The 6th meeting of the Interim Joint Committee on Agriculture and Natural Resources was held on Wednesday, December 12, 2007, at 1:00 PM, in Room 129 of the Capitol Annex. Representative Jim Gooch Jr, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representatives Jim Gooch Jr, Co-Chair, and Tom McKee, Co-Chair; Senators David E. Boswell, Bob Leeper, Vernie McGaha, Joey Pendleton, Dorsey Ridley, Richie Sanders Jr, Ernesto Scorsone, and Damon Thayer; Representatives John A. Arnold Jr, Dwight D. Butler, Mike Cherry, James R. Comer Jr, Tim Couch, Milward Dedman Jr, Mike Denham, C. B. Embry Jr, Jeff Greer, Keith Hall, Richard Henderson, Jimmy Higdon, Charlie Hoffman, Reginald Meeks, Brad Montell, Fred Nesler, David Osborne, Don Pasley, Tanya Pullin, Marie Rader, Rick Rand, Tom Riner, Steven Rudy, Dottie Sims, Brandon Smith, Jim Stewart III, Tommy Turner, Ken Upchurch, Robin L. Webb, and Susan Westrom.
Guests: Mr. Rodney Andrews, Executive Director, University of Kentucky Center for Applied Energy Research; Mr. Benjy Kinman, Director of Fisheries, Kentucky Department of Fish and Wildlife Resources.
LRC Staff: Tanya Monsanto, Committee Staff Administrator; Lowell Atchley, Hank Marks, Lowell Atchley, Biff Baker, and Lindsey Murphy, Committee Assistant.
Rep. Gooch announced a quorum was present and moved approval of the minutes of the November meeting. The minutes were approved. Then, Rep. Rand introduced guests. Rep. Gooch presented some opening remarks about the November meeting on climate change. He contended that the United States is entering the "energy age" when all states will be impacted by energy production. Then, Rep. Gooch called Mr. Rodney Andrews to testify on "peak production."
Mr. Andrews identified himself as the executive director for the Center for Applied Energy Research (CAER) at the University of Kentucky. Peak production, Mr. Andrews noted, is when all the cheap oil has been produced and demand exceeds the ability to continue to produce. Mr. Andrews then discussed various theories of peak production including Hubert's Peak which postulate a bell shaped production curve; peak oil theorists which postulate peak was reached in 2006; and non peak theorists which postulate peak is in the distant future.
Mr. Andrews continued by describing recent events that give credence to the different theories. First, he stated there continues to be rising demand for oil particularly fueled by China and India. Second, the non-opec supply isn't growing. Fourth, there is a reduction in excess capacity. Fifth, oil stocks are tied to just-in-time delivery which makes countries susceptible to events that interrupt supply. Then, Mr. Andrews discussed the views of Energy Watch and the Energy Information Administration of the United States Department of Energy. Both agree that we have reached peak oil production, but Energy Watch states that the peak was reached in 2006 and EIA states peak won't be reached until 2020 or 2030.
Finally, Mr. Andrews identified some of the implication of peak oil production. First, economic growth will slow in the developed countries compared to developing countries. Second, the flow of oil will shift to Japan and developing countries such as China and India. Third, the United States will need to strengthen dependence on regional partners for energy resources. Fourth, there will be additional pressure to bring energy resources out from moratoria.
Sen. Boswell asked about energy production in Saudi Arabia and about carbon flooding. Mr. Andrews responded that it is used in Texas and Canada. He described the practice and its viability.
Rep. Gooch talked about renewable technology and trends towards cancelling coal-fired electric plants. He stated 155 were proposed and they are being cancelled. Mr. Andrews responded that no national energy policy can eliminate coal. We can reduce demand but coal is appealing and inexpensive.
Rep. Pullin asked about heavy oils and refining capacity. Mr. Andrews replied that refineries were built to handle light sweet crude. Heavy oils are a problem and refineries will require substantial investments to refine heavy oils.
Rep. Embry asked about access to domestic oil and the age of the latest refinery in the United States. Mr. Andrews stated as much as 90 percent of the domestic reserves are under moratoria and the newest refinery is about 20 to 30 years old. It takes about 5 to 10 years to build a new refinery.
Rep. Upchurch asked how many barrels per day does the United States consume. How much oil is in Anwar and is regulation preventing the United State s from developing its domestic production? Mr. Andrews replied the United States consumes 22 million barrels per day. Mr. Andrews stated that the amount of oil in Anwar is not sufficient to stop the energy crisis but it would help. Finally regulation is a problem for production.
Rep. Gooch commented that depending on the person's perspective, production data from Anwar could be used to substantiate either side. Rep. Montel then introduced some guests and Sen. McGaha asked about the oil in Kazakhstan.
Mr. Andrews replied that Kazakhstan's oil production is about 3 to 4 million barrels per day, and the country has great potential.
Rep. Pasley asked whether oil companies are reinvesting their profits from oil. Mr. Andrews replied that it is in the oil company's interest, but the revenue projection does not play a role in upgrades. Companies want to make money.
Rep. Gooch stated that there are too many barriers to locating plants. Rep. Hall then asked about the Canadian experience with Coal-to-liquid plants. Mr. Andrews stated that the Canadian experience was funded by public expenditure and it has had a substantial impact on their economy.
Rep. Hall asked whether the production of the Canadian sands has boosted their economy. He also asked whether there is less sulfur in CTL liquids. Mr. Andrews stated that synthetic fuel liquid has less sulfur and the Canadian production is paid for by public expenditure. It has substantially impacted the economy. Canadian fuel prices are lower.
Sen. Boswell asked whether HB 1 limits the refineries from building more plants. Mr. Andrews replied that demand will grow quickly so we need all fuel sources.
Rep. Cherry stated that society needs to be more conservation oriented in fuel usage. Mr. Andrews concurred. He furthered that society needs to make decisions now rather than respond to crises later. We must plan for change, increase efficiency in all areas, develop alternative energy resources, invest in mass transit and adjust to reduced fuel availability.
Then, Benjy Kinman, Director of Fisheries for the Kentucky Department of Fish and Wildlife Resources, gave an update on the "fees in lieu of mitigation" (FILO) program. Mr. Kinman described the program as an option set up under section 404 of the Clean Water Act. Those that impair streams or wetlands can pay into the program rather than conduct mitigation themselves. The goal of the program is to restore, enhance, and preserve aquatic resources. There is a 5 member team than oversees the program and votes of stream mitigation projects.
Mr. Kinman gave a history of the FILO program in Kentucky which was authorized in 2000 and set up the stream restoration trust fund. Currently there is about 42 million in the fund and roughly 64 % of the fund has been allocated to projects. Funds come from the transportation sector and road builders. The requirement is that funds must be expended in the same river basin or ecological system where the impairment originally occurred. Projects can be delivered in several ways. Fish and Wildlife evaluates the site; we discuss the process, permit the location, and then monitor the results. It can take 1.5 to 2 years to complete a project. Under FILO, funds pay to mitigate physical damage to streams and wetlands rather than combat pollution. An example would be to reduce sedimentation.
Rep. Gooch asked where the sedimentation comes from. Mr. Kinman replied it can come from nonpoint and it comes from cutting and erosion that occurs on streams. Rep. Gooch followed up that it comes from various types of activity and Mr. Kinman concurred.
Rep. Webb discussed the 404 water task force and asked that University of Louisville and University of Kentucky testify regarding their innovative activity on stream restoration. Rep. Pasley asked if the FILO funds are earmarked for specific projects or region. Mr. Kinman replied they are expended by river basin. Funds paid by a company won't necessarily be used in the same site. Rep. Pasley asked how much of the $25 million is earmarked and where projects come from. Mr. Kinman agreed to provide a list of ongoing projects and stated that many come from University of Kentucky and University of Louisville.
Sen. Pendleton asked if rivers or streams have been identified that need remediation. Whose information do you use to determine clean-up? Mr. Kinman responded no. KDFWR is more reactive, but we have a 303D impaired water list. Pathogens aren't eligible for FILO funds.
Rep. Gooch asked who cleans up pollutants. Mr. Kinman replied the Environmental and Public Protection Cabinet (EPPC). Rep. Gooch stated that the program should work to reduce both pollution and physical impairment. Mr. Kinman agreed, but stated it wasn't possible.
Rep. McKee asked if the landowner must bear the cost of remediation. Mr. Kinman said no, but he must grant an easement in perpetuity for the activity. Fencing can be paid by FILO. Rep. Mckee asked if there is a stream size requirement or other qualifications. Mr. Kinman said yes. Rep. Webb asked if the Division of Water has legal enforcement remedies and Rep. Rudy asked about working with watersheds. Mr. Kinman stated yes to both questions.