Special Subcommittee on Energy


Minutes of the<MeetNo1> 6th Meeting

of the 2005 Interim


<MeetMDY1> November 18, 2005


The<MeetNo2> 6th meeting of the Special Subcommittee on Energy was held on<Day> Friday,<MeetMDY2> November 18, 2005, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Representative Tanya G Pullin, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Representative Tanya G Pullin, Co-Chair; Senators Walter Blevins Jr, Denise Harper Angel, Ernie Harris, Vernie McGaha, Katie Stine, and Johnny Ray Turner; Representatives Royce W Adams, Rocky Adkins, Eddie Ballard, Carolyn Belcher, Dwight D Butler, J R Gray, Thomas Kerr, Fred Nesler, Tom Riner, Brandon D Smith, and Brent Yonts.


Guests: Commissioner Laura Owens and Emil Jezik, Department of Workforce Investments; Ari Geertsema and Don Colliver, University of Kentucky; Mike Robinson, Nytis Exploration Co.; Linda Potter, Kentucky Division of Natural Resources; Pam Proctor and Karen Reagor, Kentucky NEED Project; John Talbert, Big Rivers; Eleanor Self, Sierra Club; Charles Effinger, Finance and Administration Cabinet; Charles Baird and John Gabbard, East Kentucky Independent Oil and Gas Association; Dr. Richard Sweigard, University of Kentucky Mining Engineering Department.


LRC Staff:  D. Todd Littlefield, Bill Bowker, and Kelly Blevins.


Chairperson Pullin noted that Senator Stivers' father passed away recently and mentioned that his mother is quite ill at this time. The Chair requested that a letter be sent to Senator Stivers expressing sincere sympathy on behalf of the committee. Chairperson Pullin also announced her intentions to request permission from the LRC to meet in December to take up pertinent administration regulations and pre-filed legislation, the tentative date for that meeting will be December 16, 2005.


Chair Pullin then requested and received approval of the November minutes by voice vote. Charles Effinger, Executive Advisor, Energy Program of the Finance and Administration Cabinet was then invited to the table.  Mr. Effinger said that the atmosphere is very positive to develop a successful energy conservation program. He stated that reducing consumption by ten percent is within our grasp. He went on to explain that a comprehensive energy management program is multi faceted. An effective program is an on-going systematic strategy to control energy consumption in a manner that reduces wasted energy to an optimal amount. If the state manages consumption it will manage cost as well. He described four primary steps: initial evaluation, developing the process, evaluating the opportunities, and implementing as we can. Several successes are already in place. There are several agencies that will benefit from projects currently administered by the Finance and Administration Cabinet. Forty five million dollars invested in efficiency improvements in various facilities in the last two years will generate nearly $60 million in guaranteed savings over the life of these projects. Through the current natural gas purchasing program, approximately $1.1 million in costs have been avoided resulting in substantial savings during fiscal year 2004. In addition, the Transportation Cabinet energy saving project to replace traffic signal lamps will generate nearly $12 million in electrical savings over the six year term of that project, as based on a $10.7 million investment. He then mentioned some suggested paths to build on these types of successes. First, increase awareness and participation among all government and community members. Next, establish a consistent method to collect energy consumption information.  Explore building operational practices for potential savings. Finally, improve the potential for high performance in state owned and leased facilities.


Representative Gray asked for Mr. Effinger to look into whether the school systems that have gone to a four day week have been successful in conserving energy and asked that he report back to the committee.  Mr. Effinger agreed.


Next on the agenda was Mr. Charles Baird, director of the East Kentucky Independent Oil and Gas Association. The association was founded in response to a shut in by Columbia Gas Transmission Corporation that occurred in May 2004. Approximately 1,700 wells throughout eastern Kentucky, capable of producing approximately 60 million cubic feet per day were shut in. Mr. Baird explained that the consequences of this shut-in are far-reaching. Many independents have downsized, curtailed drilling programs and reduced spending. Appalachian counties are losing property taxes and Kentucky is losing $5.7 million in severance taxes. Mr. Baird went on to explain that producers have been told that there is no pipeline capacity available to which their gas may be moved. Neighboring states such as West Virginia, Virginia, and Tennessee have all increased production and moved gas in summer months while Kentucky was shut-in.


Chairman Pullin asked how long the lines are shut-in for repairs and such. Mr. Baird replied that those types of shut-ins are scheduled and never last more than 60 days.


Chairperson Pullin asked how it is known that the transmission lines are not full. Mr. Baird explained that the K and P lines that run east and north respectively are both at capacity, but the Columbia Gulf line is known to have a great deal of capacity. He also noted that old and poorly maintained gathering lines are causing minor delays. Representative Adkins mentioned that the recently created Kentucky Gas Pipeline Authority allows producers to borrow for such repairs.


Representative Butler asked whether new product from other sources was replacing the previous output from the 1,700 wells. Mr. Baird replied that no new product has replaced old, but depleted production requires new wells.  Representative Butler went on to ask if the shut-in could be indefinite. Mr. Baird said it could.


Chairperson Pullin asked if any representatives of Columbia Gas or Equitable were present. Maurice Royster, representing Equitable stated that he was unable to make comments at that time but that they are very aware of the infrastructure problem and are looking at solutions.  Chairperson Pullin invited Mr. Royster to testify at the December meeting. Mr. Carl Breeding, representing Columbia, stated that they will plan to have a response at the December meeting as well.


Senator Turner asked about coalbed methane gas and whether any natural gas is imported. Mr. Baird replied that some gas is brought from overseas in a liquid form to Maryland where it is gasified.


Representative Gray moved that the committee send a resolution asking the United States Congressional delegation, the United States Department of Energy, Federal Energy Regulatory Commission, and the Kentucky Attorney General to investigate the situation and whether only Kentucky was affected. Motion carried unanimously.


Chairperson Pullin then welcomed Dr. Richard Sweigard, professor and chair of the University of Kentucky (UK) Department of Mining Engineering and Kim Nelson, Kentucky Coal Association. Dr. Sweigard described for the committee the declining numbers in mining engineers over the last thirty years. He testified that the state needs three times the current number of mining engineering graduates. The state has nearly enough education capacity to accomplish this. This will become critical in the next five years, due to the high retirement rate from senior management and expert technical positions. Dr. Sweigard went on to describe how UK is actively recruiting mining engineering students. Since hiring a recruiter in 2001, students in mining engineering have increased from 20 to nearly 70 in 2005. Dr. Sweigard requested $200,000 per year from coal severance tax revenues for mining engineering workforce development in the coal industry. He also requested an allocation for students residing in the Kentucky coalfield counties.


Chairperson Pullin asked about average starting salaries is for mining engineering graduates. Dr. Sweigard responded that, with a bachelor's degree, new graduates are starting at about $55,000 per year.


Representative Gray asked whether the $200,000 could be used to leverage additional federal monies.  Dr. Sweigard replied that no federal money for scholarships was available but there are means by which federal money could be received for research.


Representative Gray also asked if the starting salary for a mining engineer was specific to the state or industry wide. Dr. Sweigard replied that it is a regional coal industry figure for Kentucky and surrounding states.


Representative Adkins asked if there is any other help coming from the University aside from the Center for Applied Energy Research setting aside $40,000 for scholarships. Dr. Sweigard said no.


Chairperson Pullin asked if Dr. Sweigard has worked with the Kentucky Student Loan Corporation. He replied no they have not, and she recommended that they attempt that.


Representative Adkins reminded the membership of the goal of the Kentucky Coal Academy; to train miners using a four pronged approach: first, train the miners through simulators to get them from training to the job, second a two year degree program which will hopefully be a feeder program to the third prong, the Mining Engineering program at the University of Kentucky, and finally promoting that program to the high school technical schools.


Commissioner Laura Owens and Emil Jezik testified before the committee that they are putting together a mining program for secondary schools. They will start this program in Pike County in January of 2006 and hope to have it fully implemented by August, 2006. The initiative will consist of four program areas: diesel mechanics, electricity, machine tool technology/industrial maintenance, and welding.


Representative Adkins asked if they are coordinating and communicating with the Kentucky Coal Academy and stressed the importance of that. Commissioner Owens replied that they have been working specifically with coal companies as well. They believe that they are working with the very same curriculum as the Kentucky Coal Academy although each KCTCS campus is run independently.


Representative Yonts asked Mr. Jezik about students receiving necessary credits for graduation through miner-prep courses.  Mr. Jezik pointed out that these credits must be approved at the school district level. There are some carpentry classes where the relationship with the school district allows the student to receive a geometry credit. The school refers to it as a dual teaching situation.

Finally, Ms. Karen Reagor testified before the committee. Ms. Reagor pointed out that the mission of The Kentucky NEED  (National Energy Education Development) Project is to promote an energy conscious and educated society by creating effective networks of students, educators, business, government, and community leaders to design and deliver objective, multi-sided energy education programs. Ms. Reagor brought several recommendations to the committee.  She asked that the state consider funding NEED to expand and build the program to a statewide level. She also requested funding to provide travel stipends for schools wishing to attend NEED programs.  She addressed their need for funding to establish a scholarship program for outstanding Kentucky NEED students. She seeks funding support for registration and travel stipends for Kentucky NEED's winning teams to attend the National Youth Awards Conference, and finally funding to send teachers to NEED's national training conferences. 


There being no further business the meeting was adjourned at approximately 11:30 a.m.