Highlighting the Role of Small Business in Domestic Energy Production
Summary
The printed record of a hearing of the Subcommittee on Rural Development, Energy, and Supply Chains of the House Committee on Small Business on small businesses in domestic energy production, on March 29, 2023 and published as Small Business Committee Document Number 118-007, with Chairman Wesley Hunt presiding. Chairman Hunt says small businesses in the energy sector employ approximately 800,000 workers, citing the Small Business Administration. Ranking Member Marie Gluesenkamp Perez attributes rising energy costs to the pandemic, the Russian invasion of Ukraine and corporate profits, and calls for support for small clean energy firms. Committee Chairman Roger Williams cites H.R. 1, the Lower Energy Costs Act. The witnesses come from GO Wireline, Colt Energy, the Kansas Independent Oil and Gas Association and Solar Holler.
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Full text
[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
HIGHLIGHTING THE ROLE OF SMALL BUSINESSES IN DOMESTIC ENERGY PRODUCTION
HEARING
BEFORE THE
SUBCOMMITTEE ON RURAL
DEVELOPMENT, ENERGY, AND SUPPLY CHAINS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MARCH 29, 2023
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 118-007
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
51-444 WASHINGTON : 2023
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
NYDIA VELAZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MORGAN MCGARVEY, Kentucky
MARIE GLUESENKAMP PEREZ, Washington
HILLARY SCHOLTEN, Michigan
SHRI THANEDAR, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
Ben Johnson, Majority Staff Director
Melissa Jung, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Wesley Hunt................................................. 1
Hon. Marie Perez................................................. 3
WITNESSES
Mr. Lucas Gjovig, President, GO Wireline, Williston, ND...... 7
Mr. Nick Powell, Chairman & Owner, Colt Energy, Mission, KS.. 8
Mr. Edward Cross, President, Kansas Independent Oil and Gas
Association, Topeka, KS.................................... 10
Mr. Dan Conant, Founder & President, Solar Holler,
Shepherdstown, WV.......................................... 11
APPENDIX
Prepared Statements:
Mr. Lucas Gjovig, President, GO Wireline, Williston, ND...... 25
Mr. Nick Powell, Chairman & Owner, Colt Energy, Mission, KS.. 28
Mr. Edward Cross, President, Kansas Independent Oil and Gas
Association, Topeka, KS.................................... 31
Mr. Dan Conant, Founder & President, Solar Holler,
Shepherdstown, WV.......................................... 53
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Amogy Statement.............................................. 60
HIGHLIGHTING THE ROLE OF SMALL BUSINESS IN DOMESTIC ENERGY PRODUCTION
----------
WEDNESDAY, MARCH 29, 2023
House of Representatives,
Committee on Small Business,
Subcommittee on Rural Development, Energy, and
Supply Chains,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:01 a.m., in
Room 2360, Rayburn House Office Building, Hon. Wesley Hunt
[chairman of the Subcommittee] presiding.
Present: Representatives Hunt, Meuser, Stauber, Mann,
Perez, Schoulten, and Golden.
Also Present: Representative Williams.
Chairman HUNT. Welcome, everyone.
Before we get started, if you do not mind, could you please
stand? We will say the Pledge of Allegiance, please.
Good morning. Thank you. That is so kind.
Thank you all for being here. Again, I really, really,
really appreciate it. Thank you to the witnesses for taking
time out of your schedule to be here.
I now call the Subcommittee on Rural Development, Energy,
and Supply Chains to order.
Without objection, the Chair is authorized to declare a
recess of the Committee at any time.
The Committee is here today to hear testimony about the
role of small businesses in domestic energy production and the
regulatory hurdles they face which threaten American energy
independence.
I now recognize myself for my opening statement.
I have to bang the gavel first.
The Committee meets today to hear testimony about the vital
role small businesses play in the U.S. energy production and
why now more than ever we need to empower small businesses to
unleash America's energy potential.
Small businesses have crucial, yet often overlooked,
impacts on the health of the U.S. economy and the U.S. national
security.
According to the Small Business Administration, small
businesses account for nearly two-thirds of all net new jobs
and, in the energy sector specifically, small businesses employ
approximately 800,000 workers. From oil and gas exploration to
drilling, extraction, and operations, small businesses account
for the majority of America's energy firms.
Furthermore, small businesses are at the frontier of
innovation, spurring the shale revolution, unlocking vast
stores of domestic energy supply, and helping cut U.S. carbon
emissions by 14 percent in just 10 years.
In the oil and gas industry, small businesses are
incredibly competitive and adaptable. Their adaptability
enables them to innovate, focus on more marginal oil and gas
reserves, and pursue revolutionary technologies that larger
companies may overlook.
Small businesses in our energy sector do not only drive our
economy, but they also meet a critical need for American
families.
Hydrocarbons account for 80 percent of the world's energy
supplies and oil powers 95 percent of all transportation of
goods and people.
Elected officials cannot legislate away for the need for
oil and gas.
Recent behavior by the Biden administration highlights the
fact that America's need for abundant and affordable fossil
fuel energy is not shrinking but growing. In the past 12 months
alone, President Biden has called on oil and gas companies to
``increase production and refining''; has plundered 180 million
barrels from the Strategic Petroleum Reserve; and, has begged
Saudi Arabia to produce more oil.
In November, the Biden Administration warned Saudi Arabia
that a refusal to increase oil production would be perceived as
a choice to side with Russia against American interests. When
Saudi Arabia cut production, National Security Council
spokesman John Kirby said the U.S. should review the
relationship with Saudi Arabia in light of the OPEC decision,
and to ``take a look to see what the relationship is serving
our national security interests.''
This is a far cry from the president who, immediately upon
taking office, cancelled the Keystone XL Pipeline, halted oil
and natural gas lease sales, and raised taxes on the fossil
fuel industry.
The facts are clear; our dependence on oil and gas is not
going anywhere.
We must do more to invest in oil and gas production even if
the world seems that the oil demand peak is within a decade.
But, given the existing U.S. regulatory environment, it is
no surprise that the oil and gas production has being outpaced
by demand.
The United States can make the decision to either take the
lead, or let China and Russia displace us in yet another sphere
of influence. The United States should be the swing producer of
oil and gas in the globe, not Saudi Arabia or OPEC.
If we continue to depend on countries with high
geopolitical risk, we will only cede more leverage over our
economic and security interests to nations who want to weaken
the United States.
Conflict across the globe and the battle for strategic
reserves between the United States and countries like Iran,
Saudi Arabia, Russia, and China makes it more critical for the
United States to have control over energy production.
In fact, the recent strategic partnership struck between
China and Russia is a perfect example of why we must focus on
policy that unleashes American energy dominance.
In conclusion, producing energy within the United States is
crucial for our economic stability and security, and small
businesses play a critical role in this.
The United States must continue to be the standard bearer
in the production of abundant, ethically produced, and low-
emission energy.
If we empower American small businesses, we will do just
that.
I want to thank you all again for being here with us today
and I am looking forward to today's conversation.
And with that I yield to our distinguished Ranking Member
from Washington, Ms. Gluesenkamp Perez.
Ms. PEREZ. Thank you, Mr. Chairman, for holding this vital
hearing on the role of small businesses and domestic energy
production. Over the past 2 years, rising global energy prices
have placed a burden on American consumers and small firms.
During the peak of inflation last June, year over year prices
increase in energy nearly matched the previous record set in
the 1980s. this has put a serious strain on the pocketbooks of
Americans and the balance sheets of our local businesses. The
rising costs hurt lower income and working class people the
most as we spend higher proportions of our income on gas to
heat our homes and power our vehicles.
To fully understand the rising costs of energy, we need to
examine the broader context around energy prices here in the
U.S. Energy costs have risen due to a number of factors. First,
the initial shock of COVID-19 pandemic spurred many major
companies to significantly cut oil and gas production as demand
plummeted. But while demand rose quickly, production is just
slow to catch up. Adding to this was the Russian invasion of
Ukraine which put immense strain on global oil supplies
resulting in higher prices worldwide. Finally, we cannot ignore
corporate greed exhibited by many major companies.
The domestic energy producers have reaped high profits at
the expense of hardworking Americans. Instead of investing in
more production to ease these prices, companies opted to enrich
shareholders with hundreds of millions in dividends and stock
buybacks.
The issue before us today has no simple solution. There is
no panacea. Fossil fuels will have an important place in our
economy. You cannot match the fuel density. Working Americans
cannot go out today and buy a new electric car. Buying our way
out of this is not, you know, the path. But at the same time we
need to contend with the long-term effects of climate change.
Just last week, an IPCC report detailed the catastrophic
consequences of refusing to adapt our energy grid to low
emission sources. From crop failures to famine to
multiplication of infectious diseases, climate change has the
potential to wreak havoc on our economy and infrastructure.
As an aside, I work in a garage. When it is 117 degrees
outside, bringing in hot cars, we cannot work. That is the
reality of working class people in climate change. And we have
to acknowledge that domestic production is only part of the
equation. Transmission and grid security are equally important
and often ignored.
As someone who lives in rural Washington, I know that rural
economies cannot reach their potential when we are lacking
power lines to get energy from point A to point B. I would love
to work with the Chairman to hold future hearings on
transmission issues facing rural America.
So, this begs the question, how do we reconcile the urgent
need to support working class Americans who rely on fossil
fuels to get to work every day with the imperative to
transition to cleaner, more sustainable energy.
The answer I believe lies in the power of small businesses
and entrepreneurs. These individuals are at the forefront of
innovation driving progress in the field of domestic energy
production. They have the vision, drive, ingenuity to create
new and better solutions to the challenges we face.
As we ramp up production of alternative energy sources,
small, clean energy forums are creating hundreds of thousands
of local, good paying jobs as these firms flourish, they drive
renewal and prosperity in many rural and working-class
communities across the country.
That is why I am support of efforts to ensure that small
firms have the resources, funding, access to capital and
infrastructure necessary to succeed in this transition.
For instance, the Infrastructure Investment and Jobs Act
created grants that aid in research and development for clean
energy. And the Inflation Reduction Act created important
incentives to revitalize domestic manufacturing for clean
energy and work to expedite environmental reviews for drilling
permits on public lands.
While I support an ``all of the above'' approach to
domestic energy production, the starting place of our proposal
should not be fossil fuels above all approach. We need to
empower smaller firms across the board to develop solutions
that bring down energy prices for working families.
With that, I sincerely look forward to hearing the
testimony of our witnesses here today as we examine the
important role of small firms in domestic energy product.
Thank you, and I yield back.
Chairman HUNT. Thank you, Ranking Member Gluesenkamp Perez.
I now recognize the Chairman of our Committee, Mr. Roger
Williams from Texas, for his opening statement.
Mr. WILLIAMS. Good morning. Thank you, Mr. Chairman. I want
to thank again Chairman Hunt for holding today's Small Business
Subcommittee on Rural Development and Energy and Supply Chains
hearing on the Role of Small Business in Domestic Energy
Production.
This is an extremely important hearing so we can shine
light on how the Biden administration's harsh rhetoric against
the oil and gas industry is having a very real negative impact
on American small businesses.
In full disclosure, I am from Texas. I just want to tell
you that. So, on top of dealing with out of control inflation,
supply chain issues and labor shortages, this industry must
also deal with discrimination from the banking sector because
their work has fallen out of political favor with my colleagues
on the left.
And this hearing is also especially relevant because my
Republican colleagues are offering a solution to help these
businesses as we speak.
H.R. 1, the Lower Energy Costs Act, which is being debated
on the House floor, will solve many of the issues we are
discussing today. And specifically, this bill would increase
domestic energy production, reform the permitting process, and
reverse the Biden administration's anti-energy regulations that
are crushing our nation's small oil and gas producers.
So I want to thank you all again for being here with us
today. I am looking forward to today's hearing.
And with that, Mr. Chairman, I yield back.
Chairman HUNT. Thank you, Chairman Williams.
We will now proceed with the witness introductions.
Our first witness this morning is Mr. Lucas Gjovig. Mr.
Gjovig is the president of Go Wire--excuse me, of GO Wireline ,
which provides wirelines and pressure pumping services to
customers both large and small who drill and operate wells. A
small business based in Williston, North Dakota, GO Wireline s
works spans for petroleum welds, to water, helium, and carbon
sequestration wells. Through his time at GO Wireline, Mr.
Gjovig understands firsthand the negative impacts of uncertain
regulatory environment has on the energy industry and by
extension, the overall economy. His real-world experience makes
him an excellent witness. We are very fortunate to have you
with us today, sir.
In addition to his work at GO Wireline , Mr. Gjovig serves
on the Advisory Board of the Energy Workforce and Technology
Counsel and volunteers on the Legislative Committee of the
North Dakota Petroleum Council. He is also an active Member in
the community in his hometown of Williston where he serves as
Chair of the Williston Planning and Zoning Commission.
I want to thank you, sir, for being here, for testifying
before us on the Subcommittee, and I look forward to our
discussion today.
Mr. GJOVIG. Chairman Hunt, Ranking Member Gluesenkamp
Perez, Chairman Williams, and other distinguished Members of
the Committee, thank you for inviting me to share my
perspective on this important topic.
I am president of GO Wireline, a small business based on
Wilston, North Dakota. The men and women working at GO
Wireline----
Chairman HUNT. Mr. Gjovig, hold on.
Mr. GJOVIG. Oh, I am sorry. I wasn't supposed to start.
Chairman HUNT. I recognize my colleague, Mr. Mann from
Kansas to briefly introduce the other two majority witnesses
who are appearing before us today. So we will go through them
first and then you are up.
Mr. MANN. Great. Introductions and then we will wait for
the witnesses. Thank you.
Chairman HUNT. Thank you.
Mr. MANN. Thank you, Chairman Hunt.
Our next witness after that will be Nick Powell, who I am
honored to introduce. He is the Chairman of Colt Energy, which
is a company based in Kansas that he acquired in 1986. Colt
Energy is an oil and gas exploration and production company
that has operated in Eastern Kansas for over 70 years. Colt
Energy offers a steady line of employment to small communities
all across Kansas.
Over his career, Mr. Powell has been involved with numerous
other energy companies, including Overland Energy, Prairie
Energy, and is the past president of Eastern Kansas Oil and Gas
Association (EKOGA). Mr. Powell currently sits on the boards of
both EKOGA and KIOGA, the Kansas Independent Oil and Gas
Association, and he is currently the Chairman of the National
Stripper Well Association. Mr. Powell's extensive career will
give this Subcommittee important insight into the real world
impacts this adminsitratino is having on the small business
economy. Thank you, Mr. Powell, for what you do as an oil
producer and for testifying before this Subcommittee. And I am
looking forward to today's conversation.
After that will be Ed Cross. I am honored to also introduce
Ed Cross, another Kansan. Mr. Cross is the president and chief
operating officer of the Kansas Independent Oil and Gas
Association, a position that he has held since 2003. In that
position, Mr. Cross serves and represents nearly 3,000
independent oil and gas producers, explorers, and service
providers. In addition to his work with Cuyoga, Mr. Cross
serves on the boards of the Domestic Energy Producers Alliance
and the Council for a Secure America. He is also an active
Member of the Independent Petroleum Association of America and
serves as an advisory Committee Member for the U.S. Global
Leadership Coalition. Thanks to his extensive experience and
distinguished career, Mr. Cross can provide a wealth of
knowledge about the vital role that small business play in the
domestic energy production market and the current regulatory
state of the industry. I want to thank you, Mr. Cross, for
testifying before the Subcommittee, and I look forward to what
you have to say and to the conversation.
Chairman HUNT. Thank you, Mr. Mann.
I now recognize the Ranking Member, Ms. Gluesenkamp Perez
to introduce the minority's witness for today's hearing.
Ms. PEREZ. Our final witness today is Mr. Dan Conant,
founder and CEO of Solar Holler. Mr. Conant started Solar
Holler over 10 years ago with a vision of ensuring that West
Virginia was not left behind in renewable energy generation.
With some innovative practices and investments in the local
workforce, he jumpstarted the industry in his home state while
lowering the energy costs of local families' businesses and
nonprofits. Mr. Conant has spent his entire career in the
renewable energy industry. Prior to launching Solar Holler, he
was the first employee at the largest solar company in Vermont
and an advisor to the U.S. Department of Energy's Solar Energy
Technology Office. He holds an M.S. in Energy and Climate
Policy from Johns Hopkins University. Welcome, Mr. Conant.
Thank you for being here today.
Chairman HUNT. Thank you, Ranking Member Gluesenkamp Perez.
We appreciate all of you being here today.
Before recognizing witnesses, I would like to remind them
that their oral testimony is restricted to 5 minutes in length.
If you see the light turn red in front of you it means that
your 5 minutes have concluded and you should wrap up your
testimony.
I now recognize Mr. Gjovig for his 5 minute opening
response. Thank you, sir.
STATEMENTS OF LUCAS GJOVIG, PRESIDENT, GO WIRELINE; NICK
POWELL, CHAIRMAN AND OWNER, COLT ENERGY; EDWARD CROSS,
PRESIDENT, KANSAS INDEPENDENT OIL & GAS ASSOCIATION; DAN
CONANT, FOUNDER & PRESIDENT, SOLAR HOLLER
STATEMENT OF LUCAS GJOVIG
Mr. GJOVIG. Thank you, apologies, Ranking Member
Gluesenkamp Perez, distinguished Members of the Committee.
Thank you for inviting me.
I am president of GO Wireline, a small business based in
Williston, North Dakota. The men and women working at GO
Wireline and I are proud to be part of the industry that
provides the United States with the energy it needs to grow our
economy, maintain our quality of life, and reduce our nation's
emissions.
My partners and I started this business in 2011, and have
grown to about 200 employees working out of two locations in
western North Dakota and one in northern Colorado. But we work
across the region, including Montana, South Dakota, Wyoming,
Utah, Nebraska, and Kansas.
GO Wireline plays an important role in domestic energy
production. Our company provides wireline and pressure pumping
services to customers who drill and operate wells. From oil and
gas all the way to carbon sequestration. We work on wells
throughout their existence from when they are drilled to
eventually plugged and abandoned.
Our Wireline trucks have a miles-long spool of cable which
we use to hoist tools into welds to accomplish a variety of
tasks. This includes well integrity logging, which ensures a
well's casing is not damaged and that cement outside the casing
is preventing fluids from reaching water-producing zones at the
surface. In a horizontal oil well, we perforate the casings so
that shale formations can be hydrologically fractured and oil
and gas can then flow or be pumped through those perforations
to the surface.
Small businesses like GO Wireline play an invaluable role
in domestic oil and gas production and are vital to job
creation and growing the economy. Small businesses like ours
are also the heart and soul of the communities in which we
work. Our customers are mostly domestic energy companies, both
large and small. They have felt the impacts of the increased
global demand for energy as the world has emerged from the
pandemic, but energy production is not as simple as turning on
the spigot. Increasing energy production requires more
equipment than people, which in turn requires access to capital
and financing. Over the past several years, investors have
become increasingly reluctant to invest in our industry.
Regulator uncertainty, along with a stream of negative rhetoric
from the highest levels of government is discouraging the
investment needed to keep up with demand.
Greater manpower is also needed to meet increasing levels
of demand. The antipathy communicated against the industry,
coupled with an accurate representation of the future of our
industry has made it challenging to recruit in the competitive
labor market, particularly young people.
In 2022, we spent more time, money, and effort recruiting
new employees than we had in the last 10 years combined.
Supply chain issues have created challenges as well. Long
lead times, restricted supply and increased costs are all
limiting factors on the capital we have available to invest in
technology, equipment, and people.
Importantly, an expanded fleet and workforce does not
matter if our customers are unable to secure the permits to
explore and drill new wells. While our customers are the ones
securing permits to explore for new resources, our company is
still impacted by the administration's moratorium on new leases
on federal lands as future opportunities for us to work on new
wells will fall as a result along with production.
While the administration's rhetoric and reluctance to
support new infrastructure are hindering our industry's ability
to increase production, regulations such as the proposed SEC
Climate Disclosure reporting requirements threaten to hurt our
business directly. The proposed regulation requires disclosures
from public companies on the entire value chain, including
product end use impacts and supplier environmental impacts.
This massive regulatory action would put enormous
administrative demands to small businesses like ours, which do
not have the resources or expertise to manage and to report
this information to our public customers.
GO Wireline, along with so many other small businesses
working in this industry, stands ready to provide the services
necessary to increase production to meet increases in demand.
The policy decisions by the current administration, combined
with the politicized hostility that has targeted the U.S. oil
and natural gas industry is hindering our industry's ability to
provide abundant, reliable, and clean sources of energy that
both the U.S. and our allies need now to meet energy demand,
improve standard of living, provide national security, and
reduce global emissions.
Thank you again for the opportunity, and I look forward to
answering any questions.
Chairman HUNT. Thank you, Mr. Gjovig.
I now recognize Mr. Powell for his 5 minute opening
remarks.
STATEMENT OF NICK POWELL
Mr. POWELL. Chairman Hunt, Ranking Member Gluesenkamp
Perez, and Members of the Subcommittee, thank you for holding
this important hearing and allowing me the honor of testifying
before you.
My name is Nick Powell, the Chairman and owner of Colt
Energy. Colt Energy's main base of operations is in Iola,
Kansas, which has a population of approximately 5,500, and is
located in Allen County with a population of 12,500. It is
engaged in oil and gas exploration, production, and
development. Colt owns and operates over 150 producing oil and
gas leases with approximately 400 barrels of oil and 1,800 MCF
of gas per day. Our average oil well produces a little over a
barrel a day, and we produce about 15 MCF per day from our
average gas well.
Colt currently employes 39 full-time employees. That is one
employee per 10 barrels of oil and 18 MCF a day of gas. So in
our industry, our marginal well industry, we hire a lot of
people for the oil we produce and we are truly a small marginal
producer.
Our employee wages average approximately $75,000 plus
profit sharing, health insurance, 401(k) retirement plan, paid
vacation, and sick leave. We and other small oil and natural
gas producers provide an important source of good paying jobs
in small communities throughout Kansas. We also provide tax
revenue to counties in which we operate and to thousands of
royalty owners, many who rely on their monthly checks.
So why is the current administration clearly trying to make
it so hard and expensive to stay in business and produce the
oil and natural gas that this country will need for decades to
come? In all my years in the business, I have never seen an
administration take such a callous and unrealistic approach to
energy policy. From the day Biden became president, we were
being told that he wants to put us out of business and is
threatening costly and confusing regulations and taxes, many of
which we have no idea how much it will cost to implement or how
to implement them. It used to be that previous administrations
and Congress have tried to protect small oil and gas operators
from onerous regulations that had no real benefit for their
cost. Now it seems just the opposite. Trying to eliminate
percentage depletion, removing the marginal well exemption from
methane leak regulations and fees to be collected on methane by
the EPA to name a few.
The only purpose served by shutting down small producers
while oil demand is still strong will be to ship those jobs and
revenue and secure energy supply to many of our adversaries
that cause much more environmental harm by their producing
operations than U.S. companies taking us back to dependency for
our nation's energy supply. Here is a clear example that the
EPA is more interested in adding to our costs than lowering
measurable methane leaks.
The first EPA rule proposal released in November 2021 did
not require ongoing emissions, monitoring of low producing well
sites that emit less than three times per year. Then, in 2022,
the DOE completed a report on the emissions profile of low
production wells. In fact, one of our leases was used in that
test. They came out and ran a test on our lease and that was in
my written report, the outcome of that.
The report shows that well sites producing less than six
barrels a day fall below the thresholds that EPA has considered
as low emitting sites. On November 11, 2022, the EPA advanced
their supplemental proposed rule to regulate oil and gas
methane emissions. The EPA ignored the third party DOE study
and strengthened the leak detection repair requirements for
small oil and gas wells.
Another potential hit to our operating costs is a proposed
methane fee of $900 per ton on operations generating in excess
of 25,000 tons of CO2 equivalent. What does equivalent mean in
terms of methane and how do we prove we are exempt? The devil
is always in the detail which we don't have.
Depending on unknown cost increases we are facing from
regulations and fees does not take into consideration other
costs of doing business that increased as we deal with
inflation and labor shortages, just like everyone else. So when
we are continuing to face some of the highest inflation rates
we have seen in 40 years, small operators can ill afford any
additional unnecessary costs or regulatory burdens.
Thank you, Mr. Chairman, once again for holding this
hearing on the serious issues facing small energy companies. I
look forward to answering your questions.
Chairman HUNT. Thank you, sir.
I now recognize Mr. Cross for his 5 minute opening remarks.
STATEMENT OF EDWARD CROSS
Mr. CROSS. Thank you. Good morning, Mr. Chairman, Ranking
Member Perez, and Members of the Committee. I am Edward Cross
and I am the president of the Kansas Independent Oil and Gas
Association. I have worked in the oil and gas industry for over
38 years as a geologist and now as an advocate for the
industry, and it is my honor and privilege to serve this great
industry that enhances life experiences and improves the
quality of life of people around the world. And with over 3,000
Members, the KIOGA as we call it, the Kansas Independent Oil
and Gas Industry is a lead state and national advocate for the
oil and gas industry in Kansas.
We talk about small independents. Those are the folks that
drill and produce oil and gas. We do not generate or market the
end products. We raise our capital through the well head. We do
not tap equity markets to get that cashflow or any of the
cashflow that comes from the wells, what we use to drill and
produce the wells that we have here. And many operators spend
over 100 percent of their cashflow on drilling and developing
those new wells.
In Kansas, oil and gas is producing in 89 of the 105
counties. Our average well makes two barrels of oil per day and
23,000 cubic feet of natural gas, yet we are a 3.6 billion
industry in a state that supports over 100,000 jobs and $3
billion in family income and are consistently one of the top
three industries in the state in terms of gross state product.
Over the last 2 years, in the name of climate change, the
federal government has done much to impeded American oil and
gas production and these actions not only affect producers but
they are more often more harmful to the small businesses that
are in the oil and gas industry. President Biden and his
supporters continue to look for every opportunity to weaken,
attack, and destroy domestic oil and gas production, including
carbon and methane tax proposals, unilaterally increasing the
regulation of oil and gas production, and proposing to
eliminate critical oil and gas cost recovery tax provisions.
Biden's actions are making it harder for our economy to recover
and damaging our nation's energy security.
Because industry and infrastructure require development,
Biden's anti-development and environmental policies are a major
obstacle to responsible development. In his State of the Union
speech in February, President Biden portrayed the global energy
crisis as a problem that he is solving, but in fact, it is a
problem he has helped cause and is making worse with his anti-
fossil fuel policies. Energy information administration says
global oil and gas demand will increase over the next 30 years
and nearly half of that world's energy is expected to come from
oil and natural gas in 2045. That demand will be met one way or
another, and if America does not meet that it will be met by
other countries who do not share our security interests,
environmental, or human rights values. The solutions are right
here in America and we just need to seize upon those. It does
not make sense to place unnecessary political and legal
obstacles in the way of responsible American oil and gas
production, cancel pipelines to discourage investment in fossil
fuels, and then beg OPEC and others for more oil to contain
inflation.
The oil and gas industry can be part of the solution to our
nation's energy solutions or energy challenges. Entrepreneurs
in the private sector and smart state led policies can drive
American energy leadership. Tax policy proposals from the Biden
administration seem designed to punish the energy sector. It is
key for the small independent oil producers that Congress
retain cost recovery measures like the percentage depletion
deduction and intangible drilling cost deduction. These
measures are neither subsidies nor loopholes but tax provisions
critical for American oil and gas producers to sustain capital
availability and formation.
The EPA flipflopped on their proposed methane rule. You
know, first exempting marginal wells and then caving to
pressure from environmental activists and ignoring a Department
of Energy third-party study to make the regulations more
harmful to small producers. The EPA proposed oil and gas
methane rule is contrary to the congressional intent as the
Inflation Reduction Act exempted smaller wells from regulation.
Congress should engage EPA to ensure that the agency develops
cost effective oil and gas methane regulations that reflect
congressional intent and provide flexibility.
We also have concerns about a number of issues that are in
my written testimony, whether it be the strategic petroleum
reserve or Endangered Species Act or environmental social and
governance standards and more of those.
So in closing, you know, the most pressing issues facing
the U.S. economy in the foreseeable future are not those
arising from climate change or an energy transition; rather,
the factors to watch are inflation, rising energy costs, and
security threats. America's independent oil and gas producers
look forward to working with you and your colleagues to develop
innovative solution to address our energy challenges in the
coming years. Our mission is to empower people, improve lives,
and inspire success. I thank you.
Chairman HUNT. Thank you very much, sir.
I now recognize Mr. Conant for his 5 minute opening
remarks.
STATEMENT OF DAN CONANT
Mr. CONANT. Good morning, Chairman Hunt, Ranking Member
Gluesenkamp Perez, and all the Members of this Committee. I am
honored and humbled to have the opportunity to speak with you
today as a representative of the vanguard of a new industry in
Appalachia.
And I want to share with you three stories. The story of
how we reimagined who solar is for. The story of how we started
training the first generation of solar installers in coal
country, and the story of what Congress can do to help further
emission in bringing clean, renewable energy and jobs within
reach of all of our neighbors across Appalachia.
My name is Dan Conant. I am the founder and president of
Solar Holler. We are based in Shepherdstown and Huntington,
West Virginia, and I also come to you as a former advisor to
the U.S. Department of Energy Sun Shot Initiative, as well as a
veteran of multiple solar startups.
For generations, Appalachia has powered American prosperity
with our coal, and Solar Holler is ensuring that we will
continue to power America in the 21st century with renewable
energy.
From the moment I moved back to my hometown to start up our
company 10 years ago, we have relentlessly pursued innovative
approaches that make solar the most affordable source of energy
for all of our neighbors across Appalachia.
Due to this dedication and approach, we are a rapidly
growing team of incredibly dedicated, talented, and passionate
professionals. Over the past decade, we have started the
industry from scratch in our region and grown to a staff of 105
people. Our team models, designs, finances, and builds
beautiful solar projects that will last for the next two
generations, all the while producing free, clean energy.
Every project our team designs and builds helps families,
nonprofits, and businesses across our region cut their power
bills while revitalizing the economy of West Virginia.
Our dedication to making solar the most affordable source
of energy was shown in our very first project. A groundbreaking
community effort with my congregation, Shepherdstown
Presbyterian Church. That project won national accolades,
including the interfaith Power and Light National Renewable
Role Model Award for a first of its kind crowdfunding approach.
Rather than passing a plate or doing a traditional capital
campaign, we crowdsourced water heaters. Members of the
congregation and half the businesses in town agreed to let me
connect an internet-connected remote control to their water
heater. And we actually connected 100 water heaters across town
as a network, registered them as a power plant on the PGM
regional grid, and started day trading second by second in tune
with the fluctuations of the power grid. Using these water
heaters, we were able to create a new source of funds to
support solar projects at churches, affordable housing groups,
and libraries across the state while stabilizing the power
grid, preventing blackouts and power surges and ultimately
incorporating more renewable energy into the grid.
That first project with my church would have cost the
congregation more than $50,000 at the time. Instead, it cost
them one, one dollar. And over the next 25 years, the project
will save the church more than $100,000 to put back towards
their mission.
We had to get creative with that because of the way the
solar incentives are built that specifically discriminate
against nonprofits. Those incentives have typically left out
tax-exempt entities. Thanks to the Inflation Reduction Act that
passed last year, however, all of the federal investment tax
credits are going to be opened up to churches and schools and
municipalities just the same as they always have been for
businesses.
In 2015, we relaunched Rewire Appalachia, a workforce
development and training program in partnership with our
friends at Coalfield Development. Through that collaboration,
Solar Holler gave more than 40 young folks who were kids of
coal miners the chance and hand-up into the solar industry. We
paid for their college, for their electrical apprenticeships,
for their solar certifications, and gave them close supervision
under the tutelage of our master electricians, and we kept
going from there.
In 2020, we willingly unionized, joined up with the
International Brotherhood of Electrical Workers and have been
very proud to be leading the union movement in West Virginia.
Our latest efforts are focused on high schools and
vocational programs. This January, we launched internship
programs with Wayne County West Virginia schools, as well as
Boyd County, Kentucky. And through this program, high school
seniors spend four days a week in their vocational classes
learning electrical theory, learning drafting, and then one day
a week they are paid interns on the job, learning how to safely
and beautifully install solar systems. Once they graduate in
June, they will be able to slide right into a career with Solar
Holler and stay at home, which is one of our biggest challenges
in West Virginia with the brain drain we have seen over the
last 50 years.
I am running out of time but I have got to say, things are
going very, very well for us, especially with the investments,
the Inflation Reduction Act is making in our states. We have
seen a boom in manufacturing just in the past year,
particularly around electric school buses, grid scale
batteries. We have had five major industrial announcements in
the past year that will employ more than 2,900 people in the
clean energy industry in West Virignia. We are really excited
to be able to keep pushing the envelope here and see where this
all takes us over the next 10 years. Thanks so much, and I look
forward to answering any questions.
Chairman HUNT. Thank you very much.
We now move to the Member question under 5 minute rule. I
recognize myself for 5 minutes.
My first question is for you, Mr. Gjovig. Your company's
name alludes to the portion for the energy process you are
involved in. In horizontal wells you perforate the casing so
that shale formations can be hydrologically fractured, a
process that is credited with ushering in today's era of
energy, abundance, and independence in North America.
What would a ban on fracks do to your business, your
employees, and the overall U.S. oil and gas industry?
Mr. GJOVIG. That is an excellent question, Chairman. It
would obviously devastate our business as we are an integral
part of that function of completing a well. But in turn, it
would devastate the community in which we work, and I think
even more importantly it would devastate lower income and
working-class communities across the country as the cost of
energy would rise as production would fall.
Chairman HUNT. Excellent. Thank you.
Mr. Powell, next one for you, sir. Turning our attention to
ESG, regulatory burdens and overreach, would you say tha the
regulatory environment during the current administration has
increased or decreased your ability to access capital?
Mr. POWELL. Well, it would certainly seem to have decreased
capital. We have not had to go out and look for capital but I
have people I know that it make sit harder for them. And
certainly it does for the industry as a whole. You know, so to
answer your question, it increases it.
Now, for me specifically, because we do not go out and look
to raise money, but I know other people that I talk to and it
is a problem. And there is a concern on where this is going to
come because you have to raise money to be able to continue to
drill, particularly when the price of oil goes down and you
don't have your revenues to do drilling.
Chairman HUNT. Also, sir, you referenced the pending DOE
methane inspection rule in your testimony and that your wells
were part of the DOE study. To me, especially in the scope of
small producers such as yourself, the DEO inspection and
testing sounds like a solution searching for your problem but
not finding one.
In your opinion, does the proposed methane tax make sense
for small producers? Will it hurt your business more than it
will help your business reduce methane emissions?
Mr. POWELL. Thank you for the question. We had one of our
properties, producing properties were used in this DOE study
that was done with a third party to see whether or not these
small producing wells really produce much methane before you
impose a lot of expensive regulations on them. They tend to be
widespread and one size fits all we have seen in the past. And
so the crew came out and set up their equipment on our lease.
And they started the test, and in fact, our executive vice
president just happened to go out there and be on site. He was
curious to see the testing. And they stopped the test because
they thought their equipment wasn't working because they
weren't picking up any methane, any at all. So they checked all
their equipment, looked around, and said, no, the equipment is
working. There just isn't that much methane. And we knew that.
You know, these wells when they get old and producing marginal
wells like that all the gas is gone. That is why we do a barrel
a day because there isn't much pressure moving that oil.
And I was very surprised because I knew that about 60
percent of the wells they tested were very low. So I thought,
okay, they have paid for the money. They have run the tests. We
are going to get this exemption. Well, they switched. And now
some are being put into that. And I do not understand, so.
Chairman HUNT. Yes, sir. Thank you very much.
The last one is for you, Mr. Cross. We have got about one
minute left, so if you can wrap it up as soon as possible.
According to the U.S. Energy Information Administration,
oil and gas supply 68 percent of the United State's energy in
2022. How long would it take in terms of years for solar and
wind to meet that level of energy share? And what would be the
cost for the U.S. taxpayer to reach that mark?
Mr. CROSS. Well, it is hard for me to answer how long it
would take, the wind and solar to get there. But you know, 68
percent, you know, I think on the world level that project that
wind and solar by the year 2045 will make up 10 percent, 10.9
percent or something of globally. And that is globally, not the
United States.
So it would take, you know, they would take billions of
dollars to get to where they are today, wind and solar, where
they are at today, I don't know, 7, 8 percent of energy today.
So it would take quite some time. I don't really have an answer
to exactly when.
Chairman HUNT. Thank you very much, sir. I really
appreciate it.
And I now recognize the Ranking Member, Ms. Gluesenkamp
Perez for 5 minutes of questions.
Ms. PEREZ. Thank you, Mr. Chairman.
Mr. Conant, your company has made amazing investments in
workforce development at the local level. As somebody from a
rural community, I really appreciate that.
As somebody who works in the trades, I know it is critical
for getting early training, you know, junior high, hi school.
Can you speak about some of the benefits it provides to
communities, particularly in some of the more rural areas to
educate young people about the opportunities and the trades and
jobs that exist in local areas?
Mr. CONANT. We have made really conservative efforts over
the past 10 times. We actually built our company around
training up the first generation of solar installers in the
state. Across Southern West we have just seen, like I said in
my testimony, a brain drain over the last 7 years as the coal
industry has declined. And if you go into McDonald County, West
Virginia for instance, back in the 50s there were over 100,000
folks in McDowell County. Now we are down to about 15,000. Four
out of five buildings are empty and it is because there are no
jobs left. People have to leave the state.
So, that is why we have focused so critically on folks
coming out of high school, folks early, early adult hood so
that we can train them up in the trades, get them into the
electrical field. We are actually 3,000 electricians short
across West Virginia right now for just the work we need to do
as a state. And with the benefits of the IRA coming to
fruition, we are going to need another 4,000 electricians in
state. So we have a 7,000 electrician gap in a state of 1.8
million people. This is huge. And, you know, the time to do
that is when you are in high school or when you are coming
straight out of school. So through this partnership with Wayne
County Schools, we are really excited to be working
specifically with high school seniors, promoting vocational
education at the school level and making sure that folks have a
career path that allows them to stay at home versus filtering
off into the rest of the country.
Ms. PEREZ. Thank you. You know, later today I am going to
have a 9-foot chainsaw delivered to my office that my grandpa
used in the woods and, you know, like West Virginia, Washington
State has been centered around a particular industry for a long
time. You know, how has increased investment in renewables in
the state helped bring wealth back to the communities and
diversity the local economy?
Mr. CONANT. I would say it is still early days. So, the
industrial announcements that I was mentioning, those have all
just been made in the past year, and really over the last
several months with the new battery factories coming in and I
think the first electric school buses are just now running off
the line.
But for instance, Form Energy makes grid scale batteries.
They are locating in Weirton, West Virginia, which is an old
steel town on the Ohio River. It has got I think 5,000 to 7,000
folks, somewhere in that area, and this is going to be 700 jobs
in a town of 5,000 to 7,000 people. It is absolutely enormous
for giving folks a reason to stay, for supporting the school
system, for really supporting the infrastructure of this town
with a really rich history. So I am excited to see where all
that goes. In our case, we have got over 100 families supported
directly by the wages that we are producing. We are scattered
all over the state. In the age of COVID, we went virtual across
the teams so that everyone could live in their home holler and
not have to come into the office every day. And so that is
really spreading out the benefits across a really rural state.
Ms. PEREZ. Yeah. Thank you so much.
Mr. Gjovig, outside of H.R. 1 there are some bipartisan
efforts to reform the permitting process. Could you give us
some details as to which aspects of these bills are most
important to lowering the cost for Americans?
Mr. GJOVIG. Permitting reform and access to federal lands I
think is an important part of making sure that we have a steady
supply of American production going forward in the future.
Today, we have work that is going on, but 5 years from now if
permitting is not done now and access to federal lands is not
granted now, we will see an impact on production.
Ms. PEREZ. Mr. Powell, you mentioned in your testimony--I
do not have quite enough time to ask this question. I will
catch you in another round. But thank you.
Chairman HUNT. Thank you very much.
I now recognize Mr. Mann from Kansas for 5 minutes.
Mr. MANN. Thank you, Mr. Chairman. And thank you to the
witnesses and everyone for being here today.
I represent the big 1st District of Kansas, which is
roughly two-thirds of our state. I can assure you there is no
tree in my district and in our state that needs a 9-foot
chainsaw to cut down. Incredible. But we do have a lot of oil
and natural gas. And hundreds and thousands of oil and natural
gas wells have been drilled in our state since the late 19th
century. And they produce 6.7 billion barrels of oil and 41.2
trillion cubic feet of natural gas.
In Kansas, small independent businesses account for 92
percent of the oil production and over 63 percent of the
natural gas production. These independent producers who own and
run these small businesses employ thousands of people across
the state and they are critical to the American economy.
I am glad that we are having this hearing to shed positive
light on this tremendous industry, these fantastic people that
too often get told that what they are doing does not matter and
the government instead of thanking them, which we should be
doing, throws up more taxes, more burdensome regulations, and
makes their life more difficult. So I appreciate you all being
here today.
A few questions. First for you, Mr. Cross. Can you explain
how producers have been affected by regulatory overreach and
the impact it has had on the oil and gas industry? And then
specifically, what particular regulations are the most onerous
or are you most concerned about right now.
Mr. CROSS. Yeah. Thank you for the question. You know, our
biggest priority in the oil and gas industry are federal
regulations. We do have state regulations, too, that we comply
with, but the federal regulation seems to be the most onerous.
And so when we looked at, you know, like the endangered species
Act where they are trying to list--well, they did list just
this week, the lesser prairie chicken in Kansas is a threatened
species, which we feel they have not met all of the criteria
for listing that particular species. Those are very costly. Or
the methane regulations that are supposedly coming down. Like I
said, the Department of Energy third-party study which was done
not only in Kansas but across the nation found no viable or
significant quantities of methane or volatile organic compounds
from marginal wells, yet the EPA decided to ignore that study
so that they could put these, and these are very costly, for
the producers in Kansas.
Mr. MANN. And expand upon the methane fee. What impact
would that have on our producers? I mean, what would that mean
to our small businesses that are trying to produce oil to feed
and fuel all of this?
Mr. CROSS. Well, they have not come out with the
regulations yet but the proposals that they have right now
could cost as much as 30 to 40 percent of the cap X it would
take to drill and produce a well in Eastern Kansas where they
make less. Like Nick said, one barrel, it may be as much as 50
or 60 percent of their Cap X on a well to comply with just a
methane regulation itself.
Mr. MANN. Yeah. Incredible. Thank you.
A question for you, Mr. Powell. Can you explain the
importance of percentage depletion and how the elimination of
this would affect your small business and many others like it
throughout Kansas and throughout the country?
Mr. POWELL. Yes. Well, small producers depend greatly on
percentage depletion. Once we drill a well and it starts
producing, it goes into decline. And the only way to maintain
our revenues is by continuing to drill more wells. So we have
to use a lot of the revenue we get to put back in the ground to
continue drilling to maintain our revenue so we can maintain
our employees and our fixed costs. And percentage depletion
allows that and only for small producers. It is only allowed up
to 1,000 barrels per day. It is only on the first 65 percent of
your income. And it also, besides allowing you to continue to
drill wells to maintain your production and stay in business,
it also allows the wells to economically around longer as these
wells decline, and if costs go up--keeps more of the money so
we can keep these wells economically alive. They produce longer
and they produce money for the state, for the royalty owners.
People keep forgetting about these royalty owners. There are
probably millions of royalty owners across the country, 100,000
in Kansas, and they rely on that monthly check. And once that
well is plugged, it is not going to provide any money to the
county, to the state, nor to the royalty owners. So it helps
all those people besides us.
Mr. MANN. The royalty owners are American, different than
the royalty owners in Saudi Arabia or other parts of the world.
So these dollars stay in our economy.
Last question. I have about 30 seconds left for you, Mr.
Powell. What decisions out of Washington do you feel like have
harmed your business, your small business the most?
Mr. POWELL. Oh, I cannot do that in 20 seconds.
Mr. MANN. That is fair. That is fair.
Mr. POWELL. But, I mean, it is a long list. You know? And
it is not only the ones that we have to deal with, the cost,
because we cannot hire people to come in here and take care of
these things. It is what we look coming down the pike, you
know, the road. It is a change. It is a change. And it is
threatening, so we worry about what is coming down. And the
people we want to hire, they worry about, well, are you going
to be around as a business?
Mr. MANN. That is the important thing. If you look forward,
it is not just the regulations you have but all the talk of the
regulations that are coming, how expensive that is, how bad
that is for business on every front. So thank you all for being
here. And with that, I am past my time so I will yield back the
time that I do not have. So thank you.
Chairman HUNT. Thank you, Mr. Mann.
I now recognize Ms. Schoulten from Michigan for 5 minutes.
Ms. SCHOULTEN. Thank you so much. Thank you to the
witnesses today for coming and testifying on such a critical
issue.
The testimony that has been shared today has touched on
different aspects of workforce and retention issues, a vital
part of ensuring we have a strong domestic energy industry is
cultivating a strong workforce. I rarely have a meeting or a
conversation these days where when I ask what is the most
critical issue facing your industry or your sector and the
first response is not worker shortages or workforce development
and retention.
So, Mr. Conant, the Rewire Appalachia and high school
vocational programs you mentioned in your testimony are great
examples of how to cultivate a strong local workforce. What
further measures in the clean energy space should Congress be
paying attention to when it comes to some of those workforce
development issues?
Mr. CONANT. One of the biggest challenges we see is at the
community college level, just having teachers. It is a whole
lot more lucrative for teachers to work in the field as an
actual electrician than it is to teach other electricians. And
that has been seriously holding us back. Not just West Virginia
but nationwide. So, I would say increasing teacher pay and
making that a more competitive career so that you can enable
all the thousands of others.
Ms. SCHOULTEN. Thank you.
And I have one more question for Mr. Cross. You mentioned
in your testimony that there are ways for Democrats and
Republicans to work together on effective energy policy
priorities. Bipartisanship is a guiding principle of my
leadership here. What are some of the proposals in this space
that you can support that not only strengthen American
production but also ensure a green future for our kids?
Mr. CROSS. You know, we believe that we need energy from
all forms to meet our energy needs. But that also includes oil
and gas in that sector. So, you know, policies that do not
penalize the oil and gas industry but support oil and gas in
addition to supporting green are ways I think we can work
together to get an energy policy going forward.
Ms. SCHOULTEN. Thank you. I yield back.
Chairman HUNT. Thank you, ma'am. I now recognize Mr.
Stauber from Minnesota for 5 minutes.
Mr. STAUBER. Thank you very much, Mr. Chair.
Mr. Conant, you are involved in the solar business and the
solar panels and what have you; right? Are there any critical
minerals used in the production of solar panels.
Mr. CONANT. Yes.
Mr. STAUBER. Which ones are they?
Mr. CONANT. I am not a chemist, so I am----
Mr. STAUBER. But you know there are critical minerals?
Mr. CONANT. Yes, there are.
Mr. STAUBER. If you want to sole source critical minerals
in the United States or foreign countries?
Mr. CONANT. I really want to source them in the United
States.
Mr. STAUBER. Great. You are going to support H.R. 1 then.
That is my bill. Thank you.
Did you know that this administration pulled the lease in
their banned mining in the biggest copper/nickel find in the
world? Did you know that? The minerals for your solar panels,
did you know that, yes or no?
Mr. CONANT. My business is----
Mr. STAUBER. Mr. Conant, I am trying to help you here
because I support all of the best energy. All of the best. And
your solar panels are going to be a part of that. What I am
telling you, or asking you is, do you support minerals sourced
to the United States rather than foreign companies who use
child slave labor, yes or no?
Mr. CONANT. Absolutely.
Mr. STAUBER. Okay. In Minnesota, we have the biggest
copper-nickel find in the world and this administration just
pulled the leases and banned mining in northeastern Minnesota.
Do you support that?
Mr. CONANT. I think you should talk to the administration
about that.
Mr. STAUBER. No, I am asking you. Because it removed the
sourcing in our country. And you said you talked about union
labor. These were project labor agreements, thousands of union
workers gone because of political reasons.
And it matters to you where we source the minerals;
correct?
Mr. CONANT. Yes.
Mr. STAUBER. thank you.
Does your company get any subsidies from the federal
government indirectly or directly?
Mr. CONANT. Be inflation reduction Act created a number of
tax credits for solar projects. They extended that to the tax-
exempt entities, including churches and municipalities and
hospitals. There is also a number of incentives to target that
development directly into historical coal.
Mr. STAUBER. And I think one of the things that we have to
know as we get into the solar universe and you are in the
inception of it, we have to understand that we will never meet
the Inflation Reduction Act Standards for Critically minerals
mined domestically if we do not allow mining.
Just yesterday, the Secretary of Interior asked, and she
signed the ban. When asked if there was critical minerals in
that mine she had no idea. Zero idea to help you manufacture in
this country. So I am asking you to support H.R. 1, Lower
Energy Costs, put union workers in northeastern Minnesota back
to work using the best environmental standards, the best labor
standards in the world.
So thank you for supporting H.R. 1. I appreciate that.
Mr. Gjovig, Mr. Powell, and Mr. Cross, yes or no, do you
consider yourself big oil?
Mr. GJOVIG. No.
Mr. POWELL. No.
Mr. CROSS. No.
Mr. STAUBER. That is what I thought. And I am willing to
bet you would take offense at such a claim.
This gets at a larger point that we at the Small Business
Committee, we must always keep in mind when more regulations
are imposed or taxes are raised they have the greatest effect
on you, the small business owners. Through it's worn American
energy production, the Biden administration is doing just that,
harming small businesses and threatening to put those in the
coal, oil, and natural gas industries out of business.
Mr. Gjovig, can you expand on the cost and time that goes
into complying with the increased regulations you mentioned in
your testimony?
Mr. GJOVIG. It would require me to track our own emissions
which is something that I do not have the staff or the
expertise to do, but also the environmental impacts of my
suppliers, which would require the legwork to track that down
from my suppliers, which include small and large business. And
then disclose that to our publicly traded customers. It would
be a big administrative burden for us.
Mr. STAUBER. And my time is up. And I want to thank all
four of you for your testimony.
Mr. Chair, I thank you and the Ranking Member for holding
this. It is extremely important and that is why H.R. 1 is so
important to get across the finish line. And I yield back.
Chairman HUNT. Thank you, sir.
And I recognize Mr. Golden from Maine for 5 minutes.
Mr. GOLDEN. Thank you very much.
Mr. Cross, just another opportunity to talk a little bit
about ways that we could do some bipartisan work together to
have an effective energy policy here in the United States. You
mentioned supporting all types of energy but we didn't really
get into any specifics. I just want to give you another
opportunity. What types of investments or things could we do on
a bipartisan basis that would help out your industry?
Mr. CROSS. Okay. I think you saw in my written testimony, I
have things, you know, where most Republicans look at energy
policy as an economic issue, whereas Democrats seem to think of
it as an environmental issue.
Mr. GOLDEN. Well, I would not agree with that.
Mr. CROSS. Okay. Well, those are just polling numbers that
came out. But you know, looking at ways, and we talked about
several of those, like the tax policy, looking at the oil and
gas. We do not feel like any of our cost recovery mechanisms
like percentage depletion and tangible drilling cost deductions
are subsidies by any means because they have to spend the
money. That is the way they raise their capital. We are not big
oil. We do not tap equity markets. The cashflows coming from
the well is how we do that.
So those are critical for the smallest producers. As I
said, the percentage depletion, the majors have not had that
since 1975 or something so they do not really care about that.
But that is imperative for that small producer that makes two
barrels of oil per day.
You know, I might add in Kansas, many of those wells out
there in Western Kansas, they are providing 25 percent of the
employment in accounting, 75 percent of the property tax. And
it is critical for those. So those are the type of policies.
Mr. GOLDEN. Thinking about tax credits and tax policies,
are there things out there that are going to be helpful do you
think to energy producers for making smart investments like
more energy efficient manufacturing or emissions technologies,
carbon capture, et cetera? I mean, are there things out there
that you would look to take advantage of?
Mr. CROSS. Yes. You know, we do not receive tax credits but
like you say, cost recovery mechanisms are there. Whenever you
talked about you said carbon capture. What was the other one? I
am sorry. You said----
Mr. GOLDEN. Any kinds of tax policies that would help
manufacturers to make investments to increase their energy
efficiency.
Mr. CROSS. Yeah, you know, so we talked a little bit about
ESG, for example. That does not affect directly a lot of the
small producers because they are not tapping equity markets and
things like that. But it does affect a lot of the suppliers.
Some of them use suppliers and service companies that may get
capital from companies that are trying to get capital and they
have to comply with the ESG standard. So that greatly impacts,
you know, in our state, labor supply is a big issue. I mean, we
have, it was a very active year in Kansas in drilling but it
could have been a lot more if they could have had more people
out there drilling. So those are the kinds of things.
Mr. GOLDEN. Yes.
Mr. Powell, I saw in your testimony you expressed concern
about the president tapping into the Strategic Petroleum
Reserve. You did note that it helped drive down prices which
obviously my constituents and probably most people out there
appreciated. But you know, you noted some long-term concerns
about how that is going to impact you and your business. What
types of moves could the government make that would alleviate
your concerns about that?
Mr. POWELL. Well, I think that strategic petroleum reserve
is not to be used for what they use it for. I mean, you
artificially----
Mr. GOLDEN. To drive down high prices?
Mr. POWELL. Yeah, but it is artificial. It is short term.
You all are looking at long term, I assume.
Mr. GOLDEN. Short term relief----
Mr. POWELL. You want to make sure that we have the energy
we need----
Mr. GOLDEN. I understand that.
Mr. POWELL.--to keep this country. And if by artificially
pumping that oil out, well, if you could keep pumping it
another six months it will be empty. Then what do you do? And
what do you do if you need it? So by bringing the price down
you send a message, do not make investments. You have less
revenue coming to drill more wells, produce more oil. And if
you do not have that as we have seen in Europe, your price will
go right back up and even higher than it was when you started
to empty the petroleum reserve. So ask me this question in
another year or two when we see where the price of oil is.
Mr. GOLDEN. Right. You would like them to restock the
reserve?
Mr. POWELL. I would. In fact, President Biden said when he
did this he said, I will pump this oil out and bring the price
down. But do not worry. When it gets below $72 I will fill it
back up. That is what he said. It is kind of a bait and switch
because he did not do that. The price went to 67. Have we seen
any oil pump back into that? He could have gone out on the
futures market for 6 months and priced it below 72 and bought
it and pumped it back in there. And he did not.
Mr. GOLDEN. I have called on him to do that. So I agree
with you about that. I disagree, obviously, when gas is $5
bringing prices down is pretty critically important to the
American people.
Mr. POWELL. Like I said, 2 years from now when the effects
of artificially bringing down the price of a product has on its
supply in the future.
Mr. GOLDEN. Thank you.
Chairman HUNT. Thank you, sir.
I now recognize Mr. Meuser from Pennsylvania for 5 minutes.
Mr. MEUSER. Well, I thank you, Chairman, very, very much.
And my apologies for just dropping in. It is just one of those
busy days. I am on the Financial Services Committee as many of
my colleagues have many other Committee hearings. So this is
really important. That is my whole point, just to stress that I
am sorry I missed it because it is a very important hearing and
we really appreciate you all making the trip here.
My district now includes much of the Marcellus shale area.
We call it the Northern Tier of Pennsylvania. I have been very
acquainted with that area for quite a number of years, even
when I was not representing it only because it just has been so
important since 2011-2012. Previously, I was revenue secretary
in Pennsylvania so we set up oil and gas workgroups very early
just to help the industry understand compliance and grow in a
responsible manner. And it has made an enormous difference in
Pennsylvania. I think we have the second or third largest
reserve of natural gas in the world. And it is developing,
things are going well, but it could be doing a lot better. Not
so much because of necessarily costs and excessive taxes but
entirely because of regulations, permitting, as well as
pipelines very much, too. And investing as you, Mr. Cross, have
brought up, meaning access to capital from banks, large and
small, community, regional, and even the larger banks where
some of this ESG mandates are coming into play. I mean, it is
not uncommon for me to get a call from a community bank. You
would not believe the call I just got he would say, or she,
from the SEC warning me to watch out for my carbon footprint in
my investment portfolio. You know, I might have to hire
somebody to look after this. I thought I already had somebody
good.
So tell me, you know, there is rhetoric about it. There is
commentary. There is real life. Today we have these
requirements but just wait until next year. They are going to
be even harsher so you had better maintain them even more
stringently than you already do. Maybe you can just comment on
that for me, Mr. Cross.
Mr. CROSS. Yes. That is a big issue for small companies, as
well as the big companies. And I know in Kansas, we look at our
small banks. Many of them are small banks in Kansas. And we are
concerned about whether they are going to use an ESG standard
on that.
The other thing we are worried about is insurance companies
that have started to say that they are not wanting to insure
companies that produce fossil fuel. So that makes a big, you
know, I think Chubb came out just this last week or so talking
about how they would look at maybe not wanting to insure fossil
fuel imprints on your portfolio. And what we do in the small
independent oil and gas industry is, you know, we just want
them to be fair in their assessments. We are not asking for
anything special. We just want them to look at the financial
performance.
Mr. MEUSER. And how the upstream and downstream, right,
from water suppliers, to farmers, to grocery stores who buy the
food from the farmers who use natural gas for their fertilizer.
I mean, it seems as if an overreach is an understatement.
Mr. CROSS. There is no doubt. In Kansas, like we say, the
people that we have here, and this is true for small producers
across the nation, not only Kansas but Pennsylvania as well and
others. We are friends and neighbors. We life and work right
where we have our product. So we care about our environment as
much as anybody. They are wanting to protect that. They have
for many years. So ESG standards is really nothing new. The
industry has been doing those things for many years.
Mr. MEUSER. I would love to hear from you afterwards. We
always have limited time for this. What your suggestions would
be, I can do, we can do, this Committee can do to educate the
banks and more so the regulators in the banking community on
what you see is best, responsible, and yet maintaining a level
of responsibility as well as gaining that access to capital.
Lastly, I would just like to ask our thoughts on H.R. 1
that are coming across. This bill, H.R. 1, particularly even
maybe comment or afterwards on how we will have the
justification right to build pipelines across certain states
that have kept us from doing so. In Pennsylvania, for instance,
natural gas is about one-fifth the cost that it very often is
in the winter anyway in Boston. And if we could pipeline across
New York State, America energy wins, consumers' costs go way
down, and everybody is a lot happier.
Mr. Chairman, my apology. I am out of time. If I can get
that at some other point I would appreciate it, your thoughts
on H.R. 1.
Thanks very much. I yield back.
Chairman HUNT. Thank you very much, sir.
I want to thank all the witnesses for being here. I really
appreciate it. I really appreciate your testimony today.
Without objections, Members have 5 legislative days to
submit additional materials and written questions for the
witnesses to the Chair which will be forwarded to the
witnesses. I ask the witnesses to please respond promptly.
If there is no further business, without objection, the
Committee is adjourned. And thank you very much.
[Whereupon, at 11:12 a.m., the subcommittee was adjourned.]
A P P E N D I X
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