[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT HEARING ON COMPROMISING OUR NATIONAL SECURITY BY RESTRICTING
DOMESTIC EXPLORATION AND DEVELOPMENT OF OUR OIL AND GAS RESERVES
=======================================================================
OVERSIGHT HEARING
before the
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
APRIL 12, 2000, WASHINGTON, DC.
__________
Serial No. 106-91
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
or
Committee address: http://www.house.gov/resources
__________
U.S. GOVERNMENT PRINTING OFFICE
67-822 WASHINGTON : 2000
______
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana GEORGE MILLER, California
JAMES V. HANSEN, Utah NICK J. RAHALL, II, West Virginia
JIM SAXTON, New Jersey EDWARD J. MARKEY, Massachusetts
ELTON GALLEGLY, California BRUCE F. VENTO, Minnesota
JOHN J. DUNCAN, Jr., Tennessee DALE E. KILDEE, Michigan
JOEL HEFLEY, Colorado PETER A. DeFAZIO, Oregon
JOHN T. DOOLITTLE, California ENI F.H. FALEOMAVAEGA, American
WAYNE T. GILCHREST, Maryland Samoa
KEN CALVERT, California NEIL ABERCROMBIE, Hawaii
RICHARD W. POMBO, California SOLOMON P. ORTIZ, Texas
BARBARA CUBIN, Wyoming OWEN B. PICKETT, Virginia
HELEN CHENOWETH-HAGE, Idaho FRANK PALLONE, Jr., New Jersey
GEORGE P. RADANOVICH, California CALVIN M. DOOLEY, California
WALTER B. JONES, Jr., North CARLOS A. ROMERO-BARCELO, Puerto
Carolina Rico
WILLIAM M. (MAC) THORNBERRY, Texas ROBERT A. UNDERWOOD, Guam
CHRIS CANNON, Utah PATRICK J. KENNEDY, Rhode Island
KEVIN BRADY, Texas ADAM SMITH, Washington
JOHN PETERSON, Pennsylvania CHRIS JOHN, Louisiana
RICK HILL, Montana DONNA MC CHRISTESEN, Virgin
BOB SCHAFFER, Colorado Islands
JIM GIBBONS, Nevada RON KIND, Wisconsin
MARK E. SOUDER, Indiana JAY INSLEE, Washington
GREG WALDEN, Oregon GRACE F. NAPOLITANO, California
DON SHERWOOD, Pennsylvania TOM UDALL, New Mexico
ROBIN HAYES, North Carolina MARK UDALL, Colorado
MIKE SIMPSON, Idaho JOSEPH CROWLEY, New York
THOMAS G. TANCREDO, Colorado RUSH D. HOLT, New Jersey
Lloyd A. Jones, Chief of Staff
Elizabeth Megginson, Chief Counsel
Christine Kennedy, Chief Clerk/Administrator
John Lawrence, Democratic Staff Director
C O N T E N T S
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Page
Hearing held April 12, 2000...................................... 1
Statement of Members:
Delay, Hon. Tom, a Representative in Congress from the State
of Texas................................................... 37
Prepared Statement of.................................... 39
Fosella, Hon. Vito, a Representative in Congress from the
State of New York.......................................... 45
Prepared Statement of.................................... 47
Gekas, Hon. George W., a Representative in Congress from the
State of Pennsylvania...................................... 20
Prepared Statement of.................................... 22
Largent, Hon. Steve, a Representative in Congress from the
State of Oklahoma.......................................... 10
Prepared Statement of.................................... 13
Pallone, Hon. Frank, a Representative in Congress from the
State of New Jersey, Prepared Statement of................. 286
Udall, Hon. Mark, a Representative in Congress from the State
of Colorado, Prepared Statement of......................... 58
Vento, Hon. Bruce F., a Representative in Congress from the
State of Minnesota......................................... 4
Prepared Statement of.................................... 7
Young, Hon. Don, a Representative in Congress from the State
of Alaska.................................................. 1
Statement of Witnesses:
Becker, Dan, Sierra Club..................................... 200
Prepared Statement of.................................... 203
Bedell, Charles, National Ocean Industries Association....... 257
Ebel, Robert E., Director, Energy Program, Center for
Strategic and International Studies........................ 146
Gee, Robert W., Assistant Secretary for Fossil Energy, U.S.
Department of Energy....................................... 105
Prepared Statement of.................................... 108
Geller, Howard, Executive Director, American Council for an
Energy-Efficient Economy................................... 161
Prepared Statement of.................................... 163
Hayes, David J., Deputy Secretary, U.S. Department of the
Interior................................................... 94
Prepared Statement of.................................... 96
Hegna, Joseph H., Arco Alaska Inc............................ 185
Prepared Statement of.................................... 188
Hood, Gerald L., Secretary-Treasurer, General Teamsters Local
959, Anchorage, Alaska..................................... 173
Prepared Statement of.................................... 175
Johnston, Honorable J. Bennett, Johnston & Associates, Inc... 66
Prepared Statement of.................................... 68
Jordan, Jerry, Independent Petroleum Association of America.. 147
Prepared Statement of.................................... 150
McCormick, Walter B., Jr., President and CEO, American
Trucking Associations...................................... 259
Prepared Statement of.................................... 261
Surprenant, Monica T., Chairwoman, Louisiana State Mineral
Board...................................................... 265
Prepared Statement of.................................... 267
Thomasson, M. Ray, President, American Association of
Petroleum Geologists....................................... 132
Prepared Statement of.................................... 134
Additional Material Supplied:
Editorial titled ``Energy Problems Can't Be Drilled Away''... 52
Mr. Gekas' Bill.............................................. 28
Rothe, Ann L., Executive Director, Trustee for Alaska,
Prepared Statement of...................................... 219
Sierra Club, The best selling car in America could get 42
mpg, information submitted by.............................. 215
Letter from American Petroleum Institute..................... 274
OVERSIGHT HEARING ON COMPROMISING OUR NATIONAL SECURITY BY RESTRICTING
DOMESTIC EXPLORATION AND DEVELOPMENT OF OUR OIL AND GAS RESERVES
----------
WEDNESDAY, APRIL 12, 2000
House of Representatives,
Committee on Resources,
Washington, DC.
The committee met, pursuant to notice, at 11 a.m., in room
1324 Longworth House Office Building, Hon. Don Young (chairman
of the committee) presiding.
Present: Representative Young.
The Chairman. [presiding] The committee will come to order.
STATEMENT OF THE HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ALASKA
The Chairman. I want to thank all of you for participating
in what will be, I hope, an interesting hearing regarding our
national energy policy. It's not the first hearing we've had.
We've had hearings over the years considering energy policy.
They have not produced very much. We hope this will produce
something other than just comments.
This hearing will focus on the alarming fact that while our
nation is one of the largest consumers of fossil fuels, it
lacks a coherent energy policy. Americans are forced to rely on
what I call a policy of knee-pad diplomacy, begging those
countries that produce our fossil fuels. Essentially, our
energy policy consists of, very frankly, the Clinton-Gore
Administration sending diplomats abroad, as I mentioned, to beg
other nations for the oil necessary to supply our national
demand.
This committee's jurisdiction relates to public lands so
our focus today will be on how public lands could play a
meaningful role in protecting our national security by
increasing domestic production and reducing our reliance on
foreign sources of energy. Coming from Alaska, I can't think of
a better example of unrealized potential than the coastal plain
of the Arctic National Refuge, the development of the coastal
plain of ANWR, which clearly holds the most significant
untapped oil and gas reserves in our nation.
If I may digress, and I'm the chairman; I guess I can, from
this opening statement, it seems just like deja vu, we were in
this room, this exact room, in 1973 in March of that year,
discussing our dependency on foreign imported oil. At that time
it was 36 percent and we were talking about Alaska and the
necessity for building a pipeline to deliver the largest
deposit of oil that we knew of at that in Prudhoe Bay.
Some of the arguments we'll hear against this proposal of
ANWR will be exactly the same we heard back in 28 years ago. I
would like to remind my audience that some of you, especially
younger people, go back and study the record and see some of
those comments that were made.
To truly understand the importance of our Alaskan oil, we
need to take a trip back in time, as I just mentioned. 20 years
ago, the Trans-Alaskan pipeline actually, in fact, was
completed in 1976 and 2 million barrels per day and foreign
imports were around 35 percent. And, remember, it was 37
percent when we started. Now, in the year 2000, the Trans-
Alaskan pipeline is moving about 1 million barrels a day and
foreign oil makes up 57 percent of our domestic demand.
There's no question the State of Alaska holds a place of
promise when it comes to producing crude oil. However, in the
face of declining domestic supplies, the administration refused
to put in place an energy policy that includes the development
of significant prospects on Federal lands, frankly, including
Alaska. If I may say so, neither did the past administrations.
This makes my sixth administration I've been under and the
Congress itself has not seen fit to set forward a policy that
develops all forms of energy and not dependent on just one.
In fact, looking to bolster production on Federal lands,
this administration has done the reverse. Our domestic oil
production is the lowest it's been since World War II. Keep
that in mind. It's the lowest it's been since World War II as
far as domestic production. And I've often said anybody who
owns 56 percent or 57 percent of your company, you're going to
do exactly as they tell you to do.
The major factor in the decline of domestic production,
down 17 percent since 1992, is the rise in regulations and
taxes. The administration is currently finalizing regulations
that will increase domestic producer's tax burden by over 60
million per year.
What about coal? Let's get away from oil. More than half
the electricity produced in this country is generated by coal-
fired power plants and yet the administration utilized the
Antiquities Act to lock up the cleanest burning coal in the
lower 48. This is not a policy that promotes energy security or
important high-paying American jobs.
While we feel the impact at the gas pump, and all of us do,
high oil prices and our dependence on foreign sources of energy
have larger consequences. Our economy is prospering, but we
need the stable source of natural resources to meet our energy
needs and sustain our economic growth. Importing such high
volumes of foreign fossil fuels account for one-third of our
trade deficit. It's not automobiles, it's not TVs. In fact, it
is oil.
Americans are spending $300 million per day on foreign oil.
This added up to $100 billion last year. That is $100 billion
of American dollars, American job security, very quickly, are
exported each year.
Not only can a declining domestic industry affect American
jobs, our dependency on foreign oil can have catastrophic
effect on our economy. While the administration often claims
credit for the prosperous economy we now enjoy, this can
quickly change. If you don't believe me, check the NASDAQ as of
yesterday.
It has been reported that a $10.00 increase in Federal law
equals .5 percent increase in inflation, a .25 percent decline
in economic growth. Suppliers like Iraq continue to increase
their exports to the United States. In January 1997, Iraq
exported less than 100,000 barrels per day to the United
States. By last December, that number had steadily increased to
nearly 800,000 barrels per day.
When we went to war against Saddam Hussein less than 10
years ago to have a greater role in providing for our domestic
energy needs, do we really trust foreign suppliers like
Algeria, Angola, and Iraq enough to give them the level of
control over our economy and energy security? It's not in our
national interests to become so reliant on foreign oil that
countries like Iraq can exert so much control over our economic
future.
The root of this problem is the development of our domestic
oil and gas resources. The USGS forest as much as 16 billion
barrels to be typically recovered from Alaska. The single new
source of domestic production will replace Iraq's import for
more than 54 years. Our nation holds vast natural resources
with more discoveries being made daily. Not only are our
domestic natural resources plentiful, but we have the most
stringent environmental laws in the world to ensure that
there's a balance between our energy needs and environmental
safety.
Clearly we can do both. Frankly, in Alaska we've done that.
We've proven with a track record of safety producing oil and
gas resources for decades in the Arctic. With the advances in
technology on ice roads and better directional drilling, the
environment is protected. Federal public lands and Federal
waters hold significant promise and should be developed to
secure America's energy needs. The simple fact is Americans are
dependent upon oil, gas, and other natural resources. We need
electricity to live, oil to heat our homes, and gasoline to
move our airplanes, cars, and buses.
Even that famous association that supports me every day,
the Sierra Club, will be testifying today. They need these
resources to carry out day-to-day business. They like, many
organizations, utilize the Internet. A large percentage of the
total electricity is consumed in activities related to the
Internet. The increasing use of the Internet is estimated to be
responsible for more than half the growths in electricity
demands. A two megabyte e-mail uses a pound of coal or five
ounces of oil. Add up all the messages that are sent, and
you're talking about a significant amount of fossil fuels.
Let's face it. Whether or not you support the production of
natural resources, you use them every minute of every day and
they are needed to live if you want to live as American people
and all those other people in the world should live.
Americans use about 6 million barrels of oil in the United
States and more than 56 percent of this volume is supplied by
four nations. Even if you support alternative sources of
energy--and, by the way, not many of you who support
alternative sources support it. I don't know how many times
I've suggested that you support nuclear power, you objected. I
suggested that you support more coal burning, you object to
that. I suggest hydropower and you object to that. Each time,
you object to alternative sources of fuel then, in fact, you
put yourself on more dependency on foreign sources of energy.
The United States already holds an abundance of natural
resources that we must develop among our Federal lands because
we do own, the Federal Government, the American people, own
about 875 million acres of land and the Federal waters on the
Outer Continental Shelf.
This nation needs and deserves a coherent energy policy
that includes all forms of energy, not just fossil fuels. But
so far, we depend so much on fossil fuels any time one of the
foreign countries burps, we have a stomach ache and we need
that fuel. We shouldn't go through that.
With that, I'll yield to the gentleman from Minnesota.
STATEMENT OF THE HON. BRUCE F. VENTO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MINNESOTA
Mr. Vento. Well, thanks, Mr. Chairman. I'll put my full
statement in the record.
I'm pleased to note our friend and former colleague,
Senator Johnson, and others that are here and so interested.
It's good to see him back. We've worked with him on the many
different energy problems over my career starting with, I might
mention, synthetic fuels.
[Laughter.]
A name that will live in infamy. But, in any case, in his
work on nuclear power and waste and with our former colleague
and our mentor, Mo Udall, and so many others, obviously the oil
issue is one that separates us. I feel a little bit like a
hostile takeover here today in the Resources Committee with
regards to the folks that have a view with regards to ANWR.
My view, of course, as a sponsor, lead sponsor, which, with
170 members joining me in the House on this measure to protect
and set aside this area as wilderness long been a debate about
where we're going to go in terms of how we deal with our
Federal lands. Actually, while the chairman has pointed out
that domestic production of oil and gas are up from 89 to 98
and a substantial portion of that, about 25 percent now, as
opposed to about 15 percent comes off the Federal lands, so
we've actually increased the amount of oil.
Certainly there's a potential to do a lot more with the
existing leases that are outstanding through something called
due diligence as opposed to building up portfolios of leases
that are not being developed and utilized. Of course, there's a
lot of reasons for that. Some will suggest that the price of
oil has to go up. There are a lot of other factors that have to
be considered in the mix. Obviously, if oil stayed at $30.00 a
barrel, some of that oil in Texas that's been remaining and is
hard to recover and expensive to recover would all of a sudden
be possible to bring to the market, as an example.
But the fact that we have had a problem and that we have
been vulnerable and, to an extent, a greater increase in terms
of imports is evident to all of us. The fact is that in the
mid-1970's, it was summer and the range of 35 percent was
imported. Today it's over 50 percent as the chairman has
pointed out.
But part of that, of course, is due to the consumption
aspect of what we're dealing with and how much we're using.
And, considering on a global basis that we're using about 1/5
the energy when we have a population that is, of course, 5
percent of the total world population gives us some indication
of where we could make adjustments and where we may not be
willing to make those.
But, clearly, as far as OPEC is concerned, OPEC now is
responsible for less than half of the oil that we import comes
from OPEC. So we've actually, in a sense, reduced the
dependence on OPEC, but increased our dependence on foreign
sources of oil.
And, of course, we know ourselves that we're part of the
international marketplace. Even some of this oil from the North
Slope that we keep telling ourselves is pretty much for
domestic consumption, especially on the West Coast, even a
small portion of that, about, I guess it's, actually, Mr.
Chairman, I misstated this someone was pointing out. I pointed
out 5 percent and they said I was overstating it. It's actually
5.5 percent so I was being a little conservative.
But that is exported and, obviously, based on the policies
that you have sponsored, Mr. Chairman, we can obviously look
forward to exporting even more of that oil down the road. But
we are part of the international marketplace in terms of these
issues.
Now I think that, while we've opened up a lot of areas in
Alaska most recently, of course the National Petroleum Reserve
has been opened and available. I expect this takes a long time
to come on line is what my competition might say, but that oil
has been opened up. And there is reason to believe that these
areas, and, of course, the demise of oil production in Alaska
has been long predicted but it has not occurred. Frankly, there
has been and is substantial areas where there is oil possible
from West Sak and other areas to be developed that will
continue to keep that pipeline relatively full.
That is say, of course, and, of course, the environmental
problems and concerns we have with regards to wildlife are
something we can debate for a while. But, clearly, I think the
values with regards to ANWR, with regards to its diversity and
its importance in terms of the Native American group, the
Gwich'in that are there, is more important. It reminds me of
our friend, Geraldine Ferraro, who we served with who said that
some of us seem to know the cost of everything and the value of
nothing.
So I do think, as a nation, we need to look at continuing
to try and set aside some of these special areas, especially to
balance that off with meeting our economy and other needs, as I
said in the context of diligence, in the context of work that
needs to be done.
And to recognize the limitations that we have with regards
to spills. There have been, you know, literally hundreds of
those spills that have occurred in the Trans-Atlantic pipeline
since the late 1970's. There are many changes, environmental
changes, that have taken place there that are of concern. We
can take about ice roads and dewatering activities that gone
on. We can talk about the small footprint. But, while the size
is small, the effect of it is very profound in terms of what
goes down.
Mr. Chairman, I, obviously, look forward to the hearing
from this. This hearing is a little bit of a mystery. By some
it's been perceived that there's a great threat and the
administration's energy policy is compromising our sovereignty
by some mysterious rogue states and international schemes. But,
fortunately, our caped crusader that wears a blue sportscoat,
Mr. Richardson----
The Chairman. And now the gentleman's time has run out,
when you're talking about the----
Mr. Vento. And his lucky blue sportscoat has been
successful in beating down the opposition. So I don't think
there's any great mystery. I don't think this is going to
compete for a script with James Bond. I think that or do we
need any more black helicopters added to the mix of this issue.
The Chairman. The gentleman's time has run out.
Mr. Vento. We have some problems and hopefully we'll be
able to deal with it in a rational way. And, Mr. Chairman,
thank you for the time.
[The prepared statement of Mr. Vento follows:]
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The Chairman. The gentleman's time has expired. I
appreciate it and I'd just like to clarify one thing. Waiting
for 8,650,000 a day from other countries, the majority is from
the OPEC countries.
No. 2, the money from the oil that's been supposedly
exported from Alaska is 55,000 barrels a day of heavy crude;
55,000 barrels of oil from California. And your State alone, I
believe, exports about 16,000 barrels of energy in some form.
Mr. Vento. Mr. Chairman, if I might reply. This week we're
making the ultimate sacrifice. A brewery in my district, a
brewery, is going to now start producing ethanol.
The Chairman. Ethanol, which has cost more money to produce
than--it takes more energy to produce ethanol than the ethanol
that's produced to produce energy.
Mr. Vento. Yes. But we're all praying that the ethanol
production won't cut into the beer production.
The Chairman. All right. I appreciate that.
The gentleman, Mr. Largent, the first panel up today is Mr.
Largent was here first and he gets to speak first. Steve.
STATEMENT OF THE HON. STEVE LARGENT, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OKLAHOMA; ACCOMPANIED BY THE HON.
GEORGE W. GEKAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF
PENNSYLVANIA; THE HON. TOM DELAY, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS; AND THE HON. VITO FOSELLA, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
STATEMENT OF THE HON. STEVE LARGENT
Mr. Largent. First of all, that I am a member of the Energy
and Power Subcommittee on Commerce. I come from an oil-
producing State, the State of Oklahoma. My hometown and the
center of my district is Tulsa, Oklahoma; it's known as the oil
capital. So this is an issue that I am knowledgeable of and am
sensitive to. And so I appreciate you holding this hearing and
giving me a chance to testify.
I read, just as an aside, I read a fascinating book called
The Prize by Daniel Yergin and would highly recommend it to
this committee. In particular, it's a book that Daniel Yergin
won the Pulitzer Prize and it's basically the history of oil in
this country, in fact in the world. And it may be a little
intimidating because of its length. If it is, then you should
know that PBS also produced a videotaped series of this book
called The Prize. And I would highly recommend it to my
colleagues.
And so I would like to deliver my testimony at this time.
In response to the recent upsurge in prices at the pump,
Congress and the President are scrambling to decrease prices.
Suggestions include eliminating 4.3 cents per gallon Federal
gas tax, pressuring OPEC nations to produce more oil, and
encouraging the development of alternative energy sources.
While I understand the logic and support aspects of each of
these ideas, I believe the real answer may literally be right
under our noses.
We need to focus on developing a long-term energy policy
based on self-reliance. This policy must promote domestic oil
and gas exploration and production. Rather than directing our
efforts at short-term Band-Aid fixes, we need to work to
prevent future price fluctuations. We need to stop treating the
symptoms of our dependence on temperamental foreign producers
and work to find a long-term cure.
Every administration since Eisenhower has concluded that
the level of oil imports threatens national security. Earlier
this year, the Clinton Administration released a section 232
analysis which concluded that imported oil poses a serious
threat to our national security. Because our economy is based
on energy and, more specifically, petroleum, America should be
prepared to meet as much of this need as we can. While I
support free trade and relationship building between the United
States and OPEC nations, it is unhealthy for this relationship
to threaten American economic independence.
During the last few years, the American oil industry has
been overregulated and overtaxed. The administration's
regulations place ridiculous restrictions on how, where, and
when producers can work. Producers are subject to excessive
reporting and permitting rules that increase their overhead,
hurt their profit margins, and decrease their likelihood of
survival.
There are not one or two big regulations that harm
producers. Rather, there is a vast mosaic of rules and
restrictions from several agencies that interact to slow
production and frustrate producers.
We need to develop a tax policy that helps this vital
industry. We should develop a tax policy that eliminates the
net income limitation and 65 percent net taxable income limit
on percentage depletion. The tax policy should also modify the
alternative minimum tax. Then we need to save marginal oil
production through an aggressive tax incentive program. 80
percent of the oil produced in Oklahoma is from marginal wells,
wells that produce less than 10 barrels of oil per day.
Regulations and perverse tax incentives have cost the oil
industry 65,000 jobs, many of which were in my State of
Oklahoma. Curiously, domestic crude oil production has
declined, while American oil consumption has increased. Today
we import 56 percent of our crude to meet domestic demand.
During the recent gas price increase, politicians of all
stripes have expressed concern. However, the focus on the
short-term puzzles me. Rather than wringing our hands and
sending the Secretary of Energy overseas to plead for increased
international production, we need to look at the factors that
have increased gas prices.
First, the United States needs to reduce regulations on
domestic producers. While drilling should be safe for workers
and the environment, producers should be given the freedom to
run their operations efficiently and effectively.
Second, the administration and Congress should be willing
to explore resource-rich areas in the United States, like the
Outer Continental Shelf, the Rockies, the Arctic National
Refuge. About half the oil and one-fourth of the national gas
in the Outer Continental Shelf is in areas that are off-limits
to exploration. A recent Department of Energy report argued
that opening these lands to production would not be
environmentally dangerous.
Third, the United States should examine energy policies to
determine the impact that these policies will have on fuel
prices. Before gas taxes are imposed and before environmental
treaties are signed, the United States should examine the
economic impact of these policies.
In conclusion, without a strategy for reducing our
addiction to Middle Eastern oil, we will continue to be
vulnerable to the whims of foreign nations. To prevent future
reliance on imported oil, the United States should reduce red
tape on domestic producers, explore oil rich areas in safe
ways, and evaluate the impact that energy policy decisions will
have on consumers and our economy.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Largent follows:]
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The Chairman. Thank you, Mr. Largent. May I congratulate.
It's rare I have a Congressman stick within 5 minutes. I mean,
I want to compliment you.
The Honorable George Gekas from Pennsylvania, would you
please take the witness stand? Yes, sir, you're up.
STATEMENT OF THE HON. GEORGE GEKAS
Mr. Gekas. I thank you, Mr. Chairman. The opening statement
of the chairman acts as a backdrop for the presentation that I
am about to make, because the chairman decried the absence of a
long-term energy policy. And that was endorsed by the gentleman
from Oklahoma who complained, properly, that whatever policy we
have is bits and pieces; it's going to the OPEC companies and
begging for more production, begging them to sell us more oil.
That's some policy that we see in effect.
So what we need, the chairman says and Mr. Largent agrees,
everybody agrees, is a long-term energy policy. The bill that
I've introduced about 2 weeks ago with the cosponsorship of the
chairman of this committee, who's name escapes me at the
moment, oh, Don Young. This piece of legislation crystallizes
our vision of the long-term energy policy.
How does it do it? It calls for the immediate formation of
a bipartisan, blue-ribbon commission that would explore all of
the alternative sources of energy, all of the tax provisions to
which Mr. Largent has referred, all of the combinations of
ethics and conservation and drilling issues that could come
before it, and determine that, within 10 years, putting X, Y,
and Z and D and A in place, we could become self-sufficient.
The goal would be 10 years.
Before anyone laughs, that's what John Kennedy projected
for putting a man on the moon and it was done within 10 years.
We can become self-sufficient in 10 years, I am confident.
Only recently, for instance, the administration did come
through, for the first time, in response to the latest crisis,
on some proposals having to do with tax credits. Unlike
previous Congresses, which did away with the oil depletion
allowance which hurt Oklahoma so badly and Texas, back in that
age, that many wells were capped, the oil depletion allowance
was a kind of a tax credit that could have helped was ripped
away from the books and wells were capped.
On top of that, previous Congresses imposed excess profits
taxes, exactly the wrong kind, that's a disincentive to
drilling and to investing and to do our domestic self-
sufficient work. And so this commission that I envision would
analyze all of these and return to a sane prospect of tax
credits and exploration incentives for the domestic market.
And offshore drilling, as the gentleman from Oklahoma says,
is not going to allow the Continental Shelf to sink in and lose
the whole country while we drill for oil. It will take
conservation measures and environmental issues into
consideration. But we need to do that.
So, just as the wording of the bill itself says, this
commission would explore alternate sources of energy: ethanol,
solar power, electricity, natural gas, coal, hydrogen, wind
energy, and any other forms of alternative power sources that
the imagination can conjure up. Not to mention the initiatives
that are purely American in energy, ever since oil was
discovered.
So we can do it; 10 years and we'd become self-sufficient.
No more begging OPEC. No more relying on 55 percent of our
energy to come from foreign sources. It's a national security
issue, as well as a domestic security issue. I urge everyone to
join the chairman and me in the formation of this commission
through this bill.
By the way, what this would do, it seems to me, would
amalgamate all the ideas. There are some people who would think
tax credits are the real way to accomplish self-sufficiency.
Others think that unabated Continental Shelf offshore drilling
would do it. Others believe that changing the price schedules
and doing some other kinds of tax improvements would help.
This commission, made up of experts that we would have a
role in choosing, would put all of this together and come
through with a nice, comprehensive, long-term energy policy
that, little by little, will eat away at our dependency on OPEC
and bring about self-sufficiency and make us absolutely
independent politically, domestically, and internationally.
I thank the chairman.
[The prepared statement of Mr. Gekas follows:]
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The Chairman. I thank you, Mr. Gekas. I have just a couple
of questions and I am the sponsor of that bill and you do know
my name. That's going to cost you a lot of money, by the way.
Mr. Gekas. Yes.
The Chairman. But when's the timeframe if that bill is to
pass, which, I agree with you, Congress can never agree.
Mr. Gekas. Yes.
The Chairman. Mr. Vento wants to conserve his into
posterity.
Mr. Gekas. I'm not wed to any timetable because I really
cannot fathom how best to get it started, but if we would pass
this bill tomorrow and have it signed into law, I believe that
by the end of this year, this commission would be fully at work
and we could have a report within a year to give us the 10-year
plan.
The Chairman. OK. Before we go to any other questions, Mr.
DeLay, welcome aboard. We are glad to have you here. We have
heard from Mr. Largent and Mr. Gekas and you're up now.
Mr. Gekas. I'm going to give you a copy of my bill, to
start.
[The Bill H.R. 4035 follows:]
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The Chairman. And, by the way, what's the number of that
bill, Mr. Gekas? What's the number?
Mr. Gekas. This is H.R. 4035.
The Chairman. 4035. OK, good. Go ahead, Mr. DeLay.
STATEMENT OF HON. TOM DELAY, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF TEXAS
Mr. DeLay. Well, thank you, Mr. Chairman and I apologize
for being late. There's a lot going on before we recess Friday.
[Laughter.]
I'm hearing calls for Thursday.
Mr. Chairman, I will focus on the restrictions in
exploration and development of our oil and gas resources and
the important role that our Federal land policies play in
framing our domestic energy picture.
As I speak, our energy policy is in a shambles. Over recent
years, the multi-use component of Federal lands have been
sacrificed at the altar of environmental extremism because some
don't think these lands should be used at all.
The recent fluctuations in oil and gas prices have served
to intensify this debate and the stakes have never been higher.
Our growing dependence on foreign imports have now exceeded 56
percent of our nation's energy needs and is a direct threat to
our national security. But the real tragedy here is that all
could have been avoided were it not for the Clinton/Gore
Administration's Federal lands policies of lock them up now and
ask questions later.
The four Federal land management agencies own nearly one-
third of the land in the United States and with proposals being
considered to further increase Federal and State land
acquisition. That percentage is likely to grow each and every
year. By abandoning an important mission of the multi-use
Federal land system, the responsible resource extraction and
energy production, we have increased our reliance on foreign
nations.
We have seen the consequences of this anti-energy energy
policy at the gas pump and in the oil patch. In a little over a
year, oil prices have fluctuated from some of the lowest levels
on record to some of the highest. In the process, more than
136,000 domestic oil wells and 57,000 gas wells have closed up
since 1997 and we're left at the mercy of OPEC to make up the
difference.
But that's only half of it. Layer upon layer of new
government red tape and bureaucracy advanced unilaterally by
this administration has undermined the vibrancy of the domestic
oil and gas industry. Some of these include moratoriums on road
construction, abuse of the Antiquities Act, restrictions on new
pipeline and dam construction, obscure interpretations of our
mining laws, increased fees for offshore production in the Gulf
of Mexico, and expansive interpretations of the Endangered
Species and Clean Water Acts that have, in many cases,
unnecessarily denied permits on public and private lands.
And these are but just a handful of the harmful policies
pushed forth by this administration.
Now, under fire, the President has said we should pass tax
incentives for small producers. Now the President must have a
very short memory, because just last year, Congress passed
incentives for increased domestic oil and gas production as
part of the Taxpayer Refund and Relief Act. The President
vetoed this measure just months before prices began to rise.
In response, even Energy Secretary Bill Richardson admitted
that the administration was caught napping while the price of
gasoline jumped to nearly $2.00 a gallon.
So where can the President act to help the situation?
First, to the north. He can look toward Alaska, Mr. Chairman.
In 1995, he vetoed legislation that would have allowed oil
exploration and development on a tiny portion of the Alaskan
National Wildlife Preserve. He claimed it would undermine the
environment, but only three square miles would have been
affected. The rest of the area, which would have been
untouched, is the size of Rhode Island.
In the south, the President should repeal the increased
royalty fees that this administration unilaterally imposed. The
Rigs to Reef program in the Gulf of Mexico has proven that we
can drill for oil in the Outer Continental Shelf using new
technologies to the benefit of both the industry and marine
life.
Such capability is possible across-the-board. After all, a
sound environment and a prosperous economy are not either/or
propositions. They go hand in hand.
Mr. Chairman, it is possible to conserve the environment
while meeting our domestic energy needs with a minimal
dependence on foreign sources of energy, but the President must
take common sense action to do it. And I thank you for allowing
me to testify.
[The prepared statement of Mr. DeLay follows:]
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The Chairman. Thank you, Mr. DeLay, and I understand you
have to go. I have one question to ask you and Mr. Largent both
because you've alluded to the closing of wells, the capping of
wells. Is that a Federal law or are those State laws that
require the capping, or is that voluntary?
Mr. Largent. Mr. Chairman, it's my understanding it's all
of the above. But the State also has certain prerequisites that
have to be met when you close and cap wells. But it's
principally an economic decision when you cap a well. When it's
costing you more to produce it than you can actually make,
then, economically, it's no longer feasible to keep those wells
open.
Then the process that you actually have to follow to cap
the well, you know, there are EPA concerns, and----
The Chairman. What I'm looking at, because we lost about 3
million barrels per day from capped wells from 1986 until now.
I believe that's about the figure. Maybe I'm wrong. What would
be wrong with an incentive to keep those wells from being
capped and using that oil as a reserve? And I'm just I'm
looking because once it's capped, if I'm not mistaken, it's
actually plugged.
Mr. Largent. That's correct.
The Chairman. And you lose that production, maybe 10
barrels a day. But if all the wells were available, it seems to
me, that that would be a possibility that we might want to look
at.
One thing I'm looking for all three you gentlemen, you've
alluded to it, is if we don't get the commission like Mr. Gekas
has suggested, some of you suggested some ideas. I like, you
know, you are oil, I'm oil. We sit down with an idea of what we
can do with oil, beyond what Mr. Gekas is talking about because
he includes all the energy sources, which we have to do.
Because I don't think, contrary to what people say, we'll
ever be self-sufficient in fossil fuels. But we don't have to
be 57 percent. If we can get back down to 37 percent, 33
percent, they can't direct us on how we should manage our
business. That's what they're doing right now. And if you think
this price is going down, it's going back up again. Read the
Wall Street Journal yesterday, as, actually, they say, it's
going to go back up. And so that's one of the things.
And Mr. DeLay does have to leave. Does anybody have any
questions for Mr. DeLay?
Mr. Vento. Just on that point, Mr. Chairman, I won't keep
him. I appreciate Mr. DeLay working to conclude our business
tomorrow. He's the leader and, in spite of his, obviously,
concern about getting the work done.
But I think that on the stripper wells that, in fact, there
is, in the administration of those activities in terms of
taxes, that there are the opportunity at least to, in fact,
take off the royalty payments on them and to prevent the
continued production. Of course, I think there are differences
about when that's to go on or off.
And, of course, for a long time we had criticism in this
country because of the cheap oil policies abroad. In fact, many
of our oil price controls were initially put on with the idea
of building a floor so that there would be production. It's
ironic they ended up being ceilings at various times. But I
think we've got to look very carefully at what we're doing here
and I think most of us want to look at that and talk about what
the cost is and what we're getting back for it.
I'd just point out, I didn't disagree, Mr. Chairman, with
you that we had increased imports. It's that OPEC makes up a,
where they had made up a substantial portion of the import tax,
they make up, I guess, at one point less than half, maybe it's
more than half again right now, in 2000 numbers. But I did want
to comment.
The Chairman. Let me have one more witness and then we have
other witnesses in the room. Mr. Vito, you're not excused for
being late. You're penalized. Mr. DeLay, you do have to go.
Anybody have any questions for Mr. DeLay?
Mrs. Cubin. Mr. Chairman, I have but one brief statement to
make about Mr. DeLay's and Largent's testimony, but mostly Mr.
DeLay. You referred to being able to use the public lands and
not having access to the public lands. You referred to multiple
use. Right now the Forest Service, through regulation, is
trying to change the multiple use of the public lands from
multiple use to pre-European condition. And that is just one
example of how the administration is doing everything they can
to block access for purposes of production of coal, uranium,
hard rock, and fossil fuel, all the fossil fuels.
So I just wanted to say that.
Mr. Delay. I thank the gentlelady and she makes my point
for me. Thank you very much. Thank you, Mr. Chairman.
The Chairman. Vito.
STATEMENT OF THE HON. VITO FOSELLA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK
Mr. Fossella. Thank you very much, Mr. Chairman, and please
accept my apologies. I was in the Commerce Committee discussing
vital national issues regarding low-flow and high-flow toilets
and so the basis of my delay was voting, which is a good segway
into the testimony I'm about to offer.
Mr. Chairman and members of the committee, I would like to
thank you for the opportunity to testify today about an issue
that greatly impacts America's long-term national and economic
security. A recent spike in oil and gasoline prices have shined
a bright light on a problem that has been brewing for many
years and, if left unaddressed, is a potential threat to not
just not just our economic well-being, but our safety and
security as a nation and a people.
At the heart of the problem lies a simple and unambiguous
fact: The present administration lacks an adequate
understanding of our nation's energy needs as well as a plan or
strategy to allow the marketplace to meet the demands of the
American people. In other words, our Federal Government has now
become too often the problem and, in fact, not the solution.
High taxes and regulatory burdens inhibit the private sector
from meeting the demands of the American people and stifle
domestic production.
Despite statements by the President dating back 6 years and
America's growing reliance on foreign oil to make the United
States vulnerable to the whims of potentially unstable and
unfriendly nations, the Energy Department has failed to
articulate a clear, concise, and coherent policy.
In the words of the President several years ago, quote, ``I
am today concurring with the Commerce Department's finding that
the nation's growing reliance on imports of crude oil and
refined petroleum products threaten the nation's security
because they increase U.S. vulnerability to oil supply
interruptions.'' The nation's growing reliance on imports
threatens the nation's security. I agree with the President.
Yet, rather than taking the needed steps to encourage
domestic production, the administration has stood silently as
demand for foreign oil surged dramatically from 51 percent in
1994 to 56 percent today, a jump of almost 9 percent. In fact,
since 1992, domestic crude oil production is now 17 percent
while our consumption has increased 15 percent. This is simply
not acceptable.
Our growing reliance on foreign oil has once again garnered
much attention. This past winter, unusually harsh weather and
OPEC production caps pushed the price of home heating oil past
$2.00 a gallon. We experienced Economics 101, the laws of
supply and demand.
I first called attention to the rise in oil prices in the
early days of winter, hoping the administration would act
quickly before the situation spiralled out of control. In the
short-term, I urged the administration to pressure OPEC to end
its production cutbacks. For nearly a year, these cutbacks have
decreased the supply of oil in the world market by more than 4
million barrels per day. And, frustrated by the lack of action,
we requested congressional hearings in the Energy and Power
Subcommittee to explore the matter more deeply and to
underscore the rising cost on America's economy.
During the hearings, I was left speechless and some of my
colleagues when officials of the Energy Department conceded,
quote, ``It's obvious that the Federal Government was not
prepared. We were caught napping. We got complacent,'' end
quote. Tell that to the guy at the pump.
This is simply unacceptable, but not surprising, coming
from the same agency and administration which over the past 7
years has not developed a strategy that realistically meets
America's needs. OPEC is a cartel and over the past year we've
clearly seen what this cartel has the ability to do, their
ability to influence our economy, our politics, our markets,
our everyday life.
This winter, we saw ballooning heating oil prices as
residents of the Northeast were forced to pay exorbitant
heating oil bills and, in fact, some had trouble paying and
even getting oil to their homes or business. As winter turns to
spring and the shortage of oil increased gas prices at the
pumps to nearly $2.00 a gallon. Americans are once again forced
to dig deep in their pockets.
We have not seen these effects only in our heating, oil,
and gasoline bills. Our shipping companies, taxis, airport
shuttles, airlines, trucking companies all were forced to tack
on fuel surchages to the services they provide to Americans.
Once again, the consumer paid the price.
We tried to get a trip to Vienna. The OPEC was meeting with
Congressman Joe Barton and several others to pressure OPEC and
underscore again American needs in terms of increasing
production. The administration, surprisingly, the Secretary of
Energy, shortcircuited the trip and urged us not to attend.
We wanted to go to OPEC to see the ministers in OPEC to
remind them that American lives were lost to defend the
sovereignty and freedom of their nations and that the time for
diplomacy and more meetings had long since passed. The price
has spurred OPEC to increase production, which should bring
some relief to the gas pump over the next few months, but not
enough.
Mr. Chairman, I sit on the Energy and Power Subcommittee,
along with Mr. Largent, who is also testifying, as you heard
today. And I'd like to let this committee know that Chairman
Barton plans to have a series of hearings examining our
nation's energy needs and how to best address them, taking a
close look at what we can do as a nation to ease our foreign
dependence, to ease the regulatory and tax burdens on the
energy industry, and to encourage and increase our reliance on
domestic energy resources. We have an opportunity now. Let's do
it.
What our country has experienced this year not only
strengthens my belief that America needs to develop a long-term
strategy that reduces our reliance on foreign oil, but reminds
us that never again should the United States be forced to wait
on bended knee for the assistance of other nations when our
economic and national security are at stake.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Fosella follows:]
Statement of Hon. Vito J. Fossella, a Representative in Congress from
the State of New York
Mr. Chairman, Members of the Committee, I would like to
thank you for the opportunity to testify today about an issue
that greatly impacts America's long-term national and economic
security. The recent spike in oil and gasoline prices has
shined a bright light on a problem that has been brewing for
many years and that, if left unaddressed, has the potential to
threaten not just our economic well-being, but our safety and
security as a nation and a people.
At the heart of the problem lies a simple and unambiguous
fact: The present Administration lacks an adequate
understanding of our nation's energy needs, as well as a plan
or strategy to allow the marketplace to meet the demands of the
American people. In other words, our Federal Government is too
often the problem, and in fact not the solution. High taxes and
regulatory burdens inhibit the private sector from meeting
demands of the American people and stifle domestic production.
Despite statements by the President dating back 6 years
that America's growing reliance on foreign oil could make the
United States vulnerable to the whims of potentially unstable
and unfriendly nations, the Energy Department has failed to
articulate a clear, concise and coherent policy. Rather than
taking the needed steps to encourage domestic production, the
Administration has stood by silently as demand for foreign oil
has surged dramatically, from 51 percent in 1994 to 57 percent
today, a jump, of 6 percent. In, fact, since 1992, domestic
crude oil production is down 17 percent while our consumption
has increased 15 percent--this is simply not acceptable.
Our growing reliance on foreign oil has once again garnered
much attention this past winter when unusually harsh weather
and OPEC production cuts pushed the price of home heating oil
past $2 a gallon. We expected Economics 101 and the laws of
supply and demand to come into effect, but this did not happen.
I first called attention to the rise in oil prices during the
early days of winter, hoping the Clinton Administration would
act quickly before the situation spiraled out of control. In
the short term, I urged the Administration to pressure OPEC to
end its production cutbacks. For nearly year, these cutbacks
have decreased the supply of oil on the world markets by more
than 4 million barrels per day. Frustrated by the lack of
action, I requested a Congressional hearing in the Energy and
Power Subcommittee to explore the matter more deeply and to
underscore the rising costs to America's economy.
During the hearings, I was left speechless when officials
of the Energy Department conceded, ``It's obvious that the
Federal Government was not prepared. We were caught napping. We
got complacent.'' This is simply unacceptable, but not
surprising coming from the same Agency and Administration which
over the past 7 years had not developed an energy strategy that
realistically meets America's needs.
OPEC is a cartel--and over the past year, we have clearly
seen what this cartel has the ability to do--their ability to
influence our economy, our politics, our markets--our everyday
life. This winter we saw ballooning heating oil prices--as
residents of the Northeast were forced to pay exorbitant
heating oil bills and some in fact had trouble even getting oil
to beat their homes and businesses. As winter turned to spring
and the shortage of oil increased gas pump prices to nearly S2
a gallon. Americans were once again forced to dig deep in their
pockets. But we have not seen these effects in our heating and
gasoline bills--shipping companies, taxis, airport shuttles,
airlines and trucking companies all were forced to tack on fuel
surcharges to the services they provide to Americans--once
again the consumer paid the price.
Last month, when OPEC convened to discuss raising
production levels, I, along with Energy and Power Chairman Joe
Barton sought to arrange a Congressional delegation to attend
the meetings and bring added pressure on the cartel. I believed
the United States had to show a united front to spur OPEC to
action. The Administration short-circuited the trip, but not
before we reminded OPEC's oil ministers that, less than a
decade ago, the United States brought peace and stability to
the region when Iraq invaded neighboring countries. We reminded
them that American lives were lost to defend the sovereignty
and freedom of their nations, and that the time for diplomacy
and more meetings had long since passed. The pressure spurred
OPEC to increase production, which should bring some relief to
the gas pumps over the next few months.
Mr. Chairman, I sit on the Energy and Power Subcommittee of
the House Commerce Committee--along with Mr. Largent who is
also testifying here today. And I'd like to let the Committee
know that Chairman Barton plans on having a series of hearings
examining our nation's energy needs and how to best address
them--taking a close look at what we can do to ease our foreign
dependence, to ease the regulatory and tax burdens in the
energy industry and to encourage an increase in reliance on
domestic energy sources. We now have an opportunity to take a
long term approach to this issue--let's do it.
What our country bas experienced this year only strengthens
my belief that America needs to develop a long-term strategy
that reduces our reliance on foreign oil. Never again should
the United States be forced to wait on bended knee for the
assistance of other nations when our economic and national
security are at stake.
The Chairman. I thank you. And, at this time, the gentleman
from Louisiana, do you have a question for this panel?
Mr. Tauzin. Well, a very short one, Mr. Chairman. Most of
you are focused on the problems with foreign oil imports and
those who have a relatively good memory remember the long lines
at gasoline stations when OPEC last declared an embargo on the
United States. Steve, you were probably in high school at the
time. And so were you, Vito. But I know George wasn't. George
remembers.
What was interesting then was that our dependence was
basically improving. And some members of OPEC, Venezuela, in
particular, abandoned the OPEC oil embargo and continued to
supply us with crude. And we got through that period of pretty
hard times. In fact, in my State of Louisiana, we had the
biggest shortage of any State in America, the biggest
curtailments of natural gas of any State in America, believe it
or not, even though we were one of the biggest producers.
But we got through it. With the help of some friends, even
in OPEC, like Venezuela. We ought to remember that.
But today we've got a different form of dependence that is
even more frightening, I think, for our country. Not only are
we more dependent upon crude than ever before, even before the
embargo, but now our dependence is also growing in refined
products, as we in this country have failed to continue the
pace of authorizing, licensing, and building refineries in
America. The last one built in America was built in my
district. The last one repaired and restored is in my district.
And the concern that I don't hear a lot about and I wonder
if you might want to comment, any one of you, real quickly, on
policy that would make us independent. How do we recommend
changes? What do we do to encourage America to have more
refining capacity, on the assumption that we can find a friend
who will sell us crude when we need it? If we can't refine it
and get it to the marketplace, if we depend upon Saudi
refineries, if we depend upon OPEC refineries to supply us with
refined products, and that shuts down, what are we going to do?
Anybody have a thought on that or a comment on it? George.
Mr. Gekas. Mr. Chairman and I'd say to the gentleman that,
as I envision my proposal coming into effect, I could see that
the gentleman from Louisiana would be one of the first
witnesses to testify before the Blue Ribbon commission that I
envision on trying to blend the considerations of the oil
refinery problem with the crude oil problem with the tax
incentive problem with the exploration of ANWR with the other
tools that might be at hand for a comprehensive policy, but
always to keep the oil refinery problem in the topic that is at
hand, namely, the comprehensive long-term policy.
We can't have a long-term policy without dealing with the
refineries. This is what I'm getting at in the comprehensive
planning that this Blue Ribbon commission would recommend to
the Congress.
Mr. Largent. I would respond to the gentleman by saying,
and I'm just pulling these numbers off the top of my head, that
if they're not exactly right, they're really close, that in
1979, the number of refineries that we had in operation in this
country was around 47. Today, the number is about 23. And I
think the last new refinery that was built in this country, you
mentioned that it was in your district, I believe it was 1981
was the last refinery that was built in this country.
So, again, this is the result of the continued pressure
from a lot of different sources, economic sources,
environmental sources, that are putting pressure so that we're
not only seeing a depletion of the refineries in this country
where we have the ability to, you know, refine the crude oil,
but we're also seeing a reduction in the number of drilling
rigs that are available. They're rusting in Oklahoma today
because it's just not economically viable to produce oil in
this country because of the tax policies and the regulatory
policy.
I'll give you two examples and one hero story about the
domestic production. First the hero story. In Oklahoma, the oil
producers formed an organization called the Oklahoma Energy
Resource Board. It's an independent agency that's owned,
operated, organized by domestic producers in the State of
Oklahoma. They voluntarily donate a percentage of each barrel
of oil that goes into the Oklahoma Energy Resource Board.
The Oklahoma Energy Resource Board has two functions.
First, it disseminates information about the domestic
production industry. The second thing that it does it clean up
abandoned well sites. And in the process of the last several
years, they have cleaned up hundreds of wells that had been
abandoned in the State of Oklahoma that never would have been
readdressed had it not been for the domestic producers. And
it's a tremendous hero story. Something that was done without,
you know, government legislation, but was done on a voluntary
basis.
Two examples of some of the regulatory burden. And, believe
me, the regulatory burden that's on this domestic production
industry, they're being nickel-and-dimed to death. I mean,
these don't sound like huge things, but there's thousands of
little things that are just nickel and dime. It's death by a
thousand cuts.
One example. The Migratory Bird Act placed a burden on the
domestic producers by saying they had to place nets over all of
their barrels that they have to capture salt water that comes
out as a result of drilling. So the salt water has to be pumped
into these large barrels.
And they were finding that some of the migratory birds were
landing in these barrels that literally are no bigger than the
circumference of this table right here. And they had to buy
these nets to put over several of these barrels--I'm calling
them barrels, tanks is what they actually are, water tanks. And
there will be three or four tanks at every well site.
Well, they had to net those because of the Migratory Bird
Act. Well, the nets, you know, maybe cost, you know, $5,000,
$7,500 bucks, but then when you multiply that times every well
that has three or four barrels, it gets very expensive. Well,
that's just one example of being nickel-and-dimed to death.
Another example would be the EPA has issued this decree
that says that domestic producers have to have a toxic release
inventory about the different components, products, that they
use at the well site. And, as a result of that, they have to
prepare this lengthy document. And once they did it, when this
first came about, they realized we're going to spend, you know,
thousands of dollars preparing this document about the toxic
release inventory. Who do we turn it over to? EPA didn't even
know who to turn it over to.
Well, they have to turn it over to the fire department. So
they turned it over to the local fire department, they didn't
know what the heck to do with it so----
The Chairman. Steve, I don't want to interrupt you. Whoever
has got a phone in this room, I don't believe knows my rule. If
you've got a portable phone and it's on, get out. It's that
simple. And it's not a hard rule to follow. You've got a
buzzer. If you don't have a buzzer, get a new phone.
Mr. Largent. It have been mine.
The Chairman. I don't care whose it is. I'm just saying
leave.
[Laughter.]
Mr. Tauzin. I've been thrown out already, Steve, so don't
be embarrassed.
The Chairman. The gentleman's time has expired. I do
appreciate, you know.
Mr. Vento. Mr. Chairman, just for the record, I want to put
an editorial in that I know that you'll enjoy reading.
The Chairman. That depends. Who's it from?
Mr. Vento. The Minneapolis Star Tribune. ``Energy Problems
Can't be Drilled Away,'' Mr. Chairman. I'd submit it for the
record. And I would ask that Mr. Gekas' bill on the commission
be put in the record.
[The information referred to follows:]
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The Chairman. Without objection. The gentleman from
Kentucky--Tennessee. Folks. We're all the same. Go ahead.
Mr. Duncan. Thank you, Mr. Chairman, and thank you for
holding this hearing. You know, one of the things that I do is
chair the Aviation Subcommittee and their transport association
told us a few days ago that with each one penny increase in
their fuel costs, that they lose $200 million a year, the
airlines do. $200 million a year for each one penny increase in
their fuel prices.
And what I've said, you know, the rise in the gas prices is
not only hurting us in aviation, it's hurting us in
agriculture, tourism, and almost every industry imaginable. And
it also causes us the most serious problems, I think, for those
who live in small towns and rural areas because so many of
those people have to drive further distances to go to work.
And I have noticed over the years that these environmental
extremists who don't want us to drill for any oil almost always
come from very wealthy families and maybe they don't realize
how much they're hurting the poor and the working people of
this country.
But I have a statement, a full statement, that I want to
put in the record.
But I have some very, very strong concerns about this. I
read recently that our domestic oil production is at its lowest
level since 1951. And Mr. Largent mentioned the refineries that
I have closed. And I think it's very sad that we're sitting on
all of this and these billions of barrels of oil up in Alaska
and also billions more offshore and we have become so dependent
on foreign oil.
But primarily the concern I have is that we are hurting the
poor and the working people of this country by driving up
prices and destroying jobs. And it's going to cause us some
very serious problems if we don't act on some of this
legislation.
And I want to put my full statement in the record. But
thank you very much.
The Chairman. All right. And I want to thank the gentleman
from Tennessee. And the one reason I--sometimes I have a hard
time with it, but his name is Jim Duncan. Jim Duncan ran
against me last time in Alaska and that gives me a little
problem. And, without objection, so ordered.
The Chairman. The gentleman from American Samoa. The
gentleman from California.
Mr. Calvert. Thank you, Mr. Chairman. I find it interesting
that this administration or the Justice Department would go
after Microsoft, but they tend to not want to do anything about
OPEC.
One thing I wanted to point out that Mr. Largent brought up
about the refining capacity, most of the refineries that are
closed in the United States closed in one State and that was
the State of California. And the reason why those refineries
closed was because California has a clean air standard that's
different than anywhere else in the United States.
I don't say that, necessarily, is a bad thing. We have a
reformulated gasoline standard in California that's done a lot,
dramatically, to increase air quality in California. We have a
sulphur standard right now at 30 parts per million that being
dropped by California clean air folks to 15 parts per million.
But one thing I want to point out to my friend from
Louisiana and from Texas and other States that have a
tremendous amount of refining capacity, whatever is left, is in
the process when California went through this transfer to new
technology on refining, many of the small refiners did not have
the capital in order to invest to stay in business and so they
closed up. And so we had about 12 refineries in California and
that went down to about 6 in California today.
And that's caused a big problem. And that's one of the
reasons why we probably experience, we do experience, the
highest gas prices anywhere in the United States. We're right
about $2.00 a gallon, isn't that correct, Mr. Pombo? It depends
on where you go shopping for gasoline. And that has put a
tremendous amount of stress on folks in California.
But as you well know, the EPA has made a determination that
all refineries will have to go to the 30 part per million
standard pretty soon, by 2004, I believe. And I would hope that
we could work with the Commerce Committee and the Ways and
Means Committees and whatever we need to do around here to
remove the unintended consequence of refineries going out of
business in this country.
Because if California is any evidence of what will happen,
refineries in Louisiana and Texas will suffer because of this.
It may be a great thing for clean air, but we ought to
recognize that it's a tremendous amount of money. We need to
help, especially, small refineries and large refineries to make
these technological changes in order to meet Federal regulation
that they're being imposed upon to do that without removing too
much competition from the marketplace.
And I would like to agree with the chairman that we need to
get more oil production in the country and that's part of the
problem.
But, also, many nuclear facilities are going off line here
in the next several years. And we have great new nuclear
technologies that are clean. It's not the same technology that
folks experienced 30, 40, 50 years ago. And I think we need to
better explore new nuclear technologies, which, by the way,
produces power for about three cents a kilowatt. And,
obviously, it's clean. There's no so-called greenhouse effect.
And I would hope that the environmental community would take
another new look at the new nuclear power that is out there
today.
And, with that, I thank the chairman.
The Chairman. The gentleman, Mr. Udall.
Mr. Udall. Thank you, Mr. Chairman. I want to welcome the
panel. And it's always great, in particular, to see my
colleague Mr. Largent not in a baseball uniform throwing his
big sweeping curve ball at your head and then it ends up over
the plate.
But I want to thank the panel today. One very brief comment
from a set of comments, Mr. Chairman, and I'd ask unanimous
consent to include my statement in the record. I'm one of the
cochairs of the Renewable Energy and Energy Efficiency Caucus,
a bipartisan group. There are about 160 members in the House.
And we ought to have more members, frankly, because there are
renewable energy projects going on in almost every single
congressional district in the country.
And when I look at the title of the hearing, ``Compromising
Our National Security,'' I think it's important to remember
that there's great opportunity in the renewable area and in the
energy efficiency area and we ought to be doing more in this
Congress to invest in those research and development efforts.
And that, in the long-run, would help us economically as well
as making us less dependent on foreign sources of oil.
The petroleum geologists tell us that the world supply of
oil is finite and eventually we're going to run out. So, yes,
we should be doing all we can within the environmental laws and
within protecting the safety of the workers and so on to
extract as much oil as possible, but we ought to be
complementing that with additional efforts in this exciting new
area of renewable energy and energy efficiency.
Again, I thank you, Mr. Chairman, for the time and I yield
back what time I have left.
[The prepared statement of Mr. Udall follows:]
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The Chairman. Thank you. The gentleman from Pennsylvania,
Mr. Peterson.
Mr. Peterson. I would like to thank the panel this morning
and, I guess, remind them that I come from where it all
started. I live five miles from Great Swale where the first oil
well was produced in this country. I was actually a dug well,
68 feet deep. The oil sand came that close to the surface where
it had been oozing out of the ground for years and the stream
was called Oil Creek nearby because there was always oil in the
water, naturally.
Any way, we're not a major player in the oil field. We were
always considered the premium or Quaker State, Penzoil, where
all the major brands came from because we were a paraffin-based
oil. We still have some oil production, but I've lived to watch
that business pretty well wither up and dry, especially when
oil became so cheap for so long. And also with the regulations
and the controls.
But I know Oklahoma, and I'd like to ask the gentleman from
Oklahoma, is a State that is one of our major producing States
and I guess, with oil being 40 percent, the recent figures I've
seen that 40 percent of our energy today comes from oil, for
all uses, mostly transportation, but for all uses, that oil is
still 40 percent of our energy, can the spigot really be opened
in a State like Oklahoma with fair policies and fair
regulations and some tax incentives?
Mr. Largent. I think the answer to that is absolutely. The
economics are what drive domestic producers. And, frankly, I
would like to concur with what Mr. Vento said. I didn't read
the article that he submitted for the record, but saying that
drilling will not solve all of our energy problems, I agree
with that. I don't know that if we open up all of these areas
that we will be able to supply 100 percent of our domestic
needs.
But we certainly would not be reliant to the tune that we
are today on foreign oil and I think that's what we need to
examine, especially in light of the national security risk that
it inevitably leads to.
Mr. Peterson. I know in Pennsylvania, 10 or 15 years ago
when the decline happened, the huge unemployment, the number,
the people. It was the working man who lost his opportunity and
there were, I don't know, about Oklahoma, but in Pennsylvania
we never really replaced those jobs when we lost the oil patch
jobs. Those were working jobs from the average working people,
blue-collar people, who went out and worked in those fields and
that was a work force that's never been replaced. Most of them
cannot go to work in high-tech factories. They don't have the
skills.
Mr. Largent. Well, I would just respond by saying that
you're exactly right and that's taking place in my State of
Oklahoma where 50,000 jobs have been lost here just in the last
5 years. And what happens is not only are we losing the ability
to use the equipment--the drilling wells that are rusting, the
drilling equipment that's rusting, it's irreparable, it's going
to take years to replace that--but we're losing the manpower
and the experience as well. As those jobs are lost, people are
moving on into other jobs, as you would expect. And we lose
that as a resource as well.
And so what I'm saying is the longer we wait and prolong
moving forward and developing a sound national energy policy,
the longer it's going to take us to cycle back up to where we
need to be.
Mr. Peterson. To revive your patch, we need to move
quickly, right? Thank you.
Mr. Tauzin. Would the gentleman yield a second?
Mr. Peterson. you bet.
Mr. Tauzin. Just to say, one thing that's also missing in
this equation, but we get a lot of people saying why don't we
just produce alternatives to oil and gas? The problem is, once
you've become as dependent upon OPEC oil as we've become, then
all the folks who might want to go into alternative forms of
energy know that any day OPEC can drop that price just by
opening their spigots, they can drop it down to $8.00 a barrel,
and destroy anybody who's invested in an alternative energy
form.
So that the reliance on OPEC oil is creating a disincentive
to go out and explore other ways of producing alternative
energy for America. It's doing the perverse effect of
discouraging us to become more dependent on alternative forms.
So, in a sense, the very people who are putting all these
regulations and suppressing the development of ANWR and
suppressing the development of oil and gas in our own country
have built a reliance now that makes it even more difficult for
us to move to the alternative forms that they recommend for the
country. It killed the goose that laid the golden egg.
The Chairman. The gentleman, Mr. Pombo. The gentlelady,
Mrs. Cubin.
Mrs. Cubin. Thank you, Mr. Chairman. I will continue to
point out the problem of access to the public lands as we go
throughout this hearing today for purposes of energy
development. There are alternative sources that people on the
other side have talked about, for example, coal bed methane, in
the State of Wyoming. This is a huge resource. It's a very
clean-burning fuel that needs to be considered as part of our
national energy policy.
But because of administration regulations, road blocks, and
so on, coal bed methane is literally going into the air because
coal bed methane, as you might expect, is methane that is in
the coal seams. And when we can't get permits for pipelines to
transport this wonderful clean-burning fuel to markets, then
there is a waste of a resource that we could be using that is
not, you know, one that people think of right off the top of
their head.
I think that access to public lands is very important and
certainly Wyoming suffers from the same problems that you have
described with the oil industry, oil and gas. And I hope that
we will be able to come up with some suggestions for how much
of our energy should be supplied, what percentage should be
supplied, through domestic sources, whether it's uranium,
whether it's geothermal, solar, oil and gas, coal. Whatever it
is, we need to have a policy that says this much, this
percentage of production will make us nationally secure and
will provide the energy that this country needs.
Mr. Vento. If the gentlewoman would yield briefly?
Mrs. Cubin. Certainly.
Mr. Vento. Listen, obviously, on the oil issue, in the
last 10 years, from 1989 to 1999, the numbers I've seen,
actually from the Federal lands, that the amount of oil has
increased from about 16 percent to 26 percent, from the Federal
lands. Now domestic production may have gone down and some
other factors, but the question is what are the State lands
producing? What are the private? And I think we've heard a
little bit here about the uneconomic nature of some of the
wells because of tax and other incentives.
But I think that, you know, just as far oil is concerned in
that issue, you know, there hasn't been this decline,
necessarily, in the percentage of domestic oil coming from
Federal land. If anything, it's increased by about 10 percent
from the total of domestic oil that's produced.
Now there are other problems outstanding, but I didn't
want----
Mrs. Cubin. Reclaiming my time. The National Petroleum
Council, which is an advisory group to the Secretary of Energy,
just published a study that's called, ``Meeting the Challenges
of the Nation's Growing Natural Gas Demand.''
Mr. Vento. Natural gas. That's not oil. I'm talking about
oil.
Mrs. Cubin. That is true. That is true.
Mr. Vento. I'm not talking about----
Mrs. Cubin. Reclaiming my time. The principal factor is
improving Federal land access. And that includes on OCS.
The Chairman. I want to thank the panel. I hope you, if you
leave this room, don't forget it----
Mr. Vento. Mr. Inslee wanted to comment, Mr. Chairman.
The Chairman. Oh, I'm sorry. You're down at the bottom of
the well. Go ahead, Mr. Inslee.
Mr. Inslee. Thank you, Mr. Chairman. I know you mean me no
disrespect, at least publicly, which we appreciate.
Have any of you read any recent scientific information
about the climate change issue, carbon dioxide? Is that
something that's been on your radar screen at all? Yes, global
warming phenomena?
Mr. Gekas. The only thing I can say about global warming
if, indeed, it is developable as a real fact, let's assume that
it is, that would help exploration of solar energy technology
that would improve our capacity for using solar energy. So I
see some good coming from, if there is indeed global warming,
of which I'm very much skeptical. But that's a climactic change
that we'd have to take into account in a long-term energy
policy.
Mr. Inslee. Vito, do you?
Mr. Fosella. Yes, to a degree I'm aware of it, yes. And I
also understand that there is some dispute in the scientific
community as to the nature of the problem and, as Mr. Gekas
says, to what extent it exists if at all.
But, if I may, just briefly articulate and it sort of comes
in different ways listening to the respective members of this
committee, the fundamental notion of, it's a mindset. I think
the American people want a balanced approach to meeting the
demands of the marketplace and their needs. With economic
growth, with, whether you drive a taxi or a truck or just
driving your family, you know, to the store, you want to be
able to meet your needs but, at the same time, government
cannot be disconnected from the reality of the needs of the
American people.
And I think, too often, it's knee-jerk responses, whether
they're the nets for migratory birds or preventing the
reasonable access in Congressman Young's district. What you
find is that there is no balance. And, at the end of the day,
the American people suffer.
Let me just give you one small example as to how the least
fortunate suffer the most. In my district, there's a taxi
company and for years the gentleman who owns it had offered
senior citizens a discount of $2.00. Well, for the first time
in 20 years, he had to eliminate that discount because gas
prices rising cost him about $1,200 more per week. So he was
absorbing that cost all that time, but now he could no longer
afford it. So it was the senior citizen, living on a fixed
income, who suffered the most.
So, while I agree with and appreciate your efforts, I also
think, in the near-term, there's got to be some, I guess, for
lack of a better phrase, grasp of reality that the American
people and some of the least fortunate are suffering. And if
you want to take a long-term view, fine. I think we should. But
I think there is just no grasp of what's going on right now.
Mr. Inslee. Let me ask you a great favor. If I sent you
something about this issue, at least a short synopsis of the
science on the issue, I know you fellows are interested in
energy issues, could I ask you to read it? Could I get your
agreement to take a look at that? Because I think there are
some interesting things going on in the science recently about
this issue.
I'll send you some, because I just think it's a beautiful
day outside, but I think there are some things going on out
there; that the science is showing that you and I, assuming
we're back here in the next few years need to deal with. And I
just am using this opportunity to share a little----
Mr. Largent. If I could respond just briefly, I mean, this
is one of the real paradoxes that I've found in my time in
Congress is that let's assume that global warming is taking
place. And I think, you know, that the reviews are mixed on the
scientific evidence for that, but let's assume that that, in
fact, is taking place. We know, according to that same
evidence, that one of the leading contributors to the demise of
the ozone and the warming of the globe are coal-fired
generators for electricity.
If that, in fact, is the case and you're really concerned
about global warming, what is the paradox to me is to find that
the same people that are screaming global warming, global
warming, you know, the sky is falling are also the ones that
are the most vehemently opposed to the alternative sources like
nuclear and like hydro. Those are the most environmentally
friendly sources. Actually, natural gas is also equally
environmentally friendly, to produce electricity.
But I find the people that are screaming global warming are
also the ones that are opposed to these alternative sources
that are much more environmentally friendly. And I have not
been able to reconcile those two different perspectives.
The Chairman. The gentleman's time has expired. Before we
excuse the panel, I would like to remind everybody in New
Mexico approximately 12 million years ago there was 284 feet of
ice. I don't know how the ice got there. I have no question
about that. But I always wondered what melted the ice clear up
to the North Pole. I just want everybody to think about that a
moment. The panel is excused.
At this time, I'm going to call the Honorable J. Bennett
Johnston of Johnston & Associates; David Hayes, Deputy
Secretary, U.S. Department of the Interior; Bob Gee, Assistant
Secretary for Fossil Energy, U.S. Department of Energy.
And we're going to alternate Chairs here. Mr. Tauzin is
going to handle this Chair. Mrs. Cubin is going to handle the
next Chair. And I'll be in and out, if you don't mind. But Mr.
Tauzin is going to be taking the Chair. Mr. Pombo can handle
the third panel, all right?
STATEMENT OF THE HONORABLE J. BENNETT JOHNSTON, JOHNSTON &
ASSOCIATES, INC.; ACCOMPANIED BY DAVID J. HAYES, DEPUTY
SECRETARY, U.S. DEPARTMENT OF THE INTERIOR; AND ROBERT W. GEE,
ASSISTANT SECRETARY FOR FOSSIL ENERGY, U.S. DEPARTMENT OF
ENERGY
STATEMENT OF THE HONORABLE J. BENNETT JOHNSTON
Mr. Johnston. Mr. Chairman, thank you very much for your
kind comment. You are hale, hearty and spunky as ever. Mr.
National Parks.
And, Mr. Chairman, I must note that since I have left the
Congress and done an occasional bit of lobbying, I must remark
at how much better looking and smarter all of you seem now then
when I was there.
[Laughter.]
Mr. Tauzin. [presiding] Flattery will get you everywhere.
Mr. Johnston. Mr. Chairman, I think it was in this room, I
was last here in 1995 when we were here at the Conference
Committee of the Royalty Relief Bill. At that time, oil imports
were about 50 percent. Today they are 57 percent. The Energy
Information Administration says they are going to be 70 percent
by the year 2020.
In the midst of that, we've had gasoline prices that have
been bumping on the underside of $2.00. People are pointing
fingers at one another on the television, you hear the people
at the gas pump saying it is outrageous what is happening.
And, you know, whose fault is it? Is it the President's? Is
it the Secretary of Energy? Is it the Congress? Is it God's?
Just whose is it? Well, the real question, Mr. Chairman, is can
the Congress do anything about it, actually and really?
I would like to suggest three things that are practical,
that are real, that ought to be done. They are, first of all,
opening up ANWR. Second, requiring drilling or allowing
drilling on the Destin Dome off Florida. And, third, renewing
the Royalty Relief Bill.
I won't go into ANWR a great deal because I know you know
about it. Let me just say this. There is not a single pound of
commercial seafood produced off ANWR. The sport fishery I think
is limited to Members of Congress who go there. In Louisiana,
we produce a billion pounds, more than a billion pounds, of
commercial seafood. We have hundreds of rigs that have been
there for 50 years and more and have never done any harm.
Now you can believe that ANWR is the Serengeti if you want
to. I've been there five times. Believe me, Serengeti, it is
not. I've never seen a polar bear. I've never seen a brown
bear. I've seen a few musk ox, not many. They were, by the way,
an imported animal. They're not native. And if you believe that
the Caribou herd is a problem, I say, look at the great
experiment which took place right next door in Prudhoe Bay
where the caribou herd increase 7 times over.
Mr. Chairman, to say that it is too fragile, that it is too
dangerous to drill in ANWR when we do it out in the greatest
fish hatchery in the world, the Gulf of Mexico, is absurd and I
would hope the Congress would recognize that.
Second, Destin Dome. There are, according to the Department
of Energy, 2.6 trillion cubic feet of dry natural gas about 25
miles offshore. It has been declared by the State of Florida to
be inconsistent with their coastal zone management program. And
briefs are now being filed. The Secretary of Commerce will make
a ruling on that I think in August. This being an election
year, you can guess how it will probably come down because,
bipartisanly in Florida, they believe this is a danger.
Now, Mr. Chairman, this is dry natural gas. You cannot see
it from the shore of Florida. It would be pipelined into the
Mobile Bay area. It would be serviced from Alabama. How anyone
can, with a straight face, say that this is a danger to the
fishery out there when you've got, as I say, 2 billion pounds
of seafood over 50 years with hundreds of rigs that have never
hurt anything off Louisiana. It's simply absurd.
Mr. Chairman, if the Congress can have a willing suspension
of disbelief and allow Floridians, on a bipartisan basis, to
say that there is this imaginary danger which prevents 2.6
trillion cubic feet of natural gas from being brought in, which
is badly needed and a great solution to this clean air problem,
then, Mr. Chairman, when people whose fault is it, everyone
should point at himself.
Finally, royalty relief. Charts one and two connected to my
statement show the vast increase in drilling on the Outer
Continental Shelf of the deepwater that occurred immediately
after the passage of the royalty relief bill. Now, Mr.
Chairman, there is a new article just out yesterday that
actually hasn't been published by Andrew Derman and Daniel
Johnston and I would ask that that be distributed if it has
not.
It examines this question of royalty relief in great detail
and comes to the conclusion that the Royalty Relief Bill was,
in fact, the reason or one of the principal reasons, for the
huge upsurge in drilling in the Outer Continental Shelf. You
know it is the only place in America where there has been a
real upsurge in drilling. It will be $9.5 billion by the year
2005 in drilling alone, not to mention bonuses and royalties
and income taxes paid.
Mr. Chairman, I believe this committee ought to hold
hearings and go in depth, ask NMS, ask DOE, to come up and
testify about what the effect of it is. Because if it is as
important as I believe it is, as the figures seem to show, then
it ought to be continued.
Mr. Chairman, thank you very much.
[The prepared statement of Mr. Johnston follows:]
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Mr. Tauzin. The Chair thanks you, Senator Johnston. We will
now recognize David Hayes, Deputy Secretary of the U.S.
Department of the Interior. Mr. Hayes.
STATEMENT OF DAVID HAYES
Mr. Hayes. Thank you, Mr. Chairman and members of the
committee. I have a written that I would appreciate entering
into the record.
Mr. Tauzin. Without objection, so ordered.
Mr. Hayes. Thank you.
I'd like to talk briefly, orally, Mr. Chairman and members,
about the issue of oil and gas production on Federal lands. As
Congressman Vento has accurately explained, in this
administration, oil and gas production on Federal lands has
increased steadily.
In 1992, for example, 500 million barrels of oil per day
were produced on Federal lands. Today, that number is at least
100 million barrels per day higher. In 1992, 19 percent of our
energy supply was supplied by energy from Federal lands. Today,
the Federal lands provide more than 26 percent of the energy
supply of the United States.
And there are some areas both offshore and onshore that
illustrate the activity that is leading to these increases in
energy production. Let me mention the offshore first and
reference what Senator Johnston talked about as well.
Senator Johnston, of course, was a leader in the Deepwater
Royalty Relief Act and that has had a dramatic impact on oil
and gas production out of the Gulf of Mexico. From 1992 to
1997, leasing activity in the Gulf of Mexico has increased
tenfold. The Department of the Interior, through the Minerals
Management Service, has had a very active leasing program.
We've had a 50 percent increase in oil production from the Gulf
in the last 6 years.
Currently, 1.34 million barrels of oil per day are coming
from the Gulf and the number continues to go up. 40 million
acres of Federal offshore lands are currently under lease.
7,600 of these are in the Gulf. 1,500 are elsewhere.
Three weeks ago, there was a very successful lease sale in
the Gulf, the latest example of our policy of opening up the
Gulf, pursuant to current law and regulation. We received 469
bids on 344 blocks. In fact, I should mention that, in terms of
offshore production, in the 7-years of the Clinton
Administration, we have now exceeded the numbers of acres
leased as was leased during the entire Reagan administration.
In the past 7 years, we have leased over 34 million acres of
Federal offshore lands for production.
Onshore, we also are engaged in significant activity. The
Bureau of Land Management, which is our primary land holding
agency, has leased over 28,000 leases and approved over 15,000
permits to drill since 1993. It has concentrated its effort in
the area of greatest potential. We expect to process more than
1,000 applications for permits to drill in the Powder River
Basin this year, by way of example.
Also the Bureau of Land Management expedited an
environmental review that led to the approval of the opening of
nearly 4 million acres of additional lands in Alaska in the
National Petroleum Reserve for oil and gas exploration.
We are busy. We think it's appropriate that the Federal
lands play their part in meeting our energy security.
I must say, though, that I disagree with Senator Johnston
on one point. The administration believes that oil and gas
exploration should not occur everywhere. And when it comes to
Arctic National Wildlife Refuge, as I explained further in my
written testimony, we do not believe that it's appropriate to
initiate oil and gas investigations in that area.
The Arctic Refuge is the only place in the United States
where the full spectrum of Arctic and Sub-Arctic ecosystems is
protected in an unbroken continuum. The largest caribou herd in
the United States by far, 160,000 caribou, are in the narrow
Arctic plain, which is the only area that is being targeted for
oil and gas production. It is the most sensitive area of the
entire 19 million acre Arctic National Wildlife Refuge.
We believe it is appropriate to explore and drill in the
Arctic, hence our recent affirmation and opening up of major
new lands in the National Petroleum Reserve. In fact, that led
to, last year, a lease bonus sale of over $100 million for
those new lands that have yet to produce but that are now open
for additional domestic exploration and production.
I will close there. I will mention one thing if I can, in
closing, the last 3 seconds. Actually, I'll save that for
questions. Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Hayes follows:]
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Mr. Tauzin. The Chair thanks you, Mr. Hayes. And, finally,
I'll recognize Mr. Bob Gee, the Assistant Secretary for Fossil
Energy for the U.S. Department of Energy. Mr. Gee.
STATEMENT OF ROBERT W. GEE
Mr. Gee. Thank you, Mr. Chairman and members of the
committee. I've submitted a statement for the record.
Mr. Tauzin. Without objection, it's submitted for the
record.
Mr. Gee. And I'll take only a few minutes to summarize it.
The recent volatility in the domestic and global petroleum
market remind us again that energy is an integral facet of
everyday life and that every American can still be affected by
actions that occur well outside of our borders. The most recent
spike in oil prices was the result of attempts by both OPEC and
non-OPEC producing countries to compensate for the 1998 plunge
in oil prices. Unfortunately, the production cuts imposed by
these countries came at the same time the recovery in Asia
began to push demand back up.
Extreme market volatility, volatility which is neither good
for the energy consumer nor good in the long-run for the energy
producer. High home heating oil prices created hardships for
many Americans living on modest incomes and for other energy
consumers. At the same time, the wild swings in oil prices have
created difficulties for the nation's oil producers. When
prices were low, domestic production dropped off and jobs were
lost. Even when prices rebounded, financial markets have
remained cautious and money continues to be tight. Reinvestment
in the domestic industry continues and has been fully
materialized.
I've outlined in my formal statement several guiding
principles of our energy policy that are geared to restoring
market stability. They include both short-term efforts, such as
the diplomatic initiatives successfully pursued in recent weeks
by Energy Secretary Richardson, and longer term efforts to
increase production from our considerable domestic energy
resources.
Several of the most important domestic initiatives include
Secretary Richardson's direction to renegotiate delivery
schedules for royalty crude oil coming into our strategic
petroleum reserve. This has made more oil available to the
market this spring and, in return, you will receive more oil
for the reserve later this fall.
The President's call on Congress to reauthorize the
strategic petroleum reserve, the authorities to which have been
allowed to lapse. The President's support for legislation to
create a regional heating oil reserve. Several new tax
incentives to stimulate domestic oil and gas production and to
diversify domestic energy supplies.
And the continued investment in better technology that can
boost domestic oil and gas exploration and production. It is
this latter area, better technology, that I believe offers our
best hope for a long-term future and greater price stability.
The track record shows, Mr. Chairman, that investment in
technology pays off. Technology has helped double the odds that
an exploratory well will find producible reserves. And when
producible reserves are found, technology has greatly increased
their quantities.
In the 1970's, an exploratory well, on average, added about
10,000 barrels of new reserves. Today an exploratory well adds
about 40,000 barrels of new reserves. Technology has helped
reduce the footprint of oil and gas operations. When Prudhoe
Bay was first drilled, for example, the well pad required about
65 acres. Today the well pad needs less than 10 acres. Today
horizontal drilling allows producers to reach multiple targets
from a single well pad. With extended reach drilling, those
targets can be miles away from the surface well.
Seismic energy has been improved, providing resolutions
many times better than just a decade or so ago. In the Gulf of
Mexico where 3-D seismic has proven so valuable, we are now are
seeing the application of 4-D seismic, adding time to the data
set. In one instance, this has increased reservoir recovery to
a previously unheard of 70 percent.
Drilling and production rates are moving into greater and
greater depths and, increasingly, we are producing both oil and
especially natural gas from formations that were unreachable a
few years ago. These technology advances could not have come at
a better time because our demand for liquid and gaseous fuels
continues to grow.
In the last 15 years, our appetite for oil in this country
has increased by 20 percent. In the next 15 years, our demand
for natural gas is likely to increase by a third or more. There
is little doubt that meeting this demand will require better
technology and, equally importantly, it will require access to
areas where that technology can be applied.
The Department of Energy continues to strongly support
rational, responsible, and environmentally protected
development of energy resources on Federal lands. We recognize
that some areas have environmental concerns such that, as a
matter of policy, preclude development. Such is the case with
the Arctic National Wildlife Reserve.
Yet there are other areas that offer considerable potential
for environmentally sound oil and gas operations. For example,
as noted, we supported the opening of the northeastern portion
of the National Petroleum Reserve in Alaska. And later this
month, we will hold a workshop in Anchorage to review the
latest technologies for carrying out oil and gas operations in
this and other Arctic environments.
In a similar vein, we are working with both State and
Federal land management agencies to resolve environmental
concerns in the Rocky Mountain area. This area was highlighted
by the National Petroleum Council in its recent study on
natural gas.
Finally, Mr. Chairman, we've taken several steps to return
to the private sector those oil and gas properties which the
Department of Energy had previously held as part of the Naval
Petroleum and Oil Shale Reserves. In 1998, as you are aware,
Mr. Chairman, we sold the Elk Hills Petroleum Reserve in
California in the largest divestiture of Federal property in
our history.
This year, Secretary Richardson has proposed returning the
84,000 acre Naval Oil Shale Reserve in Utah to the Northern Ute
Indian Tribe in what would be the largest voluntary return of
Federal land to Native Americans in more than a century. There
may be considerable gas potential on this property and it is
appropriate that the Utes have the opportunity to benefit from
its development.
These actions, Mr. Chairman, demonstrate our belief that
the private sector is best able to develop our natural energy
resources most effectively in an environmentally sound manner.
We will continue to work with our colleagues at the Department
of Interior and others to share with them the advances being
made daily in science and technology as they make future
decisions regarding development of Federal lands.
This concludes my opening statement, Mr. Chairman, and I'll
be pleased to answer any questions you may have. Thank you.
[The prepared statement of Mr. Gee follows:]
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Mr. Tauzin. The Chair thanks the gentleman and the Chair
now yields to the chairman of the committee, Mr. Young, of
Alaska for a round of questions.
The Chairman. [presiding] I know your position as far as
the administration goes. And I want to thank the panel. I did
hear some of your testimony in the back room. I was meeting
with some other people back there. I did like, Senator, your
testimony was excellent. I want you to know that.
[Laughter.]
The administration's, you know. Since I can't really
believe this administration has any desire to produce any oil.
You wouldn't have taken increased the royalties, which you did,
ironically, just as the prices started hiking.
You have not let any public lands available for oil
exploration. And you may say PET Four, but not the areas that
we chose. And I have to say this and I'm going to say it again.
I said it when we were talking about the pipeline. I've heard
this argument 95 percent of Alaska is open for, in fact, I
think you said it before Dan Murkowski's committee, is open for
drilling, which is not true.
And, unfortunately, there's some thought in the
administration that just because you can drill there, that
there might be oil there. I've often said that just because a
pool table is green, there's no rabbits. And yet there's some
idea--I hope nobody caught that, for god's sakes, but that's
what the administration thinks, that they can drill because
there's the land available.
The lands we identified in PET Four were not the lands, by
the way, that you let be open for oil drilling. The bids were
very minimal compared to what we thought they should have been
because you wouldn't give us the areas that we thought were
best. That's beside the point.
But, in your testimony, I would happen to agree that the
caribou herd that you mentioned is probably the largest one.
But what is the number of caribou right now in Prudhoe Bay?
Anybody like to address that?
Mr. Hayes. Mr. Chairman, I believe it's quite a small
fraction of the porcupine herd. I believe it's about 20,000
compared to 260,000.
The Chairman. But the reason I asked that question: How
many caribou were there before we drilled Prudhoe Bay?
Mr. Hayes. I'm not aware of the exact numbers. The number
fluctuate significantly.
The Chairman. Well, I understand that. But, see, that's why
be aware. We heard the same arguments given in this committee.
I was sitting down where Mr. Simpson is sitting, by the way,
and Mr. Staggers was sitting up here. The same arguments, same
story, 25,000 caribou. And how many did you say were in the
bay?
Mr. Hayes. There are about 20,000.
The Chairman. That's amazing to me. And my god, we drilled
and they multiplied. Let us drill some more.
[Laughter.]
I mean, and we even built walkways, by the way, for those
who don't know. We required the pipeline to have walkways over
it so the caribou could walk over and go from one side of the
pipeline to the other. It costs us $28 million to build those
walkways.
To this day, no one's ever found a walkway that's being
used by caribou. Now goats used it a couple of times. But the
most amazing thing is, guess what the caribou do? They walk
under it and rub their backs to get rid of those boils on their
backs on the pipeline. But we spent $20 million doing it.
And, to our knowledge, most of the wildlife--and I'd say
all of the wildlife--in the area have increased, not decreased,
because of the activity and because of the inactivity of taking
game in that area.
And so we hear the argument about ANWR, it doesn't hold
water. You know, it's a terrible idea that we're going to
destroy that area, which is nonsense. The refuge, 19 million
acres, that's the size of the refuge, right? 19 million acres?
OK. How many acres are we actually going to use in that refuge
to develop ANWR if it's opened?
Mr. Hayes. The Arctic Plain is less than 1 million acres,
but it is, as I mentioned in the oral testimony, our belief is
it's a key acreage in terms of the biology of the refuge.
The Chairman. But that's no more different than any other
is, including Prudhoe Bay. It's exactly the same and we've done
no damage.
Now you've got less than 1 million acres. Probably less
than 12,000. Probably less than 3,000 total acres is going to
be disturbed. They could deliver oil to the pipeline 64, 74
miles away.
And, by the way, we can sit in this room. All you people
who are against this or for it, whatever it is. It is going to
be opened. It is going to be developed. And anybody that
doesn't think that is smoking pot. Right up in front of
everybody, it's going to happen. The difference is will it
happen under stress or will it happen under due diligence?
I was, again, sitting right down there. We opened the
pipeline. We built the pipeline in 3 years. Should have taken
us probably 10 years. Because why did we build it? Because we
were short, Mr. Bennett was here, we were short of oil and OPEC
was enforcing their stranglehold on our throats. And we built
it and delivered the oil, 2 million barrels a day; 1976 it
began.
Why can't the administration think about the future? This
is not the Serengeti everybody says it is. That's nonsense.
I've been there. I've walked it. I've seen it. Now if you go a
little bit further south, it is. It's gorgeous. And I think
maybe you ought to look at it. Have you been up there?
Mr. Hayes. Yes, sir.
The Chairman. When were you up there?
Mr. Hayes. Last summer.
The Chairman. Oh, I love you guys. You go up in the
summertime?
[Laughter.]
Ah. Why don't you go up in the wintertime when the wind's
blowing 40 miles a hour? And you could stand out there and say,
my god, this is beautiful.
[Laughter.]
Mr. Hayes. Mr. Chairman, I was scheduled to go in February,
but I had to testify in front of this committee that day.
[Laughter.]
The Chairman. Well, I tell you, I want to thank--not in
front of me you didn't.
Mr. Hayes. No. I believe it was Mr. Doolittle's
subcommittee.
The Chairman. No, not in front of me. But I do believe next
time I'll make sure--you won't be around--but I'll make sure
that the next guy who wants to go see this area, which I say is
really--I'm going to make sure you get up there in the middle
of January. We'll cancel the hearings. And then I want you to
stand there and tell me how gorgeous.
And, by the way, I have to say this in all seriousness,
because I mentioned it will be developed. I've had some great
ideas and I bet the oil people in the audience won't like this,
if you really want to reserve, you really want to control those
OPEC countries, you develop it. You explore. You sell the
leases. You explore it. You develop. You tie it in. And I'd
even be willing to pay the oil companies not to pump the oil.
We can produce 2,200,000 barrels a day with that pipeline,
if we had the refineries to refine the oil. But we could do
that. That's a true reserve, not SPR or whatever you want to
call it. We don't have the refineries that they can do that.
But we would have that on line and say, OK, you guys think
you can raise the price like you've done. We're going to take
and produce another 1,200,000 and we would lower the prices.
And that's why, it's not just you, I did pass it in 1995 and
you guys vetoed it. I had trouble to do it before. Very nearly
had it happen before.
But I'm just saying the administration, I understand why. I
understand the makeup of your administration. The environmental
community, they can direct and pull your strings, but it is
wrong for this nation. That area should be explored, sold,
explored, and developed, and hooked it.
Mr. Johnston. Mr. Chairman.
The Chairman. Yes, Mr. Senator, go right ahead.
Mr. Johnston. I took a bunch of senators up there a few
years ago and one of them got up there and looked around at
that barren landscape and said, my gosh, if I told the people
in my barrooms back home that we couldn't drill here and we
were going to be short of oil and I was going to be responsible
for that, they'd laugh me out of the barroom. Lo and behold,
that senator ended up voting against us because, you know, some
of her people thought it was Serengeti. But those who have been
there know it is not.
The Chairman. Well, I appreciate that, Senator, and before
I finish I have to say that when we were fighting this battle
in 1995, they had some posters put out, the Sierra Club put
them out, and I loved it. They had a wolf laying next to a
caribou calf. Now that's a cold day in January when that will
ever happen. Or July, I don't know which way you want to see
it. That was a great--good in Philadelphia. Good in San
Francisco, New York, and maybe DC., but not in reality. And I
do appreciate your coming. Gentleman.
Mr. Tauzin. Fair to say you'd find rabbits in a pool table
before you'd see that happen.
Mr. Vento. The gentleman reminds me of my mentor, Mr.
Udall, and he always said that the lion may lay down with the
lamb, but the lamb isn't going to get much sleep.
[Laughter.]
Well, I think there are a lot of issues here. Obviously, my
chairman has pointed out the volatility or the dynamic nature
and crash of caribou populations that exist there. He pointed
out that even the Alaska Department of Fish and Game in 1995
revealed a 23 percent decline in the population of the central
Arctic herd around Prudhoe Bay and then a 41 percent decline in
the caribou herd in the vicinity of the Kubak field.
So, I mean, they do go up and down, clearly. The presence
of caribou might represent the absence of our friend the grey
wolf and/or bear and other predators. So there are a lot of
factors that get into this that we kind of take and turn around
to suit what our needs are.
And I'd say, though, that this area which we're debating
here, this 1.5 million acres is something we set aside in the
Alaska Lands Act that we have to make a decision upon.
Obviously, I favor it being declared wilderness and 170
sponsors in the House favor that, along with a pretty close
margin in the Senate, as we know, favor not opening this up and
continuing the protection.
I think the issues here in terms of going to what's
happened in Prudhoe Bay are important. I have information that
indicates that, since it was opened in 1977--and I have an
interest in this. My brothers were part of the 3-year welding
team that put that pipeline together, I might say. They're
ironworkers who said if I had behaved myself, I could have had
a good job like their's.
[Laughter.]
The Chairman. That's not the area that's leaking is it?
[Laughter.]
Mr. Vento. I don't think so. You could probably have them
up there and check up on it. I think it's probably those
caribou rubbing against it that are causing it.
But, in any case, we obviously have some firsthand
knowledge, through their experiences, about this issue and
about some of the events. And I've visited in both the winter
and the summer, Mr. Chairman. I must say, it's more fun in the
summer, but there's no place like it in the world, that's for
sure. And it's sort of an Arctic desert, as was implied here,
when you talked loosely about ice roads and talked about the
problems in building paths and, you know, mining gravel out of
whatever part of the Brooks Range has been carried down toward
the ocean. We're talking about a very fragile environment.
It's an area that's almost a window on the Ice Age. And we
don't have much of that left anywhere in the world. And,
obviously, some of us think a little bit of preservation. So I
don't look at the Great Rift Valley or the Serengeti, Bennett,
but I look at it as something a little different. So I don't
need to carry on. You know what my passion is here.
But the issue is we've got a lot of problems we haven't
resolved up there in Prudhoe. As Mr. Hayes knows, he points out
in his testimony, that we've got air pollution problems. He
didn't have time to give that information, Mr. Chairman,
orally, but it's in his written statement. He points out
there's how many oil spills that we've had in Prudhoe Bay, Mr.
Hayes? Can you give us any indication of that in the last 23
years? There have been hundreds, haven't there?
Mr. Hayes. We have had hundreds. And there was just a
felony conviction 2 months ago, a $15 million fine against BP
for some environmental violations.
The Chairman. May I suggest, respectfully, that is
nonsense. What size oil----
Mr. Vento. Well, I'm just trying to get to the bottom of
it----
The Chairman. I'll get to the bottom of it. I will check
your testimony and I want you to verify it. An oil spill is a
teardrop to you. Now don't be telling me there's oil spills
there.
Mr. Vento. Mr. Chairman, I have, you know, my information
tells me that there have been 640-some oil spills.
The Chairman. You drop one drop of oil, it's considered an
oil spill. And I want to tell you, go down the street and look
at any automobile and I'll tell you there's an oil spill under
every automobile in this town. Right now. Including your car.
Mr. Vento. Just relax. Enjoy your yogurt there.
[Laughter.]
Mr. Tauzin. And don't be spilling it.
Mr. Vento. I don't want you to get indigestion, Mr.
Chairman.
But the issue that we've had a phenomena going on with the
air quality conditions that are rather unique, haven't we, Mr.
Hayes?
Mr. Hayes. Yes, certainly. In terms of there have been
emissions from the field. There also have been emissions down
in Valdes.
But, quite frankly, Congressman, it is the point you made
earlier. We do not object to the activities in Prudhoe Bay. We
are proposing that there be additional drilling in the National
Petroleum Reserve. We have $100 million that's been put on the
table by oil companies to take advantage of the opening.
The primary point is that this is the only place on the
entire North Slope where Congress has said no to drilling. We
think this area should be kept pristine.
The Chairman. Point of information. Would you tell me when
has the Congress said no?
Mr. Vento. In the law.
The Chairman. The law does not say that, now. The law says
that Congress can make that decision. We made that decision
that it would be drilled and you vetoed it.
Mr. Hayes. Well, NWLCA has a explicit provision that
expressly says----
The Chairman. And NWLCA says that area, the ANWR, shall be
opened if the Congress says so. It did not set it aside. Now
read the law.
Mr. Vento. It's a rather reserved negative, Mr. Chairman.
In any case, that's a distinction, maybe, without a difference.
But it is, obviously, reserved to Congress for a future
decision to do that which precludes it from being done at this
point.
I just wanted to point out that the temperatures in the
Arctic, for instance, have, on a Fahrenheit basis, apparently
increased almost three degrees in the past few decades. So that
there are some changes going on, whether we think it's a larger
part of a global phenomena and other factors is to be debated.
Obviously, there is a pretty significant body of information
that we could look at to make decisions about this.
One of the questions I raised earlier in my testimony,
unrelated to this, Mr. Hayes, and I don't know where your
responsibility is here, but it had to do with due diligence and
the amount of leases that have been out. You pointed out 34
million acres of new leasing on the Outer Continental Shelf
largely, I think, for gas, as my friend and colleague from
Wyoming has pointed out, the numbers there are going up where
the Federal Government produces about 30 percent of it.
But what about oil? That's sort of the nexus of what we're
talking about here. Oil leases have gone up, as you pointed
out, significantly. But what about this question of due
diligence and the amount of land or the amount of acreage under
leases today, totally, between all of the different land
management agencies and the national government? For oil
purposes, can you give me a number there? You obviously pointed
out 4 million new acres in the National Petroleum Reserve.
But the question is, and, of course, my beyond that
question is, are we, in fact, gaining performance, adequate
performance, out of these particular leases that we're putting
out? Or are we just building up somebody's portfolio of leases?
In other words, what type of pressure should we be putting on
them in terms of obtaining the type of domestic production from
national lands? So can you give me a ringing defense of the
Clinton Administration's aggressive conduct with regards to
this?
Mr. Tauzin. [presiding] Other gentlemen have comments, so
ring it quickly.
Mr. Hayes. I'll answer very quickly, Congressman, and I
will get the information to you specifically about how much
acreage is available. And I could probably--Mr. Gee could
probably answer this better than I. Our sense is that the major
limiting factor in terms of increased oil and gas production on
Federal lands has been the low price of oil over the last
several years. Obviously, oil has spiked up and now there is
more of a financial incentive to do more activity, but there is
an enormous amount of lease holdings available for production
that is not being taken advantage of and probably the largest
factor has been the price.
Mr. Vento. Mr. Chairman, just to point out. My point is not
just what is under lease, but whether we need to do more in
terms of due diligence. I understand market factors indicate
the prices and what the demand is, but the question is how much
is already out there and has not really even been explored,
much less developed.
Mr. Tauzin. Well, the gentleman's time has expired. Now the
Chair recognizes the gentlelady from Wyoming, Mrs. Cubin.
Mrs. Cubin. Thank you, Mr. Chairman. There's one thing that
I would like to say that Chairman Young and I have in common.
We have a lot of things in common, but one is that sometimes
our passion is mistaken for anger and so I just wanted to say
that because, you know, he really got totally out of hand there
for a minute.
[Laughter.]
And I agreed with every single word you said.
The Chairman. Yes, will the gentlelady yield for just a
moment? I have to go, but I've got to go back to my friend. You
said you were in ANWR?
Mr. Hayes. I was in the North Slope.
The Chairman. You were not in ANWR?
Mr. Hayes. No, I'm sorry. I thought you were wondering if I
was up there.
The Chairman. You were not in ANWR?
Mr. Hayes. No, I was in the North Slope. That's correct.
The Chairman. But you were not in ANWR?
Mr. Hayes. That's correct.
The Chairman. You didn't see the Serengeti Plain?
Mr. Hayes. No, I did not.
The Chairman. Well, everybody had the illusion you were
there. That was my interpretation.
Mr. Hayes. I apologize if you misunderstood or if I
miscommunicated. Second, Mr. Chairman, if I can----
The Chairman. Not yet. I've got to go.
Mr. Hayes. OK.
The Chairman. The Canadian government opposes this, right?
Mr. Hayes. Pardon me?
The Chairman. The Canadian government opposes drilling in
ANWR.
Mr. Hayes. Yes, that's my understanding.
The Chairman. The National Congress of American Indians
opposes this.
Mr. Hayes. Yes.
The Chairman. The Tanana Chiefs Conference?
Mr. Hayes. Yes.
The Chairman. The Council of Alasabasken Tribal Groups? The
Episcopal Church and other numerous religious organizations?
But why I want to question this is out of all those groups,
only two people oppose it that you mentioned. The rest of them
outside the United States, including the Canadian government.
Is that correct?
Mr. Hayes. Yes. Yes.
The Chairman. In other words, the Canadian government is
dictating our energy policy.
Mr. Hayes. No. No. It's meant, Mr. Chairman, as an
illustration, of some of the many folks who are concerned about
potential drilling. Probably the most relevant of those groups
are the Alasabaskens, the Gwich'in native folks.
The Chairman. OK. The other thing is the Saudi Arabians are
against this too, aren't they?
Mrs. Cubin. Reclaiming my time.
Mr. Tauzin. The Chair will start the gentlelady's time
again and we'll commence.
Mrs. Cubin. Thank you, Mr. Chairman. And Chairman Young's
points really bolster mine. I guess they team up, if you will.
In your oral testimony, you talked about how more production is
taking place on Federal lands as if to disprove my assertions
that access to public lands is the No. 1 problem that we face.
And I have to point out that the production you are
referring to is, No. 1, OCS production and, No. 2, PET Four
production and permits for PET Four and so what I'm asking you
is show me the money in the Lower 48. It isn't there. It is
plain not there.
Last year, we appropriated, I'm referring to coal bed
methane, I mean, do you dispute me that in the Lower 48 it
isn't there? It is happening at PET Four. It is happening on
the Outer Continent Shelf, the oil production, but it is not
happening in the Lower 48.
Mr. Hayes. It certainly is true that most of the increase
in production is offshore, Louisiana, and----
Mrs. Cubin. And don't you think that that truly is a
distortion of the reality when I talk about access to public
lands? I'm talking about acres in the Rocky Mountain States.
Gas, for example. Northern Montana. Gloria Flora put off-limits
the most highly prospective area for natural gas production in
the Lower 48.
Last year, for Fiscal Year 2000, we--and I worked very hard
to get this appropriation, $2.5 million earmarked for APDs for
the coal bed methane project in the Powder River Basin. Out of
that money, 11 new employee--and I realize they needed more
employees, and that's why I, you know, worked so hard for the
appropriation.
But out of that, they bought 12 new trucks and hired 11
more people and before the ink on the EIS was even dry, they
came to realize that the cumulative effects of the coal bed
methane development that the BLM did have to acknowledge that
the number of wells that they had studied was already spoken
for and so now they're requiring a new EIS which, again, the
industry will pay for.
So what happened to the other $2.5 million? Is there any
way BLM can reprogram some of that money to get some more of
those permitted?
The problem is that the BLM wasn't forward-looking enough
in their overall environmental look at the whole area to
address this. So now producers, explorers, are in a position
that they can't move forward. And it is causing a horrible
hardship in Wyoming.
Mr. Hayes. Congressman, I'm not aware of that specific
issue. I'm happy to look into it. I passed a note in terms of
onshore natural gas production, which was one of your questions
of whether there's really been onshore increases in natural gas
production. And since 1992----
Mrs. Cubin. And oil.
Mr. Hayes. And oil.
Mrs. Cubin. And permitting.
Mr. Hayes. Sure. Sure. But just a point of fact, the
natural gas production has increased, onshore, in the Lower 48
from 1.2 trillion cubic feet in 1992 to 2.0 trillion cubic feet
in 1999.
I don't deny your point, though, Congresswoman. And
certainly there are individual cases where access has been
difficult on Federal lands. There's no question about it and
there's certainly some cases where access is essentially being
denied, like the Arctic Refuge. But we are trying to work with
the industry to increase production where appropriate.
Mrs. Cubin. You know what bothers me about your testimony,
Mr. Hayes? It's that I generally think assessing blame is not a
constructive thing to do. When we find ourselves in a situation
that is damaging to ourselves personally, to our families, to
our country, that assessing blame for getting in that
situation, generally, isn't constructive.
What is constructive is looking at the current situation,
the facts that are at hand, and trying to figure out a way to
get out of it. And what I got, and I recognize that if people
can misinterpret Mr. Young's and my passion for anger that, you
know, I can misinterpret your testimony today, but it seems to
me that rather than the administration saying let's really do
something about access to public lands.
I mean, this was an agency that advises the Secretary of
Energy that said access is the problem. Instead of accepting
that and saying let's look at it, it seems that this
administration only defends the things that have happened in
the past that are currently happening today in my State I know
instead of trying to move forward. And I would just implore you
and the agency to try to move forward.
And if the chairman would just grant me one question for
Mr. Gee. Wyoming, as you know, I said earlier that we have to
address all forms of energy in order to meet our national
security needs and our energy consumption needs for our
standard of living.
The Department of Energy has the authority, jurisdiction, I
don't know what you want to call it, to offer grants for
studying coal technology so that, you know, coal would be a
more friendly fuel to the atmosphere. Wyoming is far and away
the largest producer of coal, as you know. And yet a very, very
small fraction of the money that is given for research into
coal technology has ever been seen by the State of Wyoming.
And I realize that, politically speaking, we have one
representative and two senators, but I think there is coal
technology for efficiency in burning coal that is just as
important as clean coal technology for those fuels that have a
higher sulphur content. And I would just ask the DOE to be more
open-minded and look at, you know, the consumption of coal that
comes out of the Powder River Basin and help us fund research
so that it can be a more efficient fuel, not just an
environmentally friendly fuel, but more efficient and, thereby,
more environmentally friendly. Thank you.
Mr. Tauzin. The gentleman may respond.
Mr. Gee. I may respond? I appreciate your suggestions. What
my testimony points out is that of our key tenets of our energy
strategy, and we can debate whether that's a well-thought-out
strategy, is fuel diversification. And it does still continue
to recognize the importance of coal in our energy portfolio. We
have, in fact, asked for more coal research and development
appropriations in this latest budget request.
We also have, you should know, some ongoing solicitations
for various projects for existing programs that are now being
looked at to increase energy efficiency in coal generation and
in clean coal technology. So, certainly, to the extent that you
have some constituents who have some worthwhile proposals that
we ought to look at, we would certainly be happy to.
And I understand the spirit of your remarks. We don't look
to see whether a particular State has one or two or three
Members of Congress.
We look at the merits of the particular proposal. If it
makes good sense from a scientific and energy technology
standpoint, we look at it. If we think that those benefits that
would come from a particular research project are going to
benefit not just your constituents, but the country as a whole
in continuing to maintain a diverse energy resource portfolio
mix, if we think it's a worthwhile project, we'll certainly be
happy to talk to you and to any project sponsors that might be
in your State that would be of interest in working with us.
Mrs. Cubin. And I'd like to add, as may well be expected,
from my point of view, the Department of Energy has been much
more conscious of trying to find solutions to our national
energy problems than the BLM and the Forest Service. And I
think we need to work together as a team.
Mr. Gee. On that, my I add----
Mr. Tauzin. We've got some bills. Let me ask the
gentlelady, I'm going to put her in the Chair in just a second.
I have to testify----
Mrs. Cubin. And then I'm just going to talk on and on as I
want to.
Mr. Tauzin. Let me ask the gentleman if he would hold his
response. I need to do one thing before I leave though, very
quickly. Mr. Hayes, your testimony says that the Department has
seen great success in the Outer Continental Shelf program since
the enactment of the Oil Relief Act. Does your Department
support reauthorization of the Act?
Mr. Hayes. We supported the legislation when Mr. Johnston--
and I don't think it's been presented to the administration for
a position yet.
Mr. Tauzin. So you have no position as yet?
Mr. Hayes. I am not authorized, no. I don't believe it's
been sent to the administration for a position.
Mr. Tauzin. Steve, do you have a position on the
reauthorization of the Act?
Mr. Gee. Reauthorization of the--excuse me, what was the
question?
Mr. Tauzin. Reauthorization of the Deepwater Royalty Relief
Act.
Mr. Gee. We don't currently have a position on that as a
department, Congressman. We're working with the Department of
the Interior and discussing what are the relevant facts.
Mr. Tauzin. It would be very good if both of you could seek
some guidance from your departments to give this committee some
information on it. As one of the recommendations Mr. Johnston's
made, we'd like to hear your recommendations, also.
The Chair recognizes for 5 minutes Mr. Faleomavaega and
will put Mrs. Cubin in the Chair.
Mr. Faleomavaega. Thank you, Mr. Chairman. I, too, would
like to offer my personal welcome to Senator Johnston to the
committee and someone that I certainly have the utmost respect
for over the years and when he served as chairman of the Senate
Energy & Natural Resources Committee. And I would really like
to add my thank you for all of the help that you've given,
especially to the insular areas.
And, of course, welcome Secretary Hayes and Secretary Gee
for their comments and their responses. Nothing pleases me more
than to have than Chairman Young and the gentleman from
Minnesota always having a very interesting dialog when it comes
to issues referencing the environment and the oil industry.
I read a couple of years ago that our country currently
consumes about one-third of the world's energy resources. I
don't know if it's every day or every year, but I wanted to
know if there was any truth in that. Do you have any statistics
as to exactly how much our nation consumes per year as far as
all the world's energy supply is concerned?
Mr. Gee might have some reference for that.
Mr. Gee. I have heard, Congressman, I have heard that,
roughly the same number. It is true that because we are the
most industrialized and developed country in the world, it
would not surprise me that our total aggregate consumption
would be of the magnitude that you describe. I do know that,
certainly, we are the largest consumer of oil in the world. We
consume 19.3 million barrels per day.
If I may. The total amount that has been given to me is
that we consume 94 quads. We consume 94 quadrillion BTUs of
energy, although that's getting a little too technical, of
energy per day and that is a substantial sum. The total global
number, I'm told, is 402 quadrillion BTUs and we consume 94
quadrillion BTUs. So it looks to me to be about probably one-
quarter, judging by that number.
Mr. Faleomavaega. Along those same lines, Secretary Gee,
the fact that we do consume a lot, what percentage do we waste?
Mr. Gee. I guess waste is a relative term. Let's say that
the way we consume energy has embedded a number of
inefficiencies, from the point of production to the point of
use. Whether that's from the supply end of the equation and the
end use end. And we are spending a great deal of our time and
resources as a Department trying to boost efficiency, certainly
in power generation, to boost our natural gas turbines from,
say, a 40 percentile up to a 60 percentile, and our coal
generation from a 30 percentile to a 40 percentile rate of
efficiency.
On the end use side, we're trying also to find ways to
maximize at the industrial end as well as in the residential
end ways to minimize consumption through a higher applied
standard of efficiency, CAFE standards for the automobile, and
that sort of thing.
Mr. Faleomavaega. Mr. Secretary Gee, you make mention in
your statement about the OPEC countries and the crisis of the
situation that we're in. This is not some cynical or purposely
done effort to try to undermine the concerns that we have as
far as energy supply is concerned in our nation. It is partly
because of the Asian crisis that we find ourselves now in this
kind of a predicament.
And I'm just curious, we, here again, I understand that we
have enough coal supply here as an energy resource to last us
for another thousand years. And adding onto what our good lady
from Wyoming indicated, has the Department of Energy made any
serious effort to look at this?
Now, as I listen to what Mr. Tauzin said, that we're in
somewhat of a catch-22. We increase production of oil and then,
at the same time, when we look at alternative energy resources,
this always seems to bring us back to a crisis. It doesn't
really answer the question.
But I think that, following what Congressman Cubin was
saying, what can we do with this tremendous amount of resource
that we have right in our backyard. If we have enough to last,
I mean, a long time. Is it because the means to refine it are
difficult, or we just don't want to bother with it, or we just
prefer using other sources offered, such as fossil oil fuel is
because it's more convenient?
What's the basis of our policy as far as coal is concerned,
because it seems to me if we have this resource, why aren't we
looking to the technology and perfecting it and refining it to
use it as such?
Mr. Gee. Well, Congressman, the short answer is that we
are. Coal makes up currently 55 percent of electric generation
needs. We have an ongoing program at the Department to try to
find ways to utilize coal as a potential means of providing
liquid transportation fuels as well as electric power as well
as process heat. That is an ongoing program which could lead to
the conversion of coal to a transportation fuel.
Let me add that one of the key cores of our energy policy,
and I know, again, some would dispute whether that a well-
considered policy, is fuel diversification. And by that I mean
that the range of all of the fossil fuel technologies and
resources, but also renewable energy, solar, photovoltaic,
wind, geothermal, as well as energy efficiency technologies,
both at the generation end and the end use end.
Our consumption of petroleum went up by 20 percent since
1985. One of the things we need to focus on, in conjunction
with our supply end concerns, obviously, is the end use and the
efficiency end, as you recognized. We think that energy
security can be found, certainly, in our supply side
alternatives, but also in the way we maximize our efficiency
and use of energy.
Mrs. Cubin. Eni, I have to go for a vote. And I hate to ask
the panel to wait until we come back. I will get over there as
quickly as I can and back. I know Congressman Duncan did want
to, at the very least, make a statement for the record and so,
if you would indulge us and we'll get back as quickly as we
can.
[Recess.]
Mrs. Cubin. Take your positions at the table. I'd like to
recognize Congressman Duncan.
Mr. Duncan. Thank you, Madam Chairwoman, and I've been told
that this panel has to leave and I'll try and be very quick.
But let me just say that I think that one of the problems
here may be that when people look at a map of the entire United
States and they see it on one small page in a book, they don't
realize how big this country is. And this Arctic Wildlife
Refuge is 19.8 million acres. And we say that so easily, yet I
represent half of the Great Smokey Mountains National Park,
which is the most heavily visited national park in the country
with some 10 million visitors. And those people come there and
most of the people that come there are in awe of the size and
the beauty of that park. And yet ANWR is 35 times the size of
the Great Smokey Mountains National Park.
And I've read many articles about this. And every article
says that they only want to drill or impact on about 2,000 or
3,000 acres. One article, I think, estimated it may possibly be
as much as 12,000 acres. 12,000 acres, if that's what it is,
out of 19.8 million acres. I'm not even sure if I could figure
that out, but that's probably less than 1/100th of 1 percent.
It's phenomenal how small the impact would be and yet how
exaggerated the impact is made by some of these groups.
I mean, I went up there. Senator Johnston mentioned that
he'd been up there five times, I think. Is that correct,
Senator? I went up there four a half years ago to Prudhoe Bay
and to Barrow. And I've seen it described as a flat brown
tundra, although a big part of the year, apparently, it's
covered in snow, in this coastal plain, which it was mentioned
earlier, is less than 1 million acres, although every article
I've seen says it's 1.5 million acres.
There's hardly a tree or bush on it. And yet all these
groups, very falsely and very misleadingly, run these pictures
of the parts of the Arctic Wildlife Refuge where there are
trees and bushes and mountains and streams and all that. And,
sure, those are beautiful areas, but nobody has ever advocated
drilling for oil on those parts of the Arctic Wildlife Refuge.
And so it's worse than misleading; it's just false propaganda
comparable to what they used to do in countries opposed to
everything that we've always stood for in this country.
And I'll say again there are some of these groups who don't
seem to want people to drill for any oil, dig for any coal, or
cut a single tree. And it's sad because they've not only
destroyed thousands and thousands of jobs, they drive up prices
and they hurt the poor and the working people most of all. And
yet they sit there and do it and act like they're for the
little man. And it's really disgusting.
The geologic survey says that there's almost 16 billion
barrels of oil up there. Chairman Young told me that he thinks
there's far more than that up there. And then you take billions
more offshore and all of this to be done in an environmentally
safe way, gotten to. And I think some of these groups are
funded by some of these big companies that benefit if we don't
drill for any oil in Alaska or we don't drill for any oil
offshore, because there are shipping companies and there are
oil companies from other countries that benefit greatly.
So what we do, we hurt the poor and working people in this
country and we help these big companies that benefit if we
don't produce any oil domestically.
I think it's very sad and it's particularly sad coming from
people that try to pretend like they're in favor of the little
man in this country. So, with that, I'll stop and we can move
on to the second panel, I suppose.
The Chairman. [presiding] I thank the gentleman. This panel
is excused. I want to thank, especially, the senator for
appearing. And get out and start talking about it. I do thank
the administration for appearing, although we differ. You know,
time does flies fast, thank God.
Next panel. Dr. M. Ray Thomasson, president of the American
Association of Petroleum Geologists; Robert E. Ebel, director
of energy programs, Center for Strategic and International
Studies; Jerry Jordan, Independent Petroleum Association of
America; Howard Geller, executive director, American Council
for an Energy-Efficient Economy; and Gerald L. Hood, secretary-
treasurer, General Teamsters Local 959, Anchorage, Alaska.
Will the panel please take their seats? I do thank the
panel and, for those that have been waiting patiently, this is
a process we have to go through. Many Congressmen, including
myself, have a tendency to speak too long, but the information
you give us written and vocally will be in the record as we
review this and we hopefully will do so when it comes to
drawing an energy policy up either this year or next year,
whenever we're going to do it. So I do welcome it.
Dr. Thomasson, you're the first one up.
STATEMENT OF M. RAY THOMASSON, PRESIDENT, AMERICAN ASSOCIATION
OF PETROLEUM GEOLOGISTS; ACCOMPANIED BY ROBERT E. EBEL,
DIRECTOR, ENERGY PROGRAM, CENTER FOR STRATEGIC AND
INTERNATIONAL STUDIES; JERRY JORDAN, INDEPENDENT PETROLEUM
ASSOCIATION OF AMERICA; HOWARD GELLER, EXECUTIVE DIRECTOR,
AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY; AND GERALD L.
HOOD, SECRETARY-TREASURER, GENERAL TEAMSTERS LOCAL 959,
ANCHORAGE, ALASKA
STATEMENT OF M. RAY THOMASSON
Mr. Thomasson. Thank you, Mr. Chairman, for the opportunity
to provide the view of the petroleum geology community on these
important issues. My name is M. Ray Thomasson. I've been a
practicing petroleum geologist for 41 years. I'm president of
the American Association of Petroleum Geologists, a
professional organization composed of more than 30,000 field
scientists engaged in the exploration and development of energy
resources throughout the world. The AAPG is proud of
contributing to the supply of reliable and inexpensive energy.
Crude oil and, more recently, natural gas have fueled the
economic development of our country. Today the U.S. imports
more than one-half of our crude oil and refined product needs.
Mr. Chairman, the domestic production of crude oil has declined
from 8.9 to 5.9 million barrels of oil per day since 1985 and
the production of natural gas is essentially flat because of
changes in the tax code and increasing restrictions in access
to public land.
The resources are there. Predictions about a supply
shortage have been made for over 75 years. Every prediction has
been proven blatantly wrong. The next figure shows previous
estimates of the ultimate size of U.S. crude oil resources
versus cumulative production. The resource has grown slightly
faster than has cumulative production. New science and
technology are permitting us to do a better job.
Crude oil can be moved between world markets with relative
ease, but natural gas cannot. The natural gas that we need must
come from U.S. production as well as from imported from Canada.
Assessments of the Gas Research Institute and Energy
Information Administration each show a demand for as much as 32
trillion cubic feet of gas per year by 2015. This is a 50
percent increase over current domestic production.
Presently, we are barely replacing our current annual
production with newly discovered reserves. Since 1967, over 300
exploratory wells have been drilled offshore of the Canadian
Atlantic and discovered at least 12 trillion cubic feet of
natural gas and 2 billion barrels. The estimated ultimate is 50
trillion cubic feet of gas and 10 billion barrels of oil. This
geologic trend, with similar possible greater potential,
projects southward for some 1,000 miles off the East Coast of
the U.S.
All of these wells and platforms are operating in the prime
commercial fishing waters and off the pristine tourist
coastlines of eastern Canada. Production coexists with tourism,
commercial fishing, for the betterment of all concerned.
Mr. Chairman, the National Petroleum Council and the AAPG
believe that the resource base is sufficient to support the
expected growth in demand. However, a substantial portion of
that resource base is, at present, either not accessible due to
Federal moratoria or accessible with onerous restrictions that
destroy the economic viability of development.
The NPC study also notes that the necessary increase in
capital expenditures needed for exploration and production will
have to increase from about 32 billion per year now to more
than 50 billion per year by 2015. Public lands contain a
substantial portion of the undeveloped oil and gas resources
this country needs. These lands are underdeveloped because of
two categories of restrictions: non-accessible and accessible
with restrictions.
The 1002 area of ANWR, as well as the similar coastal plain
area of NPRA should be open to exploration and development. The
1002 area represents less than 10 percent of the 19 million
acres of ANWR and contains potential oil reserves of a range
11.6 to 31.5 billion barrels.
The Department of the Interior's management of the
resources on public lands and the Rocky Mountain region and
elsewhere needs to be reformed. We request that Congress reform
both the Clean Water Act and the Endangered Species Act and
thwart the EPA's efforts to severely regulate the use of
hydrologic fluid bore-hole fracturing methods. No additional
areas of public land should be removed from access, especially
by the sole action of the President of the United States, until
a proper assessment of their resource potential is conducted.
Lastly, petroleum exploration and production are extremely
capital-intensive. Major tax reform that more fairly treats
capital in its effort to find and development new sources of
domestic oil and gas will dramatically help our ability to
provide safer and more secure resources.
In summary, Mr. Chairman, without improved access to public
lands and fairer tax and regulatory treatment, we will continue
to jeopardize our nation's economic stability and, thus, our
own national security.
[The prepared statement of Mr. Thomasson follows:]
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The Chairman. Thank you, Doctor, and I do appreciate that
you restated some of the comments made previously and I think
the trend here is exposing itself and, hopefully, we can
recognize it. We have two choices. One is to become self-
sufficient or somewhat self-sufficient or to continue down that
path of responding to the foreign countries. So I do thank you
for your testimony.
Robert.
STATEMENT OF ROBERT E. EBEL
Mr. Ebel. Thank you very much, Mr. Chairman. Let me begin
by noting that the general public's view of developments in the
world oil market is very limited. It's limited to that little
window on the gasoline pump at their favorite filling station.
If the price per gallon is essentially unchanged since the last
visit, then what's the problem? If the price happens to be a
little bit higher each time they visit, then what are the oil
companies doing to us now? The question of where that oil comes
from is rarely if ever raised. Oil is oil and what matters is
the price at the pump.
Policymakers do understand that our increasing reliance on
imported oil threatens our national security. Three findings to
that effect have been made in the past 12 years. But what to do
about that increasing reliance? The answer from our government
has been that present policy suffices, or words to that effect.
That is, yes, there's a problem but don't expect any actions
from your government which might help alleviate the situation.
But just what are these present policies? Our energy policy
continues to be guided by two considerations. First, that the
marketplace make the decisions and, second, U.S. companies are
encouraged to search for oil outside the United States, but
away from the Persian Gulf. Do we let the marketplace make the
decisions? Of course not. That's an opportunity which
governments cannot afford to bypass.
It seems to me a bit incongruous that our government
encourages the search for oil outside the United States. To
take that posture means we have consigned ourselves to greater
and greater dependence on foreign oil. That means that oil
exploration dollars are spent, but outside the United States.
And that means, in effect, we have given up on ourselves.
Should we give up on ourselves? I think not. We all know
individuals who have had great potential, but for some, they've
never been able to live up to that potential. Nations are much
the same way, having a recognized potential is not necessarily
a guarantee of success. You have to work at it to develop their
potential. Perhaps the most disappointing are those who turn
away from what might have been. How can it be that the world's
sole super power finds it so easy to turn its back on its
inheritance?
What might happen if we would reverse our policy and
encourage the search for oil and gas in the U.S. with our
potential fully available for exploitation, rather than locked
away? What will it take? Another oil embargo like we had in
1973, 1974?
Our energy policy is one-sided and inward-looking. Where
were we, when the price of oil had fallen to $10.00 a barrel?
We were rejoicing because cheap oil helped fuel our great
economic growth. Did we care about the exporters facing
financial difficulties? No, that was their problem, not ours.
But when they took collective action to raise prices,
success probably surprised them as much as it did us. We
watched over the months as prices tripled to $30.00 a barrel.
Now the problem became not one for the consumers, but for the
producers as well, because they had to look at the impact of
these high oil prices.
The U.S. is considered vulnerable because of our steadily
rising dependence on foreign oil. And the oil exporters have a
vulnerability of their own and that's their heavy reliance on
oil-derived revenues. Few have diversified economies and few
have even tried to diversify. Oil is their strength and their
weakness and we should not be surprised when oil is used to
express that strength or to overcome that weakness.
Mr. Chairman, whenever oil prices are rising, like the one
we're in today, we reach for that shelf entitled project
independence and we dust off the remedies of opening up
prospective lands, now denied, for exploration. We take a
second look at alternative forms of energy and we once again
discuss the need to become more efficient in our use of oil.
But then the crisis passes, as this one will. And the
remedies are returned to the shelf to once again gather dust to
be revisited upon the time of the next crisis, which will
surely appear but I don't know when or in what form. Mr.
Chairman, in conclusion, I must ask the question when will we
ever learn to act rather than react?
Thank you. And I would ask that my oral statement be
entered into the record.
The Chairman. Without objection, so ordered. And thank you,
Robert. Jerry.
STATEMENT OF JERRY JORDAN
Mr. Jordan. Yes, Mr. Chairman, members of the committee. I
am Jerry Jordan, chairman of the Independent Petroleum
Association of America, IPAA. Today I'm testifying on behalf of
the IPAA and the National Stripper Well Association and 32
cooperating associations, State and regional associations,
around the country. These associations represent thousands of
independent oil and natural gas producers in the country.
Independents drill 85 percent of the wells drilled in the
United States and produce two-thirds of the natural gas.
These hearings have been triggered by the recent OPEC
actions and the price increases that changed the price of
gasoline, diesel, and heating oil. So what happened and how can
we avoid a repeat?
We have an economy that's based on petroleum, as you
already heard, crude oil and natural gas. Petroleum remains the
predominant energy source and will continue to do so for the
future, at least the foreseeable future.
Domestically, we import over 55 percent of our crude oil
demand. Natural gas, on the other hand, is largely a domestic
resource with imports mainly from Canada. In the future,
domestic oil and natural gas production will be more and more
dependent on a healthy independent exploration and production
industry. Major oil companies began shifting their exploration
efforts overseas after the oil price crisis in 1986 and this
pattern will probably continue.
Oil prices are set on the world market. The U.S. is a price
taker as we've just recently found out. Independent producers
are the most vulnerable to shifts in prices. We were damaged
most severely during the low oil price crisis of 1998 and 1999.
We are recovering slowly, but we need stability and we need
policies designed to bolster our industry. It is critical to
our country.
Our current energy policies make no sense. We rely too much
on foreign oil and too little on our own resources. We talk
about shifting to a broader use of natural gas, but we are
constantly thwarting those producers who are exploring for gas.
We need different policies, but, of course, as always, there's
no single answer.
The previous testifier said he didn't know when the next
crisis is going to be. I think I can predict that we will have
at least a mini-crisis within the very foreseeable future
because our natural gas demand and our natural gas supplies and
decline curves on the wells that are producing in this country
and offshore are heading for a collision. I don't mean it's
going to be some big energy crisis. I don't know how bad it's
going to be. But I think it will at least cause price increases
and I think you ought to be warned of it. And I want to take
the time out of my testimony to raise that question, since he
said that.
I think our solutions are, first, we do have to continue to
work with the foreign producer nations, as we have been doing.
Second, we must start treating the domestic oil and natural gas
production industry as a critical element of our national
economic security. To do this, we must direct our efforts to
the two areas which can have the greatest effect: access to
government-controlled lands and water for exploration and
production and access to capital.
With regard to land access, this committee's jurisdiction,
of course, is at the heart of the developing policies on this
question. Unfortunately, the administration not only avoids
dealing with the clear need to allow exploration and production
on Federal lands, both off and onshore, it seems to be
dedicated to expanding the restrictions and prohibitions. In
doing so, it is attempting to take additional western and
offshore areas out of our exploratory inventory. This practice
is going to cause large problems for our country as we attempt
to meet our natural gas demands.
There have been successes, as described by Senator Johnston
when he talked about the Deepwater Royalty Relief Act. That was
a great success and, obviously, that should be pursued for
renewal.
Mr. Hayes in his testimony, I think, showed that if you
open it, they will come, interestingly enough. They simply
aren't opening enough. And I thought his testimony actually
proved our points better than his points.
What can we do? No one can expect that the long list of
restrictions and limitations can be instantly revised. We're
not dealing with one particular action on the restrictions to
access. We're dealing with a whole series of actions. We're
dealing with permit restrictions. We're dealing with
prohibitions, moratoriums. It takes many, many forms. And
they're very hard to fight because of this.
We do things like declare areas to be roadless areas. I
happen to think, as a recovering lawyer, that I don't think you
can do that, to take a multi-use property and then say, well,
you can't really use it for the purposes intended because we
won't let you build roads. And we intend, I intend, to advise
that we ought to test that in court if it actually happens. But
these are the kinds of things that we face and they are very
complicated and there's a number of them.
We first need to do an inventory, as this committee has
recommended, an inventory of the properties that are being
taken off the list of available Federal lands and Federal
waters. Second, we need to make a clear list of the impediments
that we are encountering, all the laws, regulations, permitting
regs, all the environmental requirements, and basically take an
inventory of them as well as the lands.
Finally, we must promptly open up the areas in the West
which have been restricted. And we must stop the additional
moratoriums. I don't know what the plural of moratorium is, but
we must stop these actions that have been taking place and look
like they're going to take place more in the next year.
Finally, with regard to capital, I would be remiss if I
didn't mention a unique opportunity that we have. For the first
time, we have an administration, as evidenced by statements of
the President in his recent radio broadcast and also the
Secretary of Energy, the industry, Members of Congress, all
seem to think that we ought to do this little package of tax
features or tax reform that have already been discussed. We
ought to do that right now.
And we ought to do it with a rifle-shot approach, not a
shotgun. Don't hang all the other things on it that make it
lose. We have agreement among all these different interests on
those issues and it won't be a solution, but it will help bring
capital to our industry. And, other than land access, capital
is the biggest problem we have.
I know I've overstayed my time and there are other things I
could say, but thank you for the opportunity.
[The prepared statement of Mr. Jordan follows:]
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The Chairman. You notice I didn't hit the gavel, Jerry.
Mr. Jordan. I know.
The Chairman. The next one is Howard Geller, executive
director of American Council for an Energy-Efficient Economy.
STATEMENT OF HOWARD GELLER
Mr. Geller. Thank you, Mr. Chairman. I'm Howard Geller, the
executive director of the American Council for an Energy-
Efficient Economy, a non-profit organization based here in
Washington.
In my oral statement today, I would like to make four
points. One, domestic oil production in the United States is
falling and will continue to fall, with or without opening the
Arctic National Wildlife Refuge to petroleum exploration.
Two, growing oil imports is a serious threat to national
security and our economic well-being.
Third, reducing consumption of petroleum products through
improving the fuel economy of new vehicles is our single most
effective and desirable strategy for cutting oil importants.
And, fourth, tougher fuel economy standards should be
adopted to increase the efficiency of new vehicles.
Total crude oil production in the United States peaked in
1970 and generally has been falling since then, as I show in
figure one in my testimony. Domestic crude oil production in
1999 was 39 percent less than peak output 30 years ago. This
has occurred because we are running out of economically
recoverable oil in the United States. Furthermore, the
Department of Energy and many other organizations project that
domestic crude oil production will continue to fall in the
future.
I am not an expert on the potential costs and benefits of
allowing oil production in the Arctic National Wildlife Refuge,
but one thing seems clear. Opening up ANWR to oil production
would not make a significant contribution to curtailing our
growing dependence on oil imports.
As Mr. Hayes has stated, the U.S. geological survey
estimates that there are 2.4 billion barrels of economically
recoverable oil under ANWR at an $18 per barrel market price.
If this amount of oil is produced over 25 years, additional oil
production from ANWR would average 0.26 million barrels per
day. Even assuming twice as much economically recoverable oil,
ANWR production would average only 0.53 million barrels per
day. And total domestic oil production in the year 2010, in all
likelihood, will be less than it was in 1999.
The Congress should be concerned that oil imports are high
and growing. We and our allies are dependent on unstable
nations for our vital oil supplies and our economy is
vulnerable to another oil price shock. Even without a price
shock, the Department of Energy projects that our oil import
bill will climb from $60 billion in 1999 to $110 billion by the
year 2010.
Unlike the poor prospects for increasing domestic oil
production, there are good prospects for reducing oil demand by
raising the efficiency of our vehicle fleet. In fact, if we had
the foresight and political will to steadily increase the fuel
economy of new vehicles sold in the United States during the
past 12 years, as we did during 1975 to 1987, we probably would
not have experienced the recent run up in oil prices.
Of course, we can't go back and redesign the vehicles sold
over the past 12 years. But we can enact policies today to
ensure that vehicles sold during the next few decades are gas
sippers rather than gas guzzlers. Tougher CAFE fuel economy
standards are essential for significantly increasing new
vehicle efficiency.
Independent analyses, including those from our national
laboratories, have concluded that the initial CAFE standards
were largely responsible for the near-doubling in the average
fuel economy of cars and a more than 50 percent increase in
light truck fuel economy from 1975 to 1987, resulting in oil
savings of over 3 million barrels per day. The standards were
met largely through better technologies without negative side
effects.
We recommend increasing the current fuel economy standards
by 60 percent to 44 miles per gallon for cars and 33 miles per
gallon for light trucks by 2012 with further increases at the
rate of 2 1/2 percent per year beyond this date. Car
manufacturers say it can't be done or it will cost a fortune,
as they did when the original CAFE standards were debated. But
policymakers and the Congress and the Ford Administration
enacted standards in 1975 in the face of industry opposition
and the car companies complied at reasonable cost. Tougher
standards are now long overdue and should be adopted before we
face another oil price shock.
We estimate that tougher fuel economy standards I just
referred to would reduce gasoline consumption by 1.5 million
barrels per day by 2010 and over 4.5 million barrels per day by
2020. With this level of savings, oil import growth would be
moderated during this decade and imports would then fall after
2010. The potential oil savings from such standards far exceed
the potential oil supply from opening ANWR to development, as I
show in figure four of my written statement.
The Chairman. How much more time do you have?
Mr. Geller. Let me just conclude here and say that
increasing vehicle fuel economy was our key response to the oil
crises of the 1970's. This strategy can and should be applied
again to avoid new oil crises in the 21st century.
Thank you and that concludes my statement.
[The prepared statement of Mr. Geller follows:]
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The Chairman. Thank you. My good friend Mr. Hood from
Anchorage, Alaska, president of the Teamsters. Mr. Hood.
STATEMENT OF GERALD L. HOOD
Mr. Hood. Thank you, Mr. Chairman. I'm here today not only
representing the 7,000 members in Alaska, but I also am
speaking for the entire 1.5 million members of the Teamsters
Union throughout the country.
And I submit that there are some in denial that there
exists in this country today a gas crisis or an energy crisis
that we haven't seen the likes of since the early 1970's. Gas
prices are at an all-time high and are projected to increase
even more, notwithstanding OPEC's recent indication to increase
production and regardless of what you read in the press. Yet,
due to the lack of a comprehensive energy policy, this country
continues its dependence on the importation of foreign oil from
countries that don't necessarily share our global philosophy
and have agendas that are directly in conflict with our own.
Our solutions to this energy crisis must be multi-faceted.
One of the components has to include an increase in our
domestic supply of oil which, whether you like it or not, will
require making Federal lands available for leasing. We
desperately need to reverse the trend of importing roughly 56
percent or 9 million barrels a day of our petroleum needs.
And I'd remind the committee that 25 years ago this country
only imported 35 percent of the oil it consumed. Domestic
production is down 17 percent over the last decade and
consumption has risen 14 percent. You don't need a road map to
see where this trend is taking us.
We must develop a program to hold our allies and trading
partners accountable for their actions. The United States
didn't hesitate to protect the sovereignty of Kuwait during
Desert Storm and, in fact, we drove the Iraqis from those oil
fields after they had set them on fire. Had it not been for
America and American expertise, much of the oil now being sold
to us at such high prices could still be burning.
We must look to areas of our own country where the
potential for hydrocarbon fuel production is greatest and where
it can be developed with the highest standards and performance
and environmental protection. The State of Alaska currently
produces approximately 1 million barrels of oil a day, or 20
percent of our domestic supply, and the coastal plain of ANWR,
according to the USGS, has the potential of producing up to 1.5
million barrels per day. In my estimation, this would be a
tremendous step in reducing our dependence on foreign oil.
And there's another testimony that disputes the figures
with regard to how much oil there may be in ANWR. Let me just
point out that when we drilled in Prudhoe Bay, we estimated
then that there would be 9.6 billion barrels of oil. Today,
we've produced 10.5 billion barrels of oil from Prudhoe. We
anticipate, by the time we're finished with Prudhoe Bay, we'll
recover about 14 billion barrels of oil. Now this is just
Prudhoe Bay. It doesn't include Nully Point, Alpine, and
Kuparuk and the other surrounding fields.
Now there are those who argue we shouldn't ravage and
pillage and plunder this last pristine wilderness in the 49th
State. Let me just say that ravage and plunder and piller
aren't my words. Those are the words of the extremists that
want to preclude our developing section 1002 of ANWR.
We in Alaska have explored and produced oil for over 30
years. We've done so with the greatest of respect for our
environment because this is, after all, the land that we live
in and we work in.
I spent time in Prudhoe Bay here recently visiting
exploration and production facilities where my members work.
And I was reminded of some years ago we had a Russian
delegation visit us in Prudhoe Bay and they didn't believe that
we were producing oil. And we asked them why. It's because we
don't see any leaking or we don't see any on the ground.
So I would ask those who vigorously oppose the exploration
of ANWR, where would you rather see oil exploration done? In a
place of the world where there's little or no environmental
protection or regulation or in a place in our own country where
we have the strongest and strictest environmental regulations
in the entire world?
Now members of organized labor have worked in Alaska's
North Slope oil fields since their discovery in 1967. And we've
done so correctly in an environmentally sound manner. Our
workers are the most efficient, the best trained, the most
skilled, and the safest workers in Alaska's oil patch.
As I testified before the Senate Committee on Energy and
Resources in 1995 and again last week, I want to emphasize to
this committee as well that the development of ANWR will create
somewhere between 250,000 and 750,000 jobs throughout this
great nation of ours. And the difference between these jobs
that we will be creating and the ones that have been created
recently is that they are higher end jobs with excellent wages
and excellent benefits, not like the jobs created here recently
which are service sector and minimum wage jobs.
Mr. Chairman, the issue before you today is important to
the members of my organization. My organization includes
600,000 drivers who turn the key on a truck to start their work
day. And whether they drive cement mixers, deliver packages or
bread, or move freight throughout the country, they rely on
gasoline and diesel fuel to get their job done.
We're asking for a comprehensive national policy, which
includes the leasing of Federal lands for oil and gas
development, recognizing the consequences of high priced oil to
a national economy that relies on trucks to transport 80
percent of the freight in this country.
I thank you for this opportunity to testify before the
committee today.
[The prepared statement of Mr. Hood follows:]
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The Chairman. Thank you, Gerry. And I was going to bring it
up a little later on. We talked about fuel-efficient cars and
fuel-efficient that, you cannot save your way into prosperity.
Anybody who's been in a bank knows that. And everything that's
delivered to us is delivered to us by a truck of some type.
And, at this time, I'll let the good lady take over the
Chair for a few moments and I'll be back.
Mrs. Cubin. [presiding] Thank you, Mr. Chairman, as you
leave. And I just love it because here I get to talk as long as
I want. Although, you know--oh, good.
I want to make one statement about Mr. Hood's testimony. As
you all know, I represent the entire State of Wyoming. I was in
a small town in Wyoming and the President had been on touting
the 8 million jobs that his policies had created since he's
been in office. And I had a lady come up to me and say, you
know, I believe that the President has created that many jobs.
She said, I know. I've got three of them. That's how much it
takes for me to make a living.
And so your point that service jobs have been created, but
good paying jobs that can result from a healthier energy
industry are not plentiful. And, you know, the minimum wage
jobs that are created simply aren't adequate for what we need
for the people that we represent in this country. So I
appreciate that point that you made.
I'm the only person I know that can't see at a distance, at
my age, but I can read stuff. So forgive me for a minute, but I
want to see your faces when I ask you questions.
I want to ask one thing. Most of you mentioned access to
lands to explore for energy sources, most of you mentioned that
in your testimony. What was your reaction when you heard the
witness from the Department of the Interior deny that access
was a problem and brag about the increase in production on
public lands? I would like each one of you to respond to that.
You want to start, Jerry.
Mr. Jordan. My reaction is that we're playing games. You
know what they say about numbers and what games you can play
with numbers. The point is that we have had a studied, steady
campaign to take huge areas of our government lands out of our
exploratory inventory, notwithstanding the numbers they may be
able to play with what they listed. I mean, they've been taking
million-acre blocks, bites, and that's what's important here.
And it's got to stop or we are not going to be able--you know,
I agree with Ray completely and the National Petroleum, which I
serve on, on the Gas Committee.
We've got the resource base to produce the natural gas that
we're going to need, but if we don't take these restrictions
off the access, there's no way we can do that. So it is
critical. And I don't know what kind of games he's playing. I'm
sure he's telling the truth, technically, so don't get me
wrong. But I think that it's painting the wrong picture.
Mr. Thomasson. May I respond?
Mrs. Cubin. Certainly. Please do, Dr. Thomasson.
Mr. Thomasson. I was struck by the fact that the place
where those acres have become available is in the offshore and
the place where production has gone up dramatically is the
offshore. I think simple logic would allow one to come to the
conclusion that if you open up access, you're going to open up
our ability to find and develop more resources.
And I second what Jerry says. Not only do we have an
enormous resource base, but because of technology today, that
resource base is not shrinking, it's expanding. So I disagree
very strongly with Mr. Geller and his statement that we are
running out of resources. It's not true.
Mrs. Cubin. Yes and I agree with you, from all of the
information that I've been able to glean through the
subcommittee that I chair.
I would like to address this question probably to Jerry,
but to any of you who have an idea on it. As Mr. Jordan stated
that independent producers drill 85 percent of the wells and I
think he said produce two-thirds of the gas production in the
United States. And because of that, I really have a goal of
trying to do everything I can to create an environment where we
can help independent producers along.
I have a problem with some of the policies that the major
oil companies have pursued. Because I realize that they have to
answer to their stockholders. However, I still think that there
ought to be some patriotism and that there ought to be some
regard for national security. And where they spend their money
for drilling, while it is none of my business, it's irritating
to me. I think that independents have a harder row to hoe, if
you will.
So I would like to ask you, do any of you think that it is
realistic that the majors might move their money, if we could
create a better environment, might move their money back to
exploring in the United States?
Mr. Jordan. Shareholders are interested in returns.
Unfortunately, we've been in a dotcom economy and it's very
difficult, whether you're a major or an independent, to make
the kind of returns, if you've got shareholders and if you have
to answer to shareholders and sometimes to bankers, it's very
difficult to justify drilling sort of where you ought to rather
than where you want to.
The majors, I know, have to do what they--I mean, I think
they're doing what they feel that they absolutely have to do. I
know many of the executives, I know they are dedicated to our
country being more energy independent, just like the
independents are. But I think it's very difficult for them and
I think that so often the policies and I've dealt with people,
with majors, who are selling properties in the United States
and they say, we don't really want to sell them, but we don't
have any choice.
But it really works out well for the country because they
sell them to independents and the independents go on and
develop them. So it's this partnership that we have between the
majors and the independents. And some of the independents are
getting very large. And as they get very large, I'm happy to
report that there are a lot of little bitty independents, it's
kind of like the food chain, there are a lot of little bitty
independents forming all over this country.
And if we create the kind of economic climate that we need
to promote our industry. And we already pay big taxes. I mean,
if we make a lot of money, we pay a big percentage of taxes.
And the oil companies pay taxes just like everybody else. But
they also apply, if they do their practice is sometimes they
get to delay paying taxes and that's considered an abuse, but
it's not an abuse. It's a value judgment made by our system
which says if you'll put your money back in and help develop
resources, we'll let you defer those taxes. It's a value
judgment.
These industries have to balance all these things. And I
think that the system is working, but we need to push harder,
just like Ray has said, we need to push policies that will
encourage drilling and encourage exploration. And then, of
course, we have to give them land access to do it because most
of our lands in the West are controlled by the government.
Mrs. Cubin. Right. And I don't disagree with anything
you've said. I do think, from my own experience in talking to
independent producers, that they have fewer resources to go
through the environmental impact studies, the archeological
studies, the endangered species studies, and all of the sort of
things, the hoops that the Federal Government puts in front of
people even when the land is not shut off by roadless areas,
for example, and wilderness study areas, for example, and those
sort of things. I guess that was the point I wanted to make.
I would like to address this question to Mr. Geller. You
talked about standards that you'd like to see for efficiency in
motor vehicles. Do you know what total production would need to
be if, in fact, in the United States--no, not production in
United States. What total consumption would be if those
standards were adopted? Do you have any statistical information
on that?
Mr. Geller. Yes. The savings I indicated, 1.5 million
barrels a day by 2010 and 4.5 million by 2020 can be compared
to our total consumption which I think is around 18, 19 million
barrels per day. Perhaps other on the panel--19.
Mrs. Cubin. But are you speaking of only consumption for
motor vehicles and not any other?
Mr. Geller. Oh. That's total oil. Motor vehicles, I think
our gasoline and diesel fuel use is 55 percent of our total oil
consumption. OK, so, total oil consumption right now is
something around 10 million barrels per day for motor vehicles.
That's both passenger vehicles and heavy trucks. So that
increasing these standards can do quite a lot in terms of
saving a very significant amount of the total consumption that
we have today and the projected consumption that we have in the
future.
The thrust of my testimony is that there's two sides of the
equation. There is a supply side, of course, and we don't deny
that. We can't just run our country on energy savings. Of
course, that's true. We need supplies.
But there's also the demand side of the equation and let's
not forget about it and let's look at the opportunities to save
energy, which will reduce oil imports, saving oil, which will
reduce oil imports. The margin will be there in reducing
imports from efficiency improvements in vehicles. That's the
biggest opportunity on the demand side. And I would suggest a
much greater opportunity for reducing imports than these other
kinds of actions being discussed here.
That is oil, domestic crude oil production has been
declining in this country for 30 years. Every forecast that
I've seen, I haven't seen them all, but every forecast,
government and non-government, is showing further declines in
the future in domestic crude oil production.
Mrs. Cubin. And I don't think that there's anyone that
would argue that efficiencies and conservation of energy is
something that we should not do. I believe everyone thinks that
we should do that. How we do that is what's in controversy and
whether government standards mandating that should be the way
to go or whether the free market should be the way to go, I
think, is where the argument and the disagreement occurs.
And I also, I don't know if you were here during the first
panel's testimony, but, you know, I think back to Mr. Largent's
response in answer to a question that it seems to be the very
same who are saying we have to have mandatory efficiencies, we
have to, you know, conserve, that we have to do something about
our oil and gas consumption, or, particularly, or oil
consumption, we have to do that.
But these are the very same people that over and over and
over again will vote, in the Congress, and will rile against
the things in the country that would promote other sources,
whether it's nuclear, even the windmills that, you know, we
have some in Wyoming. And if you drive over into California,
you see this whole field of these windmills, you know, to
produce wind energy.
I'm not saying I don't think that should happen, but, my
goodness, to me that's way uglier than an 18 inch stick
sticking out of the ground where they've drilled for gas. And,
you know, as far as the aesthetics of the situation, I think
people speak on one hand of what we need to do, but they are
not willing, on the other hand, to do what we need to do to
accomplish a reasonable energy policy.
I don't see that I have any other questions. Congressman
Simpson, did you have some?
Mr. Simpson. Not really questions, Madam Chair. It seems
like we're, from the testimony we're faced with, we have two
options. Either increase production or reduce the demand. And I
think, in reality, it's a combination of both. I think you're
going to have to increase production in this country and you're
going to have to reduce demand.
When we talk about fuel efficiency in automobiles, we
always talk about the cost and how much the public can save by
having increased fuel efficiency in automobiles. And I don't
think that that's a bad thing by any means, but we also, for
every action, there's equal and opposite reactions, and we
never seem to talk about the number of deaths that have been
caused by lighter vehicles on the road and so forth. The
accidents that they get involved in are more serious.
Do you have any studies on that, Mr. Geller, on what's
happened to the number of deaths on the road and how many of
them have been attributed to lighter vehicles and such because
of increased fuel efficiency?
Mr. Geller. Yes, Congressman. In anticipation of this
question, I addressed it in my written testimony. If you would
be so kind to look at figure three, if you have my written
testimony.
Mr. Simpson. I've got it somewhere in this stack.
Mr. Geller. I can hold up the figure if you can't find it.
Mr. Simpson. I'm sure I can find it somewhere.
Mr. Geller. The figure shows two lines: the on-road fuel
economy, the average from 1970 until today, showing the
increase from about 13 miles per gallon up to close to 20 miles
per gallon today. And it shows, over the same period, the
fatality death per million vehicle miles of travel, per unit of
driving, which declined from about close to five deaths per
million vehicle miles of travel back in 1970 down to less than
two deaths per million vehicle miles of travel today.
So while we were improving fuel economy through better
technologies, we were also improving the safety of our
vehicles. The two can be done and have been done together.
We've made our vehicles safer and we've made them more fuel
efficient.
Mr. Simpson. You wouldn't deny that more vehicles are, that
the lighter vehicles that are made of plastic today, are more
dangerous in an automobile accident going 70 miles an hour, per
se, would you?
Mr. Geller. The statistics are showing that driving has
gotten safer.
Mr. Simpson. Because of air bags and seat belts.
Mr. Geller. Seat belts, improved designs, better
engineering, more crush space. All kinds of things that have
been done and that continue to be done to keep our vehicles
safe and make them safer. It's a matter of engineering on both
sides, on the fuel economy side and the safety side. We can cut
emissions of air pollutants, we can improve fuel economy, and
we can make vehicles safer.
And I would submit that Federal standards are key drivers
of all those public goods that we're interested in. We had fuel
economy improvements when we had fuel economy standards enacted
under the Ford Administration.
Mrs. Cubin. Would the gentleman yield?
Mr. Simpson. Yes.
Mrs. Cubin. I just am sorry, but I have to make the point
that in the very timeframe you're referring to is when law
enforcement nationally, State by State, decided to really crack
down on drinking and driving. And that is just something that
you can't leave out of the equation.
I have a friend right now that has children that are just
starting to drive and one of them wants an SUV. And he said,
no, you can't have that because it kills more people. Well, you
know, I bought a truck for each one of my kids not only because
they need to haul things from our place in the country but
because they're going to be safer in it if they get in an
accident. What is wrong with--I mean, why not make the standard
heavier vehicles so that people are all safer instead of, like
the Congressman is talking about, plastic, tinny vehicles that
crunch when you--I mean, we're not going to make semis smaller.
So forgive me.
Mr. Thomasson. Madam Chairman, could I answer Mr. Geller's
comment about production one more time, with an illustration?
Mrs. Cubin. Please.
Mr. Thomasson. Skip, could you put up the first one right
there on top and then get out the gas one? What this shows is
that, as cumulative production has gone up, our resource base
has gone up as well. And what that means is that we are finding
more resources than we thought we had just the year before the
year before the year before.
Similarly, if you take gas that happens to be crude oil.
Now the fact that production has come down in crude oil, and it
has, is a direct result, frankly, of the policies that have
inhibited our ability to react. But I want you to look at
natural gas where there's been a concerted effort, because of
pressure by the administration and, mostly, by economics.
And you can see the black curve is the curve that was
projected by King Hubbard back in 1956. And that was for gas
production. He correctly predicted oil production was going to
peak in 19--you can show that one--in 1970. He was right on.
But you notice we are now 37 percent over what he projected. In
gas, we're actually back up at almost flat in our production.
My point is, and then if I could make one more point with
the pyramids, that, as our technology becomes better and what
this chart is showing is increasing technology allows us to cut
further down into the resource pyramid. Think about in mining
terms. At the very top, a nugget of gold that gets more finely
disseminated as we go down. And as you slice further down, you
expand exponentially the resource base available to you.
And your basins in Wyoming, the greater Green River Basin
is a good example, that particular basin has, now listen to the
number, please, Mr. Geller, 5,000 trillion cubic feet of gas in
place and we're learning how to get that gas out. And we're
going to learn more about how to get that gas out. And we will
get a great deal of that gas out as we slice further down that
pyramid.
So we are actually expanding our resource base now and we
can increase our production.
Mrs. Cubin. You know, I have trouble, and a lot of us have
trouble, trying to imagine what is a trillion? Whether it's a
trillion dollars. What's a trillion? It's a number too big to
understand.
So my staff, we sat down and we said, OK, how do we figure
out what a trillion is? And here's what we came up. If I'd
opened a business the day Jesus Christ was born and lost a
million dollars a day every single day from then until today, I
wouldn't have lost my first trillion dollars. And we're talking
5,000 trillion. This is a large resource.
Mr. Simpson. Well, thank you, Madam Chairman. And I just
want to--I'm not opposed to the CAFE standards and I think we
will have increased fuel efficiencies in the future and we will
also have new technologies and we will have more use of
combination engines, electric engines, gas engines, and so
forth. I know they're doing a lot of the research on electric
automobiles and stuff out at the INEL and in Idaho and stuff.
And I've been there and seen some of those things. And those
things will come along. And I think we need to encourage them
to the extent we can.
That doesn't mean that we can't have and shouldn't have and
must have, I think, more exploration and development of the oil
reserves in this country and the gas reserves in this country.
It's the combination of the two. It's not an either/or and
we shouldn't be on the sides fighting these things and
certainly we can disagree on particular areas that are
appropriate for drilling or not drilling, but the reality is
that we're going to have to have more oil production in this
country if we expect to be self-reliant or closer to self
reliance in this country. Plus we're going to have more
efficiencies and so forth and look at demand side.
So I appreciate the testimony of this panel.
Mrs. Cubin. I'd like to thank the panel very much for their
valuable testimony and thank you for being here with us and
taking the extra time. This panel is dismissed.
I'd like to call the fourth panel forward at this time. Mr.
Joseph Hegna, of ARCO; Dan Becker of the Sierra Club; Charles
Bedell of the National Ocean Industries Association; Walter B.
McCormick, Jr., the president and CEO of the American Trucking
Association; and Monica Surprenant, chairwoman of the Louisiana
State Mineral Board.
I'd like to welcome you all to the hearing. And, please,
would Mr. Hegna begin his testimony.
STATEMENT OF JOSEPH H. HEGNA, ARCO ALASKA INC.; ACCOMPANIED BY
DAN BECKER, SIERRA CLUB; CHARLES BEDELL, NATIONAL OCEAN
INDUSTRIES ASSOCIATION; WALTER B. MCCORMICK, JR., PRESIDENT AND
CEO, AMERICAN TRUCKING ASSOCIATIONS; AND MONICA T. SURPRENANT,
CHAIRWOMAN, LOUISIANA STATE MINERAL BOARD
STATEMENT OF JOSEPH H. HEGNA
Mr. Hegna. I have written testimony that I would like to
summarize orally.
I represent not only ARCO Alaska here, but the Alaska Oil
and Gas Association whose 17 members are responsible for the
majority of exploration, production, development, marketing,
refining, and transportation of oil and gas in the State of
Alaska.
It occurred to me while I was sitting back here that not
only have I visited the North Slope during February, I actually
moved there. I was crazy enough to have moved up there in
February 1985. Those first 2 weeks are some of the most
memorable, as the wind chill temperatures were down below 100
below zero and I watched the frost crawl down my wall and
attack my bed. And it finally started warming enough so it
retreated. But visually, I remember that quite well.
I was asked to speak today on Alaska on how we work to
minimize our impacts to the environment. And lately we've been
referring to this as just simply ``doing it right.'' What I'd
like to do is step back for a minute and characterize not just
what we're doing now with some of the newer developments, but
to try to talk a little bit to what we've done in the past,
speak to the record because this has been an issue several
times today.
First of all, the North Slope is huge. It's 88,000 square
miles, roughly the size of Idaho. It's 9 months of snow and ice
on the ground there. Typically, you'd be looking at 30 below
zero during the winter with wind's blowing 30 miles an hour.
Prudhoe Bay, which was discovered in 1968 and came on line
in 1977, was the first of the oil fields. Now we've grown to
where we have actually six producing locations, including
Prudhoe, Kuparuk, and several others.
Through that period of time, we've produced over 12 billion
barrels of oil. Our environmental record, I think, is unequaled
by any other location in the world. I feel like not only have
we done it right, but I think we are the best of the best.
You've heard that the caribou speaks minimal impact that
we've had on wildlife. The central Arctic herd has grown from
less than 3,000 animals to roughly 20,000 today. What we
haven't heard is about the minimal footprint that is left
through the early developments. Prudhoe Bay, Kuparuk, the
earlier fields that were developed were developed with less
than a 2 percent foot.
A footprint is where we set down gravel on the tundra so we
can put a facility on it and we protect the environment.
Prudhoe Bay at 2 percent, if you compare it to the space center
down in Florida which is 5 percent, that's very, very limited
impact. And where we've are to today, is even more incredible.
I heard some discussion on spills. And I would like to
clarify some things around spills. First of all, we report all
spills, no matter how small, whether it's a cup or a gallon. So
the spills that you hear of being referred to, most of those
are less than a gallon. And the vast majority of spills never
reach the tundra because they almost always occur over the top
of the gravel pad. So the damage that's been done by spills on
the North Slope is relatively insignificant.
We talked about doing it right. The best example that I can
think of is the current Alpine field, which is truly setting a
new standard for doing it right. That field is due to come on
line this fall and it's roughly 429 million barrels of proven
reserves.
But the interesting thing from my perspective is the
limited impact that we've had on the environment, not only in
finding, but in developing that field.
In the exploration process when we're doing seismic work,
there was no impact at all. When we went out to drill, we set
down ice roads, we set down an ice pad, brought the rig in, and
when we took it out, there was no evidence outside of the well
that's left there.
If you look at the total footprint that has been left by
Alpine, it's 2/10 of a percent of the surface area of the
field. That's a 40,000 acre surface that has only got 97 acres
gravel.
We've been able to do that by using some new technology. In
the past, we had drilling muds and cuttings that were set aside
in an impoundment on the surface called a reserve pit. We no
longer require that. We're the first oil fields in the world
that have gone basically to zero discharge on drilling waste.
We grind and inject all the waste, inject them down into the
Cretaceous zone where they are sealed 3,000; 4,000 feet below
the surface.
Additionally, we talked about the ice roads. An ice road
eliminates itself.
But the other development that's helped us out quite a bit
in reducing our impact is directional drilling. Someone
referenced it earlier by saying that we can extend out. We can
go out about four miles. A good example would be putting a
drilling rig on the White House lawn. We could drill the entire
DC. area and a good majority of the Arlington area as well
without impacting any of those areas, except where that
drilling rig is up.
So, truly, if you're looking at environmental impacts on
what's being done on the North Slope, there are great examples
of doing it right. And come on up in the winter. Come on up in
the summer and you can see those, too. But the majority of the
activity is done in the winter so we can minimize the impact.
Thank you.
[The prepared statement of Mr. Hegna follows:]
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Mrs. Cubin. Thank you for your testimony. Is October the
winter or summer up there, or fall, I mean, winter or fall?
Mr. Hegna. It's clearly winter. There's winter and--
winter's coming on.
Mrs. Cubin. Because I was there in October.
Mr. Hegna. It's the only two seasons we have up there.
Mrs. Cubin. Right. I was there in October and I remember
the cost of putting a light under a passageway like so that the
fish could find their way where they were going. And I couldn't
help but--never mind.
Thank you for your testimony. And welcome to the committee,
Mr. Becker. And would you please present your testimony.
STATEMENT OF DAN BECKER
Mr. Becker. Thank you very much, Madam Chair, members of
the committee. I am the director of the Global Warming Energy
Program at the Sierra Club and I want to thank you for the
opportunity to testify on behalf of our more than \1/2\ million
members nationwide.
And our message--well, let me just say I will summarize my
testimony if that's OK and would like to submit two additional
pieces of documentation for the record.
Mrs. Cubin. Without objection.
Mr. Becker. Thank you.
Our message is short. We should not drill under the Arctic
National Wildlife Refuge for oil. We should drill under Detroit
by making our cars and light trucks more efficient.
Once again, oil prices have risen because OPEC is
manipulating the supply to increase profits. Once again, we
have been made vulnerable by our dependence on oil. And once
more, Americans, tired of being victimized by OPEC, are looking
to our leaders for real solutions. But we can't drill our way
out of this problem.
We import 55 percent of our oil, but we sit on only 3
percent of the world's known reserves. It's a simple case of
supply and demand, as we said here earlier. We can do very
little to affect the supply, but we can do an enormous amount
to affect the demand.
In 1975, for example, Congress passed the most successful
energy saving law ever, the CAFE standards, which were signed
into law by President Ford. It doubled fuel economy. It cut oil
consumption by 3 million barrels of oil a day. And it helped
put OPEC on the ropes.
But since 1996, Congress has blocked CAFE standards with an
appropriations rider. And the industry has churned out gas
guzzling SUVs at a prodigious rate. As a result, fuel economy
has sunk to its lowest level since 1980. Oil demand has risen
by 500,000 barrels per day. OPEC has come roaring back to life.
The biggest single step we can take to curb our consumption
of oil is raising the CAFE standard. And had we started doing
that in 1994 at a stately pace of 6 percent a year, we would
have now been saving 35 million gallons of oil a day and $52
million a day and we'd be saving twice the U.S. share of the
OPEC shortfall.
At 45 miles per gallon and 34 for light trucks, we would
save more oil than we import from the Persian Gulf plus what
may lie under the Arctic National Wildlife Refuge plus what may
lie in offshore California. We would also be cutting global
warming.
Mrs. Cubin. Excuse me. Would you repeat that, please?
Mr. Becker. Sure. If we raised the CAFE standards to 45
miles per gallons for cars and 34 miles per gallon for SUVs and
other light trucks, we would save more oil than we import from
the Persian Gulf plus what might lie under the Arctic Refuge
plus what might lie under the offshore California fields.
Mrs. Cubin. Over how much time?
Mr. Becker. It would take a phase-in period of 10 years to
have all the new cars replacing the existing fleet. Basically,
10 percent of the auto fleet retires every year. So it would
take 10 years to phase-in.
But that is frankly the same period of time that is
envisioned for bringing the Arctic National Wildlife Refuge
field on line. So the timeframe is a similar one and we can
begin saving by improving fuel economy this year.
The technology exists, through more efficient engines,
improved transmissions, better aerodynamics, to make these
changes to our vehicles. These kinds of technologies could
change the Ford Explorer from a 19 mile to a 34 mile per gallon
truck. And it would save $5,500 on gas for the owner over the
life of the truck. The investment in technology to achieve that
$5,500 savings would be only $935.
Even better technology is on the new Honda Insight, which
you can buy right now. I saw one on my way over to testify.
It's a 65-mile-per-gallon car that has 2 engines side-by-side,
a gasoline engine that recharges the electric motor that mostly
runs the car. Toyota will sell a 55-mile-per-gallon 5 passenger
Prius beginning in June. But Detroit is not going to reverse,
in part because of this rider.
Rather than cutting back on energy efficiency, what we
should be doing is using energy efficiency to cut back on our
oil dependence. What we must not do is pillage the Arctic
National Wildlife Refuge for a fix of oil.
The coastal plain of the refuge represents the last 5
percent that remains off-limits of Alaska. This is, as has been
said before by this panel, although not necessarily
respectfully, America's Serengeti. It is a home to unique
wildlife: wolves, polar bears, musk ox, myriad bird species.
It's the camping ground, as been said before, of the porcupine
caribou herd, which migrate hundreds of miles to this special
place to give birth to their young.
No one knows how much oil lies beneath the Arctic Refuge.
The USGS's most recent study determined that a mean estimate of
3.2 billion barrels of economically recoverable oil may lie
there. That's less than a 6-month's supply and, even at peak
production, would represent less than 2 percent of total U.S.
daily demand and would take 10 years, as I said a moment ago,
for it to come on line.
But it doesn't really matter how much oil lies under the
Arctic Refuge. It would be shortsighted to drill there just as
it would be shortsighted to dam the Grand Canyon for hydropower
or to tap Old Faithful for geothermal energy or to pop the Mona
Lisa into the fire to warm your house. We must not sacrifice on
of America's most spectacular national treasures just for a fix
of oil.
Oil drilling in the Arctic Refuge would require
construction of a large industrial complex with hundreds of
miles of pipelines and roads, numerous drilling pads,
production wells, power plants, and housing for thousands of
workers.
Such a massive industrial facility would destroy this
pristine wilderness. The Arctic National Wildlife Refuge is
public land. It belongs to all of us. And it should be
protected for future generations to enjoy and explore and
discover. We cannot drill our way out of our oil dependence but
we can save our way out of it. Now is the time to take the
single biggest step to cutting our oil addiction by raising the
CAFE standards.
Thank you very much and I'd be happy to answer any
questions that you may have.
[The prepared statement of Mr. Becker follows:]
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Mrs. Cubin. Thank you very much.
Next, the Chair would like to recognize Charles Bedell. Is
that the correct pronunciation?
STATEMENT OF CHARLES BEDELL
Mr. Bedell. Yes. Thank you, Madam Chairman and members of
the committee. I am here today to represent the National Ocean
Industries Association. The National Ocean Industries
Association represents over 260 companies engaged in all
aspects of the exploration and development of the nation's
Outer Continental Shelf natural gas and oil resources.
We have testified numerous times over the years and it's
been interesting, again, to be sort of on the final panel here
and hear all the byplay and back-and-forth and all the issues.
Many of the things we'd like to say have been said. And, at
this point, I think the basic question that brought us here
today was, though, to take a look at the Clinton
Administration's policies and what impact they may or may not
have had on the situation we now find ourselves in.
25 years ago, we had gas lines going around the street back
here on C Street several blocks. I know. I lived down there and
worked in this building. And we haven't seem to have learned,
as an institution or as a country, from these past lessons. And
we haven't gleaned the truth that has been stated here today
several times, that we need both things.
We seem to have this philosophy that, OK, we need to jerk
America by the neck or by the collar and say you must go and
save this or do that and then suddenly, somehow, we will stop
using energy. And we have a complex society, one that can't be
changed and turned around on a dime. Sort of like a law of
physics. It has a lot of momentum.
And I think that what the administration has done hasn't
really, to this point, helped out on that. What I'm speaking of
in particular is that, for example, the administration had a
report in September 1999 called, ``Turning to the Sea:
America's Ocean Future.'' This report takes a balanced approach
to offshore energy, surprisingly enough.
And not only does it recognize how vital oil and natural
gas resources on the OCS are to our domestic energy supply and
the nation's security needs, but it highlights the importance
of natural gas reserves on the OCS, as natural gas will be the
necessary ingredient to meeting our growing energy needs, and
especially for helping our clean air situation.
Now, however, there is an old adage that says actions speak
louder than words and, unfortunately, the administration's
record hasn't been one of following its own policy advice. Now
there's a chain of events that's taken place since 1995. Back
then, the administration issued a national energy policy plan
that was called, ``Sustainable Energy Strategy.'' Now this plan
in part states that the administration is, and I quote,
``committed to enhancing the competitiveness of domestic oil
producers,'' close quote. And, ``expanding the role of clean,
efficient, and domestically produced natural gas,'' close
quote.
Later, in March 1998, the administration released yet
another study called ``In the Year of the Ocean.'' These were
discussion papers, as it was called. And these were prepared by
Federal agencies with ocean-related programs and this document
states that the environmentally sound development of the
nation's OCS will help advance the energy policy plan outlined
in the earlier 1995 document.
In addition, the document asserts that, and, again, I
quote, ``The offshore development, under proper environmental
safeguards, poses less risk for large oil spills than does
importing foreign oil in tankers,'' close quote. Pretty good.
Now in April 1998, the administration released another
document, ``Comprehensive National Energy Strategy.'' This one
says that it seeks to arrest the decline of domestic oil
production by the year 2005 by supporting, again, quoting,
``environmentally responsible development of leased Federal
lands for oil recovery,'' close quote.
It also seeks to increase, it says, ``domestic production
of natural gas by as much as 6 trillion cubic feet per year by
the end of 2010.'' But on--there had to be a but--on June 12,
1998, during the National Ocean Conference in Monterrey,
California, President Clinton issued an executive order
extending and expanding the moratoria on oil and gas leasing
off of most coasts of the United States outside the central and
western Gulf and parts of Alaska until 2012. In making this
announcement, the President said, quote, ``We must save these
shores from oil drilling,'' close quote.
There's yet another study, a September 2, a paper or report
entitled, ``Turning to the Sea: America's Ocean Future.'' Vice
President Gore introduced this one and said that natural gas
reserves on the Outer Continental Shelf are particularly
important because natural gas has major environmental benefits
over other fossil fuels. Yet 80 percent of our OCS is off-
limits. Yet this administration opposes development of the
project that Senator Johnston mentioned earlier, the Destin
Dome 56 unit project off Florida, which has at early 1990's
levels, I think it was 30 years of commercial natural gas for
the State of Florida.
To summarize, Madam Chairman, I think it's clear that the
offshore industry in the United States, if 25 years ago, we had
sat in this hearing room and someone had said what we can do
today was going to be possible, I think we would roll our eyes
and said, oh, my goodness, you know, 8,000 feet of water,
production and technology that it's safe for people, for the
environment and it's proven.
Yet, again, we have this sort of aversion to drilling. The
word ``drilling'' sets off incredible reactions in people. Yet
the facts are there and we can't seem to make these things
match and make policy based on science and on facts and not
sort of hysterical reaction.
The natural gas dependency is growing and you can't just
bring that stuff in by tanker. We can't just get it easily.
We're going to be dependent on it for electricity in the State
of Florida itself. Even though it also opposes the Destin Dome
project, it is not opposing natural gas pipelines coming into
the State. Yet, what are we going to do? Are we going to wait
for there to be brownouts throughout the State? Are we going to
wait for gas to be $12.00 at MCF and have terrible impacts on
our economy?
No, we shouldn't. We should start doing something today to
prevent that kind of thing from happening. We should be
reactive all the time. Again, that's been something that's been
said.
America's offshore industry is here. You don't have to
build it and we'll come. We're already here and we're already
doing our job. And if we had time, I could show you all the
maps showing that small companies like mine, as well as majors,
are taking the risk. We're producing the goods. And it's here
for America and we'll do as much as you'll let us.
Thank you.
Mrs. Cubin. Thank you very much.
The Chair now recognizes Walter McCormick of the American
Trucking Association.
STATEMENT OF WALTER B. MCCORMICK
Mr. McCormick. Thank you, Madam Chairman. On behalf of the
nation's responsible motor carriers, thank you for having me
here today.
Madam Chairman, the title of this hearing is ``On
Compromising our National Security.'' And I can tell you from
the firsthand accounts that have poured into my office that the
current high fuel prices are devastating industries like the
trucking industry.
In the trucking industry, we have seen a clear example of
the frustration around the country with the recent truck
rallies right here in our nation's capital. They were put
together by a group of those entrepreneurs who were being
forced out of business.
Madam Chairman, skyrocketing diesel fuel prices and the
lack of a long-term national strategy to address them are a
significant threat not only to the American trucking industry,
but also to the U.S. economy as a whole. Trucking represents 5
percent of the gross domestic product and today more than 70
percent of America's communities relies solely on trucks to
deliver their goods. Runaway fuel prices are the soft
underbelly of the U.S. economy. They make our country's
economic future vulnerable. Simply put, if trucking breaks
down, so does this historic expansion.
While prices have dropped over the last few weeks, they
remain excessively high. Last week, the national average retail
diesel fuel price was $1.44. Prices peaked at $1.50 in mid-
March, which was the highest price ever since the Energy
Department starting collecting data. That price was a 50
percent increase over last year. So you can see that the modest
six cent decline that we have experienced recently does not
give the trucking industry much relief.
Earlier this year, the fuel crisis was concentrated in the
Northeast. Now it has spread to all regions of the country.
This underscores the need for a national policy.
Madam Chairman, with the crisis at the pump, many carriers
are rapidly burning through their cash reserves. Others are
seeing their operating ratios approach 100, which means no
profit, none. If carriers are forced to either limit their runs
or to shut down their rigs, there will not be a way to pick up
and move all the freight. And, as you know, trucking is what
brings the goods to our doors and to our stores.
The other modes of transportation, which are also feeling
the brunt of high fuel prices, cannot help in this regard. If
we start to see bottlenecks, shippers who today object to a
fuel surcharge will have to scramble to get their freight
delivered at any cost. It's easy to see where that leads.
Consumer prices rise and inflation snuffs out our country's
economic expansion. It is a quick, short path to inflation.
But we believe that today's crisis can be addressed. A
release of oil from the Strategic Petroleum Reserve would have
an immediate salutary impact. On March 28, OPEC agreed to
increase production quotas. This is a step in the right
direction. But production increases will not be sufficient to
reduce the current world deficit. Demand continues to outstrip
supply and OPEC continues to pursue a policy of forced scarcity
that threatens our economy.
One thing to keep in mind is that petroleum prices are very
fungible. Therefore, we believe that a release of oil from the
Strategic Petroleum Reserve would have an immediate impact at
the pump. Some say it will take weeks to help. It's not true.
The market is very efficient, particularly when it comes to
commodities. It will react and react quickly to fuel prices
based upon an increase in supply.
To speak for just a moment on the subject of this hearing,
which is our national security. It is important to recognize
that while there is credible scientific research being done on
the fuels of the future, diesel fuel is and will be the fuel
that drives this country for decades to come.
Madam Chairman, I know that you understand and that
Chairman Young understands the importance of a continued flow
of oil. And that Chairman Young's interest in opening up the
Arctic National Wildlife Refuge to production in an
environmentally sound fashion is due in part to his concern
over the dependence on foreign oil. The same concerns hold true
for other potential areas of discovery, including parcels in
the Outer Continental Shelf and under other lands held by the
Federal Government for the people of the United States.
Madam Chairman, the ability of trucking to keep consumer
costs down has been a driving force in this historic economic
expansion. It's something we're proud of. We don't want to see
this booming economy go bust.
Therefore, I want to thank you for holding this hearing and
for the leadership that you have shown, that Chairman Young has
shown, the members of the committee have shown on this issue of
vital national importance to our economy and to our security.
[The prepared statement of Mr. McCormick follows:]
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Mrs. Cubin. Thank you very much for your testimony.
The Chair now recognizes Monica Surprenant for the
Louisiana State Mineral Board.
STATEMENT OF MONICA T. SURPRENANT
Ms. Surprenant. Thank you, Madam Chairman, and thank you
for allowing me to come and share with you what Louisiana's
experience has been with recent advances in technology. And
that's what I'd like to share with you in my very brief moments
here today with you.
We have seen substantial advances in the technology that is
in this industry. I don't think many people realize how far
we've come. A few minutes ago, my fellow on the panel here, Mr.
Bedell, made a reference to it. But what we have seen recently
with the advent of deepwater projects in the Gulf of Mexico
right off Louisiana is truly outstanding.
What we have been doing, and we originally started this
type of production in water deeper than 1,000 feet, calling
that deepwater drilling. By November 1999, there were 32
deepwater rigs in the Gulf. Today are 90 prospects out there,
serious prospects for oil.
Names like Mars Field, Neptune, Genesis, these types of
rigs or these types of fields, really is more accurate, are in
water 1,900 feet to over 2,900 feet. That's deep water. And
when we hear old timers talk about these fields and production,
they talk about them almost in hushed tones, as if they never
would have believed that this would be possible.
And when I talk about old timers, I'm talking about people
my age. I'm not that much older than they, because no one who's
seen this business in the last 20 years or so would ever have
believed this could be done. And it's being done. And the same
technology that brought this about, the same technology that
allowed the drilling to these depths is the same technology
that's keeping it safe out there. At least that's what the
statistics show and I'll get to that in a minute.
But the 2,900 feet is really nothing, as was previously
mentioned. In July 1997, Shell had a production at 5,300 feet.
Not only was it the deepest at that point, but it was 58 miles
away from the platform. 58 miles. That's how far they were able
to get from the source to a platform. In August, 1998, that
record was shattered by Chevron with an exploratory well at
over 7,700 feet. And that was 175 miles southeast of New
Orleans.
We think that these records are going to be broken in the
year 2000. This work is out there. It's being done on a daily
basis. And these rigs are operating in a very--what we see to
be a very safe manner.
Not only has Louisiana experienced and seen what the oil
industry can do in deepwater, Louisiana still has the only
offshore port in deepwater. And that's LOOP, the Louisiana
Offshore Oil Port. Now that may be old news. That port was put
in place and has operated for almost 20 years now, but no one
else has built such a deepwater port.
We're the only one in the world where an ocean-going
vessel, these large tankers that can't come in port anywhere
else, can take their cargo and unload it. And unloading it out
there at that port is a lot safer than bringing it anywhere
near the land. It's an amazing facility that LOOP has and it's
really a modern marvel. They're able to offload these tankers
with flexible lines anchoring the ship to the bottom of the
Gulf of Mexico while being able to turn 360 degrees so as not
to be impaired by wind or currents and waves while they're
doing that. It's truly a marvel.
In all the years that LOOP has been out there offloading,
at least in the first 15 years that we know of they've
offloaded 250 million barrels of oil of over 3,300 tankers,
they've never had a significant spill. So we know this is
working. We've seen it working.
I can tell you that I looked before I came here at the MMS
spill data for what is going on out there in terms of are we
really having problems? We have the technology. It seems to be
working. In all of 1999, from January to December 1999, the
total spillage reported to that agency, and they have to report
even an ounce, was 8,400 gallons. Now that's gallons. Not
barrels. They are producing hundreds of thousands of barrels
out in the Gulf, but of that, there were 8,404 gallons that
were reported to be spilled.
I don't like spillage of any amount. I wish not one ounce
would be spilled. But you need to look at the hard facts. And I
think the hard facts say the technology is there. The
technology is working. And the technology is working not only
to get oil out of the ground, but to keep us safe.
Although we have been very proud of what we've seen in the
Gulf, we do know that an ounce of prevention is worth a pound
of cure. And we have, at times, had to step back when things
have given us cause for concern. I am the chairman of the
Louisiana State Mineral Board. And, in that capacity, we're in
charge of leasing Louisiana State minerals.
And for those of you who are familiar with Louisiana,
particularly southeast Louisiana, you may be aware of Lake
Pontchartrain. Lake Pontchartrain is as vital to the City of
New Orleans and the South Louisiana as its culture, its food,
its jazz, and its relationship with the Mississippi River.
And the issue has come up, time and time again, regarding
whether we're going to drill for oil in Lake Pontchartrain. And
I'm proud to tell you that, as the chairman of the board, my
board has consistently issued a moratorium on drilling in the
lake, not because we're not willing to listen to people but
because no one has come up with a plan to use directional
drilling, or to tell us what they can do in a safe way. But
these are things that are out there. We know the technology is
out there, but people need to put that technology to work and
come up with plans that will work, as they're working in the
Gulf.
I see my time is up, Madam Chairman. Thank you for your
time. It's been a pleasure being here and I hope I've provided
some information you'll find useful.
[The prepared statement of Ms. Surprenant follows:]
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Mrs. Cubin. I think you certainly have. As a matter of
fact, I'm anxious to personally see LOOP and, you know, maybe
take the subcommittee out to look at that and have a hearing in
the district out there. I think that would be very beneficial.
One thing that I have observed from all the witnesses today
is that no one seems to disagree with the fact that we do need
a national energy policy. I think there are differences in how
we should get there, but I think the most important thing is
that we all are going to have to work together to arrive there,
regardless of what our philosophies are, because if we don't
work together, we'll never arrive. We will be here again and
again and again, as everyone has testified.
By the way, before I forget it for the fourth time, I'm
going to ask unanimous consent to enter a letter from the
American Petroleum Institute into the record. Without
objection, it's so ordered.
[The information referred to follows:]
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Mrs. Cubin. I wanted to ask you some questions. I'm going
to throw you some softballs, Mr. Becker, because, you know,
there aren't a lot of I have over here to help you, but they're
not all softballs.
Mr. Becker. Sure.
Mrs. Cubin. You testified that efficiency in motor vehicle
use would go a long, long, long way to solve the energy crisis
that we're in and to help come to a good, strong energy policy
for the country. Now is your claim that that alone would be
adequate to solve our energy problems?
Mr. Becker. No, not at all. What I was trying to point out
was that you can get a lot more oil out of saving oil in
vehicles than you could out of pumping the Arctic National
Wildlife Refuge. Obviously, we're going to need more than just
energy efficiency.
What we advocate is both supply side and demand side. Where
there is ongoing drilling, where the land has been disturbed
and you don't have a pristine ecosystem, we have not objected
to drilling. And there are places where there has not been
drilling heretofore which we also don't object to.
The question isn't an allergy to drilling. The question is
where and how appropriate it is and how special the ecosystem
is. One could chip off pieces of Mount Rushmore as a souvenir.
That's not appropriate. That's not something that we think is a
reasonable thing to do as a society. And the society as a
whole, the American people as a whole, believe that there are
special places that we should not either damage or threaten to
damage in the search for oil.
But, no, of course we agree that there needs to be more
than just efficiency. We do favor continued drilling in places
where it's been going on. We favor tertiary recovery. We are
strongly in favor of developing new resources, both fuels for
vehicles and replacements for electricity generation from
renewable sources, preferably. And we recognize that some of
those aren't available yet.
But, as you pointed out in your own State, there are wind
farms I believe in Carbon County, ironically.
Mrs. Cubin. That's correct. Yes, right. And there's only
one carbon molecule.
So that was going to be another question that I asked. Are
there types of exploration for oil and gas, such as diagonal
drilling, tertiary recovery, and those sorts of things, that
your organization does support? Because I think we really,
really need to try to find commonalities in what we do support,
agree on that, put it behind us, and then go to the more touchy
subjects like where can we drill and how can we become more
independent.
Mr. Becker. Yes, we do support many of those technologies.
Again, it's a matter of the appropriateness. We wouldn't want
to drill right through the floor of this august chamber. But
there are places where it's appropriate to drill. So it's a
matter of weighing----
Mrs. Cubin. If someone put a giant vacuum under there and
sucked a few out of here, it wouldn't be that bad. No one in
this room, however.
I think, when we're talking about statistics and the
estimations or assertions or whatever that you gave about how
if we could increase the CAFE standards over 10 years, what the
results of that would be. I think of Mark Twain's book that he
said there are three kinds of lies: lies, damn lies, and
statistics. And, being a chemist by training with an emphasis
in math and physics, I know a little bit about statistics and I
think I know that we all choose to believe the ones that are
more aligned with our fundamental philosophical beliefs.
And you chose to say that the median volume of economically
recoverable oil would only satisfy the national appetite for 6
months, but I choose to think of it more in these terms that if
the median amount of technically recoverable oil, as estimated
by the USGS, was actually found and produced, it could displace
for 29 1/2 years the imports from Saudi Arabia.
So I think that's an area where we really do need to get
some information that you can believe and that I can believe.
I'm sure that the facts about what the reserves are and what
the consumption is is probably somewhere in between, but I'd
really like to, you know, be able to come to sort of an
agreement on that.
Mr. Becker. Well, if I could just respond to that.
Mrs. Cubin. Please.
Mr. Becker. I think one can always compare a specific
statistic to another relevant or irrelevant statistic. The key
question that concerns the Sierra Club and our many members and
lots of other people in the United States isn't exactly how
much oil is there. We're not going to agree on that. But the
appropriateness of drilling and disturbing this very special
place, you know, there are lots of places where one could drill
for oil. This is one place where--I have two girls. They are
five and a half and nine and a half. And I'd like for them to
be able to visit this very special place when they grow up with
their grandchildren.
Mrs. Cubin. In the summer.
Mr. Becker. I'm sorry?
Mrs. Cubin. In the summer. Excuse me. Go ahead. No, and I
agree with you. I have sons that I'm sure I love as much as you
love your two daughters. And I would absolutely agree that
there are places where we should not be drilling, we should not
be mining, we should not be harvesting timber. I absolutely
agree with that.
But I also know what the alkaline high desert plains of
Wyoming look like that are blocked from exploration because of
what I consider to be really radical extreme environmental
policies that have been put forward by this administration. And
forgive me if it seems crass, but with the support of your
organization and other organizations like it, where, you know,
it would be more beneficial to drill there, to create jobs
there because there are so many thousands of acres, millions of
acres that look just exactly like it. At any rate, that's
something we can discuss at another time.
I wanted to address this to Mr. Bedell. You testified
before my subcommittee last August when we heard testimony on a
bill to further lock up the eastern Gulf of Mexico, which was
Congressman Goss' bill. Since that time, I wondered if Florida
Utilities has changed their plans to convert their power
generation from coal to fuel oil or to natural gas.
Mr. Bedell. Madam Chairman, the latest developments there I
believe are that there are at least two pipelines that are
undergoing review by FERC, proposals to put large pipelines
from Mobile Bay over to Tampa, the Tampa Bay area. And that the
plans are going ahead to convert power plants from coal or
other fuels to natural gas in that area of Florida.
My mother lives there and I was just visiting there 2 weeks
ago and there were articles in the newspaper then about ash,
fly ash or something, coming from one of these coal-fired
plants. And, you know, I think that there needs to be, as was
discussed earlier, a lot of continuing research on how coal can
be used because it is a vital natural resource.
But, on the other hand, Florida has not objected to the
routing of these pipelines, which are 36, I believe, inches or
more in diameter and 500 miles long. They go within five miles
of the proposed Destin Dome 56 unit where the platforms and
things would be. They follow pretty much exactly the same route
as an eight-inch pipeline that we had proposed running from
that site offshore Pensacola to Mobile Bay. And yet Florida
said that our eight-inch pipeline for that short distance
violated their coastal zone management plan. And yet they don't
object at all to these huge pipelines going across 500 miles of
offshore Florida.
Mrs. Cubin. I can't help but think of the seeming
contradiction that can't drill for oil off of Florida, but it's
OK to use the oil--or, excuse me, gas, but it's OK to use the
gas that they produce off the shore of Louisiana when, in fact,
Louisiana's economy is also dependent on tourism and, you know,
its natural beauty.
Mr. Bedell. And we have better fishing than they do, too.
Ms. Surprenant. We dispute that.
Mr. Bedell. No, that's right. Louisiana has much better
fishing.
Mrs. Cubin. I wanted to ask Mr. McCormick a question. As
you noted, many truckers, especially independent operators, and
I have spoken with many in my State because that's how we get
most all of our products in Wyoming is from the trucking
industry, but many independent operators cannot afford the high
diesel prices that they're faced with and I honestly have
talked to many who expect to be going out of business in the
very near future, if they aren't already.
And it's my understanding that my colleague, Nick Rahall
from West Virginia, is devising legislation to address this
situation involving, you know, the fuel surcharges. I wondered
if you're familiar with this legislation. And if you are, would
you comment on it for us?
Mr. McCormick. Yes, I am. Madam Chairman, I am aware that
Mr. Rahall has been exploring with the Owner/Operators and
Independent Drivers Association the introduction of legislation
that would impose a mandatory uniform fuel surcharge across-
the-board in the event that fuel prices increase.
We've had discussions with Mr. Rahall about that. We've
been going out to the broader trucking industry that we
represent to get their views on it and hope to be working with
him in the future on that.
It would have the impact, Madam Chairman, of taking the
increased costs of fuel and passing them on. And, in that
regard, might well help the trucking industry, but it continues
to leave the economy as a whole with the problem of increased
costs of fuel.
And, as you know, my testimony really focused on the fact
that this is a difficulty today for the trucking industry, but
the trucking industry is the canary in the coal mine when it
comes to the nation's economy. And what we're seeing is that,
because of the increased costs on us, truckers are beginning to
go out of business. Those costs, when they get passed on,
impact other areas of the economy and will result in an
economic slowdown.
So, while the trucking industry is very appreciative of Mr.
Rahall's efforts to help us, we also feel that we, as a nation,
need to address the larger issue of this dependence on foreign
oil. OPEC, as you are aware, came out with a new rule that they
are not going to just set production quotas at meetings. They
have now given to the chairman of OPEC, the minister from
Venezuela, the ability to set production quotas should the
price of oil go below $20.00 a barrel. Today it's at $22.00 a
barrel.
What you see here is the power to control price. And so we
need to address that dependence on foreign oil and that's why
we're here today.
Mrs. Cubin. Thank you for that. And I intend and hope that
all of you and all of your organizations will give input into a
national energy policy. I intend to have more hearings and try
to come up with some concrete recommendations for a national
energy policy that addresses more than just the oil and gas
industry, which is what this hearing has been more focused on.
But that's because, you know, Mr. Young is the king and, you
know, I'm the sometimes court jester and sometimes the queen.
It depends on who you ask. But, at any rate, we will be having
more hearings on an overall national energy policy.
Now, Mr. Hegna, you're now with ARCO Alaska and I wondered,
after the merger of BP/ARCO, do you think that you'll be hired
by Phillips Petroleum. Do you think you'll be working for them?
Mr. Hegna. I won't be working for BP. The ARCO assets in
Alaska are going to be sold to Phillips.
Mrs. Cubin. To Phillips, right. That's right. Do you think
you'll be working for Phillips?
Mr. Hegna. Well, it depends on how this testimony came
across.
[Laughter.]
Mrs. Cubin. Well, if they want a reference and you won't
how it's going to be, but have them call me.
Do you think that the new regime of companies, if you will,
will have the desire and the wherewithal to get the stranded
gas to the Lower 48 States?
Mr. Hegna. Definitely there's a tremendous--there's what,
26 trillion cubic feet of gas on the North Slope? But it's
currently not commercial to bring that down. But there's a very
active project team that includes BP and Phillips that are
aggressively working those issues. So there's a number of
things that will make it more economic, but I don't think the
changes in Alaska with ARCO merging with BP will change that
one bit.
Mrs. Cubin. You heard Mr. Becker express the view that
ANWR, and please correct me, Mr. Becker, if I don't
characterize this accurately, but that ANWR should be forever
protected from drilling. Do you think, with your expertise in
Arctic oil and gas development and also as an Alaskan, that oil
and gas resources could be produced from ANWR and protect the
environment at the same time?
Mr. Hegna. Absolutely. And as I've gone through here, we
have a tremendous record of minimizing the impact and doing it
right to the environment. And, we're getting incredibly better
as time goes on. So, yes, I'm convinced. I wouldn't be
associated with the companies if they weren't good.
I have four sons, by the way, all that are of the age where
they have to start producing. They have to start making money
for their own families instead.
Mrs. Cubin. Yes, because you might have to support them if
they don't.
Mr. Hegna. Absolutely. But we can do it right. And I have
no concern about us going into ANWR and not being able to
develop while protecting the environment.
Mrs. Cubin. Mr. Becker, all of you, sometimes we get a
piece of information and then we might not understand the basis
for someone's opinion. And I don't think I ever asked you and I
don't think it was in your testimony. Exactly what is it that
you object to about drilling in this area? Is it the aesthetics
that you wouldn't want to look at the oil rigs and the pumpers
that are required to bring the oil out? Is it a potential for
environmental accidents? Exactly what are the features that
cause you to object to it?
Mr. Becker. That's an excellent question and, no, we're not
the aesthetic society, we're Sierra Club. What we are concerned
about here is that there is a very special ecosystem. As a
scientist, you know that the delicacy of an ecosystem can be
affected by removing or changing any of the constituents of it.
So, for example, right now we have a pristine Arctic
wilderness. There is no industrial activity in that area.
There's activity in 95 percent of or 95 percent of the rest of
Alaska is open to that activity. This is a very special place
where a unique animal resource, the porcupine caribou herd
comes across the Brooks Range and comes to the very place where
they want to put the oil platforms and delivers its young each
year.
There are native peoples who depend upon that herd for
their survival. There are other animals that are either
endangered or of concern to environmentalists and others which
live in this very special place. And it's very difficult to
imagine how you bring in the air strips, the industrial
activities, the roads and pipelines that would be necessary,
the oil drilling pads themselves, the housing for the people
who are going to have to live there, without disturbing this
very special ecosystem.
So it's not just a matter of aesthetics. It's a matter of
picking apart something that has been that way for aeons and
changing it with industrial development. That is the chief
concern. It is the last place like this in the United States
and it is a place that we would like to keep that way for
people in future generations. It is part of the patrimony that
our nation has inherited from our ancestors and we want to pass
it on that way to our children.
There's lots of places you can go and look at oil
development. I've been to parts of Louisiana and parts of
California where oil development has taken place and seen what
the place looks like. It isn't the same as it was when it was
pristine. And there's no way that this unique ecosystem would
be the same after the development took place there.
Mrs. Cubin. And the statement that I'm about to make is not
meant to be argumentative about the point you just made. I
don't have the expertise to argue with you on that.
But I want to tell you about an experience that I believe
it was the second year I was in Congress. There was a bus from
the West, public land States primarily, and I really wanted to
impress upon the leadership how we can be good stewards of the
environment and good stewards of the land and still produce
natural resources, whether it's timbering, agricultural,
minerals, or whatever. And we didn't want them to think we were
just showing them the best and the most current technology. We
wanted them to see how it really was.
And so one of the things we did is we took them on a bus
ride. And, actually, Dick Armey's comment about this trip that
we took them on was the first thing that he was going to do
when he got back to Washington was offer a bill to increase the
speed limit in Wyoming because we spent so many hours on
highways on buses.
But at any rate, we took them to the Salt Creek Oil Field,
which is about 100 years ago. And it's ugly. I mean, I love
Wyoming and there isn't an ugly square inch in it, but other
people who don't love it that way would consider it ugly. The
pumper stations are real close together. The wells are too
close together. It has a bad smell. It's just not what we have
today. It's 100-year-old technology and it looks like it.
But while Newt Gingrich was standing there discussing the
situation with me, a little rabbit ran across his foot. We saw
an antelope that was lying in the shadow of a tank. And also
there were some eagle nests that were over beside one of the
pumper stations.
And my point to you is that, yes, we want to preserve some
areas to be exactly like they are now, aesthetically. But, you
know, sometimes I think that ecosystems can survive and be
healthy with human activity in the area as well.
Mr. Becker. I take your point and I understand it. I guess
where I would disagree is that when you have an opportunity to
create as much oil as you do by saving it from cars, why go
destroy a special place? It'll still be there in 500 years if
we don't drill for it. And if we sometime need it and decide
that it's more important to drill there than it is to save it,
it won't have disappeared and it won't be erased from the
memory of humankind.
But if we do drill it, in 100 years, who's going to look
back and say, gee, I'm really glad that we pumped that place
for oil? Whereas I think they would be glad to say that we made
cars cleaner and didn't need to pump that place for oil.
Mrs. Cubin. In making cars cleaner, and, please, if other
members of the panel have anything to say, please, I mean, it's
just us now, just you and me, babe, in increasing or making
more stringent the CAFE standards, living in a place like
Wyoming where the distances are so vast between one population
center--and when I'm talking about population center, I'm
talking about 1,500 people to the next town of 750. We're
talking about 100 miles, 150 miles, 200 miles.
And, in fact, there have been studies to show that the
lower speed limit has actually caused an increase in highway
fatalities because people tend to fall asleep and long straight
highways that just go through nothing but high desert plains of
sagebrush and an occasional antelope.
We're very concerned about the performance of vehicles.
And, as a matter of fact, one of the reasons that SUVs and
light trucks are so popular in the area that I live is that the
performance of those vehicles comes closer to meeting our
needs. Give me an idea what the downside in terms of
performance of vehicles would be when the higher standards are,
assuming they were, adopted?
Mr. Becker. There would be no change in the performance of
vehicles by using this technology.
First of all, let me step back and say that the way the
CAFE standards are designed--and were signed into law by that
radical environmentalist from Michigan, Gerald Ford--the way
they're designed is as a fleetwide average so that if in
Wyoming you want to buy the biggest, least efficient vehicle,
but in California they want to buy more efficient vehicles, the
two are averaged together.
So it's not that every vehicle needs to become more
efficient. And not every vehicle would. But enough of the
inefficient ones are balanced out by enough efficient ones to
make the average meet at the standard.
But the way that we propose improving fuel economy is the
way that the auto industry improved it from 1975 until by the
end of the 1980's, by adding better transmissions, better
engines, improved aerodynamics. These don't affect the
function, the use of the vehicle. They don't affect whether
they're car or truck. What they do is they dramatically improve
the efficiency of the vehicle and, as I said in my testimony,
they save more on gas than you pay for the technology up front.
So it's a win-win for the consumer. It's a win-win for
Detroit, if they'll think about it, because the Japanese
manufacturers are beginning to sell these advanced vehicles in
the United States and the American manufacturers are sitting
there hoping that they don't sell. And it's a win-win for the
environment and our energy consumption because we can tell OPEC
that we don't need their oil because we'll be saving 3 million
more barrels a day if we make these changes to our vehicles.
So if the technology's there, it's--one caution that I
would raise is I hope that the vehicles that you bought for
your sons were ones that won't roll over in an accident because
many of the SUVs, because they're designed to have a very high
center of mass, do get into roll over accidents and 62 percent
of the deaths in trucks occur in roll over accidents; only 22
percent in cars.
Mrs. Cubin. Thank you. While I do disagree with your
estimates of the benefits just on efficiencies and while I do
think that we really drastically need to increase production,
not just of oil and gas, but of many of our energy sources in
order to have a viable energy policy that gives us national
security and meets the needs of consumption that we have, I do
appreciate your view.
What energy sources, I guess do all of you, think are the
best? Fossil fuels for you, Mr. Becker, probably.
[Laughter.]
I don't need to ask you, Joe. I guess Mr. Becker.
Mr. Becker. Well, what we would propose is that we use--
first of all, we develop the cleanest energy sources that we
can, recognizing that they're not all on line now, and that we
use them in order of their cleanliness. So, to the extent that
we can use renewable energy, wind energy as you pointed out,
solar energy, that would be fine. That's not going to affect
oil consumption, however, because those technologies primarily
go to generating electricity and only about 5 percent of our
electricity is generated by burning oil.
But we favor renewable energy. We favor using natural gas,
especially over the next years, as renewable energy comes on.
We favor using----
Mrs. Cubin. Would you please tell the administration that
so that we can get the natural gas out of the Powder River
Basin in Wyoming? Excuse me.
Mr. Becker. Again, it's a matter of appropriateness. We
don't favor putting solar panels in the middle of people's
living rooms and we don't favor all oil and gas development.
But there are oil and gas developments that we have found
acceptable. And the one that Senator Johnston mentioned earlier
and others as well that we don't favor is nuclear. We oppose
new nuclear generation in favor of the rapid but reasonable
phase-out of existing nuclear power plants.
Mrs. Cubin. Thank you.
Mr. Bedell. Madam Chair, if I could address one of the
alternative fuels that was mentioned earlier, I think it was
the gentleman from Minnesota, Mr. Vento, had mentioned it, it
was ethanol.
And I've had some experience in a group that was founded by
U.S. oil companies and the Department of Energy called the
Western Hemisphere Oil and Gas Environmental Forum. This group
was put together to unite companies in North and South America
to have us exchange ideas and information on how to deal with
environmental questions and how to proceed with environmental
stewardship, as well as producing resources. And we've met in
Brazil a number of times at Petrobras, which is the national
oil company which is now--through the private oil hosted us.
And during one of those visits, they mentioned the ethanol
situation in Brazil. And they had come to rely on ethanol, had
legislated, mandated, you know, use of ethanol in a fairly--I
don't remember, forgive me, the exact proportions or percentage
of the fuel that had to have ethanol in it.
But one of the things that happened that was rather ironic
and which they didn't anticipate was that when the price of
corn went up in the world markets for food consumption, they
suddenly had a gas crisis in Brazil because there wasn't enough
ethanol because the farmers were selling the corn to Australia
or China or wherever and suddenly there wasn't just OPEC to
deal with but there was another variable that they hadn't
counted on.
I don't say that to say anything against ethanol, but just
that there are problems in just about anything we can come up
with as a quote, unquote, ``solution.'' We need to have
everything moving together at the same time.
And I think, as far as the environment is concerned, from
my sort of humble beginnings as an ecology animal behavior
biology student in undergraduate school and 25 years of
experience in the field, I think there are, over biological
periods of time, when we go in and do some oil and gas
development that seems today to have disturbed something even,
that doesn't mean that 50 or 100 years from now you'll ever be
able to tell that we were there.
The tundra is a really unique situation. I understand that.
But I think that ARCO and the other companies that have
pioneered work on the North Slope have demonstrated that
they've been able to come a long way and to just about
eliminate, I think, over, again, biological time periods the
fact that anyone will ever know we've been there.
When we come there, we aren't there forever. Unfortunately,
those resources where we find them are finite. We keep finding
new resources where we think there was only a smaller number,
as other people have testified today or in a smaller amount.
But we aren't there forever and I don't think that, in
biological time, we destroy an ecosystem. I think ecosystems
are a lot less fragile.
Mrs. Cubin. I do too.
Mr. Bedell. And I've seen beautiful birds wading right
beside the road in Louisiana where we have traffic going by and
they seem to be surviving quite well, too.
And one other thing, if I could, quickly. Leases sold to
companies, another gentleman raised the issue earlier with the
members of your committee that seemed to imply that companies
are just accumulating leases by buying them up at lease sales,
offshore lease sales, and that somehow these were just sort of
kept in our back pocket until some time when we decided we'd
just get around to drilling them.
That's far from the case. As anyone who knows the
regulations that MNS has in place, when you buy a lease, you
have to perform. You have to do certain things or you lose your
lease and it goes back to the government. If there are large
numbers of leases, apparently, that people think are just out
there for speculative, economic purposes being held, I think
it's a misperception. There are a certain number of years in
which you have to act and do things and drill aggressively to
try to find resources or give up the well. You have to maintain
production or you lose your lease.
So, looking, again, it's one of those things with
statistics. You can find things that seem to alarm you, but I
think when you dig beneath that situation, you find one that
there really isn't any plot going on here to grab all of these
leases and hold onto them until they become more valuable.
Mrs. Cubin. And I think that that is a really valid point,
counterpoint--well, really actually not a counterpoint, but one
that is relevant to the situation as wilderness study areas
that are designated in, I'm speaking particularly of the Lower
48 States, that are treated as though they are wilderness
areas, totally off-limits and those wilderness study areas have
been in place for 10, 15 years.
And, in my opinion, as a matter of fact, this is just a
little self-serving lobbying, hoping you'll all agree and come
to the Congress and lobby your representatives, that the
government needs to either decide they are, do the study,
determine that they should be wilderness areas or release them.
And I think that is another point that would be very helpful.
Mr. Bedell. I appreciate you bringing that up. That was one
in my notes here too was I looked up the definition of
moratorium and it takes about--this was in an unabridged
dictionary. I didn't write the name of the dictionary down--
it's a temporary cessation of activity considered dangerous. A
moratoria is something that would seem--it also mentions about
in an emergency or something.
And it seems to me, I guess in this room, is where the
moratoria started. And at one point, people were forbidden to
expend funds to study the situation and find out what it is
that might or might not be wrong and how to get around it.
They are incredible, these stipulations on leases we get
from them and that's right now that tell us you can't do this;
you should do that; you shouldn't overfly this area in certain
times of year because whooping cranes nest there; or this and
that and the other thing.
And, you know, I think that your point is excellent and I'm
glad that at least someone here is sensitive to that and
understands it.
Mrs. Cubin. I want to address the ethanol issue you brought
up as well. I'm sure you're familiar with the ethanol plant
that is in southeastern Wyoming and it just brings to mind what
a complicated world it is. Farm prices depressed. The energy
very expensive and it's complicated. We all need to work on it.
We need to work on it together.
I'd like to thank you all for your participation and the
record will be open for a week I guess--10 days, excuse me--for
any additional information that you'd like to submit and for
questions from the committee. Thank you very much. The
Committee on Resources is now adjourned.
[The prepared statement of Mr. Pallone follows:]
[GRAPHIC] [TIFF OMITTED] T7822.197
[GRAPHIC] [TIFF OMITTED] T7822.198
[Whereupon, at 3:46 p.m., the committee was adjourned.]