[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
REAUTHORIZATION OF EXPIRING ENERGY POLICY AND CONSERVATION ACT PROGRAMS

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 23, 1999

                               __________

                           Serial No. 106-58

                               __________

            Printed for the use of the Committee on Commerce



                     U.S. GOVERNMENT PRINTING OFFICE
60-355 CC                    WASHINGTON : 1999



                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
                                     BILL LUTHER, Minnesota
                                     LOIS CAPPS, California

                   James E. Derderian, Chief of Staff

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                    Subcommittee on Energy and Power

                      JOE BARTON, Texas, Chairman

MICHAEL BILIRAKIS, Florida           RALPH M. HALL, Texas
CLIFF STEARNS, Florida               KAREN McCARTHY, Missouri
  Vice Chairman                      THOMAS C. SAWYER, Ohio
STEVE LARGENT, Oklahoma              EDWARD J. MARKEY, Massachusetts
RICHARD BURR, North Carolina         RICK BOUCHER, Virginia
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
CHARLIE NORWOOD, Georgia             SHERROD BROWN, Ohio
TOM A. COBURN, Oklahoma              BART GORDON, Tennessee
JAMES E. ROGAN, California           BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ALBERT R. WYNN, Maryland
HEATHER WILSON, New Mexico           TED STRICKLAND, Ohio
JOHN B. SHADEGG, Arizona             PETER DEUTSCH, Florida
CHARLES W. ``CHIP'' PICKERING,       RON KLINK, Pennsylvania
Mississippi                          JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York                (Ex Officio)
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)



                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Canes, Michael E., American Petroleum Institute..............    11
    Fuller, Lee, Vice President of Government Relations, 
      Independent Petroleum Association of America...............     7
    Gee, Hon. Robert W., Assistant Secretary for Fossil Energy, 
      Department of Energy.......................................     3
Material submitted for the record by:
    Warfield, Timothy, Executive Director, National Association 
      for State Community Services Programs, letter dated 
      September 13, 1999, to Hon. Thomas Bliley..................    28

                                 (iii)

  


REAUTHORIZATION OF EXPIRING ENERGY POLICY AND CONSERVATION ACT PROGRAMS

                              ----------                              


                      THURSDAY, SEPTEMBER 23, 1999

                  House of Representatives,
                             Committee on Commerce,
                          Subcommittee on Energy and Power,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2123, Rayburn House Office Building; Hon. Joe Barton 
(chairman) presiding.
    Members present: Representatives Barton, Stearns, Largent, 
Coburn, Rogan, Shimkus, Wilson, Shadegg, Fossella, Bryant, 
Ehrlich, Hall, McCarthy, Sawyer, Pallone, and Wynn.
    Staff present: Cathy Van Way, majority counsel; Miriam 
Erickson, majority counsel; Donn Salvosa, legislative clerk; 
Rick Kessler, minority professional staff; and Sue Sheridan, 
minority counsel.
    Mr. Barton. The subcommittee will please come to order. The 
Subcommittee on Energy and Power of the Commerce Committee is 
here today to hold a legislative hearing on the Energy Policy 
and Conservation Act reauthorization.
    Before we have opening statements and go to our 
distinguished panel, we would like to welcome the members of 
the Chilean National War College. I am told that there are 
somewhere between 30 and 50 Chilean War College members in the 
audience today and that they will be going over to meet with 
Chairman Spence of the Armed Services Committee.
    Gentlemen and lady, we welcome you and hope that you enjoy 
your stay in Washington. We are delighted to have a strong 
relationship between the great nation of Chile and the United 
States of America. We appreciate your attendance at today's 
hearing.
    I want to welcome our other audience members and our panel 
today. We are going to reauthorize the Energy Policy and 
Conservation Act, hopefully by unanimous consent, later this 
morning. Without congressional action, the EPCA will expire 
next week, on September 30. We are going to consider a proposal 
to reauthorize that piece of legislation.
    EPCA is vital to our energy security. It established the 
Strategic Petroleum Reserve; it authorizes this country's 
participation in the International Energy Agency. Reauthorizing 
these provisions is essential to protecting the United States 
in the event of a shutoff of foreign oil supplies.
    It is for this reason that I strongly support the 
reauthorization of the EPCA.
    While we are reauthorizing the act, I believe that we 
should consider another protection from dependence on foreign 
oil. That is, if we can, we need to increase our domestic oil 
and gas production, or at least maintain it.
    The United States produces domestically 45 percent of its 
daily petroleum needs and 40 percent of that production comes 
from independent oil and gas companies. Extended periods of low 
prices like United States producers faced earlier this year can 
be and have been devastating to independent producers and to 
domestic production.
    Since the beginning of this calendar year, many producers 
have gone bankrupt and as many as 136,000 stripper wells have 
been shut in because of low oil prices. A stripper well is a 
well that produces less than 15 barrels of oil per day.
    At this hearing we are going to consider one provision to 
EPCA that will protect our producers of these stripper wells in 
times of extraordinarily low prices. We simply cannot afford to 
lose an opportunity to strengthen our domestic resource.
    I am interested in learning about proposals to reauthorize 
the act as well as any other suggestions as to what we can do 
to preserve domestic oil and gas production during extended 
periods of extraordinarily low oil prices.
    I want to welcome our panel today and I look forward to our 
hearing.
    With that, I would recognize the distinguished ranking 
member, Congressman Ralph Hall of Rockwall, for an opening 
statement.
    Mr. Hall. Mr. Chairman, thank you, and thank you for your 
opening statement. I do have an opening statement. I have 
everything except my glasses. I will ask unanimous consent to 
put my statement in the record.
    Mr. Barton. Without objection.
    I am surprised that my glasses didn't help you. These are 
the best glasses that WalMart sells.
    The gentleman from California, Mr. Rogan, is recognized for 
an opening statement.
    Mr. Rogan. Mr. Chairman, thank you. Once again I compliment 
my dear friend, the ranking member. I have my glasses but no 
opening statement.
    Mr. Barton. The Chair would ask unanimous consent for all 
members not present to have the requisite number of days to 
enter an opening statement at this point in the record.
    Is there an objection?
    [No response.]
    Mr. Barton. Hearing none, so ordered.
    We want to go to our panel. We have three distinguished 
witnesses today. Leading off will be the Honorable Robert Gee, 
who is the Assistant Secretary for Fossil Energy at the United 
States Department of Energy. Then we will hear from Mr. Lee 
Fuller, who is representing the Independent Petroleum 
Association of America and the National Stripper Well 
Association, and then Mr. Michael Canes, who is representing 
the American Petroleum Institute.
    Gentlemen, we welcome you to the hearing. Each of your 
written statements is in the record in its entirety. We are 
going to recognize you, Mr. Gee, for 7 minutes, and then Mr. 
Fuller and then Mr. Canes. Welcome to the committee. The floor 
is yours.

   STATEMENTS OF HON. ROBERT W. GEE, ASSISTANT SECRETARY FOR 
FOSSIL ENERGY, DEPARTMENT OF ENERGY; LEE FULLER, VICE PRESIDENT 
 OF GOVERNMENT RELATIONS, INDEPENDENT PETROLEUM ASSOCIATION OF 
  AMERICA; AND MICHAEL E. CANES, AMERICAN PETROLEUM INSTITUTE

    Mr. Gee. Thank you, Chairman Barton. Mr. Chairman, thank 
you for holding this hearing today on the administration's 
proposed bill to amend and extend through September 30, 2003, 
authorities of the Energy Policy and Conservation Act that 
would otherwise expire on September 30. My remarks this morning 
will be brief.
    When the act last expired in September 1997, the Strategic 
Petroleum Reserve was recovering from several non-emergency 
sales of oil for budgetary purposes and was facing the threat 
of yet another directive to sell oil for non-emergency reasons 
contained in the fiscal year 1998 budget.
    We appreciate the actions of members of this subcommittee 
and the full committee that relieved the department from the 
obligation to sell oil in fiscal year 1998 and reverse the 
trend toward a smaller Strategic Petroleum Reserve.
    I am pleased to report that after selling 28 million 
barrels of oil in fiscal year 1996 and 1997 and narrowly 
avoiding a sale in fiscal year 1998, in April of this year the 
department resumed oil acquisition that it ended in April 1994 
with the transfer of Federal royalty oil from the Department of 
the Interior to the Strategic Petroleum Reserve. The current 
program is to transfer 28 million barrels, an amount equal to 
the volume sold during fiscal years 1996 and 1997.
    The amendments in the administration's bill will modernize 
the act by eliminating provisions which are no longer necessary 
or desirable and amending others to reflect the current state 
of the reserve program.
    The bill proposes to delete unused provisions of the law 
that provide for the establishment of regional and industrial 
petroleum reserves. It deletes the anachronistic requirement 
for a SPR plan and its consequent amendments and retains and 
codifies the distribution plan to require the sale of reserve 
oil to the highest bidder.
    In addition, the bill relieves the department from the 
impracticable requirement to submit a plan for an expansion to 
a billion barrels by 1992 and substitutes a reasonable 
requirement and necessitates submission of an expansion plan 
when the Secretary determines such an expansion is desirable. 
The bill would also eliminate the current 75,000 barrel per day 
minimum fill rate that has not been honored during the last 
decade.
    Mr. Chairman, starting in 1996 the Department of Energy 
conducted a review of its policies for the reserve. We issued a 
Federal Register notice inviting public comment on an array of 
issues and in May 1998 published an Administration Statement of 
Policy on the Strategic Petroleum Reserve. Our bill reflects 
the positions contained in that statement of policy.
    U.S. capability to draw down the Strategic Petroleum 
Reserve in a severe energy supply emergency is critical to U.S. 
national security and economic interests and is crucial to our 
relationship with the other member countries of the 
International Energy Agency.
    The extension of the act's authorities is needed, for 
instance, to facilitate U.S. company participation in a major 
Y2K response exercise that is being conducted by the 
International Energy Agency beginning in the last week of this 
month. If the act were to expire, the U.S. companies would be 
required to withdraw, disrupting the exercise and preventing 
the United States from playing any meaningful role.
    Additionally, all direct authorities to utilize the reserve 
are contained in the act, and its timely extension could become 
critical were a year 2000 computer problem actually to occur 
and disrupt world oil flows. We simply cannot afford to enter 
December of this year without the President's drawdown 
authority intact.
    Mr. Chairman, I urge the subcommittee and the full 
committee and the whole Congress to consider the 
administration's bill favorably and expediently to amend and 
extend the provisions of the Energy Policy and Conservation Act 
without a lapse of authority.
    Thank you, Mr. Chairman.
    [The prepared statement of Robert W. Gee follows:]
  Prepared Statement of Robert W. Gee, Assistant Secretary for Fossil 
                   Energy, U.S. Department of Energy
    Mr. Chairman and members of the committee: I am pleased to appear 
before you today to talk about the Administration's legislative 
proposal to amend and extend to September 30, 2003, certain authorities 
of the Energy Policy and Conservation Act (EPCA), which are scheduled 
to expire on September 30, 1999.1 I would also like to bring 
the Committee up to date on certain activities the Department has 
undertaken related to these authorities.
---------------------------------------------------------------------------
    \1\ The Administration transmitted its proposed legislation to the 
Congress on March 15, 1999.
---------------------------------------------------------------------------
    EPCA authorizes (in Titles I and II) two programs at the core of 
our nation's energy security: the Strategic Petroleum Reserve (SPR) and 
our participation in the International Energy Agency (IEA). It also 
provides authorities to support our long-term efforts to reduce 
vulnerability through several energy efficiency and renewable energy 
and conservation programs. These programs (in Title III) were extended 
in P.L. 105-388 to September 30, 2003.
    U.S. capability to draw down the Strategic Petroleum Reserve in a 
severe energy supply interruption is critical to U.S. national security 
and economic interests and is crucial to our relationship with the IEA. 
The U.S. plays a vital role in the development of emergency response 
policies within the IEA. It is imperative that Congress act expediently 
to pass legislation to amend and extend these provisions, without a 
lapse of authority. Such a lapse could have major implications over the 
next few months. The extension of EPCA authorities is needed, for 
instance, to facilitate U.S. company participation in a major exercise 
with Y2K implications that is being conducted by the IEA beginning at 
the end of September. Additionally, the timely extension of EPCA will 
be especially important this year if it is determined a Y2K-related 
drawdown is necessary.
    In addition, the Department of Energy conducted a review of its 
policies for the SPR. We issued a Federal Register Notice inviting 
public comment on various issues affecting the Reserve and subsequently 
published a Statement of Policy on the Strategic Petroleum Reserve in 
May 1998. The Administration's bill reflects the Statement of Policy.
    Finally, EPCA was enacted 24 years ago and includes many provisions 
pertaining to the SPR which are no longer necessary, and references 
programs that no longer exist. Our bill deletes or amends EPCA 
provisions accordingly.
Need for the Reserve
    During the last 24 years the Strategic Petroleum Reserve has become 
the Nation's principal defense against oil price shocks related to 
supply interruptions. Additionally, U.S. leadership in stockpiling has 
been and remains critical to the accumulation of stocks in other 
International Energy Agency member countries. The SPR inventory is 563 
million barrels of oil, which is currently held in four sites in Texas 
and Louisiana and is the equivalent of 60 days of imports. It is a 
significant deterrent to the use of oil embargoes as a political weapon 
as well as substantial protection against the effect of actual or 
imminent disruptions in crude oil supplies. For example, the Reserve 
vastly increased the flexibility of the United States to pursue the 
embargo of Iraq and Desert Storm in 1990-91without concern that the 
hostilities would precipitously disrupt the availability of oil.
    Today, the potential for oil market disturbances remains, whether 
caused by wars, political and religious unrest, natural disasters, or a 
failure in transportation logistics. Meanwhile, U.S. dependence on oil 
imports is expected to increase, with the world's oil reserves 
increasingly concentrated in highly volatile regions. While the U.S. 
currently enjoys diversity of suppliers for its imports, we remain at 
potential risk. Supplier diversity will not limit the serious economic 
impact of a significant rise in oil prices. A strong and viable SPR is 
as relevant in today's market as it was when EPCA was passed in 1975.
Recent SPR Initiatives
    This year the Administration undertook two new initiatives 
affecting the SPR--the use of royalty oil to fill the SPR and 
initiation of a study on the appropriate size of the SPR.
    In February, Secretary Bill Richardson and Secretary of the 
Interior Bruce Babbitt announced that the Department of the Interior 
would take up to 28 million barrels of Federal royalty oil paid in kind 
and transfer it to the Department of Energy to help fill the SPR. Staff 
from the Department of Energy and Department of the Interior have 
worked together cooperatively to craft and implement this program. 
Under Phase I of the program, arrangements were made with four of the 
largest producers in the Gulf of Mexico for the transfer of 
approximately 9.2 million barrels of crude oil to the SPR in exchange 
for royalty oil. Deliveries began in April. In the second phase, the 
program has been expanded to offer the maximum feasible volume of oil 
and open the program to a larger number of bidders using a competitive 
bid process.
    Phase II will be an ongoing solicitation of invitations for bids to 
transfer or exchange royalty oil for oil to be delivered to the SPR. In 
Phase II A of the program, the Department awarded contracts for 9.59 
million barrels to four companies on June 15, 1999. Phase II A 
deliveries commenced on August 1, 1999, and will continue through 
February, 2000. The Phase II B request for offers will be issued in 
early November, 1999, with deliveries anticipated between February 1, 
2000, and November 30, 2000.
    As indicated in the May, 1998, Administration Statement of Policy 
on the Strategic Petroleum Reserve, an interagency group led by the 
Department of Energy is revisiting the Department's 1990 study on the 
appropriate size of the SPR. Participants from the Department of 
Treasury, Council of Economic Advisors, Office of Management and Budget 
and Central Intelligence Agency, as well as the Department of Energy 
are involved in the project. A final report will be transmitted to 
Congress in the near future.
    I would now like to turn to a discussion of the various amendments 
proposed in the Administration's bill to amend and extend EPCA.
SPR Amendments
    The importance of extending SPR's basic authority under EPCA has 
already been discussed. In addition, the proposed Administration SPR 
amendments modernize EPCA by eliminating provisions which are no longer 
necessary or desirable, and amending others to reflect the current 
state of the SPR program. The Administration's bill proposes to delete 
the provisions providing for the establishment of regional and 
industrial petroleum reserves. It deletes the requirement for an SPR 
Plan and Plan Amendments, and codifies the distribution portion of the 
Plan to require the sale of oil drawn from the Reserve to the highest 
bidder. The bill also would make a plan for expansion of the Reserve 
necessary only when the Secretary determines such an expansion is 
desirable and would eliminate the current minimum fill rate. In 
addition, the bill proposes that the requirement for a 30-day 
congressional review period for alternative financing contracts be 
deleted.
    Regional Petroleum Reserves: The Act currently provides for the 
establishment of regional petroleum reserves in Federal Energy 
Administration regions that are dependent upon Petroleum imports for 
more than 20 percent of their consumption. The Act also permits the 
Secretary to substitute crude oil for products and to store the oil in 
a reserve ``readily accessible to'' rather than actually located in 
such regions. Based on analytical findings and substantially higher 
costs for regional storage, the Department of Energy and its 
predecessor organizations have consistently determined that the storage 
of crude oil in the centralized SPR would meet the requirements of all 
regions of the country in the event of a petroleum supply disruption. 
Because the need for a regional petroleum reserve is not foreseeable 
and funding for such a program is not justifiable based on its expected 
benefits, the Administration's bill deletes both this requirement and 
references to regional and refined petroleum product storage.
    Industrial Petroleum Reserve: The Act permits the Secretary to 
establish an Industrial Petroleum Reserve as part of the Strategic 
Petroleum Reserve, by requiring importers of petroleum products and 
refiners to store and maintain oil in readily available inventories. 
This provision has never been implemented, would shift the cost of the 
program to industry, and would be particularly onerous to administer. 
The Administration's bill deletes both this provision and references to 
industrial petroleum reserves consonant with the Administration's 
stated policy that the Nation is best served by centralized, 
Government-owned, Government-controlled storage.
    The Plan: The Act currently requires the Secretary to maintain a 
Strategic Petroleum Reserve Plan, and specifies the details that must 
be included in the Plan. This was appropriate when the Reserve was in 
its planning phase during the mid and late 1970's. Currently, the 
Reserve consists of four storage sites with 700 million barrels of 
cumulative storage capacity, and the Plan that details those sites has 
been completed. The Act also requires that the Plan specify the levels 
of fill for certain years, all of which are now in the past. The 
Administration's bill proposes that the requirement for the Plan and 
Amendments be deleted. The one remaining part of the Plan which is 
still necessary is the Drawdown and Distribution Plan embodied in Plan 
Amendment No. 4. The basic policy of distributing oil from the Reserve 
by competitive sale, contained in Amendment No. 4, is maintained in the 
Administration's bill by making that policy part of the governing 
statutes.
    The Administration believes that free market sales are far superior 
to allocation as a method of distributing oil from the world's 
strategic reserves. While Plan Amendment No. 4 provides that public 
sales will be the primary method of distribution, it also allows the 
Secretary to allocate up to 10 percent of the sales volume. This 
allocation authority should be eliminated. The Department has never 
used this allocation authority, and its existence may unnecessarily 
encourage some consumers to rely on the Government rather than the 
market for supplies in an emergency. It will also put elected officials 
in the difficult position of having to evaluate requests for 
preferential treatment from various constituent groups during a 
national emergency. The Administration's bill reflects the 
Administration's belief in market mechanisms and the impracticality of 
allocation; it does so by codifying open market sales to the highest 
bidders as the method of distributing Strategic Petroleum Reserve oil.
    Expansion: As the Committee is aware, a 1990 amendment of EPCA 
requires the Department to submit an SPR Plan Amendment detailing 
expansion of the Reserve to one billion barrels. While the Department 
did conduct the requisite studies, analyses, and public hearings to 
pick sites and complete such a Plan Amendment, final steps in the 
process were not taken because it was clear that such a plan could not 
be implemented within the time horizon for which the studies were 
relevant. Due to budget constraints and the need to decommission the 
Weeks Island site, setting a schedule date for reaching a capacity of 1 
billion or even 750 million barrels was and is unrealistic. The 
proposed legislation requires that the Secretary report to the Congress 
on plans to expand the Reserve at the time such expansion becomes 
likely. This deferred requirement would replace the current statutory 
requirement.
    Statutory Fill Rate: The Act contains a requirement for filling the 
Reserve at a rate of 75,000 barrels of oil per day until the Reserve 
has reached 750 million barrels. This requirement has been waived 
regularly by a number of Congresses at the request of several 
Administrations. Given that the Department has not met this requirement 
for many years and the capacity of the Reserve was reduced to 700 
million barrels after decommissioning the Weeks Island site, the 
Administration bill deletes the requirement. The bill also proposes to 
delete the linkage which makes sales authority for Naval Petroleum 
Reserve No. 1 crude oil contingent upon an SPR fill rate of at least 
75,000 barrels. Because Naval Petroleum Reserve No. 1 was sold in 1998, 
this provision is no longer applicable.
    Alternative Financing: Another issue addressed by the 
Administration's bill is Congressional review of alternative financing 
contracts. Alternative financing contracts, including oil ``leases'' or 
similar arrangements, are a means to reduce the budgetary requirements 
for Strategic Petroleum Reserve oil. No contracts have ever been 
negotiated for alternatively financed acquisition and current law 
imposes some requirements on alternative financing contracts that 
diminish the chances that such contracts could be successfully 
negotiated. Specifically, the Act requires that contracts that would 
not otherwise require any Congressional action lie before the Congress 
for 30 legislative days before going into effect. This provision adds a 
time delay to already complicated contracts, and adds an element of 
uncertainty to contract negotiations. The Administration bill proposes 
deleting the requirement for a 30-day congressional ``lie before'' 
period after a contract is signed. Of course, if promising negotiations 
should occur we intend to discuss plans with the appropriate 
Congressional committees prior to any contract execution.
IEA Authorities
    The Administration's bill also extends to 2003 U.S. participation 
in the emergency preparedness activities of the IEA. The IEA, which is 
the main forum for energy cooperation among 24 countries, was created 
in 1974 under an Agreement on an International Energy Program. As a 
member of the IEA, the U.S. is obligated to maintain inventories of 
Government-owned or commercial stocks above minimum operating levels 
equivalent to 90 days of net imports. EPCA also provides limited 
antitrust defense for U.S. oil companies participating in the IEA's 
emergency preparedness programs to enable them to assist the IEA in 
planning or implementing a drawdown of government-controlled oil 
stocks.
    Last year's amendment to EPCA's antitrust provisions, broadening 
the scope of U.S. oil company participation in IEA activities, has 
enabled the IEA to more fully engage its oil industry advisors in 
planning its response to future oil supply disruptions. Last fall's 
successful Emergency Response Exercise was the first major IEA activity 
at which U.S. companies made use of the broadened antitrust provisions. 
On September 28-30, the IEA will sponsor an oil disruption response 
simulation exercise to test its ability to respond to disruptions in 
world oil markets. One element of the exercise will focus on the 
potential impact on world oil supply of Y2K-related computer problems. 
In addition to energy security experts from the IEA's 24 member 
governments, representatives of major oil companies will play a key 
role in this exercise. Immediately following the exercise on October 1, 
the IEA and its oil company advisors will meet to turn the lessons 
learned during the simulation into policy and response options for 
addressing the Y2K problem.
    We urge you to pass these authorities expeditiously to facilitate 
U.S. participation in these important programs.
Committees on Renewable Energy Commerce and Trade and Energy Efficiency 
        Commerce and Trade
    Title II of EPCA also provides the authority for the Committee on 
Renewable Energy Commerce and Trade (CORECT) and the Committee on 
Energy Efficiency Commerce and Trade (COEECT). COEECT is an interagency 
committee whose 15 Federal Agency members, in conjunction with private 
industry, develop and implement strategies for the export of U.S. 
energy efficiency technologies. CORECT, which has not received 
appropriations in the last three years, has curtailed its activities in 
the export of renewable energy technologies. The Administration 
strongly supports reauthorization of these programs to promote the 
export of U.S. energy technologies and products.
Conclusion
    In summary, the energy programs extended by the Administration's 
bill are central to our nation's energy and economic strategies. I urge 
you to reaffirm our commitment to these programs and ask for your 
assistance in the passage of this bill.
    That concludes my prepared testimony. I will be glad to answer any 
questions.

    Mr. Barton. Thank you, Mr. Secretary.
    We would now like to hear from Mr. Lee Fuller, who is 
representing the Independent Petroleum Association of America.

                    STATEMENT OF LEE FULLER

    Mr. Fuller. Thank you, Mr. Chairman. Mr. Chairman and 
members of the subcommittee, I am Lee Fuller, vice president of 
government relations for the Independent Petroleum Association 
of America.
    I am pleased to appear before you today to discuss 
reauthorization of the Energy Policy and Conservation Act on 
behalf of the 7,000 independent oil and gas producers 
represented by IPAA and on behalf of the National Stripper Well 
Association.
    The National Stripper Well Association represents the small 
business operators in the oil and gas industry, producers with 
low volume, high cost stripper or marginal oil and gas wells.
    National energy policy generally receives little attention 
unless there is a crisis or a public outcry. The subject you 
consider today, important in its own right, also should be the 
basis for a broader discussion of U.S. energy policy and 
national security.
    It is essential that national policy recognize that 
domestic oil production is the nation's true strategic 
petroleum reserve. Far more than the hundreds of millions of 
barrels in the Strategic Petroleum Reserve, the ability to 
produce 6.5 million or 7 million barrels a day of domestic oil 
is essential to America's national security. Oil is this 
nation's economic lifeblood. Without a stable oil supply, the 
United States economy and the world's economic health is at 
risk.
    While a strong and vibrant domestic oil and natural gas 
industry plays the lead role in maintaining America's energy 
and national security, we must not forget the importance of a 
reliable Strategic Petroleum Reserve. IPAA and NSWA welcome 
most of the administration's proposed technical changes and the 
extension of EPCA.
    Our government's capability to utilize the Strategic 
Petroleum Reserve in an energy supply disruption is critical to 
U.S. national security and economic well being. Because our 
members do not refine or retail petroleum products, 
independents do not hold large stockpiles that can be readily 
allocated. Yet we know that clarification of antitrust defenses 
included in the proposed amendments, for example, are important 
to private companies who play a vital role in the development 
of emergency response policies within the International Energy 
Agency.
    Extension of the antitrust defense for U.S. companies 
participating in the IEA's emergency preparedness programs is 
an important component in planning response to future oil 
supply disruptions.
    As you know, this year the Department of the Interior and 
the Department of Energy entered into an agreement to use 
Federal royalty oil to fill the SPR. We believe the program to 
take up to 28 million barrels of royalty oil paid in kind is an 
example of good government. Not only has DOE found a way to 
replace the 28 million barrels of oil sold for non-emergency 
purposes in 1996 and 1997, it has also discovered a way for 
Congress and the administration to meet EPCA's requirements 
that call for a 1 billion barrel oil reserve without having to 
appropriate scarce resources to do so.
    After completion of the 28 million barrel RIK acquisition, 
the reserve will still only have less than 600 million barrels 
of oil in storage. The SPR currently has a capacity of 700 
million barrels. IPAA and NSWA strongly encourage Congress and 
the administration to continue with the initiative and fill the 
reserve to its maximum capacity.
    Another change proposed in the administration's EPCA 
reauthorization concerns the Department of the Interior and 
joint bidding for exploration and development rights on the 
Outer Continental Shelf. This is a complicated and adversarial 
issue that has historically caused division in the industry.
    The proposal calls for the Secretary of the Interior to 
establish a program for setting the terms of joint bidding by 
any company for the right to explore for and develop leases in 
the OCS on or after December 31, 2000. Having seen this 
proposal tucked away in the reauthorization proposal with no 
comment from the administration has caused apprehension among 
many independent producers operating in the OCS.
    Earlier this week the IPAA Offshore Committee met to 
discuss the proposed changes to the existing policy on joint 
bidding. The Offshore Committee has indicated their opposition 
to changing the current joint bidding policy. It is the 
consensus of the committee that current joint bidding policy 
allows for a healthy and competitive leasing program for OCS 
properties. It should also be noted that changes are not 
necessary in light of the fact that the secretary of the 
interior has the authority to permit joint bidding for those 
excluded under the current policy.
    I would like to focus the remainder of my remarks on energy 
security as it relates to the SPR and America's domestic 
producers. In terms of energy and our national security 
preparedness, America is on thin ice. We do not have a crisis 
or a supply shortage now, but that could change and could 
change quickly. We want the United States to be prepared.
    Maintaining the Strategic Petroleum Reserve is a vitally 
important part of our energy preparedness. The reserve is 
intended to be America's insurance policy against a severe oil 
supply disruption or severe economic disruption. IPAA and NSWA 
want to ensure that SPR is never misused by Congress or the 
administration again. It is our sincere hope that non-emergency 
sales of stockpiles from the SPR such as those that took place 
in 1996 and 1997 to help balance the budget and pay the cost of 
operating and maintaining the facility will never take place 
again. The Federal Government should not cash in our insurance 
policy to pay today's bills.
    We also urge you to more closely examine America's true 
``strategic petroleum reserve.'' That reserve is the 22.5 
billion barrels of known and recoverable oil. Our technically 
recoverable resources are even greater--88 billion barrels of 
oil and 885 trillion cubic feet of natural gas. Every day, 
thanks to technological advances, we find oil in this country 
where we have heard time and again that we were drying up. In 
the Gulf of Mexico, deep water exploration has shown great 
promise. And on shore, in dozens of fields and basins producers 
are finding new reserves and ways to get more from existing 
reserves.
    So as we consider policy changes to improve our Strategic 
Petroleum Reserve, let us remember that there are other policy 
changes that need to be made if we are to develop our domestic 
resources, the other strategic reserve. Both are of great 
importance to our economy and national security.
    That concludes my comments. Thank you, Mr. Chairman.
    [The prepared statement of Lee Fuller follows:]
    Prepared Statement of Lee Fuller, Vice President of Government 
 Relations, Independent Petroleum Association of America, on Behalf of 
            IPAA and the National Stripper Well Association
    Mr. Chairman and members of the subcommittee: I am Lee Fuller, vice 
president of government relations for the Independent Petroleum 
Association of America (IPAA). I am pleased to appear before you today 
to discuss reauthorization of the Energy Policy and Conservation Act 
(EPCA) on behalf of the 7,000 independent oil and gas producers who are 
members of IPAA and on behalf of the National Stripper Well Association 
(NSWA). NSWA represents the small business operators in the oil and 
natural gas industry, producers with low volume, high cost stripper or 
marginal oil and natural gas wells.
    With the exception of members of this subcommittee and the Senate 
Energy Committee, few in Congress focus on energy policy until there is 
a crisis or public outcry. The subject you consider today--important in 
its own right--also should be the basis for a broader discussion of 
U.S. energy policy and national security.
    It is essential that lawmakers recognize that domestic oil 
production is the nation's true ``strategic petroleum reserve.'' Far 
more than the hundreds of millions of barrels in the Strategic 
Petroleum Reserve, the ability to produce 6.5 to 7 million barrels/day 
of domestic oil is essential to America's national security. Oil is 
this nation's economic lifeblood. Without a stable oil supply the U.S. 
economy and the world's economic health are at risk.
    While a strong and viabrant domestic oil and gas industry plays the 
lead role in maintaining America's energy and national security, we 
must not forget the importance of a strong and viabrant Strategic 
Petroleum Reserve (SPR). IPAA and NSWA welcome most of the 
Administration's proposed technical changes and the four-year extension 
of EPCA. Our government's capability to utilize the Strategic Petroleum 
Reserve (SPR) in an energy supply disruption is critical to U.S. 
national security and economic well being. Because our members do not 
refine or retail petroleum products, independents do not hold large 
stockpiles that can be readily allocated. Yet, we know that 
clarification of antitrust defenses included in the proposed 
amendments, for example, are important to private companies who play a 
vital role in the development of emergency response policies within the 
International Energy Agency (IEA).
    Extension of the antitrust defense for U.S. companies participating 
in the IEA's emergency preparedness programs is an important component 
in planning response to future oil supply disruptions. Last fall's 
Emergency Response Exercise was very successful. This month IEA's 24 
member governments and representatives of major oil companies will 
participate in a simulation exercise to test our drawdown preparedness 
for Y2K-related computer problems. Without the extension of antitrust 
protection included in the proposed reauthorization legislation the 
exercise will likely be conducted without the involvement of the 
companies.
    As you know, this year the Department of the Interior and the 
Department of Energy entered into an agreement to use federal royalty 
oil to fill the SPR. We believe the program to take up to 28 million 
barrels of royalty oil paid in kind is an example of government at its 
best. Not only has DOE found a way to replace the 28 million barrels of 
oil sold for non-emergency purposes in 1996 and 1997, it has also 
discovered a way for Congress and the Administration to meet EPCA's 
requirements that call for a 1 billion barrel oil reserve without 
having to appropriate scare resources to do so.
    After completion of the 28 million barrel RIK acquisition the 
Reserve will still only have less than 600 million barrels of oil in 
storage. The SPR currently has a capacity of 700 million barrels. IPAA 
and NSWA strongly encourage Congress and the Administration to continue 
with the initiative and fill the reserve to its maximum capacity.
    Another change proposed in the Administration's EPCA 
reauthorization bill concerns the Department of the Interior and joint 
bidding for exploration and development rights on the Outer Continental 
Shelf (OCS). This is a complicated and adversarial issue that has 
historically caused division in the industry.
    The proposal calls on the Secretary of the Interior to establish a 
program for setting the terms of joint bidding by any company for the 
right to explore for and develop leases in the OCS on or after December 
31, 2000. Having seen this proposal tucked away in the reauthorization 
proposal with no comment from the Administration has caused 
apprehensive among many independent producers operating in the OCS.
    Earlier this week the IPAA Offshore Committee met to discuss the 
proposed changes to the existing policy on joint bidding. The Offshore 
Committee has indicated their opposition to changing the current joint 
bidding policy. It is the consensus of the Committee that current joint 
bidding policy allows for a healthy and competitive leasing program for 
OCS properties. It should also be noted that changes are not necessary 
in light of the fact that the Secretary of the Interior has the 
authority to permit joint bidding by those excluded under the current 
policy.
    I would like to focus the remainder of my remarks on energy 
security as it relates to the SPR and America's domestic producers. In 
terms of energy and our national security preparedness America is on 
thin ice. We don't have a crisis or supply shortage now, but that could 
change . . . quickly. We want the United States to be prepared.
    Maintaining the Strategic Petroleum Reserve is a vitally important 
part of our energy preparedness. The reserve is intended to be 
America's insurance policy against a severe oil supply disruption or a 
severe economic disruption. IPAA and NSWA want to insure that SPR is 
never misused by Congress or the Administration again. It is our 
sincere hope that non-emergency sales of stockpiles from the SPR such 
as those that took place in 1996 and 1997 to help balance the budget 
and pay the costs of operating and maintaining the facility will never 
take place again. The federal government should not cash in our 
insurance policy to pay today's bills.
    We also urge you to more closely examine America's true ``strategic 
petroleum reserve.'' That reserve is the 22.5 billion barrels of known 
and recoverable oil. Our technically recoverable resources are even 
greater, 88 billion barrels of oil and 885 trillion cubic feet of 
natural gas. Every day, thanks to technological advances, we find oil 
in this country where we've heard time and again that we were drying 
up. In the Gulf of Mexico, deep-water exploration has shown great 
promise. And onshore, in dozens of fields and basins, producers are 
finding new reserves and ways to get more from existing reservoirs.
    So, as we consider policy changes to improve our Strategic 
Petroleum Reserve, let us remember that there are other policy changes 
that need to be made if we are to develop our domestic resources, the 
other strategic reserve. Both are of great importance to our economy 
and national security.
    That concludes my comments. Thank you, Mr. Chairman.

    Mr. Barton. Thank you, Mr. Fuller.
    We would now like to hear from Mr. Canes, who is 
representing the American Petroleum Institute. Your statement 
is in the record in its entirety and we recognize you for 7 
minutes.

                 STATEMENT OF MICHAEL E. CANES

    Mr. Canes. Thank you, Mr. Chairman and good morning. My 
name is Michael Canes, senior economic advisor to the president 
of the American Petroleum Institute. API represents over 400 
member companies in every aspect of the oil and natural gas 
industry, including exploration and production, transportation, 
refining and marketing.
    My testimony focuses on the critical role of section 252 of 
the Energy Policy and Conservation Act, or EPCA, and the urgent 
need for Congress to reauthorize the act before it expires next 
Thursday, September 30. Section 252 of EPCA enables oil 
companies, including several of API's members, to assist the 
International Energy Agency, or IEA, in planning for possible 
oil supply disruptions and in responding to an actual 
disruption.
    Kenneth Haley, chairman of the Industry Advisory Board, a 
group of 19 oil companies that advises the IEA on emergency 
response issues, was originally scheduled to testify before the 
hearing was postponed from last week. He is unable to be here 
today but asked that his statement be made part of the hearing 
record.
    Oil companies have supported the IEA since its inception in 
1974, working to maintain and improve its emergency response 
procedures. These consultations between representatives of the 
member governments, the IEA staff and oil companies make the 
IEA unique and contribute significantly to its effectiveness.
    All of the oil companies' activities in support of the IEA 
have been conducted under the protection of the statutory 
antitrust and breach of contract defenses established in EPCA. 
Without this protection, few if any companies are likely to 
participate in the activities. That would be unfortunate, both 
in non-emergency times and in emergencies.
    In non-emergency times, the current law provides antitrust 
protections that have been indispensable in allowing oil 
companies to provide advice to IEA to help it keep its policies 
up to date and consistent with the continuing evolution of oil 
markets. An example is the oil supply disruption simulation 
exercise that will be held at the end of this month.
    Oil company representatives will be working together with 
energy security experts from the IEA's 24 member governments to 
better understand how the IEA's emergency response measures can 
work with the powers of oil markets to minimize the economic 
damage resulting from a supply disruption. The exercise also 
will explore the possible actions that the IEA member 
governments could take in response to potential Y2K problems.
    In the event of a real supply disruption, the companies are 
able to provide up-to-the-moment evaluation of key supply and 
demand factors and the impact of possible responses by the IEA. 
Such information can be of immediate value to IEA officials. 
However, EPCA is scheduled to expire on September 30. This 
would eliminate the statutory antitrust defense that has 
allowed the oil companies to advise the IEA and would halt the 
effective consultations.
    The next oil supply disruption cannot be predicted. Thus, 
it would be unwise to allow EPCA to lapse. Continuity of 
coverage under EPCA is essential to allow the oil companies to 
assist immediately in the event of a disruption.
    The U.S. oil companies have been asked by the government to 
assist the IEA. I am convinced that such consultations are 
useful and lead to more effective IEA response measures which 
in turn reduce the economic damage that might be caused by a 
future oil supply disruption. Thus, API encourages the Congress 
to reauthorize EPCA immediately, extending to 2003 the 
statutory antitrust and breach of contract defenses that are 
essential to allow U.S. oil companies to support the IEA's 
emergency response activities.
    Thank you, Mr. Chairman. I look forward to your questions.
    [The prepared statement of Michael E. Canes follows:]
  Prepared Statement of Michael E. Canes, American Petroleum Institute
    Good Morning. My name is Michael Canes, Senior Economic Advisor to 
the President of the American Petroleum Institute (API). API represents 
over 400 member companies in every aspect of the oil and natural gas 
industry, including exploration and production, transportation, 
refining and marketing.
    My testimony focuses on the critical role of Section 252 of Energy 
Policy and Conservation Act or ``EPCA'' and the urgent need for 
Congress to reauthorize the Act before it expires next Thursday, 
September 30, 1999. Section 252 of EPCA allows oil companies, including 
several of API's members, to assist the International Energy Agency 
(IEA) in planning for possible oil supply disruptions and in responding 
to an actual disruption.
    Kenneth Haley, Chairman of the Industry Advisory Board, a group of 
19 oil companies that advises the IEA on emergency response issues, was 
originally scheduled to testify at your hearing last week, September 
16, 1999. He is unable to be here today but has asked that his 
statement be made part of the hearing record.
    At the request of the U.S. government, oil companies have supported 
the IEA since its inception in 1974, working to maintain and improve 
its emergency response procedures. These consultations between 
representatives of the member governments, the IEA staff, and oil 
companies make the IEA unique and contribute significantly to its 
effectiveness.
    All of the oil companies' activities in support of the IEA have 
been conducted under the protection of the statutory antitrust and 
breach of contract defenses established in EPCA. In my opinion, few, if 
any, companies would participate in these activities if the defenses 
were not available.
    In non-emergency times, the current law provides antitrust 
protections that have been indispensable in allowing the oil companies 
to provide advice that helps the IEA keep its policies up to date and 
consistent with the continuing evolution of oil markets. An example is 
the Oil Supply Disruption Simulation Exercise that will be held at the 
end of this month. Oil company representatives will be working together 
with energy security experts from the IEA's 24 member governments to 
better understand how the IEA's emergency response measures can work 
with the power of oil markets to minimize the economic damage resulting 
from a supply disruption. The exercise will also explore the possible 
actions that the IEA member governments could take in response to 
potential Y2K problems.
    In the event of a real supply disruption, the companies are able to 
provide up to the moment evaluation of key supply and demand factors 
and the impact of possible responses by the IEA.
    However, EPCA is scheduled to expire on September 30, which would 
eliminate the statutory antitrust defense that has allowed the oil 
companies to advise the IEA, and would halt the current effective 
consultations.
    The next oil supply disruption cannot be predicted. Thus, it would 
be unwise to allow EPCA to lapse. Continuity of coverage under EPCA is 
essential to allow the oil companies to assist immediately in the event 
of a disruption.
    The U.S. oil companies have been asked by the government to assist 
the IEA. I am convinced that such consultations are useful and lead to 
more effective IEA response measures which in turn will reduce the 
economic damage that might be caused by a future oil supply disruption.
    Thus, API encourages the Congress to reauthorize EPCA immediately, 
extending to 2003 the statutory antitrust and breach of contract 
defenses that are essential to allowing oil companies to support the 
IEA's emergency response activities.
    Thank you.
                                 ______
                                 
Prepared Statement of Kenneth W. Haley, Chevron Corporation, on Behalf 
                  of the American Petroleum Institute
    My name is Ken Haley. I am Manager of Energy Forecasting for 
Chevron Corporation. I am providing this statement for the record on 
behalf of the American Petroleum Institute (API). API represents over 
400 member companies in every aspect of the oil and natural gas 
industry, including exploration and production, transportation, 
refining, and marketing. This statement describes our industry's 
activities under the Energy Policy and Conservation Act (EPCA). In 
particular, the statement focuses on the critical role of Section 252 
of EPCA in allowing the oil companies to assist the International 
Energy Agency (IEA) in planning for possible oil supply disruptions 
and, most importantly, in responding to an actual disruption.
    There are about 40 oil companies that operate in countries that are 
members of the International Energy Agency (IEA) and have agreed to 
work with and report data to the IEA. Of these Reporting Companies, 19 
serve as members of the Industry Advisory Board (IAB). The IAB includes 
most of the large multinational companies based in the U.S. and Europe 
as well as smaller companies that operate in only one or two countries. 
I have represented Chevron as a member of the IAB for 13 years, and I 
am currently the Chairman of the IAB, a position I have held for over 6 
years. Because of my role as Chairman of the IAB, my perspective on the 
role of EPCA is perhaps unique to other witnesses.
Background
    At the request of the U.S. and other IEA-member governments, and 
under terms of the Agreement on an International Energy Program, the 
international agreement on which the IEA is based, oil companies have 
supported the IEA since its inception in 1974. Advice from companies 
was an integral part of the design of the IEA's Emergency Response 
System at that time, and it has contributed to maintaining and 
improving the IEA's emergency response procedures over the years. 
Companies were actively involved in providing advice to the IEA and its 
member governments during the oil supply disruptions in 1979/80 and 
1990/91.
    The IEA and the member governments consult with oil companies 
through the Industry Advisory Board, the body that advises the IEA on a 
wide range of factors related to the emergency response measures--
policy issues, changes in the markets, and technical issues associated 
with oil production, transportation and refining. Through the IAB and 
its subcommittees, the IEA and its member governments have access to 
the expertise of many oil companies that operate throughout the world. 
These consultations between representatives of the member governments, 
the IEA staff, and oil companies make the IEA unique and contribute 
significantly to its effectiveness. The mechanisms for consultation are 
well established, and both the IEA and the member governments actively 
seek input from the private sector. Because oil markets are 
continuously evolving and changing, regular input from companies plays 
an important role in keeping the IEA informed of those changes.
    All of the oil companies' activities in support of the IEA's 
emergency response activities have been conducted under the protection 
of the statutory antitrust and breach of contract defenses established 
by the United States. Similarly, the European Union has adopted an 
exemption for the companies. These protections, which carry with them 
extensive obligations for record keeping, reporting and monitoring of 
activities by government observers (all of which have been carefully 
observed over the years), are of critical importance to the oil 
companies. I believe it is safe to say that few, if any, companies 
would participate in these activities in support of the IEA if these 
defenses were not available. I base this conclusion on the fact that, 
in the past, whenever the EPCA defense has lapsed, the IAB suspended 
all operations until the effective date of the EPCA extension 
legislation. Fortunately, these gaps in coverage have never coincided 
with a real oil market disruption.
Current Situation
    In non-emergency times, the current law provides antitrust 
protections that have been indispensable in allowing the oil companies 
to provide advice that has helped the IEA continue the process of 
improving its emergency response capability. World oil markets have 
evolved dramatically during the 25 years since the IEA was created, and 
they can certainly be expected to continue changing. Thus continuing 
advice from the companies, who operate in the oil markets on a daily 
basis, is a key element of keeping the IEA's emergency response systems 
and procedures up-to-date and consistent with the realities of world 
oil markets.
    An example of this process is the Oil Supply Disruption Simulation 
Exercise that will be held at the end of this month. It represents a 
major new step in developing coordinated emergency response plans that 
take advantage of the efficiency of oil markets by using emergency 
reserves, such as those in the Strategic Petroleum Reserve, as a first 
response to offset disrupted supplies. Oil company representatives will 
be working together with energy security experts from the U.S. 
Government and the IEA's 23 other member governments to better 
understand how the IEA's emergency response measures can work with the 
power of oil markets to minimize the economic damage resulting from a 
supply disruption. The exercise will also explore the possible actions 
that the IEA member governments could take in response to potential Y2K 
problems, addressing both the uncertainties as the end of the year 
approaches as well as possible responses if supply disruptions occur in 
early-2000.
    In the event of a future supply disruption, the companies are 
currently in a position to provide timely, well-informed advice to the 
IEA and its member governments regarding key supply and demand factors, 
including the likelihood of severe shortages and the impact of possible 
responses by the IEA.
    EPCA is scheduled to expire on September 30, 1999, which would 
eliminate the statutory antitrust defense that has allowed the oil 
companies to provide effective assistance to the IEA. There is, of 
course, no way of knowing when the next oil supply disruption will 
occur. By its very nature, the occurrence of the next oil supply 
disruption cannot be predicted, but given the uncertain world in which 
we live, it is likely that sooner or later there will be another crisis 
of some kind. In light of these risks, it would be unwise to allow EPCA 
to lapse. Emergency response programs are most effective at mitigating 
the impact of a supply disruption if they are implemented quickly. 
Continuity of coverage under EPCA is essential to maintain the legal 
structure that allows the oil companies to immediately begin working 
with the IEA and its member governments to adopt response measures in 
the event of a crisis. It would be unfortunate to allow a gap in the 
coverage provided by EPCA that could result in advice from the oil 
companies not being available when it was most needed, if a disruption 
were to occur in the months ahead.
    The oil companies have been asked by the U.S. Government to assist 
the IEA. The State Department, the Department of Energy and the IEA 
have repeatedly advised us that they want U.S. oil companies to advise 
the IEA on emergency response matters. I am convinced that such 
consultations are useful and lead to more effective IEA response 
measures, which in turn will reduce the economic damage to our economy 
and the economies of our allies that might be caused by a future oil 
supply disruption. Thus, API encourages Congress to reauthorize EPCA 
immediately, extending to 2003 the statutory antitrust and breach of 
contract defenses that are essential to allowing the oil companies to 
support the IEA's emergency response activities.

    Mr. Barton. Thank you, Mr. Canes.
    The Chair would recognize himself for the first round of 
questions, which will be 5 minutes.
    Mr. Fuller, I think you are aware that I have been working 
on an amendment to this piece of legislation that would give 
the secretary the permissive authority to purchase marginal 
well oil when prices fall below $15 a barrel. I have spoken 
with some people at IPAA. Is your group aware of this and 
willing to support it being added on a temporary basis to the 
reauthorization bill?
    Mr. Fuller. Mr. Chairman, this is an issue that we have 
also looked at over time as a mechanism to try to deal with 
marginal well production in times of crisis. I think as an 
organization we would like to see this concept move forward to 
see what can be done in that regard.
    As you know, there are a number of complicated factors that 
one needs to take into account to try to make it work, 
acquiring the oil or trading for it in some fashion to get it 
to the Strategic Petroleum Reserve and others.
    I think there are also questions that one needs to address 
in terms of whether you would preserve some capacity in the 
Strategic Petroleum Reserve to be used to fill in this kind of 
a crisis. For example, right now the empty capacity, as I 
mentioned, is about 100 million barrels. That is roughly 80 
days of production from marginal wells around the country. So 
some capacity would have to be there to make that type of 
process work.
    I am glad to see that you are addressing the question of 
price, because that is also a very significant factor in 
maintaining marginal wells. These wells are higher cost wells 
and therefore are more susceptible as price falls.
    Mr. Barton. Mr. Secretary, I met yesterday with Secretary 
Richardson and I also met in Congressman Hall's office with 
some of the professional staff at the Department of Energy on 
the amendment. Secretary Richardson said that he was very 
sympathetic to it and the professional staff said that they had 
concerns about implementation such as Mr. Fuller alluded to but 
they were neutral as to trying to make it work, and they 
thought they would be willing to do that if the secretary 
supported it.
    Have you had any conversations with Mr. Richardson since 
yesterday afternoon on this amendment?
    Mr. Gee. I have not had an opportunity to talk to Secretary 
Richardson since he met with you late yesterday afternoon. I 
have talked to my staff who met with you and am aware of your 
conversations with him. We are taking a look at your amendment, 
Mr. Chairman.
    We are certainly sympathetic with the spirit of your 
amendment in recognizing the severe impact that low oil prices 
have had on stripper well capacity. One of the goals of our 
office and of our department is to preserve existing domestic 
production capacity of which stripper wells certainly play a 
big role. To the extent that your amendment moves in the spirit 
of helping to maintain that domestic capacity, certainly we are 
sympathetic. We are not, however, as you know and as Secretary 
Richardson indicated to you, prepared to commit to a position 
on your specific proposal at this time, but we will certainly 
be happy to take a look at it.
    Mr. Barton. As long as it is permissive and not coercive, 
the staff estimate is that there is no CBO scoring negative to 
it. So, as you said, we are moving in spirit in the direction 
that you all support.
    Mr. Gee. That is something we are taking a look at, yes, 
Mr. Chairman.
    Mr. Barton. Could you comment, Mr. Secretary, on the 
Strategic Petroleum Reserve's Y2K capability? Are you satisfied 
that in the event of a Y2K problem that the SPR would still be 
functional and could be drawn down if necessary?
    Mr. Gee. Yes, Mr. Chairman. We are absolutely confident 
that we have no lingering Y2K problem on the infrastructure of 
our Strategic Petroleum Reserve facilities. They are ready. As 
a matter of fact, we have already prepared all of the 
administrative requirements in the instance of a disruption of 
oil flow from foreign sources, were that the case, to be able 
to respond timely on our behalf; were there, for instance, some 
problem with one of our foreign suppliers of domestic crude.
    We are confident that we are ready, and our staff in fact 
will be on alert when the clock strikes 12 midnight December 31 
to see if there is any need to begin a drawdown, if that were 
the case.
    Mr. Barton. Thank you, sir.
    My time has expired. The Chair would recognize Mr. Hall for 
5 minutes.
    Mr. Hall. Mr. Chairman, thank you.
    Mr. Gee, you understand that the bill that is before us 
does not include reauthorization of certain programs to 
encourage export of American technology for renewable energy 
and energy efficiency, and I think you also understand that the 
administration supports the reauthorization of these programs. 
I am very hopeful that we can work out the problems with the 
provisions.
    It does not bother me that with my connection with the 
Science Committee for them to refer it to them, but it seems 
like a useless referral and time-consuming and does not really 
need to be done, because I think they are largely procedural in 
time for next week's full committee markup, and time is pretty 
much of the essence right now.
    Tell us a little more about these programs. I understand 
that some of the activities have become dormant in recent 
years. Give us some reasons why they ought to have life 
breathed back into them other than the reason that we need to 
do anything we can to help the energy community and that they 
have been pretty well run roughshod over and have not been, in 
my opinion, given the attention and the support of this 
Congress or this administration or the past administration. 
There are ten states out of 50 that produce this and they have 
to almost run over the other 40 to get anything that is 
worthwhile, or make trades that are almost unconscionable.
    Give me some good reasons for the record as to why these 
programs became dormant and without appropriations, and help us 
put in the record where we can read it to others and others 
will read it why they merit an extension.
    Mr. Gee. Thank you, Congressman Hall. As you know, I am the 
fossil energy guy at the Department of Energy and I am not the 
expert in renewables or energy efficiency, but I do know that 
including the necessary authorizations to continue these two 
programs is part of this administration's, this department's 
desire. Let me give you a very, very brief, cursory description 
of what is contemplated.
    One of the programs that we understand needs 
reauthorization is the Committee on Renewable Energy Commerce 
and Trade, which is a 14-member interagency working group of 
the Federal Government. Its purpose is to develop a partnership 
between the U.S. private sector and the Federal Government to 
mobilize resources of these various agencies to assist the 
renewable energy industry to increase their international 
market share. Close cooperation is needed between U.S. industry 
and our agencies because of the competitive forces that they 
face in a global market.
    It is my understanding that this program has not been 
funded over the last two fiscal years. It was begun around 
fiscal year 1994 and was funded through fiscal year 1996.
    The desire on the part of the department is to have 
reauthorization despite the fact that the program has not been 
funded during fiscal year 1997 or 1998 because of the desire to 
have that authorization in place were there a desire to re-
appropriate funds for these programs because of the need to 
meet the challenges in a global marketplace and have our 
private sector work closely with our agencies to promote 
renewable technologies abroad.
    The other program is the Committee on Energy Efficiency 
Commerce and Trade. It also is an interagency working group.
    Let me get my notes in order. There is one other program.
    Mr. Hall. In the interest of time, if you would like to and 
if the chairman approves, you could give me these things to put 
in the record, to be added. I just want to get them on record 
for those who are not here to read them and for those who are 
not members of this subcommittee to have them available.
    Mr. Gee. The other program, Mr. Congressman, is similar to 
the other program. Its mission is to assist energy efficiency 
industry to compete in the international market through an 
interagency working group. In this instance, this is where 
competitors of U.S. firms receive direct substantial government 
export assistance where they face barriers into foreign 
markets. The purpose of this energy efficiency commerce and 
trade group is to consult and collaborate with representative 
industry groups and Federal agency heads to coordinate and 
leverage actions and programs of the Federal Government with 
the private sector.
    This program has been funded on a continuous basis since 
fiscal year 1993. There is an outstanding request for fiscal 
year 2000 as well. It is intended to help leverage export 
assistance to foster energy efficiency technologies abroad.
    Like I said, Mr. Chairman, we will be happy to provide you 
and the record with more information. I am not the energy 
efficiency expert at the Department of Energy, as you know, but 
we will be happy to give you additional information.
    [The following was received for the record:]

    The attached fact sheets on the Committee on Energy Efficiency 
Commerce and Trade (COEECT) and the Committee on Renewable Energy 
Commerce and Trade (CORECT) are provided for the record.
       COMMITTEE ON ENERGY EFFICIENCY COMMERCE AND TRADE (COEECT)
    The Committee on Energy Efficiency Commerce and Trade (COEECT) is 
an interagency working group of fifteen Federal agencies chaired by the 
Department of Energy whose mission is to assist the U.S. energy 
efficiency industry to compete in the international market--where its 
competitors receivesubstantial government export assistance and where 
it faces barriers to entry into foreign markets. COEECT consults and 
collaborates with representative industry groups and relevant Federal 
agency heads to coordinate and leverage the actions and programs of the 
Federal Government affecting the export of energy efficiency products 
and services to support U.S. energy efficiency industry efforts to 
successfully compete for its share of the large world market. COEECT's 
purpose is to increase energy efficiency exports, thus creating US jobs 
and reducing global environmental pollution.
Funding History
    FY 93: $248K
    FY 94: $704K
    FY 95: $1,116K
    FY 96: $1,116K
    FY 97: $1,100K
    FY 98: $1,000K
    FY 99: $900K
    FY 00: $1,200K (requested)
Approach
 COEECT coordinates Federal member activities.
 COEECT leverages existing Federal resources by:identifying 
        existing export assistance programs which apply to the energy 
        efficiency industry;
    --bringing to bear member agency resources to promote the goals of 
        these programs on behalf of the energy efficiency industry, 
        resulting in increased exports;
    --and pursuing the commercial financing of projects and seeking out 
        host country matching dollars for the purchase of U.S. energy 
        efficiency goods and services.
 COEECT partners with the U.S. energy efficiency industry by:
    --understanding its export market priorities and identifying 
        barriers that cannot be overcome without this specialized 
        Federal assistance;
    --developing assistance for all energy efficiency firms to enter 
        targeted markets, including overcoming financing and regulatory 
        barriers, identifying projects, conducting focused trade 
        missions with contact with potential buyers from industry and 
        government, market conditioning, project implementation, 
        matchmaking, deal closure and market assessments;
    --providing industry a link to and leveraging of the wide range of 
        government programs and activities designed to increase U.S. 
        industry's market share.
FY 1999 Activities
    COEECT continues to assist industry, especially small and medium-
sized businesses that could not afford to develop business outside the 
U.S., increase their market penetration and global competitiveness. 
COEECT's activities support the U.S. energy efficiency industry in 
providing technical information on, and assistance in, export financing 
and project implementation in the areas of Latin America, Asia, and 
Central and Eastern Europe.
       COMMITTEE ON RENEWABLE ENERGY COMMERCE AND TRADE (CORECT)
    The Committee on Renewable Energy Commerce and Trade (CORECT) is a 
14-member interagency working group of the Federal Government. CORECT's 
primary objective has been to forge an effective partnership between 
the U.S. private sector and the Federal government to mobilize the 
resources of the CORECT member agencies and assist the renewable energy 
industry to increase their international market share. Given the large 
potential market for renewables exports and the increasing competition 
from government-aided European and Asian industries, close CORECT-
industry collaboration is needed to ensure that U.S. business is able 
to secure a significant portion of this market. By increasing renewable 
energy exports, the program creates U.S. jobs, returns money to the 
Federal government through tax revenues and reduces pollution from 
traditional energy sources.
Funding History
    FY 94: $1.886 million
    FY 95: $1.884 million
    FY 96: $1.888 million
    FY 97: $ 0 ($2.0 requested)
    FY 98: $ 0 ($2.0 requested)
Approach
    First, CORECT works very closely with the U.S. renewable energy 
industry to obtain as clear an understanding as possible of its export 
objectives. This collaboration has led to the designation of four major 
regional markets: Latin America and the Caribbean, Asia and the 
Pacific, Africa, and Eastern Europe and the Commonwealth of Independent 
States. Within those regions high priority country markets have been 
identified where U.S. firms have a significant potential to sell their 
products and services.
    Second, after the identification of barriers CORECT works with 
industry to design practical assistance aimed at enhancing market entry 
prospects for all U.S. renewable energy firms in specific country 
markets. The aim of the approach is to insure that CORECT works with 
U.S. business to overcome specific impediments identified by U.S. firms 
with experience in specific overseas markets.
    Third, CORECT aids industry by working collaboratively to identify 
project lending that emphasizes commercial financing lending rather 
than aid from governmental resources. This has become increasingly 
feasible as life cycle costs for renewables have continued to decrease 
to the point where in countries heavily dependent on petroleum imports, 
many large scale renewable technologies are directly competitive with 
thermal electric generation systems. Additionally, CORECT is working 
with industry to bring about this same situation with smaller-scale 
rural renewable energy applications, which are increasingly seen as a 
more sustainable alternative than reliance on dispersed hard-to-
maintain diesel generators.
Activities
    No funding for CORECT was received in FY 1997, FY 1998 and FY 1999. 
No activities ongoing.

    Mr. Hall. For that I thank you.
    Will the chairman yield?
    Mr. Barton. The gentleman's time has expired, but we will 
yield for one more question.
    Mr. Hall. I have a question of the chairman. Our visit 
yesterday with you and members of other departments indicated 
that your bill was limited to stripper wells. Have you enlarged 
that?
    Mr. Barton. The wording is ``marginal well.''
    Mr. Hall. That would go up to 15?
    Mr. Barton. Fifteen barrels. That is my understanding what 
the definition is in the law.
    Mr. Hall. How about the tertiary thrust? We discussed that 
a little bit.
    Mr. Barton. That is not included.
    Mr. Hall. But could be if there is no objection?
    Mr. Barton. It is permissive. So it would be at the 
discretion of the Secretary.
    Mr. Hall. I think it is a good bill and I think it 
certainly is a tool that might aid an industry that needs not 
only some aid but some kind words. Thank you. I yield back my 
time.
    Mr. Barton. We appreciate that support.
    We want to thank our Chilean friends for your attendance 
and seeing democracy in action.
    The gentleman from California, Mr. Rogan, is recognized for 
5 minutes.
    Mr. Rogan. Mr. Chairman, thank you. Thank you for calling 
this hearing. I thank each of the panelists for their 
participation.
    Mr. Gee, I was hoping you could just fill in a few 
background gaps for me in my knowledge of the historical 
background of the Strategic Petroleum Reserve. This was created 
about 25 years ago as a result of the oil shocks of 1973, and 
the purpose of the reserve was to protect us against future 
shocks at least for a period of time?
    Mr. Gee. That is correct, Congressman. It was started in 
the mid-1970's roughly as an effort among the OECD countries of 
which the United States is a member to collaborate in instances 
of oil supply emergencies where there was a disruption of oil 
flow. At that time, as you know, there was a huge dependency, 
as there still is today, on oil coming from the Persian Gulf 
region.
    It was the United States' effort to develop a capacity to 
have oil in storage in underground caverns, to have roughly 
anywhere from a 60- to 90-day drawdown capability to mitigate 
price shocks in the instance of a severe oil interruption from 
our foreign source crude oil.
    We are proud to say that this is something that the United 
States has made a commitment to and is viewed worldwide among 
International Energy Agency members as a model for other 
nations to follow, that is, those countries that are IEA 
members of which all the OECD countries are a part.
    We hope that the commitment is shown by all to maintaining 
the reserve and to replenishing its capacity because of our 
continued dependence upon crude oil, which is even greater 
today, from foreign sources than it was in 1974, which I think 
at the time was around 35 percent reliance, which is now beyond 
that, well into around 54 or 55 percent today on foreign source 
crude.
    Mr. Rogan. I am sorry. You said it has gone from about 35 
percent?
    Mr. Gee. It was 35 percent, I believe, in 1974 and 1975, at 
the time we began the process to develop the Strategic 
Petroleum Reserve. It is now, as I understand it, around 54 or 
55 percent of net imports.
    Mr. Rogan. Obviously it preceded my time in the Congress. 
My recollection of that time was that it was the stated policy 
of the United States to wean ourselves from dependence on 
foreign oil. What you are saying essentially sounds like we 
have committed a callosal failure in that regard. How do you 
account for that?
    Mr. Gee. We have not done a very good job. I think it is a 
number of factors. One is the growth of the United States 
economy and our huge energy consumption demands. The United 
States is the most energy intensive country in the world. We 
consume more energy than any other industrialized country per 
capita.
    Another factor, unfortunately, has simply been our 
unwillingness to make the necessary policy steps to move us 
toward a way of increasing our reliance on domestic sources. We 
are trying to turn that around. This administration, for 
instance, is committed to halting the decline in domestic 
production capacity by the year 2005.
    We recognize that we are going to have to take steps, among 
other things, to improve the way we consume energy and also 
preserve our domestic capacity because of the perilous position 
it puts us in and our huge reliance on foreign source crude.
    Mr. Rogan. In that regard, is the administration also 
seeking out new sites to drill and produce?
    Mr. Gee. We have.
    Mr. Rogan. Domestic sites?
    Mr. Gee. That is a sensitive political question. On the 
other hand, we have been able to find areas where we think our 
industry ought to be entitled to go and develop. For instance, 
the Department of the Interior recently opened up parts of the 
National Petroleum Reserve in Alaska for drilling. They are now 
looking at various bids to help develop those public lands 
because of the necessity of having to find more sources of oil.
    One other thing that the Department of Energy is doing--
actually, a number of other things--is helping to improve the 
economics in oil drilling technology. We have a number of 
programs already in place to help lower the cost of production, 
particularly among the small independents who are in a 
financially distressed situation. We have programs working with 
them to foster technology transfers so that they can put in 
place the best available technology to lower their drilling 
costs.
    We have another program to help lower their electricity 
costs. Part of the cost incurred out in the oil patch in 
producing oil is attributable to electric utility costs, which 
make up about 40 percent of overall cost of production. We are 
working very closely with the industry, with the independents, 
and with the National Association of State Energy Officials to 
try to find a way to guide them and help them do energy audits 
and find ways to lower their electricity cost which plays such 
a large role in keeping a lot of the marginal capacity 
economically viable.
    Mr. Rogan. Thank you, sir.
    Mr. Barton. The gentleman from Ohio, Mr. Sawyer, is 
recognized for 5 minutes for questions.
    Mr. Sawyer. Thank you, Mr. Chairman. I really appreciate 
Secretary Gee's last comments. In 1974 and 1975 I was working 
at the Public Utilities Commission of Ohio, policy analysis and 
that sort of thing. The effect of oil on virtually all other 
alternative sources of energy played itself out in the real 
lives of people at that point.
    The kind of effort that had begun, according to my staff, 
with recommendations from Secretary Harold Ickes in the 1940's 
and President Truman's Mineral Policy Commission in 1952, 
Eisenhower's suggestion of an oil reserve in the Suez crisis in 
1956, the Cabinet Task Force on Oil Import Control recommended 
a reserve in 1970, and finally in 1975 we got to it.
    Your chronicling the size of the reserve really raises a 
question. You say it is about 563 million barrels now. The 
current capacity is about 700.
    Mr. Gee. Seven hundred.
    Mr. Sawyer. The statutory target fill rate would aim us 
toward 750. You argue in your testimony that 750, much less 1 
billion, is unrealistic today but that we will move toward 
analyzing what that ought to be.
    Is the 60- to 90-day drawdown capacity still the standard 
by which we ought to judge this? What would that produce in 
terms of needed capacity? What should the reserve size be and 
how best should we hold ourselves accountable for achieving and 
maintaining it even in the face of budget pressures?
    Mr. Gee. Our current capacity, as you indicated, 
Congressman, is 700 million barrels. We are currently at around 
563 million barrels. After we complete our royalty in kind 
program with the Department of the Interior, it should be 
around 585 million barrels, still leaving us something around 
115 million barrels shy of full capacity.
    We have a size study that is under way. It is going through 
interagency review at this time. It is going to be developing 
the economics underlying the different options of continuing to 
fill the Strategic Petroleum Reserve and what an optimal size 
may be.
    The study itself will not specifically recommend a size per 
se, but it would show the relative tradeoffs, depending upon 
what size we choose to opt for. For instance, if we were to go 
ahead and fill our capacity up to the full 700 million barrels, 
right now, because we have the capacity there, probably the 
cost would not be that great; it would be negligible. To go 
from 700 to 800 million barrels would probably incur some 
additional cost. Beyond 800 million barrels, I'm told we would 
then have to determine whether there are important economic 
benefits to be gained by going above 800 million barrels. At 
least that is what our technical staff tells us.
    We will have a much better indication once this study comes 
up to be able to make a firmer recommendation on what an 
optimal size could be.
    Right now our drawdown capability is 60 days worth. Under 
the International Energy Association requirements we are 
required to have a 90-day drawdown capacity as an IEA member. 
We meet that additional capacity by virtue of commercial 
storage, that is, storage provided by the private sector.
    Mr. Sawyer. If it were all done in the reserve, would that 
be toward the billion barrel?
    Mr. Gee. It moves us in that direction. The 1 billion 
barrel requirement as I understand it, was something that was 
in the original enabling legislation of EPCA. We were to have 
achieved that by 1992. Obviously we missed that target.
    Mr. Sawyer. In the very brief time remaining to me and 
within the chairman's range of patience, can you tell me how 
that asset is valued for budget scoring purposes as an asset of 
the United States?
    Mr. Gee. I am told, Congressman, that when we buy inventory 
it is scored and when we sell inventory it is scored, but so 
long as the inventory remains static it has no budgetary 
impact.
    Mr. Sawyer. So if it were a cash deposit, it would have 
value, but if it is an asset, it does not?
    Mr. Gee. Correct.
    Mr. Sawyer. That may be something to look at, Mr. Chairman.
    Mr. Barton. I thank the gentleman from Ohio. We now 
recognize the gentleman from Oklahoma, which has got many, many 
small independent oil and gas producers, the Honorable Mr. 
Largent, for 5 minutes.
    Mr. Largent. Thank you, Mr. Chairman.
    Mr. Fuller, I notice that your title at the IPAA is manager 
of their energy forecasting.
    Mr. Fuller. I am the vice president of government 
relations.
    Mr. Largent. You are energy forecasting, Mr. Canes?
    Mr. Canes. No.
    Mr. Largent. Does anybody do energy forecasting?
    Mr. Canes. No, sir.
    Mr. Barton. If the gentleman would yield. We want the 
record to show that Mr. Fuller's title on the committee handout 
does say energy forecasting. So Mr. Largent can read.
    We have obviously made a mistake at the staff level and 
should not hold Mr. Largent accountable for that.
    Mr. Fuller. Maybe I have skills I am unaware of.
    Mr. Largent. Let us see. Let us test them.
    What are the predictions for energy consumption for this 
country for the next five or 10 years? What is expected to 
happen? Do you know?
    Mr. Fuller. I have not seen a forecast in that area. I 
think probably the best forecast that is put together in that 
regard is probably done by the Energy Information 
Administration.
    Mr. Largent. Mr. Gee, do you have any idea?
    Mr. Gee. I do not have the exact number, Congressman, but I 
do know the IEA numbers do show an upward trend of continued 
energy consumption.
    Mr. Largent. Mr. Canes?
    Mr. Canes. Yes, I think that is right. It largely depends 
upon economic activity. So long as that remains strong and 
positive, I think the expectation is there will be some 
increase in consumption of energy.
    Mr. Largent. It seems to me I saw just recently across my 
desk a prediction that showed that energy consumption in this 
country was to double in the next ten to 20 years. I cannot 
remember. It is something like that.
    My question is this. The United States today is currently 
producing domestically about 45 percent of our domestic needs. 
Given the fact that that consumption is going to double, say, 
in the next 20 years at the outside, does the United States 
have the capacity to maintain 45 or 50 percent of our domestic 
needs and produce it domestically?
    Mr. Gee.
    Mr. Gee. I think that is a very good question and that is 
something that we are taking a very careful look at. I will 
give you an illustration. When we talk about energy 
consumption, we are talking about transportation, we are 
talking about power generation, we are talking about the range 
of uses of energy in our economy.
    One of the concerns we have, for instance, is we know that 
electric power is going put a huge demand on the drawdown of 
natural gas, on natural gas proven reserves. Every forecast 
that we have seen, particularly forecasts of the Energy 
Information Administration, show that there will be a huge 
demand for more natural gas over the next ten to 15 years for 
that reason.
    One of the concerns we have is whether there is sufficiency 
of supply to meet that demand. That is something that we are 
working very closely with the National Petroleum Council on at 
this moment, doing an evaluation of what our policies are to 
meet the challenge of finding a way to make sure that there is 
sufficient natural gas supply to meet that huge demand.
    Mr. Largent. Well, it is tough to import natural gas, isn't 
it?
    Mr. Gee. It is going to be very difficult. We do not expect 
we will be able to import much natural gas. As you know, it 
needs to be liquefied and it is hugely expensive. So it is 
going to have to come presumably from a domestic source.
    Mr. Largent. That brings me to a question about the IEA. 
Mr. Canes, the Strategic Petroleum Reserve, is that a part of 
the emergency plan of the IEA? In other words, if there was an 
interruption in the supply of oil worldwide, would the United 
States ever be called upon to use our Strategic Petroleum 
Reserve to send to somebody else?
    Mr. Canes. I do not think it works quite that way, Mr. 
Largent. I believe that all countries are expected to have 
emergency plans and facilities.
    Mr. Largent. For their own use?
    Mr. Canes. Yes, and different countries, I think, approach 
this in different ways. I think some work on the demand side, 
and I think our choice has been to have a Strategic Petroleum 
Reserve to enhance supply. It is my understanding that there is 
no requirement to ship that oil overseas.
    Mr. Largent. Mr. Gee, what is the average cost of a barrel 
of oil in the Strategic Petroleum Reserve today? Do you know?
    Mr. Gee. Right now the average embedded cost price is 
around $27 per barrel. That is my understanding. That is the 
historic embedded average cost.
    Mr. Largent. When we sold it on a non-emergency basis in 
1996 and 1997, what was the cost per barrel in the petroleum 
reserve and what did we sell it for?
    Mr. Gee. Let me get that number for you, if I may.
    [The following was received for the record:]

    The average price paid for the oil in the Reserve was $27.14 per 
barrel.
    Sales were as follows:

------------------------------------------------------------------------
                                   Amount of SPR Oil
           Fiscal Year                   Sold           Cost per barrel
------------------------------------------------------------------------
FY 1996.........................  5.1 million         $18.95 per barrel
                                   barrels.
                                  12.8 million......  $17.81 per barrel
FY 1997.........................  10.2 million......  $21.64 per barrel
------------------------------------------------------------------------


    Mr. Largent. Let me go on. What do we add to the cost of a 
barrel of oil just for maintenance every year in the SPR?
    Mr. Gee. I am informed that it costs us approximately 25 
cents per barrel per year to maintain that capacity.
    Mr. Largent. Mr. Canes, I have a question again about the 
IEA. Who are the players in the IEA? Is everybody at the table? 
Are the Middle East countries at the table? Is Russia at the 
table with the IEA? And what enforcement mechanisms exist for 
the players that participate in the IEA in the case of 
worldwide interruption?
    Mr. Canes. Mr. Largent, I am not completely acquainted with 
every country that is in there, but I believe it is largely the 
OECD countries that make up the primary members of the IEA.
    Mr. Largent. So are we talking about Saudi Arabia?
    Mr. Canes. No. The OECD would be primarily western Europe, 
Japan, the United States, Canada.
    Mr. Largent. Russia?
    Mr. Canes. I am not sure whether Russia is a member of the 
IEA. As far as I know, they are not, but I may be mistaken on 
that.
    Mr. Largent. So we are talking about a significant number. 
What about Argentina or some of the countries in South America? 
They are not players either. So we are talking about the most 
significant producers in the world do not participate in the 
IEA.
    Mr. Canes. I believe that is correct.
    Mr. Largent. How effective can the IEA be when the most 
significant producers in the world are not at the table?
    Mr. Canes. Sir, I believe that it was originally intended 
to be a mechanism for consuming countries, the large consuming 
countries to collectively decide on ways to deal with 
disruptions or emergency situations. So it has functioned 
largely for that purpose. That is the reason, I believe, why 
producers other than, say, Great Britain are not members of the 
organization.
    Mr. Largent. Doesn't it make sense to try to make an effort 
to get the producers at the table in case there is an 
interruption? It is one thing to have all the people that are 
in need to say, OK, how are we going to do this? We don't have 
enough oil. How are we going to allocate? But in reality it is 
not up to them; it is up to the people that are producing. I do 
not understand why the OPEC countries, for example, are not at 
the table.
    Mr. Canes. It might be that a different kind of mechanism 
which would include producers might be a good idea to try to 
work out what should be done in emergency, but IEA, as I 
understand it, was not intended for those purposes.
    Mr. Barton. The gentleman's time has expired.
    Mr. Largent. Thank you, Mr. Chairman.
    Mr. Barton. We can submit questions for the record.
    Did Mr. Fuller wish to comment on that?
    Mr. Fuller. I just wanted to make a comment on that point. 
One of the concerns we have had, particularly as we watch this 
last oil price crisis, is the importance of trying to be a 
player in the international arena with respect to these 
producing countries for the United States.
    As you are probably aware, there is current investigation 
under the section 232 process to look at the threat to national 
security that imported oil poses.
    Our recommendations on ways to address that is a strong 
encouragement that the United States needs to be much more 
proactive with producer countries in looking at the need for 
supply around the world, and particularly in responding quickly 
to the kinds of events that we saw happen in the last 20-some 
months that created the price crisis that had such a 
devastating effect on our domestic industry.
    Probably IEA is not the format for that, but it is 
certainly a need that we think this country needs to pursue.
    Mr. Barton. Thank you.
    The gentle lady from Missouri, Ms. McCarthy, is recognized 
for 5 minutes.
    Ms. McCarthy. I thank you, Mr. Chairman, and I thank you 
for holding this most important hearing.
    Mr. Gee, through my travels and my experiences I have 
learned about how other countries are cleaning our clock on 
export of renewable energy to the developing countries where 
traditional energy just will not work. There isn't the 
infrastructure; there isn't the capacity; there isn't the use 
for oil and the traditional uses we have. Japan and other 
countries for some time now have been out there exporting 
renewables into these countries.
    There has not been much said about reauthorizing these 
efforts, the two programs, the Committee on Renewable Energy 
Commerce and Trade and the Committee on Energy Efficiency 
Commerce and Trade, COEECT and CORECT. I wonder if you would 
speak to those.
    I have concern, as the administration does, with regard to 
the impact of energy use particularly in developing nations. We 
do not want them going down the path that China has gone down 
and causing grave pollution and consequences that are going to 
be very expensive for the world to clean up.
    Would you kindly address those matters now in preparation 
for our work on this bill.
    Mr. Gee. Thank you, Congresswoman. Congressman Hall had 
already asked me the same question, but I will be happy to give 
you a brief description of those two programs. Let me do that 
simultaneously.
    Ms. McCarthy. I do not need a description. I want to know 
what we are doing about reauthorizing them and also what we are 
doing as an administration and a government to see that we do 
not get our clocks cleaned in the future.
    Mr. Gee. The administration is seeking reauthorization of 
both programs because of the necessity to underscore the 
importance of the export of energy efficiency and renewable 
technologies by U.S. companies with a collaborative effort 
between the private sector and our government to try to gain 
market entry into those developing countries and other venues 
that you just mentioned.
    I think the purpose that they serve is to have a 
competitive advantage for U.S. firms who are strongly backed by 
other firms in other countries by their governments as well to 
gain market access. Both of these programs are very important, 
because if we do not activate them on a timely basis, the 
United States stands to lose a significant market share in 
marketing both those technologies.
    Ms. McCarthy. Is currently losing. It isn't ``stands to.'' 
The tense is wrong in the administration and in the minds of 
the American oil companies. British Petroleum. Look what they 
are doing. And it is working. What is the administration doing 
to get the attention of the industry here that instead of 
playing catch-up to get out in front of it?
    Mr. Gee. Our office is the fossil energy office, but I know 
that Dan Reicher, who heads the Office of Energy Efficiency and 
Renewable Energy at the Department of Energy, has been very 
aggressive in working with our private sector to try to 
preserve and improve market share among members of our industry 
in those foreign venues. I will be happy to refer your 
questions to him. I am not the energy efficiency and renewable 
expert, as you know.
    I can tell you today that both these programs are high 
priorities for our department and for our administration, 
because we do think that it is important for the United States 
to be very actively involved working with our private sector to 
market those technologies, because there are going to be 
instances when traditional uses of forms of energy are not 
going to be favored for a variety of reasons, either logistical 
or environmental, in a number of foreign regimes, and that 
energy efficiency and renewable energy will be the technology 
of choice and that it is very important for the United States 
to play a major role there.
    Ms. McCarthy. I appreciate your efforts. I still think you 
need to use the verb tense that is most appropriate. This is 
not a futuristic goal. This is now, and we are behind the 
curve.
    When oil executives come before this subcommittee and I ask 
them about this, they think maybe I'm on Mars or they are on 
Venus. I don't know. But this is a great opportunity for our 
economic development, for the betterment of our globe and the 
environment that we share, and it is like a lost opportunity, 
because we are still just talking about it here in this country 
where other nations are acting on it and have been.
    I appreciate your activities. I would just like to say 
let's fast forward them.
    I thank the Chair for his indulgence and this time.
    Mr. Barton. We have got two votes on the floor. We are 
going to recognize Mr. Stearns for his 5 minutes, and then we 
are going to recess. We will continue the hearing at the end of 
the recess, which should be around a quarter to noon. We will 
recognize Mr. Stearns for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman. I will be brief, 
particularly in light of the vote.
    Mr. Gee, every time I come to the House floor there is 
usually some amendment to decrease the fossil fuel program. 
Evidently you have taken reductions both from Congress as well 
as the Department of Energy. Isn't that true?
    Mr. Gee. That is correct, Congressman.
    Mr. Stearns. Let me ask Mr. Canes and Mr. Fuller. What are 
the benefits of the fossil energy program? I hope you will be 
candid with us. Many members do not know and we are trying to 
determine what the benefits are. Maybe this is a perfect time 
for you to tell us.
    Mr. Fuller. From the independent sector, we have strongly 
supported that program. Mr. Gee described a number of the 
activities that the fossil energy program has been engaged in 
that is particularly directed at working with independent 
smaller producers. Obviously most of our companies do not have 
the resources to develop elaborate technology steps forward.
    Mr. Barton. Would the gentleman yield on his answer. Before 
Congressman Shimkus and Congresswoman Wilson leave, would you 
all be willing to submit your questions in writing for the 
record? And Mr. Ehrlich and Mr. Fossella. If you all agree to 
do that, we can go to authorization of the bill when we come 
back instead of having questions. Is that acceptable? Is there 
any objection on the Democratic side?
    When we come back, we will be ready to go to markup of this 
piece of legislation.
    Proceed.
    Mr. Fuller. This is a program that we have found to have 
the potential to be very beneficial. In addition, because it 
focuses frequently on trying to establish technology transfer 
information to small producers, it helps us a great deal.
    Mr. Stearns. Mr. Fuller, you think it is a good program?
    Mr. Fuller. We do think it is a good program.
    Mr. Stearns. You think we should increase the funding for 
it?
    Mr. Fuller. I think you should get the funding back to 
where it had been. So that would be an increase from where it 
is now.
    Mr. Stearns. Mr. Canes.
    Mr. Canes. Mr. Stearns, I was not prepared to deal with 
that question today. I think in general we have had a very 
strong working relationship between the industry and the DOE, 
but on this specific question I would have to get back to you 
for the record.
    Mr. Stearns. You mean you have got to contact the institute 
and talk to them?
    Mr. Canes. I would want to find out.
    Mr. Stearns. This has never come across your plate whether 
the fossil fuel program is good or bad in your entire tenure at 
this particular institute?
    Mr. Canes. No. Because my responsibilities have been on the 
economics and statistics side, I have not dealt with the 
research side of it and the relationship between our companies 
and the fossil fuel portion of DOE, but I am sure we do have 
some things to say on this and will be glad to supply you that.
    Mr. Stearns. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Barton. Thank you. We are going to recess. Before we 
do, all members will have the requisite number of days to put 
written questions in the record for the witnesses to answer. We 
also would ask unanimous consent that some other national 
organizations put a written statement in the record subject to 
both minority and majority staff agreeing on those statements.
    Is there objection to that?
    [No response.]
    Mr. Barton. We are going to recess until a quarter to noon. 
We are going to reconvene at 15 until noon and we will go into 
markup. The witnesses are released. We are in recess.
    [Whereupon at 11:15 a.m., the subcommittee was recessed, to 
reconvene at 11:45 a.m., this same day.]
    [Additional material submitted for the record follows:]

 National Association for State Community Services Programs
                                                 September 13, 1999
The Honorable Thomas Bliley, Chairman
United States House of Representatives
Committee on Commerce
2125 Rayburn House Office Building
Washington, DC 20515
    Dear Congressman Bliley, I would like to thank the Committee for 
this opportunity to express the views of our organization in the matter 
of the hearing being held on September 16, 1999 related to the Energy 
Policy and Conservation Act (EPCA--42 U.S.C. 6865). The National 
Association for State Community Services Programs (NASCSP) is a 
membership organization representing state directors of the U.S. 
Department of Energy's (DOE) Weatherization Assistance Program (WAP) 
and the U.S. Department of Health and Human Services' Community 
Services Block Grant. DOE has offered a set of statutory changes to 
revise existing WAP legislation. This letter serves our testimony in 
support of these much needed revisions to the current laws governing 
this important program.
    The first proposed change involves the cost per unit average. The 
proposed average would be increased to $2,500, adjusted annually. A 
closely related proposed change involves the allowable expenditures 
included in the average cost per unit. When approved, the capital-
intensive category would be eliminated and all higher cost units would 
be included in this revised higher average. Also, health and safety 
costs would be excluded from this average and accounted for as a 
separate cost category.
    NASCSP fully supports these two proposed changes. Both will result 
in the reduction of the administrative workload at the state and local 
levels related to tracking separate cost categories. In addition, DOE 
will recognize health and safety investments as legitimate costs.
    Finally, we support the DOE proposal to eliminate the out-dated 
energy auditing requirements and establish a more advanced energy audit 
standard.
    WAP has undergone many changes in recent years and will likely face 
many more in the future as we learn more about residential energy use 
and discover new energy saving technologies. Because of past statutory 
and regulatory revisions enacted by Congress and DOE, the state and 
local agencies that deliver the WAP have been able to increase the 
program's cost effectiveness and energy savings potential by 80% 
between 1989 and 1996. Of course, the more than 75,000 low-income 
families who receive WAP services each year are the real beneficiaries. 
These families enjoy lower energy bills and safer, healthier, and more 
energy efficient living conditions. Your favorable consideration of the 
proposed changes currently before your Committee will help provide an 
even more effective program by relieving unnecessary administrative 
burden and helping to promote the integration of new advanced 
technologies.
            Respectfully submitted,
                                           Timothy Warfield
                                                 Executive Director
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