developed with, frankly, the equipment community and the vendor community. they can be great partners with us as we move into the future. so many things, there's also many great partnerships with the sector. i mean, we really align, i think, now more than ever on a number of issues. even though you always hear about the divisiveness and the things that we don't align on because we get fired up about that, but there's so many things we do align on and we will continue to partner with the rest -- i'll continue to partner with the rest of the industry where i can. and i know my team will as well. >> joy. >> all right. thank you. >> our next speaker is will

pettit, executive director of the geothermal resources council. usca is no stranger to geothermal energy. our program director, andrew palmateer, has been expasnding t in africa. are we on a verge of a boom here in the united states? we'll hear from will now. thanks. >> all right. doe with have the slides coming up? look at that. with have the sli up? look at that. so there's the answer. yet, usa has done a fantastic job with everything they've been working on especially in east africa. there's a lot of development in that part of the world that i think owes a lot to the usea and what they've been doing. so, thank you very much. thank you, pbarry, for inviting me. it's a real pleasure and i'm excited to be here. of course, we really are on the slight unwind. i can feel that the room wanting

to get there. so the size of prize in geothermal is huge. there's no doubt geothermal energy will be a huge success in the near future. we're on the brink of a boom in the industry. this is because the energy transition needs us as society decarbonizes and electrifies over the next few decades. we're now inside an energy revolution and we've heard a lot about this today and i'm kind of following a similar thread. society will need a mix of renewable and clean energies sbeas well as a huge leap in energy efficiency and heat management and all of the above clean energy strategy. we will need renewable and clean energies that are always on. no matter what the time and whatever the weather, this means thinking outside the box in terms of how we manage our energy supply and consumption. it also means there are

significant opportunities for collaboration across industries and geothermal is at the center of that. in this presentation i'll provide an introduction into where geothermal is heading and how it fits into that energy mix. so geothermal energy is a recovery of heat from the earth that is then converted to electricity or used directly. the earth is a huge heat source that constantly transports heat from its center to the surface by thermal conduction and convection. geothermal technologies and industries then capture that heat for a wide range of uses. it's a renewable energy source that emits very low greenhouse gases just like solar or wind, except the energy comes from within the planet beneath our feet. that solar -- that energy can be a few meters depth to thousands of meters depth. like solar, geothermal is scaleable. geothermal industries can be broadly split into four types.

extraction of natural hydrothermal waters at temperatures usually well above 100 degrees "c" and from great depths to generate electricity. direct use of cooler water for industrial and community heating systems, usually between 40 and 100 degrees "c" then geothermal heat pumps to operate at lower temperatures with shallow installations to heat or cool individual buildings or homes. they are geothermal equivalent to rooftop solar. the fourth type is known as egs. enhanced geothermal systems where deep reservoirs are engineered to circulate water in a rock heat exchanger. in the u.s. current power production is focused on the western states where the most accessible resources can be found. california is the largest producer and has the largest

geothermal field in the world. however, the earth is hot everywhere. it's just how deep we want to drill and the economics of recovery. this map indicate temperatures at the subsurface and access to hot rock. in the usa we have about 3.8 gigawatts of installed geothermal power capacity. we have about 1 gigawatt being developed. a recent study by the department of energy shows that there can be over 60 gigawatts of capacity by 2050 if we enable cost-competitive geothermal expansion. total accessible egs resources can provide much more than 100 gigawatts of power according to other government studies. egs is in a research phase but offers huge potential. the benefit of enhanced geothermal systems is that we can tap into our subsurface heat resource anywhere. research projects in egs are being performed all over the world. in the usa there are two

projects funded by the d.o.e. and bill gates's breakthrough energy ventures. these systems do not need hot water in place but instead rely on enhancing natural permeability by pumping fluids continuously through a permeable reservoir in one big giant natural heat exchanger that can be many kilometers deep accessed through drill holes. the main challenges with egs are to develop the reservoir, access it economically, and control the fluids. the d.o.e.'s forge project is sichlted in utah and establishes an experimental field site to research, test and demonstrate egs technologies. on the path to developing commercial projects elsewhere. it will receive $140 million in continued funding over 5 years. when launching forge, the secretary of energy noted funding efforts toward the next frontier in geothermal energy

technologies will help diversify the united states domestic energy portfolio, enhance our energy access and increase our energy security. i believe those technologies will develop rapidly and egs will be a big success in helping bring geothermal into the mainstream and becoming a significant energy provider in the future. the d.o.e.'s study published in may is pivotal and far reaching. it highlights the importance of geothermal in the energy mix, not just in electricity generation but also in direct use of heat for domestic and commercial applications and thosepumps in buildings. the report shows if we can bring down regulatory timeframes and well costs and enable geothermal anywhere, then we can see amazing market growth through

2050. we can scale up existing geothermal heat pump technologies in residential and commercial buildings. we can include heat pumps in new builds and retrofit to existing buildings to reach 28 million installations. we can develop district heating systems that supply heat directly to communities and industries leading to an estimated 17,500 installed systems. and that 60 gigawatts of estimated power capacity means geothermal will provide 10% of total u.s. electricity demand. this is a vast potential for economic expansion. the geovision report was like a call to action for federal lawmakers. and 2019 became a record year for geothermal on the hill. draft legislation had broad appeal and was largely bipartisan. we've had three congressional hearings. one in june with the senate

committee on energy and natural resources. one in september with the house committee on natural resources, subcommittee on energy and mineral resources. and one in november with the house committee on science, space, and technology, subcommittee on energy. the previous year we had congressional hearing was in 2007. it was also a busy year for draft legislation that includes geothermal energy. the grc's policy committee has followed this activity with great interest and supports all the draft legislation. the pcs, independently funded group of interested organizations advocating on behalf of the geothermal community to inform government policy regulations and decisionmakers. the chairman of the grc's policy committee, paul thompson, and our past president, maria richards, from southern methodist university, testified

at hearings last year along with other grc members. we look forward to seeing the next steps on all the bills i listed here and are excited about 2020 being an even bigger year for us. as many of you know, the further consolidated appropriations act of 2020 was signed into law in december. the grc commends this legislation and applauds the federal government for this passage. the legislation had two impacts for us. it retroactively revived and extended the full production tax credit, the ptc, for geothermal facilities through 2020, continuing u.s. support for the geothermal industry. the ptc provides a credit for each kilowatt hour of energy produced by the taxpayer from qualified renewable energy facilities. the previous ptc for geothermal facilities expired at the end of

2017. this support contributes to the ongoing creation of new jobs in the geothermal industry as well as the nation's energy independence. secondly, the act increased the budget for d.o.e.'s geothermal technologies office. from $84 million in 2019 to $110 million in 2020, that's a 30% increase. this money brings increased funding for egs on top of the forge project including at least one demonstration project and increased funding for ground source heating, cooling, and district heating. the main threads of the host of proposed draft legislation from last year were increased research, establishing more forge top experimental sites including east of the mississippi, streamlining permitting processes and development of co-production technologies with petroleum and mineral industries. and i want to dwell on this co-production a little bit here. the oil and gas industry has a

lot of opportunity in the geothermal markets as these grow. society will pressure the oil and gas industry to lower their carbon profile which means they need to invest in renewable and clean energies. there are clear technical overlaps with oil and gas exploration and subsurface bo borehole operations that make sure it fits with geothermal. this has already begun in the reservoir and mechanics research and development arena. i believe the oil and gas industry will naturally gravitate toward the geothermal technologies to fit their clean energy goals as geothermal becomes more established and mainstream. as for the mineral industry, i'd like to focus briefly on lithium. geothermal developers are looking at ways of increasing the value of geothermal plants where possible so as to make more power production, make power production even more

competitive. one way to achieve this is through co-production of minerals with the power. in an area like the imperial valley in southern california, the minerals are transported in the geothermal brine solution that is extracted from the hot rocks at depth. and currently, that brine is pumped back into the reservoir. the demand for lithium will increase substantially over the next ten years as society transitions to using more battery storage and transportation turns to electric vehicles. the supply of lithium is becoming of national importance as battery markets and technologies develop. mineral security becomes critical as the u.s. currently produces hardly any lithium. it so happens that in imperial valley, there's a huge resource in the geothermal brines. companies like berkshire hathaway energy have been investigating how to recover that lithium. and estimate that the region could produce over two-thirds of

the world's demand in 2025. and at a very competitive cost to elsewhere. this symbiosis of geothermal power and mineral recovery is an amazing opportunity as the mineral extraction technologies will need the power that can be obtained from the same renewable and clean energy source. it also has many opportunities for expanding local economies as battery and vehicle manufacturers potentially move into the same area as the lithium production. finally, i'd like to take a few minutes to step back and look at the even bigger picture. let's ask ourselves this. where is my clean energy coming from on a still dark winter night in 2030? what about in 2050? well, let's think about that a little bit. what's going to be happening in 2030?

well, there's three things that are certainly going to be happening. firstly, decarbonization. renewable portfolio standards and greenhouse gas emission targets will increase penetration of renewable power in electricity markets and be replacing carbon-emitting generation with a carbon-free energy mix. secondly, electrification. we already heard a lot about this today. our ground transportation will electricfy as demand for electric vehicles increases substantially. and technical innovations see electric trucks entering the market. there will also be pressures to electrify our homes, buildings, and industries by making them more energy efficient and removing carbon-emitting heating and industrial systems. and thirdly, climate change is here and is a scientific fact. the global climate will continue to get hotter and extreme weather events more common. this is going to drive public opinion and accelerate

decarbonization electrification o' over the following decades. all this means that electricity demands will increase, peak loads will move to later in the evening and during the winter. storage and energy efficiencies will play big roles but clearly can't meet all the future demands when solar and wind cannot. society will also need clean and renewable energies that work through the night in any weather and are efficient during the winter months. these things are already happening. in california as an example, rps and ghg emission targets mean that government agencies are needing to find practical solutions across a broad range of activities. california will be 60% renewable by 2030 and have reduced emissions to 40% below 1990 levels. states across this great nation will follow the same path, 29

now having adopted rps targets. policies for fighting climate change and lowering greenhouse gas emissions will yield procurement of new geothermal energy in both heat and power on an unprecedented scale. geothermal makes a significant impact to building jobs and providing economic benefits in local communities across the nation. for every 2 megawatts of geothermal development, there are five quality jobs created. the highest for any renewable energy. operators pay local taxes and pay royalties for state and federal lands. one of geothermal's benefits as well as one of its challenges is it's hidden almost completely from view beneath our feet. surface installations that use you y geothermal have the smallest footprint of all the renewable energies. it doesn't have the foot pretty of oa

footprint of solar and wind. but it's always there as a renewable base load resource, geothermal is a reliable source of energy that can give clean renewable power and heat that's always on. it can provide the electricity grid with resiliency and reliability. it's a stable 24/7 energy source with capacity factors greater than 70% in practice. higher than any other power resource except nuclear. it can be ramped up and down so it's flexible to give power when it's needed and can help balance the grid when intermittent renewables come. mitigating the so-called duck curve where large demand ramps are needed due to evening consumption combined with solar generation coming offline as the sun sets. geothermal power also provides ancillary services that are so important to maintaining a resilient and stable power grid with capabilities, spinning and

non-spinning reserves and frequency regulation. as solar and wind continue their penetration into our energy markets then we will need geothermal energy to provide these services day and night all year round. whatever the weather. combine this win-win situation for the renewable energy sector with benefits that geothermal can bring to the oil and gas industry and development of critical mineral recovery, then it means that geothermal, collaboration between wide and disparate parts of our energy and mineral sectors for the benefit of everybody. so, to conclude, the geothermal industry is helping to build a future where geothermal power and heat can be rolled out across the nation as a critical source of energy for u.s. households and businesses. as we transition to a clean, renewable, energy future. it's clear that society needs geothermal now. thank you very much.

[ applause ] >> hi. alex with usea. >> hi. >> there was recently a french study, i believe, looking at integrating carbon capture use and storage with geothermal systems. is that familiar at all, and if so, can you touch on that? >> i'm not familiar with that particular study, but the two technologies can go hand in hand, absolutely, for sure, because carbon capture is effectively putting carbon dioxide, as you know, down into the reservoirs assuming there's a really good cap rock down there that can hold it in place. so, and it can also displace fluids. so the technologies -- those two technologies can go hand in

hand, and, again, it speaks to that relationship with all of these subsurface technologies. oil and gas which will continue to be obviously a big part of the energy -- energy spectrum, with carbon capture going into subsurface reservoirs and with geothermal being in other subsurface reservoirs, you have this kind of mix of technologies that can really collaborate. >> jeff price on good options. there's one geothermal technology that hardly ever gets mentioned. you had it i think in one line in your first slide which is geothermal or ground source heat pumps. is that something that your association deals with? where does that stand now? is there any -- are there any organizations that are actually widely marketing it? what are the constraints to its

future use that has a broad applicability over -- earlier over a much broader geographic area than some of the other larger scale geothermal resources? >> yeah, great question. and geothermal heat pumps could be a huge success story. they are literally, as i mentioned, the equivalent to rooftop solar and could be rolled out nationwide. they can be scaled up, if we started on that road, literally started on that road, we could reduce costs. we could make the economics of it much, much, much better. and i think, you know, outside of the u.s., geothermal heat pumps have a much greater acceptance and use.

in europe, they are much, much broader use than what they are here. you could certainly go a long, long way to reducing the power requirements of whole residential areas if you combined solar and geothermal heat pumps into buildings. commercial buildings and residential buildings. so they do have a really big future, but as you say, it's getting that message out there that really -- that really is tric tricky. one of the great things, i think, there is that you could make those whole -- it comes back to the whole microgrids discussion because you could make those entire areas of residential and commercial buildings effectively energy independent because with those combinations of technologies,

then you're literally creating your own power. >> thank you, will. appreciate it. [ applause ] >> thank you. >> all right. we're coming to the end of our program, but this is -- we have a couple of great speakers left. betsy monsoe is the ceo of the american coal council. now, on one hand it seems like the headwinds are unrelenting for the coal industry between public opinion, aging plants, 10 gigawatts of co s canceled last. betsy has another story. without further adieu, betsy monso. >> thank you. thank you, barry. appreciate the opportunity to participate today. the american coal council's membership comes from across the coal value chain, so those that produce it, consume it, transport it, trade it, and a

whole host of support services firms involved. as we consider the start of a new decade, the outlook for 2020, it's also an opportunity to refrelect on the decade that just ended. taking stock of the past ten years for u.s. coal feels a little bit like a roller coaster ride. there was some good markets and good times early in the decade. mounting challenges by mid-decade. and a mixed bag of better policy and regulatory support but weaker domestic markets later in the decade. coal continues to be the leading fuel source for electric generation globally. i know you heard that earlier, but just in case you've been here for so long that you forgot, i thought i should mention it again. total coal consumption worldwide is about 8 billion tons. the international energy agency expects coal use to remain broadly stable in the coming years.

this will reflect continued growth in china, india, and southeast asia and continued declines in the united states and europe. u.s. coal is shipped to both domestic and international customers and used to make electricity, steel, and other industrial products. while the export market segment is important to u.s. coal, the domestic power sector has traditionally accounted for 85% or more of u.s. coal demand. coal faces intense pressure in this market segment. the u.s. electricity resource mix continues to be characterized by growing natural gas and renewables capacity while coal capacity continues to be shut down. this has significant implications. natural gas is primarily a just-in-time fuel and renewables are variable. producing electricity as available rather than as needed.

our nation's coal plants are critical assets that directly support the reliability and resilience of the electric grid. they are dispatchable so they can run any time 24/7. they store inventory on site so they're fuel secure. they are ready to be deployed as needed to assure that electricity supply meets demand every minute. these are indispensable attributes and coal plants can contribute at a level above their weight because of them. in the winter home heating is the top priority for the use of natural gas. during cold weather periods when electricity demand surges, there may not be enough gas available for both home heating and electric generation in some regions at some times. solar and wind resources are intermittent. their availability may not match up to electricity demand

patterns, especially when demand surges in extreme hot or cold weather. 2019 provided continuing examples of the vulnerabilities of the changing power sector resource mix. resource mix. during a 2019 polar vortex event in the upper midwest, there were problems with natural gas systems and a drop in wind production during a bitterly cold period in january. the drop in wind occurred due to automatic shut offs of wind turbines in the extremely cold temperatures. this was unanticipated. generation forecasts had overestimated the wind resource contribution by as much as eight gigawatts in the electricity region. that's over 56% of the installed wind generation in that region. a miso maximum generation event was triggered.

electricity conservation measures were instituted to reduce usage. in some cases residents were asked to turn thermostats down to 63 degrees. auto makers cancelled shifts in plants, and there was wide closure of businesses and schools. it was coal that came through providing the highest share of electricity during the polar vortex event. last summer, texas providing another example of the risks of moving away from coal. faced with high temperatures and near record electric demand, the electric reliability council of texas issued two emergency alerts during the week of august 12. customers were asked to turn thermostats up, stop using large appliances, and shutting off pool pumps. yes, that's a thing. i understand it's harmful to the mechanisms. businesses were asked to reduce us aj, and large consumers were

requested to shut down non-essential production. er cot had not issued a non-emergency alert since 2014. available generating resources had dropped during this hot august week, and ercot cited temperatures. this is of more than 20 gigawatts of wind capacity in the ercot region. with fewer coal plants in the mix to backstop other resources, the risk of these types of incidences and interruptions may increase. more than 40% of the coal fleet in 2010 has retired or announced retirement. eia estimates about 13 gigawatts retired in 2019 and about 6 will retire in 2020. and some private sources are already estimating even higher retirements in 2020. and no new coal generation is

being added unlike natural gas and renewables. eia protects 2020 capacity of 11 gigawatts of natural gas, 24 gigawatts for solar, and 19 gigawatts for wind. policy makers should not expect that closing additional coal and nuclear plants and relying more on just in time fuel and variation generation sources will provide the same system reliability and resilience experienced in the past. fuel security was analyzed by america's power which found that almost 40% of our nation's total electric generation capacity is not fuel secure. their analysis included natural gas capacity without dual fuel capability combined with renewables capacity. polling has shown that nearly three quarters of americans believe in an all of the above strategy that includes coal, natural gas, nuclear power, and

renewables. it also shows that more than half of americans think the u.s. government should support coal and nuclear plants given their ability to produce electricity 24/7 and their use of fuel stored on site. jobs are another important aspect of the energy business. the coal sector accounts for about 400,000 direct, indirect, and induced jobs. the average wage for a coal miner is more than $80,000 per year, about twice as much as the solar installer. coal-related jobs are vitally important to the states and communities where coal is mined, transported, and used in power plant, steel making facilities, and industrial applications. these jobs make a difference between thriving, local, and regional economies and those plagued by unemployment and its undesirable side effects. it would be short sided and misguided to assume that coal

sector jobs can be replaced and that task forces and retraining can actually produce high quality durable jobs in other industries. favorable factors for coal include continuing federal regulatory reform and rebalancing, finalizing epa's affordable clean energy rule in 2018 was a big step. epa's continuing efforts to revise and clarify regulations are important for planning and compliance by coal power plants. the ceq's new national environmental policy act regulations address many barriers that have plagued energy and infrastructure development for years. those regulations incorporate sensible and long overdue reforms that facilitate timely and better coordinated environmental reviews. in congress, the year end spending bill included funding for the department of energy's fossil r&d program at the

highest level in a decade. doe is making progress in important areas. this includes the coal first initiative, also mentioned this morning, and as well as advancing research on production of rare earth elements of coal and coal combustion products. additionally, d.o.e. is supporting projects to develop applications for the carbon in coal to be used in products such as carbon fiber, carbon foam, graphene, and graphite. d.o.e. also continues work on ccs with a sharp focus on bringing down its cost. congressional interest dove tails with interest. last summer utilizing significant innovations with technologies or use it act was passed by the senate. this bill supports co2 emission production by advancing technologies. this includes improving the permitting process for ccus

infrastructure products. it would also encourage other technology innovations such as direct air capture of co2 from the atmosphere. and it would promote the beneficial use of co2 in industrial products. with more discourse about reducing co2 emissions, there should be even more opportunity for collaboration. but ways to address co2 emissions have to make sense for business and the economy. they must provide opportunities to create value, not destroy it. and being a leader in developing these applications provides a path for the u.s. to export them. u.s. co2 emissions have been decreasing, but co2 emissions from the power sector in much of the rest of the world have been increasing. so, the global aspects must be considered as must the fact that coal has enabled a good deal of the electrify cation of the

improve of quality of peoples' lives. the world energy report has noted that coal share of global power generation is 38%, and that hasn't changed in two decades. obviously it's a bigger pie today considering population increases and much greater electricity usage. coal power plants continue to be built and run. there is at least 300 gigawatts of new goal generation capacity under construction in asia alone. that is more than the entire existing u.s. coal power plant fleet. the average age of the coal power plant fleet in asia is about 11 or 12 years. those plants will be running for decades. evaluation of energy resources must encompass their full life cycle costs and environmental impacts. the often touted attribute of renewables is they are low or

zero carbon emitters. that is only one piece of their environmental impact which includes using massive amounts of resources in wind turbines. many of these resources and materials are mined or made outside the u.s. in countries with far less stringent standards than ours. the additional generation capacity needed from other resources including coal in order for them to be ready to fill the availability gaps of renewables is inefficient and costly. it adds to the negative environmental impact of renewables because without them redundant capacity is not needed. also the environmental and cost impacts of transmission projects to bring power from renewables to population centers must be taken into account. and finally end of life decommissioning and disposal aspects must be considered. coal generation in the u.s. has already been reduced from a

share of 45% in 2010 to about 25%. with new coal plants not currently being built, it's even more important to retain the remaining coal power plant fleet. our nation will benefit from doing so. a diverse generation portfolio including coal which acts as both a market and operational hedge protects reliable resilient electricity and affordable prices for consumers. thank you very much. questions? >> hi. brian kellogg. you mentioned improving the permitting process for ccus

projects. are you familiar with the ceq recently publishing a proposed rule that would significant revise need for regulations? and can you comment on that? >> well, the ceq rule i think is important for not only energy but other infrastructure and other projects. so, it has widespread implications. and that's important. as i mentioned, you know, nipa regulations have been a barrier for many, many years to these kinds of projects. so, the way these regulations are structured streamlines the processes. it allows the permitting to be better coordinated by the authorities involved. it shortens the timelines for reviews. so, it should be beneficial for development. thank you. [ applause ]

>> all right. our penultimate speaker is greg dolen. he's the ceo of the methanol institute. she's one of the newest members of the family. methanol is a carrier fuel for hydrogen which is the future. he said hydrogen is the future. if hydrogen is the future, then greg dolan of the methanol institute is the future. greg. >> thanks. thank you for inviting me to join you here today. i'm going to talk about the use of methanol as an emerging energy resource. we first started using methanol as a road transportation fuel here in the united states. in the state of california, we introduced methanol flexible fuel vehicles and fuelling infrastructure back in the 1980s

and 1990s. now, while we've seen the expansion of methanol production here in the united states driven by the shell gas revolution, today the story of using methanol as an energy resource is mainly a chinese and european story. now, i'm going to touch a little bit on the use of methanol as a fuel for road transport, marine transport, emerging heat markets for methanol in china, and then i'll end up looking at methanol as a hydrogen carrier for fuel cell technologies. we promote the expansion of the market from the offices in washington, across the river in alexandria, and we have offices in singapore, brussels, and beijing. we represent the world's largest methanol producers, distributors, and technology companies. we sell methanol in every corner of the world. now, on a global basis, most

methanol is produced from the steam reformation of natural gas. plants have produced 5,000 tons a day, 600 million gallons a year. take natural gas, desulfurize it, reform it into synthesis gas which is a mixture of hydrogen and co2. we combine that and make liquid methanol. you can make that synthesis gas from the the gasification of coal. that's primarily done in china. but you can also get those component feature, hydrogen and c o 2, from the a wide range of biomass. once you take that synthesis gas and turn it into methanol, you open up a wide range of markets. last year total methanol global demand was about 83 million metric tons, 27 billion gallons were sort of on the scale of the global ethanol industry. 60% of our market is using methanol as a chemical

commodity, building block for hundreds of products that touch our daily lives, paints, solvents, resins, car parts. 40% of the market is use of methanol as emerging energy resource. and the fastest growing sectors are in the energy sector. now, we have a number of pathways to produce methanol as a net carbon neutral fuel. you can take any biomass resource, solid waste, forestry residue, gasified to produce the synthesis gas that's used to make methanol. we can take biogas from land fill gas, waste water treatment, dairy farms, and use that biogas to make methanol. one of the member companies is the largest purchaser of the biogas here in the united states. they produce biomethanol in texas that's sold into the european market where it's considered a second generation advanced biofuel and qualifies under the european union fuel

quality standard. you can blend 3% ethanol anywhere in the european union today. it's part of their fuel requirements. you can also take any renewable electricity resource, solar, wind, geothermal, hydropower, produce hydrogen through the electrolysis of water. to make methanol synthesis gas, hydrogen and co2, the co2 can come from a process way stream, aluminum steel meal or see stripping co2 from the atmosphere. you can make renewable methanol. that's a carbon neutral fuel, reduce co2 emissions by up to 95%. it's being done commercially today. now, here in the united states, we produce our methanol from natural gas. because of the shell gas revolution over the last ten years in the 2010s, we saw a resurgence of methanol production. we had methanol plants that had

been moth balled for a decade brought back to life. we have new green field plants being built in the united states. we have two plants cut up in chile and moved to louisiana to take advantage of the affordable natural gas here in the united states. more is on the way. we've got a plant being built right now in west virginia using marcelas shell gas and another plant coming on line later this year in louisiana being build with investment from china. and we've got a lot more plants on the way. now, each one of those methanol plants will cost somewhere between 1.1 and $1.8 billion dollar to build. we'll use a lot of natural gas, about 125 million cubic feet a day or 50 billion cubic feet a year. so, methanol plant is a huge consumer of natural gas. as we're building all those methanol plants, we're looking at mostly an export market. china is the world's largest

market for methanol. china consumes more than half of all world methanol demand. the fastest growing segments there use methanol as energy resource, direct use of methanol as a fuel, and nto, oel fens, that being the feed stock for plastics. now, we have also tariffs. we've talked a bit about tariffs today. methanol has a 25% tariff on both the u.s. and chinese side. the u.s. went first. china reciprocated. now, we don't actually import methanol to the u.s. from china. we're building methanol plants here for an export market. china is the world's largest market for methanol. the chinese don't want to sell us their methanol. they want to buy our methanol. that would reduce the trade deficit with china. but we have a 25% tariff. we also talked a little bit today about the phase one deal that was announced last week between china and the u.s. china's agreed to purchase

$52 billion more in energy products from the u.s. in the next two years. methanol is on that list as an energy product from the u.s. but with a 25% tariff, it's kind of hard to compete on global markets, particularly when the main supplier of methanol to china is iran. they're facing a 25% tariff. now, speaking of energy markets in china, one of the fastest growing markets there is using methanol as a direct transportation fuel. the eia put out a study two years ago now where they were looking at the direct use of methanol as a fuel in china at about 200,000 barrels per day. that use is m-15, 15% methanol blended with gasoline, using the existing fleet of passenger cars as a high octane fuel. more recently, we're seeing the use of m-100, neat methanol being used for cars, trucks, and buses in china.

two cities in china right now, they have 20,000 taxis runs on m-100. taxi drivers save a third in their fuel costs every month using methanol. if you look at those pictures, you don't see a lot of blue sky there. so, methanol also reduces particulate matter, reduces pollution. so, it's cleaner and cheaper. the chinese government last year announced a public policy promotion for the use of m-100 in cars, trucks, and buses. it was driven by the ministry of industry and information technology and seven other ministries calling, again, the commercial production of m-100 fuels. they've now approved 32 different vehicles from 9 different manufactures of vehicles, heavy duty and light duty, for the sale and use of methanol fuels. in europe, one of the largest integrated oil and gas major, enni in italy joined with fiat chrysler to look at how can we

reduce co2 emissions from cars and they came up with an a-20 blend with 20% alcohol. reduces co2 emissions. they've demonstrated this in a fleet of fiat 500 cars. they find that this a-20 blend is a 100 ron fuel and that's important because the auto makers are targeting 100 ron for more efficient high octane fuels. methanol can do that. they showed this fuel is transparent to all e-10 cars which means while both alcohols, methanol and ethanol, there's no problem with using this blend, this high octane, high alcohol fuel blend in today's cars. in germany, there's a program called c 3 mobility for closed carbon cycle. it's a program of the german government and auto industry. what they're looking at is how do we reduce the greenhouse gas emissions from the automotive

sector. their focus is on the renewable molecule. if you look at germany, they're supposed to be a carbon neutral economy by 20507. to get there, you've got to use a lot of renewable energy. germany doesn't have the capacity to produce all the renewable wind or solar power that they need to get to their targets. they will have to import that renewable electricity in some other form. in europe we talk a lot about e fuels, electrofuels, power x. it's taking renewable electricity and turning it into a liquid fuel that you can move around the world. so, you can take solar power, solar wind farms in north africa, turn it into liquid ethanol and ship it into the german market. one-third of the their total energy fuels will come from the powered effects and methanol is one of the fuels they're looking at. so, under this program, they'll be demonstrating a wide range of

light duty cars and heavy duty vehicles that are running on methanol and also derivative product. they'll take the methanol, turn it into gasoline, or turn it into other fuels like ome and dme that can be used in heavy duty vehicles. turning from road transport to shipping, shipping industry is being driven by emission reduction requirements in the international maritime organization. this month is requirements to reduce sulfur in bunker fuels went into place. by 2050, shipping is supposed to reduce greenhouse gas emissions by 50%. now, the ships that are going on the water today are going to be on the water for 20 to 30 years. so, for shipping, they've got to make decisions now about how to meet their obligations for 2050. methanol is one of the options for shipping. we've got a number of vessels that are on the water today. some of these are ocean-going chemical tankers that are dual fuel capability.

they can run on any diesel fuel or methanol and can switch back and forth with the press of a button. now we're seeing the use of methanol as a fuel as a hydrogen carrier in cruise ships, work boats, tug boats, ferries. all can be used with methanol. methanol is one of the most widely shipped chemical commodities in the world of the 83 million metric tons of methanol consumed last year, 60% moved from one continent to another. any port, we've got large chemical storage tank farms, you've got methanol storage capacity. so, we've already got methanol now available at 100 points today. that methanol is in the port right now, and it's one of the widely shipped chemical commodities in the world. in terms of cost, methanol has half the energy content of diesel, so you need twice as much. but even there, even though we need twice as much fuel, we're competitive with today's bunker

fuels. today, methanol is selling at a discount to low sulfur marine gas fuel. so, we can be competitive on a fuel cost price . in terms of bunkering methanol, it's ambient. it's easy to store. it's easy to go from the port, from a bunker vessel, and then on to a ship. methanol is also readily biodegradable. so, if you had a spill of methanol, it's a much safer for the environment than diesel bunker fuels being used today. i want to talk more about china. i've been to china many times. every time i go, i hear about some new market for the use of methanol in china. china is now banning the use of diesel and coal in industrial boilers used for industry and residential heating. there are more than a thousand boilers that have been converted to run on ethanol, about 2

million tons of methanol demand. so, in china, they have less than 1/10 of the pipeline structure than we have here, so natural gas is not an option in many cities. what are you left with? methanol is an option. it's actually in most cases cheaper than using natural gas, even if it were available. we're also seeing the use of methanol is clean cook stoves in china. some of these are one burner stoves used in residence, but mostly we're talking about large commercial stoves used in restaurants and central kitchens. there it's 5 million ton of methanol demand. that's 1.7 billion gallons. and it's literally thousands of restaurants are using methanol as a clean cook stove fuel. this one picture shows you a cook stove manufacturer north of shanghai. they've got a control room where there's a big screen.

there's 1,000 points on a map. each one of those points represents a commercial kitchen using a methanol cook stove. they are so sophisticated they've got cameras in each of those kitchens. they can see how it's being used, make sure it's being used safely. they can control the methanol supply remotely. if the guy doesn't pay his bill, they can turn it down. they can also dispatch methanol through an app. you can go on your phone and say send me this much methanol, and they can ship it immediately. we're now seeing methanol is kilns for glass and ceramic productions. when using methanol to make ceramics, for instance, methanol, again, the molecule is ch3oh. there are no carbon to carbon bonds. it's carbon to carbon bonds that produce suit oot or particulate matter. so, you have clean burning methanol and cheaper than the

propane it's displacing. so, it's cheaper and higher quality. they're using methanol for drying tobacco in china. every third cigarette smoked in the world is smoked in china. they're looking to dry tea in india which is another emerging market. the use of methanol for home heating. there's now 30,000 homes using methanol for heating. another 50,000 will be added this year. and we're seeing that market also grow in china. i want to close quickly to talk about the use of methanol as a hydrogen carrier of fuel cell. it's got the highest hydrogen to carbon ratio of any liquid fuel. you can take that liquid methanol and put it on a car and reform it to hydrogen. so, you can take a fuel cell, fill up a car with liquid

methanol, and then use the hydrogen from that methanol to fuel a fuel cell. we're seeing applications in stationary power that's typically cell phone towers or remote applications where they're using methanol instead of diesel generators or battery sets to run cell phone towers, using it in soldier power. there are u.s. troops using methanol instead of batteries, methanol fuel cell instead of batteries and reducing the weight of the soldier power. and we're seeing methanol as a fuel for fuel-celled vehicles. here we talk about methanol fuel cells making better electric technology practical. so, you take a methanol fuel cell, fill up the car up with liquid methanol. three minutes just like today. there's no infrastructure concern. no timing concern. no time lost to it. the battery is what you drive the car on and you're going to be reducing the weight of the batteries by 2/3 using that

methanol fuel cell. so, you've got a cheap fuel, liquid fuel, a fuel that can be produced renew bli. you can take a battery e.d. that might have a range of 300 kilometers. now you've got a car that will run 1,000 kilometers. so, it's a range-extended battery electric vehicle. one of our member companies is denmark has now introduced or building a manufacturing plant. it's going to produce 15,000 cells a year. another one of our members is doing the same thing in china, just nofrgt of shanghai. a new manufacturing plant will produce 50,000 methanol fuel cell units a year. so, this is real commercial technology. with that i want to close with contact information.

i'm joined by larry knaven. i thank you all for your attention. >> a few years -- as you mentioned, methanol is produced in very large scale multibillion dollar plants. a few years ago, there was some interest at some companies promoting small scale production technologies. where do those stand today? are any of them coming anywhere near commercial production? >> so, a world scale methanol plant is 5,000 tons a day. these are large facilities, 600 million gallons. but all the technology companies that make those plants, johnson, mathy, now offer small scale methanol. so, they'll sell you a methanol

plant that produces 3 to 500 tons per day. that technology is coming. i know of a couple that are going to be introduced in the next probably 18 months. the time to bring the smaller plants to market is much shorter. you can also use stranded gas fields or even biogas for that methanol. but there's also companies that produce what they call methanol box. they have a container and put a methanol plant in there. you can take it to north dakota, take flare gas, turn it into liquid methanol. they use a lot of methanol in shale gas recovery. so, there's a market for it right there in those fields. but we can do small scale methanol as well as renewable methanol. [ applause ] >> our last speaker is going to

tee up the cocktail party. derrick morgan. he's the svp of american fuel and pe tro chemical manufacturers. and i like to think of derek as my go-to on all things gasoline, but afpm is definitely involved in more than just gasoline as you can imagine. so, derek. [ applause ] >> all right. i'm the last speaker so i'm going to endeavor to be very, very brief. so, have a couple things to talk about here. if i can figure out the clicker, that would be good. there we go. so, what are we going to talk about? i'm going to el you about afpm, the internal combustion engine for a minute, and talk about what i was invited to talk about which is renewable fuel standard, perennial favorite in our industry. afvm started in 1902. the independent refiners in pennsylvania.

we have a long history. and we represent nearly 90% of u.s. refining capacity and nearly all the petro chemical manufacturing in the u.s. i wanted to start off just with a bigger picture on energy. i won't spend a lot of time here but i love this chart. it's from the epa. and it shows here trends over the last 45 years. you see their gross domestic product has grown tremendously, almost 300%. you've got vehicle miles travelled, population, energy consumption. the bottom two metrics there is co2 emissions which have increased a little bit, but as a share of the economy, they're way, way down. then you see the six common air pollutants at the bottom that have decreased about 74%. so, the bottom line point here is we've become a lot more prosperous and become cleaner at the same time. and i do think our industries played a role in that, that i'll get into in just a minute. sometimes you hear the internal combustion engine is over. you know, you see that on

magazine covers all the time. is it really true? i see familiar faces here last year talking about that and warning maybe this is a little too soon to write that obituary. and interestingly enough, electric vehicles sells in the united states and globally were down last year. so, the march to the 100% ev future that we're told is there may not come to pass. the eia has a projection that even in 2050 about 75% of cells will be internal combustion engine. that's maybe one of the outliers to some of the others, but almost everybody acknowledges that for decades to come the internal combustion engine is going to be around. it's certainly the most popular choice in america today with about 98% of sales. so, with that as a given, the important part is to make sure that the internal combustion engine is meeting customers' needs and as clean as it can be. internal combustion engines

today are clean and getting cleaner. the stat you see on the right-hand side is 99% cleaner than 1970 models. can you imagine 99% cleaner. that is an amazing statistic that is not known. o-tenness on the efficiency side we increased efficiency roughly 30% just since 2004. i think this is a story that needs to be told. it's a function of the fuel's industry and the automotive industry. we've invested close to $100 billion just in the last decade or so in producing cleaner fuels. a lot of that has to do with desulf desulfurization in different fuels. you have it on the auto side trying to meet efficiency demands while keeping consumer choice at the top. so, i love this quote from janet mccabe who was in the epa during the obama administration. she pointed out that new cars, suvs, pick up trucks, heavy duty trucks, and buses are roughly

99% cleaner for common pollutants than 1970 models. we are driving more, but cars are getting more fuel efficient. people have more choices. whether they want a small car, suv, pick up truck, they can buy a hybrid or traditional vehicle. i think that's a good way to look at the internal combustion vehicle and the progress it's made and can make. i wanted to get into some of the emission control programs in the united states. just deal with transportation. i often hear it said when i'm um on a hill talking with people or talking with the media that transportation doesn't have any cap. there's no program that looks at transportation. it's actually not true. there's three very major ones. so, you have the corporate average fuel economy or the mobile ghg requirements out of the epa. that is directly a ghg program. you have the zero emission

program in california and nine of ten states and you have the renewable fuel standard which is the one we're going to spend most of the time on today. so, the rfs, renewable fuel standard. this began in 2005. i was working with vice president cheney in the bush white house. it was birthed in 2005 and supercharged in 2007. so, in 2007 is where we got the volume requirements that are in the statute today. it was initially created to reduce american dependence on foreign oil, to promote rural development, and reduce ghg emissions. i think you can see that in the three folks most critical in getting that legislation passed with the president who emphasized the importance of foreign oil, promoting development with speaker haaser had that band wagon, and reducing ghg is what nancy pelosi brought to the table in 2007 with esa when it was increased.

so, the primary objective is the diversify fuel supplies. we'll get into that in just a minute. first, why do refiners get worked up about the renewable fuel standard? it's because we are the obligated parties. we are the ones that at the end of the year have to turn in renewable identification numbers to the epa to show enough biofuel was blended in the gas supply. why is that an issue? this graphic tells you a little bit why. we're the red circle there. that's the petro chemical -- or your refining plants. we're in the middle of the stream here. so, upstream you've got from the wells all the way on the left side all the way to consume orion the right side. we're the folks that turn the crude oil into this products you use every day. but before you buy them, it usually goes to the yellow circle. some refineries sell direct, but most goes to a terminal or dispenser. that's where it's blended.

they obtain the rens and by the end of the year folks in the circle have to buy the rens and turn them back into epa. we have petitioned the epa to move the point of obligation further downstream to those who are blending it. we think that makes a lot of sense for reasons i can get into if you want to see me afterwar.s they spend more on rens than they pay their employees. it's the number two cost in their operation outside of buying crude oil. that's why it's a big concern. all right. going back to the rfs and the reasons why it was created. one of them was foreign oil dependence lessening here. here the shale revolution helped this picture. that line crossed the zero mark now. we're nit petroleum exporting

country now. as you'll see, the deputy administrator of the eia testified that it really wasn't the rfs that played a role in that. it was the production boom that played a role in that. the rfs did play a modest role but not the driving factor. rfs had a goal, and that was to diversify the fuel of the united states. we had been producing ethanol in the united states for many years. so, that was not a surprise. but what they wanted to try to do was kick start the next generation biofuels. those just have not come to pass. so, if you look at this chart, statutory volume written in 2007 is on your first column there. conventional biofuels, 15 million gallons. supposed to be 11. and sell lossty was supposed to be 7 million gallons. every year epa has had to waive those numbers. they waived down to a little more than a third and

cellulostic is a rounding error. 97% of that is from biogas that's captured and used in transportation. so, the next generation biofuels that president bush talked about in terms of switch grass and things of that nature haven't developed in a commercially feasible manner. so, it's really become a matter of conventional biofuels including biodiesel. biodiesel is an expensive component of deez m. it's typically about a dollar a gallon more expensive than pe petroleum diesel. so, it's not insignificant impact on consumer. conventional bioethanol. this is where you hear a lot of the headlines in rfs discussions. we like to point out the facts of the gasoline market. and the facts of the gasoline

market is that ethanol has a blend wall of 10% or so. up to that point, it's pretty easy to blend ethanol into our gasoline supply. the -- if you see this chart, this explains why this fact was considered but the way that congress did is they just had volumes every year going out and they took the aeo projection of what the total gasoline supply would be. that's the blue line you see there. it's supposed to go up to about 165 billion gallons by 2019. but lo and behold with more efficient vehicles in particular in a slowing economy around 2008 time frame you see the red line. that's what actually happened. then you see today's protections in the red dotted line. it's not going to hit the 165 billion gallons. if you remember ethanol had the 15 billion gallon volume requirement which could have been met with 165 billion

gallons without hitting that 10% blend wall. but if you're where we're at today which is 143 billion gallons or so, you start to hit the 10%. that's what makes the program really, really expensive. the components of the blend wall are simple to understand really. it's primarily infrastructure issue. so, gasoline stations about 50 to 60% of which are single station operators have to prove to the epa that their tanks can't hold more than 10% ethanol without a risk of it leaking into their tanks. so, a lot of those owners, maybe they've inherited an asset or bought an asset, they just don't know. and to dig up the tank to be able to harden it for above e 10 is very expensive. it could be 180, $200,000 just so they can sell a product they're not sure there's a market for. that is one of the bigger impediments to it. another big impediment is just vehicles. i have a 2014 model vehicle. right in my manual it says not

to fill up with anything more than 10%. and probably if you have a car before 2015, 2016, your manual says the same thing. also e-15 is illegal to use in lawn mowers and other small engines by law. so, there's just a number of infrastructure constraints and a majority of the auto fleet today not warranted to use above e-10. that's within what has been causing ethanol to not get that full 15 billion gallons. it has been smaller refinery exemptions which we're going to get into now. the smaller refinery exemptions has been in the media a lot. i know all of us with our various issues might like to be in front of the president about a dozen times in the last 18 months over rfs. it's not all it's cracked up to be. i can say. it is a difficult issue, and it become very political. one of the kind of political footballs that came back and forth is the small refinery

waivers. you can see in the left hand chart that the number of waivers increased in particular in 2017 and 2018. a lot of that was driven by court cases where the court slapped down the epa for being overly stingy on that. we can talk about that at the cocktail receptions. they're typically granted far into the few you are which. so, for example, it could be summer of 2019 when it was when the epa granted waivers for the 2018 compliance year. so, the refinery doesn't know if they're going to get an exemption. even if they did know they were going to get an exemption, they're still producing the same product which is going back to the -- to my schematic here. they're selling downstream. they're selling what's called a bond. they're selling a bomb that's not a finished gasoline product. it has to be blended with ethanol by the distributor, by the terminal, to get it up to

the right octane level and so forth. they're going to be selling that product at pretty much a commodity product. you're not going to be able to get a tariff on a pipeline in a lot of cases in order to change that, to try to turn it into finished gasoline. so, even if they knew they were getting exemption, they're still selling the same product. so, all of that leads to the statistics which are very clear from the eia. this shows on the left-hand side the ethanol blend rate in gasoline. it's right at about that 10% level. easy to get e 10. there are some people that do e 15. there's a tiny bit of e 85. that gets you over 10%. you saw the previous chart, 2017, 2018, there are more sres but the blend rate has continued to go up. the real story for ethanol that has been the reduction in exports. and that's the blue lines you see on the right-hand side. when china stopped importing ethanol from the united states, that was a big blow for our

friends in the ethanol industry. i do say friends. our member companies are actually two of the top five producing ethanol companies in the united states, members of the trade association. they're all oil refiners. so, it's not us versus them. it's really all together we're in liquid fuels together. so, the statistics are telling the story that ethanol, there hasn't been that demand they've talked about. all right. so, the 2020 rule, this smaller finer exemptions played itself out in the 2020 rule. primarily how it did that was the thought was we know there's going to be small refinery exemptions so we're going to guess how many and reallocate that among industry. as you can imagine, that's not a great position to be in if you're not an exempt refiner because you at the beginning of your compliance year are told you've got to turn in this many rens based on how many gallons you sell. in addition, the epa is saying all the exempted gallons are

going to be put on you. so, you're saying to part of the industry you're exempt and everybody else has to, quote, make up the difference, even though, again, we don't think there are things to make up. there are definitely rens that have to be returned and that will affect the price of rens which affects the price of compliance. so, we are, as we always do, we'll be suing on this rule and courts will look at this. we're also suing on the e-15 rule. and you know, stay tuned for all of that. what i would love to do is just spend a couple of minutes on a way past this. a way past this is a 95 octane standard. the way past this could be when congress passed the renewable fuel standard, that 15-year running length of statutory volumes and 2022 hand the program over to epa and say based on these factors you need to decide what volumes are appropriate. we don't like the idea of epa having that much discretion. friends in the ethanol industry

don't like that idea. it's not good government for a government agency to decide to essentially plan what the fuel supply is, right? so, we think a better solution would be to phase out the rfs and have a technology neutral 95 ron standard. 95 ron is a step above what current regular is today, and it would give ethanol a chance to compete for additional gallons. so, it would deliver about a 3 to 4% fuel efficiency gain because the auto makers could have a higher compression engine which would be more efficient. so, that's what the autos get out of it. the carbon reductions would be equivalent to taking hundred of thousands vehicles off the road just from the efficiency gain. i would like to tell my friends who are more inclined to electroification route, no matter what you want to do, internal combustion is going to be around a while. why don't we work to make that more efficient. so, that's our story and we're sticking with it.

so, it could be sold over existing fuelling infrastructure, day one nationwide. sometimes you hear other numbers. we heard 100 ron, 98 ron a lot. couldn't sell that in california and you would force other fuels like e 20 if you get above 95. we think 95 is a sweet spot that allows us all to compete for the customer. very quickly, let me end on this. we think the 95 ron can benefit everyone. it's the lowest cost for the consumer. with e worked a year and a half to try to figure out what's the best way to increase the efficiency of the internal combustion industry. it would allow the cars to comply with cafe more cost effectively. it would provide retailers with optionality and flexibility. all kinds of new entrants could be in the market and retailers would have the ability to select the fuels their consumers want to use. it would reduce the compliance burden for refiners, being the number two cost for refiners.

and lastly ethanol is the cheapest source of octane out there out of anybody and they would be able to compete for more gallons. so, we're going to try to continue to encourage this reform measure, and we are excited about the future of liquid fuels. [ applause ] very good. thank you very much. [ applause ] >> thank you everyone for joining us today at the state of the energy industry forum. if you don't already, please follow us on twitter at u.s. energy association #state of the energy 2020. thank you. we're adjourned. [ applause ]

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brought to you as a public service by your cable television provider. our live campaign 2020 coverage of the presidential candidates continues today in new hampshire at 6:00 p.m. with tulsi gabbard in claremont. on sunday, senator elizabeth warren in cedar rapids, iowa. watch our coverage on c-span, on demand at c-span.org, or listen on the go with the free c-span radio app. next, joint chiefs of staff general john hyten discusses security challenges facing the united states. he talks about the space force, issues impacting the military, and china's military power. [ applause ] >> good afternoon, everybody. it is good to be here. secretary don li, i didn't see