American Iron and Steel Institute/Steel Manufacturers Association Annual Members Conference

Statements of Senior Advisor Doug Matheney as prepared at the American Iron and Steel Institute/Steel Manufacturers Association Annual Members Conference in Washington, D.C. on June 4, 2019. 

Thank you.  I’m honored to follow Secretary Acosta and Administrator Wheeler.

And it’s an honor to represent the Department of Energy here this afternoon, and I want to thank Roger Newport, Tom Gibson, and Phil Bell – and everyone at AISI and SMA for having me here today. 

Steel is critical in virtually every aspect of energy development – and yours is an energy-intensive industry.  So, there’s a connection between the Administration’s energy policy – including fossil energy development – and the potential for America’s manufacturing sector, including the steel industry. 

That’s what I’d like to explore with you for the next few minutes.

First, let’s take a look at the big picture.

We live in a new world.  We now have a President who is committed to putting America first – American security, American economic growth, American energy, American industries, and American jobs. 

In my job, I see this commitment every day.  The President embraces the fact that we have vast domestic fossil energy resources in the United States and that we need to unleash the potential of these resources and to make America energy dominant. 

He’s working to make it easier to do that by undoing overly burdensome regulations on fossil energy.  And he’s committed to creating opportunities for industries and workers that were hit hard by the war on coal. 

And his strategy to achieve those goals can be summed up in three words – innovation over regulation. 

Instead of implementing draconian regulations that stifle development and growth, the reality is that we have to develop the technology to expand energy development and meet our energy challenges.  And as Senior Advisor at the Department of Energy, I’m honored to be on the front lines of this effort.

The President and his Administration also realize the importance of America’s steel industry to our national and economic security – and to the economic life of so many communities.

So, President Trump is committed to strengthening the steel industry in the United States – to creating new, good-paying jobs, and to producing our own steel products. 

You’ve seen that commitment in things like the President’s “Buy American, Hire American” Executive Order, and in his efforts to streamline and improve the regulatory process for energy infrastructure development.  

And you’ve seen that commitment in his actions against harmful trade policies to protect American workers.

Of course, there are still challenges, but the good news is that we’re now seeing solid, unmistakable signs of a turnaround in the U.S. steel industry.

Through April of this year, total and finished steel imports were down 8 percent and 17 percent respectively, from the same period last year.

Capacity utilization at existing mills is up to more than 80 percent and we’ve seen a number of idled plants restart operations.

So, that’s really good news for American steel production – and for American steel workers.

Now, I want to talk for a few minutes about the intersection between fossil energy development – and what we’re doing at DOE to expand that development – and the impacts and benefits for the steel industry.

Let’s start with the big story, certainly the biggest energy story in most of our lifetimes – the shale revolution.

The shale revolution – spurred in part by early DOE-supported R&D – has propelled the U.S. to become the world’s largest producer of both crude oil and natural gas.  

We became a net exporter of natural gas in 2017 for the first time since 1957. 

And the Energy Information Administration projects that we will become a net energy exporter next year.

To put that in context, we’ve been a net energy importer since 1953.

So, the shale revolution has been transformative.  And nowhere is that more evident than when you look at the impact that American LNG is having in the global gas market. 

As you know, my office has the regulatory authority over natural gas exports within the Department of Energy, and to date, we’ve authorized over 32 billion cubic feet per day of natural gas primarily spread across 13 large-scale export projects in Louisiana, Texas, Maryland, Georgia, and the Gulf of Mexico. 

Around 13 billion cubic feet per day of natural gas export capacity is in various states of operation and construction across seven large-scale LNG export projects in the U.S. 

And by the end of next year, U.S. LNG export capacity will more than double where we are currently.

Now, the phenomenal growth in U.S. oil and natural gas development has had enormous benefits in terms of U.S. energy security and the impacts on global markets.  But that development – and the demand for those resources – has also resulted in the need for additional pipeline capacity. 

So, new LNG export facilities and expanded pipeline infrastructure means more construction – and more demand for steel.  

But, as you’re well aware, there’s a pressing need to clarify and expedite the U.S. regulatory process that is often slow, or is used to delay or derail critical energy infrastructure development.

The Administration has taken important steps to encourage that development. 

For instance, we have been able to issue LNG authorizations within two weeks or less following the Federal Energy Regulatory Commission’s, or FERC’s, review of LNG export applications. But FERC’s process has often been lengthy.

The good news is that FERC recently put in place a new framework to streamline, expedite, and improve their LNG terminal application review process, and we believe that the LNG approval process will be much timelier going forward.

And, in April, President Trump issued two sweeping Executive Orders aimed at removing barriers to energy infrastructure development. 

These Executive Orders are a major step toward removing unnecessary red tape, streamlining and modernizing the regulatory process, and promoting an efficient domestic energy market.

And they will help provide the certainty the private sector needs to invest in critical energy infrastructure projects – and the jobs that go with them.

Speaking of energy infrastructure, DOE is working to improve our pipeline infrastructure – employing big data and machine learning tools to improve operational reliability in natural gas gathering, transmission, distribution, and storage facilities – and to help advance the pipelines of the future. 

And, of course, as the oil and gas industry moves forward in artificial intelligence and digitalization of the field, we’re working on oil- and gas-specific machine learning and data analytics projects to improve the recovery of our unconventional oil and gas resources.

In the meantime, the expansion of natural gas development is opening up economic potential and opportunities across the country.  Of course, there are the obvious examples in North Dakota, which sits on the Bakken Shale, and in the Permian Basin in West Texas. 

And increased production has kept energy supplies both affordable and reliable for your facilities.

But the shale revolution is also opening up new opportunities in places like Appalachia, where a lot of natural gas contains substantial volumes of natural gas liquids, including ethane, which can be separated from the gas and converted into plastics, antifreeze, and other products we use every day. 

Last year, we wrote a report for Congress on this potential and we found that, with the massive growth of production of natural gas and natural gas liquids in Appalachia, it only makes sense that we look to that region as a home for an additional petrochemical industry base.

And that’s not just our analysis.  A 2018 IHS Markit report concluded that the Appalachian region has sufficient ethane to support up to five world-class ethane crackers.

In fact, we’re seeing the market move in that direction already.  Shell is constructing a $6 billion cracker plant in Beaver County, Pennsylvania, and we hope to see a positive final investment decision later this year on PTT’s planned $10 billion cracker plant in Belmont County, Ohio. 

Industry and government need to work together to fully realize this opportunity.  For our part, I can tell you that Secretary Perry has talked to the President about this, and the President is very excited about it. 

In fact, as part of one of the infrastructure Executive Orders I mentioned earlier, President Trump ordered DOE to prepare a report on opportunities to promote economic growth and workforce development in Appalachia, including the development of an Appalachian petrochemical industry. 

So, these are the kinds of opportunities that flow from expanded development of our oil and gas resources – opportunities that mean economic growth, new jobs, and increased demand for steel products.

Now, let’s take a look at coal, which is not only critical to our energy security, it’s also vital to your industry.

After years of burdensome regulations on coal from here in Washington, I think we have reason to be optimistic about its future.

True – overall, coal consumption has declined in the U.S.  But we saw increased production in the Central Appalachian and Illinois Basins last year.

And our coal exports are also up.  Last year, those exports were the highest in five years. 

Here at home, coal still provides around 30 percent of our electricity –  and last year’s extreme cold spell on the East Coast – and this year’s Polar Vortex in the Midwest – underscored its importance as a 24/7 resource. 

So, despite those who say it’s on its way out, coal will continue to be in demand as a global energy source, and it will continue to be critical to the resiliency, reliability, and stability of the nation’s electricity grid – and to industries like yours.

So, there are some strong green shoots for coal. 

But I don’t want to sound Pollyannaish.  There are challenges to coal.  The Administration is moving on the regulatory front to strengthen coal.  And obviously, moving to replace the last administration’s Clean Power Plan with the Affordable Clean Energy Plan is a huge step. 

These regulatory actions are critical.  But, when you peel back the onion one layer, the reality is that we have to develop the technology to solve our energy challenges.  And that’s what we’re focused on at the Department of Energy.

One of our biggest challenges is that today’s fleet of coal-fired power plants is aging rapidly.  In 2018, we saw the second-highest year ever for coal plants retirements – 20 plants representing 14 gigawatts of coal capacity.

If this pace continues, we could see a significant undermining of the resiliency and reliability of America’s electricity supply, especially during extreme weather events.

So, we’re focused on advanced processes and technologies to increase the efficiency of existing plants – to extend their lives and ensure that they can operate on an evolving grid that is accommodating more and more intermittent, renewable generation. 

At the same time, we need to begin developing the plants of the future – plants that are cleaner, very efficient, and have a smaller footprint. 

And that’s why we have an initiative we call Coal FIRST – for flexible, innovative, resilient, small, and transformative. 

Through Coal FIRST, we’re working to develop plants that are:

•      Small – in the range of 50 to 350 MW;

•      Highly efficient – north of 40 percent; 

•      Near zero emissions;

•      Nimble and flexible to meet the demands of an evolving grid; and

•      Modular designs that provide high quality and lower costs.

Here’s one of the beautiful things about these plants – their modularity, size, and flexibility mean they can be sited wherever they’re needed, near coal mines or near industrial facilities.  

And these units would be perfect for steel plants, where you need a ready supply of clean, low cost power.  In fact, we’ve been talking to some of you about the benefits of Coal FIRST to your industry.  And we look forward to working with you as we move forward.

We began rolling out the Coal FIRST initiative in earnest last year, and we recently selected 13 projects to design the plants of the future. 

In the next few months, once we’ve reviewed the designs, we’ll issue a funding opportunity of just over $100 million for projects to develop critical components and advanced manufacturing approaches required by Coal FIRST systems. 

In the meantime, we’re also looking at developing advanced energy systems, such as supercritical CO2 and energy storage, to improve efficiency by capturing almost every last BTU of energy. 

Now, doing all these things – increasing plant efficiency and standing up future plants – means that we need materials that can withstand higher temperatures and higher pressure, so things like specialty advanced alloys. 

We’ve been working – and we’re continuing to work – to develop these materials – and we want the American steel industry to be the go-to folks for the development supply chain.

By the way, I just want to note that there’s a potentially huge market for coal beyond the power sector. 

The National Coal Council recently issued a report called “Coal in a New Carbon Age” that highlights the opportunities to utilize coal to develop a wide range of products.

At DOE, we’re exploring these new value chains for coal – including processes and applications that can provide real benefits to the steel industry.  For instance, we’re working to develop coal to use as a feedstock for needle coke and pitch that can be used for arc furnace electrodes. 

So, we’re excited about where we’re going with this R&D and, as the end-users, we want to work with you in this effort.

Besides modernizing today’s plants and designing better ones for tomorrow, we’re also advancing the deployment of carbon capture, utilization, and storage, or CCUS – technologies that can be used in fossil energy power plants and industrial plants, like steel mills. 

Now, you’ve made great strides in reducing greenhouse gas emissions from your plants.  But looking at the long game, CCUS will remain a critical tool for emissions reductions.  And there are steel plants around the world that are using CCUS technologies right now.

As you may know, DOE has a robust CCUS R&D program and we’ve had some impressive successes, but there are still some technical hurdles to commercializing these technologies – the most significant being the costs associated with carbon capture, which we need to reduce by about 50 percent, ultimately getting it down to $30 a ton. 

It’s a challenging goal, but we’re exploring early-stage R&D on advanced technologies that have the potential to get us there.

We’re also investigating ways to extract an economic benefit or additional value from CO₂ and, by the way, carbon monoxide. 

Of course, EOR is the most near-term application, but we’re also looking into ways that we can convert CO₂ into building materials, chemicals, and fuels – valuable products that can shore up the business case for CCUS.

And, again, we welcome the opportunity to collaborate with you – to get your input and to partner with you to help us advance these critical technologies.

So, the steel industry and fossil energy development intersect in a number of areas where we can find avenues for mutually beneficial cooperation.

What the Administration is doing, and what we’re doing at DOE, is having – and will continue to have – real impacts and benefits – for the country and for your industry.  At the same time, your products and the innovation you represent will help make it possible for us to do what we do.

And the work that we both are doing is helping to strengthen America’s economic, energy, and national security.  At the end of the day, that’s what really matters.

So, we look forward to expanding our cooperation and collaboration with the steel industry.

Thank you.