Hearing of the Senate Energy and Natural Resources Committee

SECTION: CAPITOL HILL HEARING

HEADLINE: HEARING OF THE SENATE ENERGY AND NATURAL RESOURCES COMMITTEE

SUBJECT: ENERGY INFORMATION ADMINISTRATION ANNUAL ENERGY OUTLOOK 2004

CHAIRED BY: SENATOR PETE V. DOMENICI (R-NM)

LOCATION: 366 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: PANEL I:

GUY CARUSO, ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION, DEPARTMENT OF ENERGY;

PANEL II:

RICHARD J. SHARPLES, SENIOR VICE PRESIDENT, STRATEGIC PLANNING AND MARKETING, ANADARKO PETROLEUM CORPORATION;

PAUL D. KOONCE, CEO - TRANSMISSION, DOMINION ENERGY, INC.;

JAY SAUNDERS, VICE PRESIDENT, ENERGY ANALYST, DEUTSCHEBANK

BODY:
SEN. LISA MURKOWSKI (D-AK): Thank you, Mr. Chairman. And welcome, gentlemen, I'm sorry that I was not able to hear your presentation this morning. I have had the opportunity to read through all of the testimony that was presented prior to the hearing this morning. And I appreciate the fact that Alaska is recognized and contained within the solution when we're talking about meeting this country's demand for natural gas. We recognize that, in Alaska, we've got what the country needs.

We just need to figure how to get it to you. And I always like to listen to my colleague from Louisiana. She and I share a great deal in common when it comes to energy issues. And to hear her frustration over government policies inhibiting our activities or our ability to get the energy, the much needed energy to Americans, it's a subject that we can entirely relate on.

I do note, Mr. Caruso, in your statement, that the assumption is that the Alaskan natural gas pipeline will come on in 2018 or thereabouts. We, in Alaska, want to do all that we can to see that happen earlier. And as you know, there have been several applications submitted to the state, one from the three major producers, one from MidAmerica that was referenced by the senator earlier, and there was a third application that was just submitted last week that relates to what we call All Alaska LNG line which would be a spur line running down through the state of Alaska and LNG, liquefied natural gas, for transport to the West Coast.

This is something that hasn't been included in anybody's analysis so far as I can see. It's something that we have been focused on in Alaska for some time. We want to make sure that not only do we get our natural gas to the market in the lower 48, but we want to make sure that Alaskans have access to our own gas as well. So this is a project that we are following very, very closely

So a question to probably you, Mr. Koonce, because you mentioned in your testimony the two applications that are pending and recognize that with these applications, there is a promise to result in a project that's more innovative and less costly than many previously thought. I hope that you are right. We hope that you're right that there will be that competition, that there will be that incentive to move something along. First, just a question to you, as it relates to the possibility of an all Alaska line or a spur and how that might affect your analysis of getting gas to market through the pipeline across Canada or possibly LNG imports from Alaska. Have you looked at this project at all and would you like to share any comments?

MR. KOONCE: Senator, I apologize. I have not-I'm not acquainted with the LNG alternative that you speak of. But, as an industry and as a company that participates in pipeline development, we are very anxious to see if we can move along the development of this pipeline and the resource base more quickly than 2018. It's our belief that it's needed more quickly than that when you look at the domestic decline. And, in my discussions with individuals from Trans Canada as well as MidAmerica and as a company that's in the local distribution business, we sought retail customers in Ohio and Pennsylvania and West Virginia. It's very important that the infrastructure be in place but what's more important is there be supply contracts to backstop the capacity.

And in my discussions with Trans Canada and others about the likelihood of that project moving forward, you know, what I tell them sitting in the eastern half of the United States, that what is most important is the project developers bring with them representatives of the producing companies who can make representations to fill that capacity with production. And that is really what we are anxious to try to bring about because I think once local distribution companies sign up for capacity, they also want to know that their supply that they can count on. They don't want to make one without the other. I think that's the area where probably the most work needs to be done now that we have two competing proposals attempting to get this gas out of Alaska.

SEN. MURKOWSKI: I want to make sure that we state clearly for the record. I have said it repeatedly to my colleagues but it bears repeating here that, in order to facilitate an Alaskan natural gas pipeline, we've got to get the energy bill through or certainly those components that allow for a natural gas pipeline, whether it's the permitting and streamlining regulatory review, certainly the financial incentives, all these will be key. And if we fail to do that, I'm concerned that, when we look at this chart that shows the growth in Alaska production, that that is pushed out even further. And, based on all the analysis that I have seen, we, as a country, can't afford to push that curve out further because what happens is we increase our reliance on foreign imported LNG.

Quite honestly, looking at the figures recognizing that, right now, we import 1 percent of our LNG but by the year-what is it? -- 2025, we will be at a point where we are importing 15 percent LNG. That's a dramatic increase in a relatively short period of time. And, of course, the concern that I think we all share is that we get to that point with our natural gas that we currently are at with our oil, where we are close to 60 percent dependent on foreign sources of oil. We don't want to go there with our natural gas when we have the reserves in this country.

We might not be able to do 100 percent of it but we should-shame on us if we get to the point that we are with oil-with natural gas that we are with oil. So I appreciate again the focus on Alaska and I would ask all of you to help us educate the rest of the country on the need to bring Alaska's gas to market.

Thank you, Mr. Chairman.