[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
RISING FUEL PRICES AND THE APPROPRIATE FEDERAL RESPONSE
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
JUNE 28, 2000
__________
Serial No. 106-240
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
----------
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73-069 WASHINGTON : 2001
_______________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Lisa Smith Arafune, Chief Clerk
Phil Schiliro, Minority Staff Director
C O N T E N T S
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Page
Hearing held on June 28, 2000.................................... 1
Statement of:
Richardson, Bill, Secretary, Department of Energy; Carol
Browner, Administrator, Environmental Protection Agency;
and Robert Pitofsky, Chairman, Federal Trade Commission.... 131
Schneider, Scott, vice president of sales, Mister Ice of
Indianapolis, Inc., Indianapolis, IN; Mark Hrobuchak, CEO,
president of MPH, Transportation and Logistics, Scranton,
PA; Charles Bailey, Jefferson, OH; Elaine Oberweis, CEO,
Oberweis Dairy, Inc., Chicago, IL; and Doug Wilson,
Gridley, IL................................................ 47
Letters, statements, etc., submitted for the record by:
Bailey, Charles,Jefferson, OH, prepared statement of......... 62
Burton, Hon. Dan, a Representative in Congress from the State
of Indiana, prepared statement of.......................... 5
Chenoweth-Hage, Hon. Helen, a Representative in Congress from
the State of Idaho:
Prepared statement of.................................... 35
Report of the Attorney General's Advisory Committee on
Gasoline Pricing....................................... 185
Gilman, Hon. Benjamin A., a Representative in Congress from
the State of New York, prepared statement of............... 273
Hrobuchak, Mark,CEO, president of MPH, Transportation and
Logistics, Scranton, PA, prepared statement of............. 52
Kanjorski, Hon. Paul E., a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 86
LaTourette, Hon. Steven C., a Representative in Congress from
the State of Ohio, prepared statements of Mr. Cavaney and
Mr. Vaughn................................................. 246
McIntosh, Hon. David M., a Representative in Congress from
the State of Indiana, prepared statement of................ 40
Morella, Hon. Constance A., a Representative in Congress from
the State of Maryland, prepared statement of............... 25
Oberweis, Elaine,CEO, Oberweis Dairy, Inc., Chicago, IL,
prepared statement of...................................... 67
Richardson, Bill, Secretary, Department of Energy; Carol
Browner, Administrator, Environmental Protection Agency;
and Robert Pitofsky, Chairman, Federal Trade Commission,
prepared statements of..................................... 132
Ryan, Hon. Paul, a Representative in Congress from the State
of Wisconsin:
Memo dated June 5, 2000.................................. 229
Prepared statement of.................................... 161
Sanders, Hon. Bernard, a Representative in Congress from the
State of Vermont, prepared statement of.................... 172
Schneider, Scott, vice president of sales, Mister Ice of
Indianapolis, Inc., Indianapolis, IN, prepared statement of 49
Shays, Hon. Christopher, a Representative in Congress from
the State of Connecticut, prepared statement of............ 268
Waxman, Hon. Henry A., a Representative in Congress from the
State of California:
CRS Report............................................... 11
Prepared statement of.................................... 270
Wilson, Doug,Gridley, IL, prepared statement of.............. 74
RISING FUEL PRICES AND THE APPROPRIATE FEDERAL RESPONSE
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WEDNESDAY, JUNE 28, 2000
House of Representatives,
Committee on Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 2:30 a.m., in
room 2154, Rayburn House Office Building, Hon. Dan Burton
(chairman of the committee) presiding.
Present: Representatives Burton, Gilman, Morella, McHugh,
Horn, McIntosh, Souder, LaTourette, Barr, Terry, Biggert, Ose,
Ryan, Chenoweth-Hage, Waxman, Kanjorski, Maloney, Cummings,
Kucinich, Tierney, Ford, and Schakowsky.
Staff present: Kevin Binger, staff director; Daniel R.
Moll, deputy staff director; David A. Kass, deputy counsel and
parliamentarian; Mark Corallo, director of communications;
Caroline Katzen and Nicole Petrosino, professional staff
members; Kimberly A. Reed, investigative counsel; Lisa Smith
Arafune, chief clerk; Robert A. Briggs, clerk; Robin Butler,
office manager; Michael Canty, legislative assistant; Leneal
Scott, computer systems manager; John Sare, staff assistant;
Corinne Zaccagnini, systems administrator; Phil Schiliro,
minority staff director; Phil Barnett, minority chief counsel;
Kristin Amerling, minority deputy chief counsel; Ellen Rayner,
minority chief clerk; and Jean Gosa and Earley Green, minority
assistant clerks.
Mr. Burton. Good afternoon. A quorum being present, the
Committee on Government Reform will come to order.
The ranking minority member, Mr. Waxman, is on his way. He
intends to make an opening statement, but since we are under
severe time constraints because of floor action, we need to get
started. We anticipate that within 2 hours we will probably
have another vote or a series of votes, and I want to make sure
we get as much done as possible.
I ask unanimous consent that all Members' and witnesses'
written opening statements be included in the record, and
without objection, so ordered.
I ask unanimous consent that all articles, exhibits, and
extraneous or tabular material referred to be included in the
record, and without objection, so ordered.
I ask unanimous consent that questioning in this matter
proceed under clause 2(j)(ii) of House rule 11 and committee
rule 14, in which the chairman and ranking minority member
allocate time to members of the committee as they deem
appropriate for extended questioning not to exceed 60 minutes
equally divided between the majority and the minority, and
without objection, so ordered.
I am not going to make a long opening statement today
because of the time constraints. We all know what the problems
are, so I don't think we need to speak at length.
The price of gasoline has gone through the roof this year.
The entire country has been hit hard, but nobody has been hit
as hard as the Midwest. In Chicago, the price of gasoline has
reached $2.30 a gallon. In Milwaukee, the price reached $2.20 a
gallon. Other parts of the Midwest have been hit almost as
hard. In my hometown of Indianapolis, we have been paying over
$1.70 a gallon.
We haven't seen anything like this since the oil crisis of
the 1970's. In fact, it wasn't that long ago that people in
most areas of the country were barely paying $1 a gallon. This
problem has an impact on the entire economy. The cost of fuel
is factored into almost everything we buy and sell: bread,
food, meat, potatoes, ice. We have a person here from the ice
industry. Every product that we sell is affected by the
gasoline prices.
But it goes beyond that. When gas prices skyrocket, it can
be devastating for families as well as small businesses. We are
going to hear from some of those people in our first panel.
We are going to hear from a small businessman from my
hometown of Indianapolis. We are going to hear from an
electrician from Ohio. We are going to hear from a man who runs
a trucking company in Pennsylvania, and we will hear from a
woman who runs a dairy farm near Chicago. We will hear from a
farmer from Illinois as well.
The questions before us are pretty simple: Why did this
happen? Could anything have been done to prevent it? What is
being done to get prices back down to a rational level? And
what can be done to prevent something like this from happening
again in the future?
Lots of explanations have been offered: OPEC cutbacks,
rising demand, reformulated gasoline, and transportation
bottlenecks. I think it is fair to say that this sudden
eruption caught everyone asleep at the switch. I think it is
also fair to say that this administration has not had an
effective energy policy.
For instance, I have real questions about the way we have
handled OPEC, the oil-producing countries, over the last
several years. When oil prices were at an all-time low last
year, Secretary Richardson went over to the Middle East.
According to media reports, he encouraged OPEC nations to start
raising prices. There is apparently some dispute over exactly
what he said at those meetings, but I will read to you what the
Saudi Arabian Oil Minister said; He said that Secretary
Richardson had ``saved the oil industry'' during that visit
because his intervention had persuaded the Saudis to change
policy by raising prices. So we will ask the Secretary about
that today.
Raising prices is exactly what they did. In the last year,
they raised prices from $10 a barrel to $34 a barrel. I don't
understand why it is in our interest to encourage OPEC nations
to raise prices.
I read Secretary Richardson's opening statement from
yesterday's hearing. He says that free market forces are the
foundation of the Clinton administration's energy policy. Now,
I don't see how encouraging OPEC to artificially restrict
supply and raise prices is a free market policy. It is
certainly not a pro-consumer policy.
When OPEC's cutbacks got completely out of hand and gas
prices went soaring this spring, Secretary Richardson was sent
back to the Middle East to try to get them to bring prices back
down by increasing production. Judging by the prices at the
pump, this trip was not nearly as successful as the one that
raised prices.
My question is: How much leverage do we have with OPEC? We
were there in the Persian Gulf war when the Gulf nations needed
us. Now where are they now?
These are all issues that we are going to discuss with
Secretary Richardson. I know that he is making the rounds from
one committee to the next this week, and I appreciate that he
has carved out a little time for us to be with us here today.
We are going to talk a great deal about reformulated
gasoline today. Is reformulated gas behind the price spikes and
supply disruptions in Chicago and Milwaukee? According to the
EPA, the phase 2 requirements for reformulated gasoline add
about 5 to 8 cents to the cost of a gallon of gas. However,
according to the Congressional Research Service, that figure is
more like 25 cents in Chicago and Milwaukee. So where did the
extra 17 cents come from?
How much has reformulated gasoline added to the problems in
the Midwest? We will be going over that issue at length with
Carol Browner from the Environmental Protection Agency during
the second panel. I know several of our members from the
Midwest are eager to discuss the reformulated gas issue with
her, and we appreciate the fact that she will be with us today.
We are also going to hear from the chairman of the Federal
Trade Commission, Mr. Robert Pitofsky. The FTC has started an
investigation into the gasoline price increases, and we look
forward to hearing his testimony as well.
In our third panel, we will hear from Mr. Red Cavaney from
the American Petroleum Institute and Mr. Eric Vaughn from the
Renewable Fuels Association. We appreciate their being here as
well.
Now, there is one point that I want to touch on briefly,
and I hope my colleagues on the Democrat and Republican side
listen to this because I think it is very important, and that
is the issue of natural gas. We have an abundant supply of
natural gas in this country, approximately a 500-year supply.
It is inexpensive, it is clean-burning. So why is it we can't
get people to convert to natural gas automobiles? There are a
number of countries around the world where natural gas vehicles
are very popular: Argentina, Germany, Italy. In those
countries, you can find natural gas at gas stations all over
the country.
Since 1990, many gas stations in California have carried
natural gas, but in this country, outside of California, you
can't find it anywhere. There is a system that lets you refuel
a natural gas car right at your own home. There is a special
system of nozzles that you can attach to the natural gas supply
in your home and refuel your car overnight while you sleep, and
the cost is about one-third of the cost per gallon of gas.
Natural gas costs, as I said, are about one-third of the
cost of gasoline. It pollutes less and we have an abundant
supply. So I don't know why we don't take advantage of that. Of
course, it makes a lot of sense, so it probably won't ever
happen.
Let me just say a couple of things in closing. These
problems that we are experiencing aren't going to go away by
themselves. We need to have a comprehensive energy policy, or
these problems are only going to get worse. We don't have a
comprehensive energy policy right now, and the administration
needs to address that.
I have had a chance to review Secretary Richardson's
schedule for most of this year. It looks like to me he is
traveling all the time. I see a lot of political events on his
schedule. I tried to get a meeting with him 2 weeks ago to talk
about the situation regarding the espionage or alleged
espionage at Los Alamos, and I couldn't get a meeting because
he was traveling. He couldn't testify before the Senate
Intelligence Committee because of his travel schedule.
I think we need to ask some tough questions about who is
minding the shop. I think we need to completely re-evaluate our
approach to dealing with the OPEC countries. I think we need to
completely re-evaluate our approach to reformulated gasoline. I
think the complexity of all these different formulas of
gasoline is just overwhelming to our distribution system. I
also think that we need to get serious about using natural gas
as an alternative gasoline in our cars, like they do in many
other countries.
I think we are obviously going to have some disagreement on
some of these issues. I am sure we won't resolve many of them
today. But if we don't accomplish anything else today, I would
like to get an answer to this simple question. Fall is right
around the corner. What is being done by this administration to
make sure we don't have a repeat of this calamity during the
home heating fuel season? And what is being done to make sure
that we don't have a repeat of this crisis situation next
summer?
And, with that, Mr. Waxman, I will be happy to yield to you
for an opening statement.
[The prepared statement of Hon. Dan Burton follows:]
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Mr. Waxman. Today's hearing addresses an important topic:
Why are gasoline prices so high, especially in the Midwest?
There are some things we know about this issue and many that we
don't. I hope this hearing will shed light on some of the
unanswered questions.
But let me begin by reviewing what we know. First, I think
it is clear that environmental requirements are not the cause
of high gasoline prices. The chairman and other Republican
leaders have tried to blame the Clean Air Act and the
Environmental Protection Agency for high gas prices. They say
that reformulated gasoline is a lot more costly to make than
conventional gasoline, forcing fuel prices up. But they are
simply wrong.
I know something about the reformulated gasoline provisions
of the Clean Air Act because I was one of the principal authors
of those provisions. The record shows that the reformulated
gasoline provisions of the 1990 act have been an enormous
success. Since 1990, emissions of volatile organic compounds,
the main source of urban smog, have decreased by 20 percent.
Average levels of urban smog have dropped by 9 percent. At the
same time, the Clean Air Act is responsible for reducing
emissions of hazardous air pollutants by over 800,000 tons
annually.
One of the single most important factors in achieving these
reductions has been reformulated gasoline. As a result of
reformulated gasoline, emissions of smog-forming pollutants
have been reduced by 105,000 tons annually, and emissions of
toxic air pollutants have been reduced by 24,000 tons annually.
The levels of benzene, a known human carcinogen, declined by 38
percent in urban areas that introduced reformulated gasoline in
1995. And these reductions have been achieved at an extremely
low cost.
Republican leaders are saying that reformulated gasoline is
causing high gas prices, but the fact is that across most of
the Nation, the average retail price of a gallon of
reformulated gasoline is less than the average retail price of
a gallon of conventional gas.
Let me repeat this point because it is something that
people ought to take note of. The retail price of reformulated
gasoline is often less than the retail price of conventional
gasoline. If the Republicans were right, this would be
impossible. Reformulated gasoline would be much more expensive
than conventional gasoline, but the fact is reformulated
gasoline costs most motorists less than conventional gasoline.
There are other essential facts that are often overlooked
in this debate. We will hear today that reformulated gasoline
is different in Chicago and Milwaukee than in many other parts
of the country. In other parts of the country, reformulated
gasoline is made with MTBE. In Chicago and Milwaukee, it is
made with ethanol. We will hear today that it is the ethanol
requirement that is driving up Midwest gasoline prices. Part of
this is true. Reformulated gasoline in Chicago and Milwaukee
does use ethanol. But it is not true that the Clean Air Act or
any other Federal law requires the use of ethanol in
reformulated gasoline in Chicago and Milwaukee. In these areas,
under Federal law it is perfectly legal for the oil companies
to seek to use reformulated gasoline that uses other oxygenates
if they wanted to.
Now, why do the oil companies use ethanol in reformulated
gasoline in Illinois and other Midwestern States? They do this
because these States grow a lot of corn. These States have
passed State laws that give tax breaks and other incentives
that encourage the use of the ethanol in fuel. So it can't
possibly be Federal ethanol requirements that are responsible
for high prices in Chicago and Milwaukee since there aren't
any. There aren't any Federal laws that require the gas to be
changed in those two areas when they do their reformulated
gasoline. It is State laws to satisfy the corn growers that
require the ethanol to be used.
Moreover, it is doubtful that ethanol is the cause of high
prices. Detroit uses conventional gasoline, not reformulated
gasoline. But this week the price of conventional gasoline in
Detroit was $1.93 per gallon, 7 cents more than a gallon of
reformulated gasoline in Milwaukee. Republicans have said that
Congressional Research has found that reformulated gasoline is
the cause of high prices. Well, the CRS has a new report out
today, and I want to share this report with my colleagues and
to read about what it says.
As of June 19, RFG--reformulated gasoline--prices in
Chicago and Milwaukee, which are determined not only by cost of
production but more directly by the supply of and demand for
gasoline locally, were 50 to 58 cents above reformulated
gasoline prices elsewhere. Not all of this difference can be
attributed to the RFG requirements or the use of ethanol. In
fact, non-reformulated gasoline sold in areas near Chicago and
Milwaukee is priced well above comparable gas sold elsewhere.
More recently, the RFG price differential in the area appears
to be diminishing significantly.
That is part of what CRS said, and then they also went on
to say the RFG program by itself has caused only limited price
increases in other markets on the order of 2 to 8 cents per
gallon, which is the range currently in effect as the prices in
the Midwest decline.
[The information referred to follows:]
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Mr. Waxman. If reformulated gasoline is not the cause of
high gas prices, what is? Well, one cause that has been
mentioned is the temporary shutdown of explorer pipeline in
March. This is a possible cause. But as we will hear from
Federal officials today, it does not seem likely that the
pipeline is a major cause of high prices. In fact, I understand
that the pipeline has unused capacity and could ship more
reformulated gasoline to the Midwest if the oil companies asked
it to do so.
Another possible cause is price gouging by the oil
companies. It is clear that the high prices of fuel in the
Midwest mean millions more in oil company profits. But the fact
that oil companies are earning record profits does not
necessarily mean they are violating the law. If the shortage of
gasoline in the Midwest is due to a legitimate cause or causes,
oil companies' profiteering may be improper, but it would not
be illegal.
I requested that the chairman invite the CEOs of the major
oil companies to testify today so that we could get answers to
these questions, but they have refused to attend, and the
chairman has refused to subpoena them, even though on this
committee the chairman could issue a subpoena, and they would
have to show up. But he didn't choose to issue subpoenas to the
CEOs of the oil companies. He wanted to make sure he got Bill
Richardson here to beat up on him. But what about the CEOs of
the oil companies?
Some on the Republican side have criticized the
administration for seeking a Federal Trade Commission
investigation into oil company behavior, but this is exactly
what is needed. There is clearly much more that we need to
learn about why prices spiked up in the Midwest. The Federal
Trade Commission has the expertise and experience needed to
provide answers. And so you wonder why they would criticize the
administration for asking the FTC to look at this issue.
There is one final point I wanted to address. It is
Congress' role and responsibility in this matter.
Unfortunately, energy policy is an area where we simply haven't
done our job. And I don't say that in a partisan way. Congress
hasn't done its job. The Democrats and Republicans have not
done the job. The administration has proposed numerous
initiatives that would have increased energy efficiency and
reduced our reliance on imported oil. These initiatives include
tax breaks to promote the purchase of fuel-efficient vehicles,
the creation of heating oil reserves, and research partnerships
with the auto industry.
But Congress has repeatedly blocked these initiatives. In
fact, we have even let the President's authority to deploy the
Strategic Petroleum Reserve expire. So the President can't act
on his own because Congress took away his authority to have
that reserve of oil now made available in this crisis of high
oil prices.
The leadership in Congress is good at pointing fingers, but
they rarely seem to accept responsibility for their mistakes.
In this case, however, Congress would serve the public better
if we did less blaming and more legislating.
Mr. Chairman, that completes my statement. I look forward
to hearing from the witnesses. I want to explain to the
witnesses that what we have going on today in the House is a
three-ring circus. On the floor is an important legislative
fight on prescription drug benefits for Medicare where, again,
we are not even talking about how we can resolve our
differences and pass a bill. We are only pointing to the
differences and fighting over what the American people want us
to stop fighting about and start legislating. And so some of us
have to be on the House floor. There are other committee
meetings as well. So I apologize to the witnesses if I am not
here when they make their oral presentation. But we are going
to have the whole transcript and record, and I hope the
chairman will even let us ask further questions for the record
so we can have this hearing record as complete as possible.
I say a three-ring circus. Ironically enough, we have three
rings in the circus on this issue because the Commerce
Committee of which I am a member has held a hearing, this
committee is holding a hearing, and the Judiciary Committee of
the House is holding a hearing.
I guess the American people are concerned about this
problem, but so far all three committees are holding hearings
trying to blame somebody. Let's take responsibility. Let's
understand the facts. Let's act. And let's act in a bipartisan
way to do something to help people who are suffering from these
high oil prices.
Thank you.
Mr. Burton. I would like to correct one thing. We do not
have people from the major oil companies here today, but like
Chairman Gilman, chairman of the International Operations
Committee, we will probably have another set of hearings, and
we will ask the people from the oil industry to come in.
We do have some of the representatives of the oil industry
here, however, but the people from the major oil companies will
be asked to testify in the not too distant future.
Mr. Gilman. Mr. Chairman, I will reserve my opening for
Secretary Richardson.
Mr. Burton. Chairman Gilman reserves his time.
We are going to recognize members for opening statements.
What is the order we have here? I thought we were going to go
with Mrs. Morella. Is Mrs. Morella here? Since everybody
arrived at the same time----
Mrs. Morella. Mr. Chairman, I do have an opening statement.
I hope to learn from this committee and the panels that we have
assembled. But I am going to ask unanimous consent to have the
opening statement put into the record since so many Members are
interested and it would take too long to hear all the opening
statements.
[The prepared statement of Hon. Constance A. Morella
follows:]
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Mr. Burton. I thank the gentle lady.
Mr. Ryan, I understand, has to go to a markup, so we will--
oh, excuse me. We will go to you right after we go to the
Democrat side. Do you have an opening statement, Mr. Tierney?
Mr. Tierney. No, Mr. Chairman. Thank you.
Mr. Burton. Mr. Ryan.
Mr. Ryan. Thank you, Mr. Chairman. Thank you for
considering my markup.
As Mr. Waxman said, we do have a lot going on today. I
would like to make an opening statement because I represent
southeastern Wisconsin. We are right smack dab in the middle of
the Milwaukee-Chicago area, so I would like to talk about this
issue a little bit, if you don't mind.
Half of the district I represent is in the EPA designated
ozone non-attainment area. The other half is not. Reformulated
gasoline is the most important issue to my constituents in
southeastern Wisconsin at this time, and it has been that way
for over a month. And they want to know why they are paying
gasoline prices that on average are 40 cents a gallon more than
anybody else is paying in the United States.
Now, along with Jim Sensenbrenner and I, we commissioned a
report from the CRS, the nonpartisan research branch of
Congress, which has been widely cited today, and I think there
is a copy floating around, and this report goes into the issue
of why we are paying these his gas prices. Nowhere in this
report is collusion and price gouging listed as an underlying
cause for high gas prices.
Now, I think it would be shortsighted for anyone on this
panel to suggest that it is not happening. That is the whole
purpose of an FTC investigation, one that I, along with all
members of the Wisconsin delegation, asked for. And I think Mr.
Pitofsky is coming here to talk about that. So I think it is
shortsighted for anybody here to allege with authority, with
knowledge, that price gouging is occurring. But on the same
point, you can't say it is not occurring. So let's put that one
aside and hear from the FTC when they come up here.
But, also, I have an internal EPA document dated June 5th
of this year which was written by a policy director to Deputy
Secretary Glauthier, and please forgive me if I have
mispronounced his last name. This memorandum summarized the
rapidly increasing gas prices in the Milwaukee area as a supply
problem: ``high consumer demand and low inventories.''
The EPA memo then gets more specific. ``The Milwaukee and
Chicago area supply situation is further affected by, one, an
RFG formulation specific to the area that is more difficult to
produce; two, higher regional demand; three, higher regional
refinery utilization rates; four, limited alternative supply
sources, limited transportation links; and, seven, lower
gasoline inventories relative to the rest of the country.'' A
supply problem, an RFG problem, an ethanol problem, a
convergence of many factors that the EPA in their own memo
cites on June 5th.
Now, again, nowhere in this EPA's memo is their explanation
for Wisconsin's gas prices is collusion for price gouging. That
is what the FTC is investigating.
But many members who have been following this issue,
especially those of us from Illinois and Wisconsin, know that
Wisconsin and Illinois use ethanol instead of MTBE, which makes
the phase 2 RFG blend relatively more expensive than the rest
of the country. This is because refiners must make the vapor
pressure lower, and as well, according to the EPA document,
``remove a greater quantity of the high volatility gasoline
blend stocks that was removed for Phase 1 RFG.'' The effect is
that RFG-2 gasoline production processes will yield less
gasoline overall than RFG-1 processes.
It goes on and on. I will summarize what the EPA memo says.
Basically they saw this coming. They know that we had a unique
problem in the upper Midwest. They know we used ethanol. They
know we had all of these converging market forces coming to
bear, and we moved forward with this RFG mandate.
On May 23rd, the petroleum marketers petitioned for a
waiver from this mandate in the upper Midwest. I, along with
Senator Herb Kohl, Senator Russ Feingold, and Jim
Sensenbrenner, also on that date petitioned the EPA for a
waiver from this mandate, foreseeing that these factors would
occur. The EPA's own internal documents suggested this would
occur. We had a unique situation in Wisconsin and in Illinois
that we thought would lead to a very high spike in gas prices.
The EPA in turn said no. The only shot that is going to occur
with RFG is a 5 to 8-cent-a-gallon gasoline increase. That
didn't happen; 40 cents a gallon increase.
So what I would like to know is, A, why, when you had this
internal documentation, which was then followed up with this
most recent CRS report, did you continue on with the RFG
mandate when you suggested that it was going to be a 5 to 8-
cents-a-gallon increase, when it was actually about a 40-cents-
a-gallon increase? Why, when we had this knowledge within the
EPA, within the other branches of our Federal Government, did
we move forward with this? And why were our requests for
waivers, until we could get a handle on this situation, denied?
That is what I would like to know today.
This isn't finger pointing. This isn't blame shifting. This
is simply a review of the facts that took place over the last 2
months, and I think that really speaks to the heart of the
issue, and that is what the constituents that I represent in
southeastern Wisconsin want an answer to. And I hope that we
can dig into that in this hearing.
Mr. Burton. I understand, Mr. Ryan, you have to go to
another markup, but if you can get back here, perhaps you can
put those questions to the head of the FTC.
Mr. Ryan. I would like to do that.
Mr. Burton. Thank you.
Mr. Kanjorski.
Mr. Kanjorski. Thank you, Mr. Chairman.
Mr. Chairman, I want to thank you for having this hearing,
because I think if nothing else, we will have an opportunity to
look at what are the potential causes of some of the problems
in the energy field today, but they just have not happened in
this last month, and they have been going on in the country for
about 6 months. I know that the northeast portion of the
country suffered from the same problem with heating oil and
diesel fuel in the late winter of this year.
And I have been trying to look around and see where is the
problem and where is the fault that can be laid? And I conclude
that there isn't any one single individual or group that can be
identified, and I am not sure even if the word ``fault'' is the
correct word. It is the system that is working.
And I think my friend from Wisconsin put his hand on it. He
talked about his CRS study, and he laid out that there is a
shortage of supply, and of course, there is an increased demand
in the summer. And if we go back to our basic economics, we
know that supply and demand usually fix price, and short of
rationing or some other methodology to reduce demand, price is
used to contain demand. And as the price--if you have 90
percent supply for 100 percent demand, that 10 percent spread
exacerbates the price sometimes by as much as 50 or 100
percent, because the marketplace will raise the price until the
demand decreases consistent with the amount of supply
available. That would mean that oil companies significantly
could raise their profits from, say, 10 percent to as much as
30 or 40 percent, and legitimately argue that it is the
marketplace, supply and demand, and they are correct.
Our problem is: does that constitute gouging, and are we as
a Congress and the American people going to accept the
responsibility for this tremendous deficit in supply and the
ever-increasing demand that is out there without some of the
concomitant investments that are necessary in refining
capacity, new sources of field, encouragement in the field. But
nevertheless, if we leave it as a free-market system, you could
end up with a $3 or $4 a gallon gasoline, whose price would be
driven by a limited supply, and overwhelming demand,
particularly in summer months or areas of excessive use.
So we have to, as a Congress, be looking at long-term
policy increased in all the new fuel sources, and potentially
excess profits, because that price, although it is a free-
market-arrived-at price, will exacerbate profits to
extraordinary proportions. And I think some of the testimony
today is going to reflect that some of the oil companies in the
United States have shown 300, 400, 500 percent increase in
profits. It is not because they invested any more money. It is
not because they did anything other than the fact that they had
a limited supply for an overwhelming demand, and price reaches
its own level, and as a result, their profits go up
inordinately.
Now, I do not think it would be fair for any of us to
condemn the petroleum and gas industry of the United States. I
think to be rational, to a large extent, we have had cheap
gasoline as a matter of national policy for a long time. We
should try and keep gasoline and diesel fuel at a reasonable
rate, because it does fuel what has been the world's most
successful economy.
But on the other hand, I agree with the ranking member of
the committee, Mr. Waxman. We in the Congress know that in
prosperity there are more cars sold, more homes built, and more
use of energy, and for the last 20 years in this country we
have totally neglected a structured national policy to either
provide a larger supply or make more efficient the use of the
supply that we have so we can bring the demand down that it is
affordable to the average person or to the small businessman. I
think that is what the direction of this hearing should be
about. That is why I commend the chairman.
I just want to raise one other question, and that is, if we
think we have problems today with gasoline and diesel fuel
prices, whether it is in the Middle East or anywhere else, we
ain't seen nothing yet until we get to electricity and the
overwhelming demand and increase of demand for electricity in
this country and the limited supply that is out there. Everyone
I have talked to in the field project brown-outs this summer.
As we find deregulation of the energy field and electricity
occurring across this country, again, price is going to be
arrived at by the forces of supply and demand, and that means
very high price, and in some people's vernacular, that could
constitute gouging for excessive profits. And I think if we
can't arrive at an energy policy, at least we ought to arrive
at a policy that we don't reward people getting excessive
profits because of the flotation of price as a result of
limited supply and excess demand. And if we can keep our eyes
focused on that effort, I think we can do some good by coming
up with some new policy. If we try and find fault and point
fingers, as we traditionally have done in these last several
Congresses, we will not have done the people's business. Thank
you.
Mr. Burton. Thank you, Mr. Kanjorski. I understand Mrs.
Biggert has to go to a mark-up as well, so we will ask Mrs.
Biggert to make her statement real quickly.
And I understand you are going to do some of the
questioning, Mrs. Biggert, so will you be able to be back? OK,
Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman. I represent a
suburban Chicago district, and as we all know, the Chicago area
now faces the highest gas prices in the Nation, and this is not
a distinction of which we are proud or happy. Chicago area
residents have heard all about the numerous and complex factors
that influence what we pay at the pump for a gallon of
gasoline. They have heard about petroleum industry
consolidation, pipeline distribution, the Unocal patent, retail
competition, State and local taxes, government regulation and
OPEC.
What they have not heard is why they in particular are
paying the highest pump prices in the 48 contiguous United
States. Any and all of these factors may be contributing to the
high price of gasoline today, but as members of this committee,
it is our primary responsibility to focus on the issues of
Federal responsibility. In particular, we want to know what
role the Federal Government has played through its actions or
through its inaction, precipitating the increase in gas prices
in the Midwest and throughout the Nation. I want to be assured
that it is not Federal regulation or Federal interference in
the market that has forced the price of gasoline sky high in
the Midwest. I want to hear that our Federal agencies have done
everything possible to insure that no Federal program, no
agency, bureau or office, and no bureaucrat has precipitated
the spike in the price of gasoline in my home State. I don't
believe the administration witnesses here today can give us
these assurances, but I challenge them to try.
Immediate action is what is needed. Individuals are
struggling with the burden of high gas prices, as are
businesses like Oberweis Dairy, an independent dairy processor
that delivers its wonderful ice cream products to consumers
throughout Illinois. I am very thankful that the CEO of
Oberweis Dairy, Elaine Oberweis, is here today to share with
this Congress the hardship her business faces under the added
burden of high gas price.
I hate to say it, but we saw this coming, and the
administration should have seen it coming too. For the past
year the Illinois delegation has been warning EPA that the new
regulations for the second phase of the RFG Program would
seriously impact the price of gasoline in Illinois. We held
hearings in Illinois. We had meetings in Washington, DC. We
offered solutions to avoid the situation. And still the EPA did
nothing. Everything would be fine, we were told. Well, things
are not fine, and we are not happy.
And as the non-partisan Congressional Research Service
Report indicated last week, we now know that our warnings,
unfortunately, were right on the mark. CRS reported that at
least 25 cents of the increase in the price of gasoline in the
Chicago area is directly attributable to these new RFG programs
and regulations, and still there is no action from the EPA.
Last week Administrator Browner was quick to assert that the
wholesale price of gasoline dropped on the same day the FTC
announced a formal investigation into collusion on the part of
the Nation's oil refiners. Yet there was no comparable quick-
fire assertion made by EPA when the price of gasoline began to
rise with the implementation of phase II of the Reformulated
Gas Program on June 1st. What is especially disappointing about
the EPA's inaction is that it could result in an erosion of
support of the RFG Program, which has successfully improved the
quality of Chicago's air. The EPA and the Clinton
administration can point fingers at the oil companies, but at
some point they had better look in the mirror. Too many
government regulations affect the price of gasoline, which is
why the actions of the DOE and EPA must be scrutinized. There
are Governors and State legislatures, like mine in Illinois,
that are right now going back for special sessions, all for the
purpose of providing relief to gas customers by way of a
moratorium on their State gas taxes. They are forced to take
this extraordinary action of sacrificing badly needed road
improvement funds in order to give consumers at the pumps an
extra 10 or 20 cents per gallon relief. These extraordinary
actions would not have been necessary. These sacrifices would
not have to be made. These road improvement funds would not be
foregone if only agencies like the EPA had heeded the warnings
and done their job.
I want to thank all the witnesses for being here today. It
is about time that we put on record what kind of adverse impact
these high gas prices are having on individuals and small
business owners across America. Thank you, Mr. Chairman.
Mr. Burton. Thank you, Mrs. Biggert. I believe Mr. Kucinich
was the next one. Mr. Kucinich.
Mr. Kucinich. Thank you very much, Mr. Chairman, for
holding this hearing, and glad we have so many Members of
Congress here, and thanks to the panelists.
I think the public knows intuitively what is going on. You
don't have to be an economist. You don't have to be a Member of
Congress. You don't have to work at a gas station. People know
when prices go up 25, 30, 40 cents within a few days, that
someone is taking advantage of them. There is no shortage of
gasoline, the supply of gasoline. We know the oil companies had
made substantial profits from 1999 to year 2000, the first
quarter. The public understands this. And the average person,
who is just trying to make ends meet, trying to support a
family, who relies on a car in this automobile culture, who is
stuck with primarily one source of fuel for their cars,
understands they are a captive right now of the oil industry,
and that this government has a responsibility to challenge the
private sector's pricing practices, to examine where the laws
of supply and demand have gone awry, to ferret out all areas
where the public has been cheated in the last few weeks, and to
make sure that there is some remedy brought forward, such as a
windfall profits tax.
But that is not going to be enough. We need to encourage
the development of new technologies which are energy efficient,
so we are not back here year after year at committee rooms,
talking about what we are going to do about rising oil prices.
We need ultra efficient engine technologies and ultra efficient
fuels which will enable people to have alternatives, so we are
not captive of the oil companies, and so this country can move
toward sustainability and not be captive to foreign oil.
But does anyone in America doubt that the oil companies
have taken advantage of the American people? Perhaps only the
oil companies doubt that. But the American people know what
happened. They know, and particularly in the Midwest, and in
Cleveland where I come from, they know they are being cheated,
and they want their government to do something about it. And to
the FTC, who is on the second panel, I am not satisfied with
the conduct of the FTC approving merger after merger after
merger, and pretending that is not going to have an effect on
the marketplace.
So I am looking forward to the discussion here today, but
people in my district already know what this is about, and they
expect the government to be a little bit more active in
surveillance of the pricing practices of the oil company, and
they expect their government to stand up to protect consumers
so that we are not at the mercy of oil companies, who will take
advantage of anything in the marketplace to sock it to the
consumers. Thank you.
Mr. Burton. Thank you, Mr. Kucinich. Before you leave,
could I talk to you just a second, Mr. Kucinich?
Mr. Kucinich. Yes, sir.
Mr. Burton. Mr. McHugh.
Mr. McHugh. Mr. Chairman, I am going to follow the lead of
the gentle lady from the great State of Maryland and withhold
my statement for the moment. I always appreciate hearing from
my colleagues, but frankly, we are going to be around here
where I can hear that any time. I would like to hear from these
good folks, so I will yield back.
Mr. Burton. Do we have any other members on the Democrat
side? Who was next, Ms. Schakowsky or--OK, Danny, go ahead.
Mr. Davis of Illinois. Thank you very much, Mr. Chairman,
and let me commend you for holding this hearing to examine the
causes for the rise in gasoline prices and generalize the
impact of the high gasoline prices on the U.S. economy. I also
want to thank the witnesses for coming to share their knowledge
and expertise.
Mr. Chairman, the current gasoline prices in the Midwest
especially are totally unacceptable. The good and hard-working
people of Chicago are paying $2.50 per gallon in some areas,
and about a year ago, gasoline prices in Chicago averaged about
half that much, a little bit more, and I think that this is way
beyond the pale.
With the current high prices of gasoline, we need to better
our relationship with oil-producing countries, insure research
funding for alternative energy development, and to strengthen
our antitrust law provisions, and to investigate the practices
of the big oil companies.
First of all, relationships with major oil-producing
countries are critical factors for maintaining reasonable
gasoline prices. The United States need to renegotiate with
these nations, and we also need to look at the oil-producing
companies, the oil-distribution companies, the companies that
get the product to the consumer.
Second, Mr. Chairman, with the current high price in
gasoline, I believe that the time to act is now. We need to
approve additional research funding for alternative energy
programs, and energy sources. We need to allocate more money in
renewable energy research, for example, research in renewable
ethanol as a fuel alternative. We need to find better ways to
make ethanol and other products like it more reasonably
accessible to the consumer, and I believe with our track record
of technology advancement, of improvement, that we can actually
do that.
And, finally, Mr. Chairman, I certainly welcome the FTC as
it looks into the practices of the companies. I am not sure
that I believe that there is any one answer or that anybody's
got a panacea to what is causing the problem to exist, but I do
believe that by putting forth a concentrated effort, looking at
all of the factors that are in fact involved, that we can come
up with a strategy and a program and a direction that will get
prices down to the point where consumers can reasonably expect
to make use of them.
And so I thank you, Mr. Chairman, and yield back the
balance of my time.
Mr. Burton. Thank you very much. Mr. Horn.
Mr. Horn. Thank you, Mr. Chairman. I did not intend to say
anything, but I am going to say one sentence, and then I will
turn back a lot of my time to the gentlewoman from Idaho, and
then I hope we get to the panel who has been long suffering.
But we in transportation in this Congress on both the
Senate and House side, often in annual bills we purchase diesel
buses and diesel school buses and all this kind of thing. It
seems to me Congress could say, ``Hey, let us start in trying
to get the cleanest type of fuels,'' and there is no question
we have got to invest in batteries in this country. That is one
of the major things we have not been able to do. It needs it
both for military purposes, as well as civilian transportation
purposes, and natural gas is the type of bus we ought to do.
That is clean fuel, and frankly, I get tired of the diesel
smoke in my face as I am driving behind buses and trucks and
all the rest of it. So I think we ought to think in those
terms.
And I now yield the rest of my time to the gentlewoman from
Idaho.
Mrs. Chenoweth-Hage. I thank the gentleman from California,
and I will just summarize my opening statements by asking the
question: how much does this administration's environmental
policies impact the price of oil and gasoline?
I found it interesting yesterday, Mr. Chairman, in the
Washington Times, that it was quoted inside the Beltway that
Paul R. Ehrlich and Anne Ehrlich, who wrote a book entitled
``The Population Explosion'' and published it in 1990, on page
219, is quoted as saying in the book: ``The United States could
start by gradually imposing a higher gasoline tax, hiking it by
1 or 2 cents per month until gasoline costs $2.50 to $3.00 per
gallon, compared to prices in Europe and Japan.'' And then on
the dust cover, on the inside of that book, was a statement
written by our now Vice President Al Gore, who is quoted as
saying, ``The time for action is due and past. Ehrlich has
written the prescription.''
And, Mr. Chairman, I am wondering how much the
environmental policies of this administration is the
prescription. We can sit here and point fingers at each other,
but there is a major problem with this administration's
environmental policies. We are now 56 percent dependent on the
unstable OPEC nations for our oil resources, and we are sitting
on top of great resources in this country at ANWR and multiple-
capped oil companies, that because of the environmental
policies, we are not able to develop.
So that will end my oil statement, Mr. Chairman, but I
would like to ask permission that my entire statement be
entered into the record.
Mr. Burton. Without objection. Thank you, Mrs. Chenoweth
and Mr. Horn.
[The prepared statement of Hon. Helen Chenoweth-Hage
follows:]
[GRAPHIC] [TIFF OMITTED] T3069.018
[GRAPHIC] [TIFF OMITTED] T3069.019
Mr. Burton. Ms. Schakowsky.
Ms. Schakowsky. Thank you, Mr. Chairman. I appreciate the
patience of the panel.
We have been suffering in Chicago from some of the highest
gasoline prices, and I just wanted to briefly tell you my take
on this, because I have really been puzzling over why our
prices in Chicago and Milwaukee have been so much higher than
everywhere else.
We had a hearing in Chicago that was convened by
Congressman Bobby Rush last week, and at that time, what we
were hearing from the oil companies--there was a lot of finger
pointing going on, but we heard about how high the taxes are
relative to other places around the country. And that is true,
in Illinois we pay higher taxes. And then they were talking
about ethanol, and that the problem really is that we have to
use ethanol. We heard about--then we came to Washington and met
with some of the oil executives and we heard about supplies,
and we heard about problems with pipelines, and of course, we
saw a lot of finger pointing at the EPA and the environmental
regulations.
Well, let us look at all the facts, peel away the rhetoric,
and look at what we have. And what we see is that the cost of
reformulated gasoline in all of the places around the country
except Chicago and Milwaukee areas was always about the same
price as conventional gasoline. We are talking about the fees
to RFG. In Chicago, for example, these are old numbers, but
June 12th, $1.62 for conventional gasoline, $1.63 for
reformulated in places other than Chicago and Milwaukee; $2.04
in Chicago and Milwaukee, a full 60-cent per gallon difference.
Well, when the FTC began its investigation,
coincidentally--and I don't think it really was--we began to
see this precipitous drop in the wholesale cost of reformulated
gasoline with ethanol in the Chicago area, and we have seen
that drop now from, it was at about $1.60 a gallon to now, as
of 2 days ago, $1.22 a gallon. So what could it be? We have not
changed the taxes. The supplies have been the same. The
pipeline, which was a problem, was the same fix on the 15th and
the 14th as it is today. The EPA regulations haven't changed
any. It seems to me that if prices can fall so far and so fast,
that it was within the power of the oil companies to drop those
prices, and the only explanation then that makes sense to me is
that Chicago and Milwaukee, the two areas that use ethanol the
most, were being punished for their use of ethanol, a corn-
based product that the oil companies don't make any money off
of. That is the only thing that distinguishes Chicago and
Milwaukee from the other places around the country, is our use
of ethanol. And it seems to me that that is where the problem
lies, that the oil companies, who have seen up to 500 percent
profits this year, this quarter this year over last year, have
seen fit to use the environmental regulations as a fig leaf to
disguise their attack on ethanol and to punish those of us in
the areas that most heavily rely on ethanol.
I hope now that we are going to continue to see a decline
in the wholesale price, that we will see it reflected at the
price in the pump, which of course for our consumers is the
bottom line, and that this hearing will shed further light on
the subject. I appreciate the witnesses' indulgence, and I
thank you, Mr. Chairman.
Mr. Burton. Thank you, Ms. Schakowsky. Mr. McIntosh.
Mr. McIntosh. Thank you, Mr. Chairman.
I have a prepared statement that I would like to put into
the record, and just make a couple minutes' remarks.
Mr. Burton. Without objection.
Mr. McIntosh. And let me focus on the Midwest, because that
is where I think the key problem is, at least where I am
familiar with it, and let me remind everyone on the committee
that the Chicago market also includes parts of Indiana,
particularly Lake County.
And I was up there recently, and noticed that on the Lake
County side of the border, you are paying $2.18 a gallon. You
drive 2 miles south and you are paying $1.78 a gallon, whether
or not in that non-attainment zone and don't have to use
reformulated gas. So there is a price difference, and unlike
the East Coast or the West Coast, it costs a lot more to use
this reformulated gas.
I think what we need to keep in mind is that an economic
analysis of this explains what is going on pretty simply, that
the demand curve for gasoline is very inelastic. Put into
English, that means people are willing to pay a lot more for
the same amount of gas, because they need to fill up in order
to drive to work and buy groceries and use it in their car.
Therefore, when the supply goes down and the demand is still
high, you get a spike up in the price. That is what has
happened here. That is what is referred to by some of the
members as gouging.
The solution to that is one of two things. People use less
gas so you reduce the demand, or suppliers find alternative
supply and increase the supply, and that will then cause a
decrease in the price.
When you break down according to the CRS study, which is
confirmed by the memo that Mr. Ryan introduced today from EPA,
and frankly, confirmed by the subsequent CRS study that Mr.
Waxman mentioned, you look at the price of gas in the Midwest,
in the Chicago area, as well as the broader Midwest, it was $1
a gallon roughly a year ago. It has been increased by about 50
cents a gallon which can be attributed to the restriction of
supply by OPEC and the oil-producing countries. That gets you
to about $1.50 range. That is what people on the East Coast and
the West Coast are paying for gas, both reformulated and non-
reformulated. The restrictions in supply due to the pipelines
and the fact that there are no refineries supplying the
Midwest, adds about another 25 cents to the gallon, and then
the fact that Chicago and Milwaukee and Lake County, Indiana
use reformulated gasoline with ethanol adds another 25 cents to
the gallon.
And it isn't 25 cents more expensive to produce that gas,
the problem is that the blend when you blend with ethanol is
different than the base ingredient for other reformulated gas
using MTBE or an oil-based product.
So, in California or New York they have a fairly large
supply of the base material, they add the oxygenate and get
reformulated gas. But in these two cities and Lake County, IN,
the EPA regulations require them to produce a special blend and
the supply problem comes about because of that requirement that
there be a special blend that you mix with ethanol. That is
what spiked up the price by another 25 percent according to the
CRS study.
Now, when people say that the regulations are causing the
increase in the cost, that is one way to look at it. And I can
understand why some of my colleagues say that can't really be.
The oil companies are only required to spend so much money to
produce that. The rest of it is they are charging extra money
for the product that they are selling.
But if you look at it the other way that you have got this
dislocation between demand and supply and the demand curve
essentially is what causes the spike in prices; people are
willing to pay more in order to get a gallon of gas when there
are fewer of them around. The regulations are causing a
dislocation in the market so that the suppliers cannot bring in
alternatives to sell at a cheaper price. And, so, the low
supply causes the high price, the EPA regulation prevents
anybody else coming in and supplying an alternative in Chicago,
Milwaukee, and Lake County.
And that is how the government regulations have caused this
temporary crisis in the Midwest cities by not allowing the
market forces to work to bring in alternatives to that
reformulated phase II gasoline. That is what this committee
should look at. That is, frankly, what the Governors in
Illinois and Wisconsin requested EPA to grant a waiver, to say,
let's get through the summer, where we can open up the market
place, and you can have a different form of reformulated gas
come in, supply the need, and we will see the price come back
down.
Thank you, Mr. Chairman.
[The prepared statement of Hon. David M. McIntosh follows:]
[GRAPHIC] [TIFF OMITTED] T3069.020
[GRAPHIC] [TIFF OMITTED] T3069.021
Mr. Burton. Thank you, Mr. McIntosh.
Mr. Ford.
Mr. Ford. Thank you, Mr. Chairman.
I look forward to hearing from the panel so I am not going
to speak very long. I would say that we have all become experts
here, at least we believe we have become experts on the
environment and how these emissions may affect our environment
and how you can mix these things. I don't claim to be that
bright and I am amazed at the intellect and the wisdom that
poured on this side regarding how EPA does its job and how the
big oil companies are conducting themselves.
I will note again for the record that I know we have a
third panel where we will have a representative from the
American Petroleum Institute, and I think the Renewable Fuels
Association but I do hope that the chairman will show the same
vigor and relentlessness in bringing the CEOs of some of the
large oil companies before this committee too as he did Cheryl
Mills who have been subpoenaed before this committee.
I would have to think that this issue affects more
Americans than whether or not e-mails might have been lost at
the White House, but that might be a difference of opinion on
sides of the aisle.
With that being said, I look forward to hearing from the
panelists. They have taken time out of their very, very busy
schedule to be with us today and I do apologize that more of my
colleagues could not be here. This is an extremely busy day as
we debate prescription drug benefits for seniors in America.
And with that I yield back the balance of my time and hope that
we can get on with this panel as well as the other panel.
And I would say one additional time, I know Mr. Waxman has
said it. I hope to hear from the heads of the oil companies,
perhaps they can explain what clearly so many on the other side
of the aisle now understand in terms of what EPA, the Clean Air
Act, has required these oil companies to do. I would like for
them to explain to me how it is they are enjoying a 500 percent
profit--nothing against it, I am a capitalist also, I think the
people ought to make all the money they possibly can--but we
ought to be very careful in casting aspersions on laws that
have made our air cleaner and our water safer to drink and at
the same time oil companies are enjoying record profits.
I would also add that over the last 8 years, and as we
criticize environmental regulations, our economy is growing
like it has never grown. We are all making forecasts about
surpluses we are going to enjoy in this Nation and we are all
now, both sides of the aisle, trying to determine how we are
going to spend the taxpayer's money. So, I would caution my
friends on the other side, who suggest that somehow or another
the EPA has slowed the growth of this economy. We are growing
like we have never grown before.
We face a particular crisis here, and instead of the
demagoguing that goes on, on both sides, we ought to call all
of those before us who could perhaps provide some insight and
guidance as to what, we, as policymakers ought to consider and
ought to be doing to help to bring some relief to working
mothers in my district in Memphis, in the Ninth District in
Tennessee, certainly in California, where my friend, Mr. Ose,
is from and Indiana, where Mr. McIntosh and where Mr. Burton is
from. I would hope that my colleague from Indiana, Chairman
Burton will not hold too much against Mr. Ose, since he is from
California and I saw you don those glasses on the floor, Mr.
Chairman, saying that the Indiana Pacers would defeat the
Lakers. That didn't happen. I hope that you would not hold that
against Mr. Ose in his efforts to bring relief to the residents
of California.
With that, I yield back my time.
Mr. Burton. I wasn't going to until now.
Let me just say since we cannot run cars on missing e-
mails, we will have the people from the oil company before us.
Who is next on our side?
Mr. La Tourette.
Mr. La Tourette. Thank you, Mr. Chairman.
I will try to be mercifully brief. I want to thank you for
holding this hearing today and for inviting not only the
consumers that I think are going to be the most important
panel, but also the Federal agencies and representatives of the
oil industry and also alternative fuels. I am also encouraged
by the opening statements today that it has not devolved into
the rhetoric, the silly rhetoric that punctuated some of the
press conferences that occurred on Capitol Hill at the end of
last week.
My personal favorite, not only at the press conference but
also at a meeting that I was at with the EPA Administrator, was
somehow a letter sent by the Administrator of the EPA and the
Energy Secretary caused the wholesale prices in Chicago to
plummet that very day. Apparently they sent the letter and it
scared the beJesus out of the oil companies and oil prices
dropped 27 percent on the wholesale market in Chicago.
That is a ludicrous and ridiculous observation, but it got
me to thinking because a couple of days earlier Congressman
Kucinich had sent a letter to the FTC to the chairman, as a
matter of fact, 3 days earlier than the Energy Secretary's
letter, and the EPA Administrator's letter. We got a letter
back from Chairman Pitofsky that said that he was going to
launch an investigation in the Midwest. So, it occurred to me
that maybe Congressman Kucinich and I could have a press
conference and take credit for tumbling gas prices in the
Midwest but that would be, I think, just as silly.
It would appear from the meetings that Speaker Hastert had
over the last couple of weeks that there have been a number of
unhappy circumstances that have come together about the same
time in the Midwest and they have left drivers and consumers
really scratching their heads in my State. We have heard from
some of our colleagues from Illinois and Wisconsin, they have a
pretty good handle on it. At least they had new regulations
that went into effect on June 1st for RFG-2. I would say that
we have 4 out of every 10 gallons of fuel sold in Ohio is
already ethanol made with corn and, so, I don't suspect any
vast right-wing corn conspiracy going on at least in the State
of Ohio.
But I would tell you that we don't understand what happened
to us in Ohio on June 8th. I got a call from a guy who lives in
Geneva, OH. His wife filled up at a gas station that morning
before she went to work and the gas was a $1.57. He comes home,
5 hours later, and he fills up at the same gas station, same
pump, apparently the same gas in the tank that was there at the
beginning of the day was $1.99. There is no war, no national
disaster. He couldn't think of anything that caused it to go up
so much and he is asking, well, OK, we understand what happened
to our friends in Chicago, we understand what happened to the
folks in Milwaukee, but what is going on in Geneva, OH?
And I want to welcome Charles Bailey from Jefferson, next
door, who has experienced some of the same things from
Jefferson, OH, to talk a little bit about what he experienced.
I think it is easy to cast blame. I think it if you don't like
the Environmental Protection Agency you can blame their
regulations and say that they have caused the problem. If you
don't like the Clinton administration you can say that they
don't have a fuel policy and energy policy to follow. If you
don't like the big oil companies you can accuse them of price
gouging. If you don't like the Republicans you can say, as some
have suggested, that the Republicans are in the pocket of the
big oil companies and we don't want to look at them.
I would hope that rather than fanning out and hunkering
down into foxholes or, in this case, oil wells, that at today's
hearing the committee really, everybody who comes before the
committee sits back and says, maybe in this crisis I could have
done something better.
For instance, we are aware that the EPA granted, they
didn't grant a waiver but they granted enforcement discretion
to St. Louis, Missouri, which is a fine city but also the
Energy Department took a look at fuel supplies, saw they were
low, as they did for Chicago and Milwaukee, and decided not to
issue enforce discretion. Well, why?
Maybe the EPA could have done better. Maybe the Energy
Department could have done better. And the oil industry, I
think what happened in Ohio is that the pipelines broke. We had
some problems, shortages were low, a 15-year low. But if I am
an oil company and I can sell gasoline in Chicago for $2.20, as
Mr. Kanjorski was talking about, supply and demand, why the
hell would I sell it in Ohio for a $1.60? I am going to take it
up to Chicago and sell it.
And my suspicion is that they perhaps were a little
greedier in the supply and demand situation than they needed to
be. Maybe we need to look at our PAD system that was put into
place after World War II to develop oil distribution in this
country and come up with a better way to do it.
And in the spirit of cooperativeness, and doing something
constructive, the Transportation Committee is already looking
at the Explorer Pipeline and we are talking about pipeline
safety. Mr. Waxman, I think, talked about the Explorer
Pipeline. It is now operating at, my understanding is, 80
percent pressure, 90 percent capacity. And rather than saying
well, you know, darn somebody, we are looking to work with the
Department of Transportation how to get them up to 100 percent
so Chicago could have more gasoline than they know what to do
with.
I thank you, Mr. Chairman, and yield back my time.
Mr. Burton. Thank you, Mr. La Tourette.
Mrs. Maloney.
Mrs. Maloney. Thank you, Mr. Chairman.
First of all, Mr. Chairman, I really want to sincerely
thank you for calling this hearing because I think it is
tremendously important to customers and it is a very important
issue. Recently I have been very alarmed by the incredible
growth in gasoline prices across the Nation and in my own State
of New York. And these prices have grown even though the oil
supply has remained constant over the past year. As we know, on
Wednesday, June 21st, OPEC agreed to raise their oil production
by 700,000 barrels a day or 3 percent.
But what really astonishes me is the oil industry's
pathetic excuses for the increases that they have seen and the
cost of gasoline has become record highs. The oil industry
profits have increased from 200 to 500 percent over the last
year. And I think that it is no accident that when the Federal
Trade Commission announced that it would launch an
investigation into whether the oil companies were engaged in
price gouging the price and the cost of a gallon of gas
actually dropped in the Midwest.
But what I would like to get to is--and I would like to
stress that this is standard practice for some of the oil
companies. Back in 1996, Chairman Horn and I, in part of our
effort to oversee the collection of Government debt, issued a
report on what was owed to the Federal Government on
uncollected oil royalties for oil that is extracted from land
that is owned by the taxpayer, federally owned land. And what I
found in my studies is that there was a consistent effort to
cheat taxpayers and the Government out of millions of dollars
that are owed in royalties and this money that comes in, in
royalties goes to education and to many important areas.
We had a series of hearings and there were subsequent
investigations by GAO and others that really came to the
conclusion that many of the major oil companies were paying
royalties based on what they called posted prices but the price
was much lower than the market price. And we merely worked,
many of us, to encourage a law or a rule that is very simple,
that the oil companies should pay the Government and the
taxpayers the same amount that they pay each other.
And because of the lawsuits that came out of these
investigations that we had in your hearings and other places,
the oil industry paid the Federal Government more than $300
million and overall the oil companies were forced to pay over
$5 billion to the Federal Government, States and Indian Tribes.
And there were many suits against the oil companies and they
settled over their underpayment. And recently the Office of
Minerals and Management Services re-wrote the rule that merely
states that the oil companies should pay to the Federal
Government what they paid each other which is market price and
that will provide an additional $66 million each year to the
Federal Treasury.
So, I think that is important but the reason I bring up
this history of hearings and work that many of us on this
committee did on the underpayment of oil royalties shows a
behavior of trying to really rip off the American consumers and
rip off the fair and just payment.
And I can say that I am looking forward to the report that
will come from the Federal Trade Commission on how we jumped to
500 percent increases in profits, while the supply was
basically the same in this country.
Thank you.
Mr. Burton. Does the gentlelady yield back her time?
Mrs. Maloney. If anyone would like to comment on that, I
would be glad to hear their comments.
Mr. Burton. Well, we are not to the questioning phase of
the hearing yet, Mrs. Maloney.
Mrs. Maloney. OK.
Well, I was at another meeting and just got here. So, I
yield back. I didn't realize it was opening statements. I
thought we were at questions.
Mr. Burton. OK. Thank you very much.
Mrs. Maloney. Thanks.
Mr. Burton. Mr. Barr.
Mr. Barr. I look forward to the testimony and questions,
Mr. Chairman.
Mr. Burton. Mr. Terry.
Mr. Terry. I will associate myself my remarks with Mr.
Barr's.
Mr. Burton. So noted.
Mr. Ose.
Mr. Ose. Thank you, Mr. Chairman.
Before I associate my remarks with Mr. Barr, I want to
remind the chairman that I am from Sacramento and a supporter
of the Sacramento Kings, not the Los Angeles Lakers.
Mr. Burton. Well, I would hope that in the finalists you
were rooting for the Indiana Pacers even though they were not
successful.
Mr. Ose. Does Indiana have a team?
Mr. Burton. Never mind, never mind. [Laughter.]
Would the--first of all, before we have you sworn in, I
want to thank you all for your patience. Would you all rise so
I can swear you in, please?
[Witnesses sworn.]
Mr. Burton. Be seated.
Our panel consists of Scott Schneider, from Indianapolis;
Mark Hrobuchak. Where are you from, Mr. Hrobuchak?
Mr. Hrobuchak. Northeastern Pennsylvania.
Mr. Burton. Charles Bailey from Jefferson, OH; Elaine
Oberweis?
Ms. Oberweis. From Aurora, IL, represented by Mr. Dennis
Hastert.
Mr. Burton. Speaker Hastert. Well, we better treat you
right then. And Doug Wilson. Where are you from, Doug?
Mr. Wilson. North central Illinois in Congressman Tom
Ewing's District.
Mr. Burton. Very good.
I think we will just go right down the line. Mr. Schneider
is a member of the city county council of Indianapolis and also
I guess runs the Mister Ice Co., with his father, who is a good
friend of mine.
Mr. Schneider.
STATEMENTS OF SCOTT SCHNEIDER, VICE PRESIDENT OF SALES, MISTER
ICE OF INDIANAPOLIS, INC., INDIANAPOLIS, IN; MARK HROBUCHAK,
CEO, PRESIDENT OF MPH, TRANSPORTATION AND LOGISTICS, SCRANTON,
PA; CHARLES BAILEY, JEFFERSON, OH; ELAINE OBERWEIS, CEO,
OBERWEIS DAIRY, INC., CHICAGO, IL; AND DOUG WILSON, GRIDLEY, IL
Mr. Schneider. Thank you, Mr. Chairman and members of the
committee. I would like to thank the committee for giving me
this opportunity and in particular my Congressman, Chairman
Burton, and Mr. McIntosh is also a delegate of my State. In
1964, my father realized the American dream of owning his own
business. Starting in his garage he formed a small business
supplying packaged ice to local businesses for resale. Now,
over 36 years later, much hard work and sacrifice, 12
employees, and the help of his father and those employees, the
business has grown to a very successful and well-respected
distributor of commercial ice machines, and restaurant
equipment.
Our family has about 7 trucks, traveling at 60 mile radius
of Indianapolis, performing service and sales functions for our
customers. Needless to say, gas prices, obviously, have a huge
impact on our business.
As gas prices go up, quite simply, our profits go down. Gas
prices directly affect our bottom line. But it affects much
different than if there were an increase in merchandise for
resale or things of that nature. Those prices can generally be
passed on in the form of a price increase of our own.
But it affects our company differently than normal fixed
costs that every business has. The recent volatility of gas
prices especially in the Midwest has affected us and there is
no way really to recover those in the business that we are in.
So, we would have to absorb them.
Our company has two customer segments. We have a retail
segment and a wholesale segment. The retail segment, most of
our customers have a long-term contract and as a short-term
spike in gas prices go up, our long-term prices cannot be
changed. So, therefore, that affects directly to the bottom
line.
For our wholesale customers most of those customers receive
products that we ship out by freight carrier and the freight
industry is showing a lot of increase in gas surcharges and our
prices have been going up. Those prices usually are included in
our discount structure, therefore, when freight prices go up
our margin also goes down and it is a thin margin to begin
with.
And, consequently we are trying to order more shipments,
more items per shipment, fewer shipments, which obviously then
puts a strain on our inventory levels and strains our cash-
flow. Now, fortunately, and Lord willing, we can get through
this. We are a strong company and I believe we will be able to
get through a short spike in gas prices. But given the long-
term continued prices at these levels, we would possibly be
faced with cut backs and lower margins.
The question now to me seems to be how do we correct this?
And I would like to emphasize quite, quite, obviously, that I
am in no way advocating any sort of Federal price control on
gasoline. But what I am advocating actually is that this body
take at least some sort of action that it has the power and the
control to take. I have identified two areas that I believe
have an immediate and direct impact on gas prices. That would
be No. 1 to lift EPA regulations; and No. 2, suspend or even
cut the Federal gas tax.
And, if I could, Mr. Chairman, I would like to interject, I
know that I have got, continue on with my prepared remarks, but
as I was listening to the opening remarks of the panel, the
committee, it occurred to me that really what we are looking at
in my opinion is a much larger picture and a bigger question
and that is a general question of government regulation, in
particular, here, the EPA; and in general, for businesses
everywhere. General Government regulation that hinders us all.
And we, as a business, are forced to deal with all kinds of
Government regulation. And it almost seems at times that in
order to succeed in business we do that in spite of the
Government regulations from any, every different type of
department, both local, State and national.
I am from the Midwest so I will use the analogy of a
tractor pull. It is very similar to a tractor pull where
business is the tractor and Government is the weight upon the
sled in which we pull. And as the weight of Government
regulations gets greater and greater we have to work harder and
harder and spinning our tires more often just to stay, just to
sustain the pace that we are at now.
And I firmly believe that if something does not happen to
Government regulation in general that businesses small and
large alike are going to stall out under the weight of
Government regulation.
The question was this committee, was the rising fuel prices
and the appropriate Federal response. In my opinion, that
Federal response and this committee's response can be summed up
in some simple language and that is please, get Government off
the backs of small business and, in particular, for this
committee, pull the reins on the EPA. They are over-regulating
business and in this particular case, there is identifiable
areas where the gas prices have gone up simply because of non-
attainment and those types of things.
There is an article in a northern Indiana newspaper and Mr.
McIntosh was right on line when several of the counties in
Indiana lie in the non-attainment zone and some do not. And the
headline is, Drivers Bolt for County Lines To Fill Up Gas
Tanks, because the gas on the other side of the county line is
30 cents cheaper. And, again, you all mentioned that there is
no change in supply, there is no change in anything other than
Government regulation by the EPA. And those effects or those
regulations took effect in my State on June 1.
So, as I was talking to some of my peers and my colleagues
telling them that I was going to appear before the committee, I
was given some marching orders by several of them. And that is
to plead with you to pull the reins on the EPA and to pull back
on Government regulation in general.
Thank you very much.
[The prepared statement of Mr. Schneider follows:]
[GRAPHIC] [TIFF OMITTED] T3069.022
Mr. Burton. Thank you, Mr. Schneider, and be sure to give
your mom and dad my regards.
Mr. Hrobuchak.
Mr. Hrobuchak. Mr. Chairman, and members of the committee,
I would like to thank you for appearing today in front of you.
I have a lot to say in a short period of time so I am going to
be real quick about it. I have been in the transportation
business, trucking business for 22 years, OK? As a refrigerated
carrier, I was third in command of the 10th largest
refrigerated trucking company in the United States at one time.
And we are located in northeastern Pennsylvania in the 11th
Congressional District and due to Mr. Paul Kanjorski I have to
thank him, Congressman, for being here. He has supported me all
the way.
You know, we heavily rely on fuel. And, you know, this is
not a problem that just happened a couple of weeks ago in the
Midwest. This problem happened 8 months ago. And the trucking
industry was struggling since then and we were promised an
investigation then and we have not seen anything. They have
held hearings, March 9, 2000. As a matter of fact, I was
recommended to testify at those hearings, and it was actually
the Energy of Power and Subcommittee hearing, chaired by
Congressman Barton of Texas. And it was on oil market price
fluctuations.
I have not heard a thing. I was promised that there would
be something done. I will go further. This is not just about
fuel. This is about jobs. OK? I have over 150 employees that
work for me, owner-operators, company drivers, mechanics,
office staff and administrative staff. OK? I started in 1995. I
left the 10th largest refrigerated trucking company and went on
my own. OK?
I started with nothing. By the year's end I did $3.4
million. At the end of this year I will have done $15 million
in gross revenue and sales. And it was not an easy hike and
it's not getting any easier.
The fuel is choking the transportation industry by the
throat. And this is just by coincidence yesterday. A gentleman
from the Travel Port Centers of America stopped in my office
and it's a big chain of places where trucks can stop and get
fuel and guys get showers and stuff like that. And he actually
told me the reason the shortage as he experienced and why fuel
was so expensive up in the New England area was because they
have actually rerouted the pipeline up into the New England
area and made him ship his trucks over to Kentucky when he was
based in Richmond, VA, just to get the fuel he needed to
support his truck stops. And all that fuel went up to the New
England States.
So, I don't believe there was a shortage there. Let me
hurry on with this.
I will address the fuel issue now. Our fuel price rose 78
percent in the 10-day period. MPH sustained losses during this
period while our gross revenues increased 26 percent in the
first quarter of 2000, OK, in comparison to the 1999 first
quarter, OK? But our profits fell in 2000 98 percent in
comparison to 1999 because of direct cause of the fuel
shortage, so-called.
And all that's really happened in my opinion is that the
trucking industry has gotten off the back of Congress and
subcommittees and lowered the fuel enough to where now they
raise the gas prices. And it's raising everybody's attention.
And they are seeing where they can get away with it. And,
you know, I have several responses to that. And I contacted
everybody. I started with Mr. Kanjorski, in the 11th
Congressional District. I contacted Senator Sherwood, Holden,
Specter, and Santorum, Energy Secretary Richardson,
Pennsylvania State Senator Mellow, Pennsylvania Attorney
General Fisher, Governor Ridge. I also contacted President
Clinton and Al Gore, OK?
And I contacted everybody. I have been working on this
since the very beginning and I work hard and I have actually
ignored my business in spite of everything that has happened.
And I take this serious. This is my livelihood. And I have
independent owner-operators that work for me which, you know,
tried to be self-employed independents and want to be the
American entrepreneur with their own little truck running
around the country.
I want you to know that 80,000 trucks were returned from
one corporation in the United States that had 35 percent of the
market share, OK, was given back by the American owner-operator
who pulled freight. So, what I am trying to say there is that
in my company during the fuel shortage for the first quarter is
that 20 of my employees, owner-operators had, went bankrupt,
they lost their homes, they lost their houses, they lost their
cars, they lost everything because they just couldn't live up
to the fuel prices.
And we need to take immediate action. I mean immediate. We
need to do something this time. We can't say we are going to
try to do something, OK? We need to make those parties
responsible, OK, impose taxes, OK? Not only the parties
responsible but the executives of those companies responsible
and hold them.
And I don't agree with a peeling away with the Federal and
State taxes. I just want you to put a moratorium on them. Just
a moratorium on them so the trucking industry can get a grip
and get back in line where it needs to be so their bottom line
can get back on track with its profits.
OK? That is all I have to say. Thank you very much.
[The prepared statement of Mr. Hrobuchak follows:]
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Mr. Burton. Thank you very much, and we will get back to
you in the question-and-answer period.
Mr. Bailey, if you could, you might keep your eye on that
little clock there. When it gets to ``sum up,'' you have about
1 minute left. If you could stay within that timeframe, it
would help us.
Thank you.
Mr. Bailey. Good afternoon, Mr. Chairman and members of the
committee. My name is Charles Bailey. I live in Jefferson, OH,
the county seat of Ashtabula. It is part of the Ohio's 19th
Congressional District.
Let me begin my testimony by saying I am honored to be here
on behalf of northeast Ohio. I thank Chairman Burton for
holding this hearing and Congressman LaTourette for inviting me
to testify.
I am a foster parent, I am an adoptive parent. I am
probably the closest thing you are going to see to a typical
American family here. I work as an electrician. My wife is a
stay-at-home mom. I drive 880 miles a week to and from work. I
work at an outfit in North Canton called Schaub Electric as a
union electrician.
The price of gasoline has cut into my family's budget, as
it has with everybody else in this country. We no longer have
any luxuries in life, and barely have enough money to buy
groceries. There will be no fairs or festivals in my children's
lives this summer, no amusement parks, and because we have
chosen to move closer to work and save on gas, there won't even
be many trips to grandma's house.
I have been chosen to tell my story about how this has
affected me and my family. But in truth, I am telling the story
of millions. Every person in this country feels the effect of
the rising price of gasoline. It has doubled in a matter of a
few months and has made the cost of living increase in more
ways than just at the pumps. Our grocery prices have gone up,
due to the rising cost of delivery. We live close to Lake Erie,
and the Great Lakes, and I have seen this effect at marinas, as
far as fishing charters, anything that has to do with the Great
Lakes.
There isn't any part of our lives or the local economy this
hasn't affected. Our country has grown to rely on
transportation that uses gasoline, which means, in reality,
that not only has this affected us at home, but it has affected
everything in this country. There are many people who have it
much worse than my family: people who have to travel for a
living, people who have loved ones in the hospital and need to
be visited, people who are barely making it on what they were
being paid before the hike in gasoline and now can't pay their
bills at all. And what about those individuals on fixed
incomes? Social Security, the people that need to make it to
the doctors or the pharmacy, are they going to be able to pick
up their prescriptions after paying for gas?
As a Nation, this has hit everyone's pocket, and there
doesn't seem to be any relief in sight. How are our children
supposed to become well-rounded when they can't even play
extracurricular activities because there is no money to pay for
it; when they are not allowed to take the trip in sixth grade
to Washington, DC, because mom and dad won't have the money to
get back and forth to work if they take that extra money and
use it for the field trip. What is this world coming to when
your children can't even take a field trip?
In the past year, we have been able to do very little. The
cost of gasoline is so high that we can barely make it to the
grocery store. Our grocery budget has been cut almost in half.
With six children and two adults, we have five children--and I
also have a 15-year-old niece staying with us over summer
break--that doesn't leave a whole lot for us to choose from.
The days of big dinners are over for us at this point.
We try to make sure that the kids have everything that they
need before we even concern ourselves with any needs we may
have. There have been many evenings in this last year that
either myself or my wife have gone without a meal so that the
children can have seconds. We feel it is more important to let
them have a second helping for their growing bodies. I never
want any of my children to go to sleep hungry. This is an issue
for many people in our area. We have others who are getting
public assistance because they can't work and support their
family. However, there is no assistance for those of us who go
out and work every day and still don't earn enough to simply
feed their family, let alone try and supply them with all of
the other basic necessities of life.
I am fortunate to have a good enough job. But I drive 88
miles one way to work, so I can have hospitalization for my
children. Like many families, we have two car payments. We have
nothing new. We have two 1992s. My Jeep has 160,000 miles on
it, and it will probably be wore out before I ever have it paid
for.
As for any trips to the amusement park or the zoo, we just
don't have it in the budget to go anywhere. With the cost of
the tickets, food and, of course, the added expense of gasoline
for a family, it is just impossible to go anywhere. We had
hopes of taking our children to Disney World before they get
too old, but I don't ever think that will ever happen. I now
spend $400 a month for gasoline just to go to work and back.
After local media did a story about me coming to
Washington, I received e-mails. In a matter of 3 days, I have a
folder here 1-inch thick from Northeast Ohio people reaching
out and telling me their stories. I have read every one of
these e-mails, and I have responded.
And I wish for my Federal Government to take the steps that
are necessary to bring our gas prices back down, so the local
families can have the things in life that this Nation has
promised us and that is here for us. That is the reason we are
here.
Thank you.
[The prepared statement of Mr. Bailey follows:]
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Mr. Burton. Thank you very much, Mr. Bailey. And those e-
mails that you have, if you would like to share those with the
committee, we would be happy to have those, and we will review
them.
Ms. Oberweis.
Ms. Oberweis. Thank you for inviting me here today. I am
indeed honored to be asked to testify in front of this
distinguished committee, and I would especially like to thank
Representative Biggert for extending the invitation.
I am Elaine Oberweis. I am president and CEO of Oberweis
Dairy, the processor of the finest milk and the most delicious
ice cream on the planet. We utilize three means of
distribution: direct home delivery, company-owned retail
stores, and wholesale distribution to both single-store and
chain-store grocery stores. Our service area covers most of
Illinois and the St. Louis, MO, area. Milk is brought in from
Illinois and Wisconsin and processed in our North Aurora
facility and then distributed either directly to homes, our
stores or our wholesale accounts. We utilize approximately 75
trucks to accomplish these deliveries.
It is troubling that our fuel costs have increased more
than 40 percent from May 1999 until June 2000. This translates
to an additional $15,000 per month for fuel. While this number
does not sound huge in governmental budgetary terms, the
increased cost on an annual basis represents 16 percent of our
1999 pre-tax net income; dollars that could have been spent to
expand our business and better serve our customers.
We have also been assessed fuel surcharges of up to 4
percent by most of the trucking companies serving our own
suppliers. Thus, the cost of our farm milk, raw materials and
resale items, such as butter and eggs, have also increased.
High gas prices have hidden costs as well. Our employees
receive the IRS-mandated $.31 per mile for business use of
their personal vehicles. This is a national standard. Thus, the
Chicago area employee is penalized by the higher price of fuel.
Our employees are also paying much more just to get to and from
work each day, as Mr. Bailey has testified, so their paycheck
is effectively shrinking.
We have an extremely difficult time attracting employees to
the Chicago job market. The national media coverage of the cost
of fuel in Chicago is fanning the flame of fear about the high
cost of living in the area. Recruiting in an already very tough
job market is only becoming more difficult.
What does this mean in the long run? The convenience of
Oberweis home delivery that we provide to our customers may
become an unaffordable luxury. It will be increasingly more
difficult to hire new employees. As a result, our ability to
grow our business will be restricted, if not stopped all
together.
Mr. Chairman, Government involvement in fuel formulation
affecting the economics of fuel pricing has created today's
environment. The inequalities that exist between Chicago's
price of fuel and that of the rest of the United States is the
direct result, at least in part, of a bureaucratic execution of
a plan. On its own merits, reducing emissions through the
change in gasoline formulations may be worth doing--however,
not at the expense of job creation or product quality.
The EPA has set standards for air quality that would result
in required changes to gasoline formulations. The EPA, oil
industry and local Governments were aware of Chicago's need to
implement these new formulations. The EPA and the oil industry
should have been working together to forecast the changes in
demand based on new regions being required to use reformulated
fuels. Thus, the adjusted cost of fuel should not have been a
surprise. And the increased cost of the EPA-mandated
formulations could have been softened by an increased supply,
allowing the basic price of fuel to fall during the
implementation period. The new formulation could have been
introduced with little fanfare.
But also affecting supply are OPEC's monopolistic
restrictions on supply. Also, it is my understanding that a
supply issue in the ``pipeline'' is affecting the oil
industry's ability to deliver fuels to market. Combined, these
two issues are seriously depleting supplies. Thus, rather than
an increased supply at the moment of implementation of the new
formulation, we experienced a decreased supply and higher
prices at the pump. It is my claim that only the Government
would behave as it has in continuing to mandate the
reformulated fuels during a crisis.
As a businessperson, I can testify this is an unworkable
strategy. No business would force or implement a plan that is
no longer viable. When business conditions change, businesses
alter their plans to allow them to continue to be successful.
In any major business undertaking of which I have been part, at
the time of the plan's implementation, we reassess the
environment to assure ourselves the underlying assumptions are
still true. The existing supply of required fuel is one
assumption the EPA had a responsibility to check, and it didn't
check its plan for viability.
Now the Congress has a chance to say to Chicago and the
Upper Midwest, ``We can wait until all of our ducks are in a
row before we make this important change.'' Congress can remove
the requirement for reformulated fuels mandated by the EPA or,
at a minimum, delay such action until both the oil industry and
the EPA can assure increased supplies. Or, best of all, in lieu
of mandating reformulated fuel usage, Congress can increase the
tax on the current formulation of fuel and reduce the tax on
reformulated fuel nationwide. The market would then be allowed
to solve the problem, as it should.
Mr. Chairman, I thank you again for this opportunity to
present my views, and I am more than happy to answer questions.
[The prepared statement of Ms. Oberweis follows:]
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Mr. Burton. Thank you, Ms. Oberweis.
Mr. Wilson.
Mr. Wilson. Thank you, Mr. Chairman and members of the
Committee, for this opportunity to discuss the rising price of
gas for farmers and our perspective of what the right solution
could be for what I see is a preventable problem.
My name is Doug Wilson, and I am a farmer in north central
Illinois, and I am also the immediate past president of the
Illinois Corn Growers Association. I am testifying today on
behalf of the NCGA and the more than 30,000 farmers they
represent in the 48 States.
Let me make one thing perfectly clear right off the bat. No
group suffers more from skyrocketing fuel prices than farmers.
This year, the typical corn farmer will pay a whopping $5,000
more for fuel and other inputs than he did last year. For many
of us, especially family farmers like myself, that is a giant
chunk out of our wallets, and it will have a devastating impact
on our ability to make ends meet.
Why has this occurred? Because fuel prices have increased
phenomenally since last year's harvest. I called my local
petroleum distributor yesterday in Livingston County. I asked
him for a comparison of what the price of gasoline, diesel fuel
and other products I use were 1 year ago and what they were
today. The price of gasoline has jumped 64 percent, and the
price of diesel fuel is up 73 percent for the off-road price
that I pay for the diesel. That is none of the Federal tax.
Last year I was able to contract my fuel needs for 69.9 cents a
gallon. Today, that price is $1.209.
Most of our equipment runs on diesel. In fact, U.S.
agriculture uses almost 4 billion gallons of diesel every year.
Consequently, American farmers will be spending approximately
$2 billion more to plant and harvest this year's crop. And if
these higher prices persist, we are going to be looking at
higher costs for agricultural chemicals, and farm fuels and
supplies as well. For instance, the cost of anhydrous ammonia,
one of the most-used fertilizers for corn, is up $50 per ton in
my area just in the last 5 weeks. This is because of the
increasing demand for natural gas, from which it is made.
Farmers are paying through the nose, despite a record in
energy conservation that we have implemented. By switching to
more fuel-efficient machinery, adopting conservation practices,
reducing tillage and becoming smarter about pest management,
farmers' energy consumption has declined by nearly 30 percent
since 1978. At the same time, corn yields have increased by
more than 22 percent. We are doing everything we can, and then
some, to be environmentally responsible and hold down our
costs, while maximizing our productivity.
So let me repeat: There is no one out there with a greater
stake in reducing energy costs than American farmers, which is
why we want to be doubly and triply sure that any action that
Congress takes to address the issue really addresses the real
problems.
Let me start with what I believe is not one of the
problems, and that is the Clean Air Reformulated Act program,
the RFG program that so many of you have been mentioning today.
Big Oil would have you believe that consumers have been paying
$2.30 a gallon or more for gasoline in the Midwest because of
costs of complying with more stringent phase 2 Clean Air
guidelines that took effect earlier this year, particularly in
areas of Chicago and Milwaukee where corn-based ethanol is used
to make cleaner-burning RFG.
During the summer months, refiners must use a lower
volatility gas to blend with ethanol to make RFG 2, yes, but
the lower volatility gasoline costs only slightly more than the
U.S. Environmental Protection Agency has repeatedly emphasized
that it should be no more than 5 to 8 cents, as some of the
opening comments said earlier.
On the other hand, consider the fact that a gallon of
ethanol delivered to Chicago-Milwaukee market is currently
selling for $1.28 to $1.32 a gallon. That is well below the
current price of gasoline. This means that blending less-
expensive ethanol into gasoline actually reduces the cost of
finished gasoline. If we were not using ethanol in RFG in
places like Chicago and Milwaukee, gasoline prices could be
even higher than they are today.
But despite the economic and environmental benefits of
using ethanol in RFG, the EPA hasn't helped us either. Despite
repeated urgings from ourselves and many others, including the
Illinois delegation, the agency has failed to make appropriate
regulatory changes that could reduce the cost of producing
phase 2 RFG.
Current EPA rules fail to give ethanol credit for
significant carbon monoxide reduction benefits. If these
environmental benefits were fully accounted for, refiners could
blend ethanol into their RFG much more cheaply and easily. But
as the rules now stand, there is actually a disincentive to use
ethanol in RFG.
Corn growers and ethanol manufacturers long ago geared up
to meet the demands of the new phase 2 RFG. With 58 facilities
in 19 States, producers are making ethanol at a rate that
exceeds 1.6 billion gallons per year. This means the United
States is using 1.6 billion gallons less of gasoline than we
otherwise would have, and we could easily make more.
So from both a price and supply standpoint, you reach the
inescapable conclusion, ethanol is not the problem, it is the
solution.
So why have gasoline prices gone so high? No one seems to
know the answer. But one thing that we do know for sure,
something smells in the barnyard. And that is why we asked the
Federal Trade Commission to investigate, and we applaud your
committee's action of looking into the problem, but the facts
just don't add up.
Crude oil prices have leveled off, so they cannot account
for the recent price rise. The supply of crude is plentiful, at
least if you believe ExxonMobil's recent statement that the
company has exceeded 100-percent replacement of its oil and gas
reserves for the 6th year in a row.
Meanwhile, oil companies have allowed gasoline inventories
to drop to alarmingly low levels in many areas. And despite
having 5 years to prepare for phase 2, refiners failed to build
adequate supplies of low-volatility gasoline to blend with
ethanol.
Ethanol-blended gasoline should be selling for less than
conventional gasoline. But since April, both RFG and
conventional gasoline prices have risen at close to the same
rate, 34 percent and 29 percent respectively.
So are we looking at price gouging by the oil industry or
is it a cleverly orchestrated attempt to eliminate RFG
requirements? I will openly say Big Oil has never liked the RFG
program and has not been very happy to work with it. My hope is
that your good work and that of the FTC will get to the bottom
of the matter.
Now, I would also hope you use this occasion as a unique
opportunity to craft a more rational national energy policy,
one that expands the use of reformulated fuels, such as
ethanol, and domestic energy sources, such as oil, coal and
natural gas. By reducing our dangerous dependence on foreign
oil, we can benefit the environment, while increasing our
energy security.
Mr. Chairman and members of the committee, I hope you will
heed what has been said by the panel today and those that
follow. I hope you will recognize that ethanol remains the
answer. It is the only fuel that is made from all-American
resources, 100-percent renewable, it is clean burning and it
improves our air quality. And as not mentioned by those
supportive of MTBE, it does not pollute groundwater. And so I
hope that all of this will help to improve our national energy
security, our environment and our economy.
I thank you for your time, and I would also be pleased to
answer any questions.
[The prepared statement of Mr. Wilson follows:]
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Mr. Burton. Thank you very much, Mr. Wilson. Let me just
ask a couple of questions. I know you have been here a long
time, and I really appreciate your patience.
Let me start with you, Mr. Schneider. Since the gas prices
have increased, how much more is your company spending for
transportation per month of all kinds? And you can give me a
percentage, if you would like, or a dollar amount, either one.
Mr. Schneider. I don't have a particular number because it
is sort of a recent phenomenon in Indianapolis that gas prices
have gone up so high--as of yesterday, $1.84. But I would say
the simple math, a year ago I believe a newspaper article said
that we were at 89 to 90 cents a gallon 1 year ago in
Indianapolis. So if you look at just another dollar per gallon,
you can look at the math there.
Mr. Burton. So you are looking at almost double your fuel
costs right now.
Mr. Schneider. Absolutely.
Mr. Burton. You talked about getting fuel surcharges when
you received shipments. Can you give me an example of how that
has kicked up the cost of your products.
Mr. Schneider. Our freight carriers, we use an LTL carrier,
which means that we don't contract a full truck body out. We
use one or two skids go out per shipment to different areas. As
the base rates have also gone up over the last few years, the
fuel surcharge has gone up, and that has gone up an average of
10 to 12 percent, which is a direct drop to any profit that we
have in those----
Mr. Burton. So it affects the bottom line substantially.
Mr. Schneider. Absolutely.
Mr. Burton. Yes.
How about the rest of you? We will start with you, and go
right down the line. What kind of an increase have you seen in
the spending, as far as your transportation costs are per
month?
Mr. Hrobuchak. Currently, for the last 2 months, since fuel
came down 50 cents a gallon, it is approximately up 52 percent.
But at one time it was up 125 percent in comparison to this
time last year.
Mr. Burton. And then when you have that kind of an increase
and it starts biting into your profits, do you have to consider
laying off people and that sort of thing?
Mr. Hrobuchak. Well, no, I have been in the business long
enough. We aggressively pursue surcharges, like he was saying.
So our customers, we pursue surcharges several percent, which
does not nearly accommodate our fuel costs. But what we do is
redirect our trucks in different fashions, to where we can
compensate and make money in other areas, something that we
don't specialize in doing. We just figure out the math in
different areas.
Mr. Burton. So you eat part of the costs yourself, and the
rest you try to pass on to your consumers.
Mr. Hrobuchak. Right.
Mr. Burton. Let us say, for instance, it was a person that
used flour and you were transporting that, and they were making
bread, the cost of bread naturally would go up, and it would be
passed on to the consumer.
Mr. Hrobuchak. Right.
Mr. Burton. So they can only eat part of the loss
themselves and the rest is borne through inflationary trends in
the country.
Mr. Hrobuchak. Well, out of the 50-percent increase in
costs, they would be paying roughly 7 percent of that.
Mr. Burton. How about you?
Mr. Bailey. I am going to address that in two ways: First,
in my home, right now we are experiencing about a $200-per-
month increase in fuel use compared to last year, which, you
know, your house payment, your utilities, those things are set.
You can't change that. So, basically, you take away from
necessities, as far as groceries or any sort of entertainment
or anything like that you might do with the children.
And the other I wanted to address it is I notice this at my
work. We use on the average of 3,500 gallons of gas per month.
The National Electrical Contractors national average is 1.8-
percent profit before taxes, after all expenses. So when you're
talking on an average of $4,000 more per month and you have to
recoup that at 1.8 percent before taxes, that is an awful lot
more work that you have to get and make a profit on just to
recoup that small amount of money.
Mr. Burton. Ms. Oberweis.
Ms. Oberweis. It has cost us about $15,000 a month, and if
you annualize that out in terms of our net income, that
represents about 16 percent of our 1999 net. So that is, for
us, a huge number.
Mr. Burton. Mr. Wilson.
Mr. Wilson. My list is a little bit longer than just
gasoline or diesel fuel. In addition to diesel fuel, which is
the No. 1 way that I power my equipment, I also use gasoline in
trucks, and sprayers and things like that. I also use liquid
propane [LP], a natural gas product, which has gone up about 30
percent so far. Also, which I mentioned earlier in my
testimony, anhydrous ammonia is up about $50 a ton, also a
product of natural gas. And DAP, a dry fertilizer that contains
nitrogen, is up about $15 a ton. I have a feeling that that is
going to go substantially higher.
What I have seen is the energies follow each other. And as
we have seen higher prices in one particular sector, the others
seem to follow. And so I am afraid that we are going to see,
going into the fall and winter season, a lot harder situation.
Mr. Burton. Thank you. Mr. Tierney.
Mr. Tierney. Thank you, Mr. Chairman, and I want to thank
the panel. In deference to trying to get to your statements, I
forewent an opening statement. So bear with me as I probably
talk a little more than I question at the moment.
It took some pains to listen to what you said, and I don't
dispute anything that any of you said in terms of the impact
that it is having on you. It is happening in our district. It
may be a little less extreme to what is happening in the
Midwest, but we also felt a similar impact with the home
heating fuel situation last winter and anticipate more problems
this winter.
But I looked through the CRS report, and I note that there
are five reasons for costs going up, according to them: One is
that 25 cents of the increase is allocated to the pipeline
difficulties. One pipeline had a leak and one pipeline went on
fire. Now, certainly the Government and the EPA didn't have
anything to do with those incidents, and those are costly. Yet
I don't see those industries taking any of the hit on that.
Neither of those pipelines and their owners are asking to lower
their prices or are taking a hit on their profits, but they are
the ones that caused 25 percent, either through bad operation
or bad maintenance or maybe it was just bad luck.
Forty-eight percent of it is because of supply. Crude oil
costs have increased because supply is down. Again, the
industry apparently did not do what they should have done in
anticipation of the situation we are in. Again, they are not
taking a hit on their profit margin. You all and everybody else
is taking a hit.
Two cents to 8 cents is on the EPA regulations, and
although I know it's fashionable among some to all want to pile
onto the EPA on this, I think Mr. Wilson has it right when he
says that, you know, 2 cents to 8 cents is not our problem
here. It may--and I guess we can talk a little about this, Mr.
Wilson, as to whether or not ethanol and the fact that it has
gone up, they say, 25 to 34 cents higher in certain areas like
Milwaukee and Chicago because they use ethanol as opposed to
MTBE or something else, and that's a local decision of the
refiners. It is not government, it's not the EPA that requires
that, it is the refiners. And, again, they are doing it to
appease the corn growers, and they are not taking any hit on
their profits or anything like that. They are passing it along
to all of you.
The last category, of course, then is the higher profits.
The fact that with the supply lower than it is and demand being
greater, they have jacked up their prices. They are having a
great time for themselves, and again they are not taking a hit,
they are passing it along to you.
So I go back to Mr. Hrobuchak's comment and Mr. Schneider's
comments, who said, ``Yeah, we need relief and we need it
now.'' Maybe one suggestion on that is that the States whose
taxes on gasoline are generally higher than the Federal
Government, and the Federal Government, each temporarily have a
moratorium on some of their taxes, and maybe we do something
about having the companies that are responsible take some
relief from some of the excess profits that they have got in an
interim basis, and we spread it around instead of trying to all
jump on the EPA for what amounts to about 2 to 8 cents. And
then we can focus on keeping our environment where it ought to
be and getting some relief here while the FCC--the FCC has some
impact in taking a look and investigating what is going on with
these companies that all of a sudden are making miraculous
profits from everybody else's misfortune, and apparently, their
ineptitude in a number of different areas.
Mr. Wilson, just before my time is up, let me ask you: do
you think the use of ethanol based gasoline is responsible for
the recent price increases in the Midwest?
Mr. Wilson. I don't think the production and the usage of
adding ethanol to the gasoline is at all in the fault. If I
were to speculate, and I guess let me clarify, as president of
the Illinois Corn Growers last year, this little farm boy from
Pike Township found himself in a lot of doorways I never
thought I would be, all the way from the White House to a lot
of these types of chambers, to the Chicago City Council, to
Springfield, to too many hallways in the EPA.
If I am going to speculate on the situation, we have a
situation that EPA could have been more responsive to earlier
on as they implemented phase II. And, the oil companies had
issues with supply and other things happening. However, let us
look at the situation we have. The Reformulated Gasoline
Program is a nationwide program. However, in almost every other
area, people are screaming to get rid of MTBE, the other oxygen
additive, because of groundwater contamination. In Chicago, we
have lowered carbon monoxide levels by 25 percent and we
haven't polluted 1 gallon of water. And guess what? It is not
an oil product.
Is there something going on here that means we have been
targeted? Is indeed there a problem that has been tried to turn
into an opportunity to break RFG's back? I am mad at the EPA. I
am mad at the oil companies, and there is probably some of you
on the panel I don't agree with either, because the bottom line
is, a lot of us, everyone sitting on this panel, is feeling the
pinch, and I think there is enough blame to go around. But
there is a situation here that, as I said earlier, something
smells in the barnyard.
Mr. Tierney. I think it coincides with remarks that I made.
I think we can point our finger at where some investigation
needs to be done. And, you know, the companies certainly should
have anticipated it. EPA should have anticipated it. The
companies should have anticipated it. And EPA doesn't control
the supply and what they keep on in their inventories, and that
is the point that I want to make clear. Those companies knew
damn well that they were going to have this situation. They
could have done it at a reasonable price. They had the time to
put that in here, and instead, they work around and try to jack
all of you up so you can all get mad at the EPA, when in fact,
they could have had the supplies on hand, they could have
prepared for this, and they could have moderated the prices
down on that, and they could have done a better job in a lot of
those areas.
So I want to thank you all for your testimony here today
and let you know that we should do something about this, but we
should not direct our attention and our anger in the wrong
direction, and we should understand that as much as this is a
free market out there, some people are taking extreme advantage
of this free market at your expense. Thank you.
Mr. Burton. Thank you, Mr. Tierney. Mr. Souder.
Mr. Souder. I thank the chairman, and I wanted to continue
a little bit with Mr. Wilson on the ethanol question.
You heard in the opening statement of our distinguished
ranking minority member, a direct attack on ethanol, which is
kind of a bipartisan southern California attack on ethanol,
because it is certainly happening on the Republican side as
well. And in the CRS report that we were given, part of its
argument is that the low volatility oxygenate blending is more
expensive because it is harder to manufacture. Do you know any
data on that, and is that true?
Mr. Wilson. Well, now you are getting past where a farmer's
knowledge is into the situation, although I do have a lot of
folks that have been helping and assisting keeping me informed.
From everything that I have been able to see and read, and
a lot of the same sources that you have had access to, I cannot
believe that the ethanol is the No. 1 issue. Could the EPA have
made some adjustments that would have made life easier for the
oil refineries? Absolutely. They brought phase II gasoline in
at the maximum level. We encourage them to look at ways--and as
a matter of fact, the Illinois delegation has offered
solutions. Illinois EPA Director Skinner has led with some
alternatives available. Those were refused. And so I think I am
back to the assessment that ethanol isn't the problem. The two
or three different choices of how to move forward with
implementing the next phase of the Clean Air Act has been the
problem.
Mr. Souder. It is important, if you can communicate too to
your association, that those of us who are strong supporters of
ethanol for both energy independence and the question of
environmental, and happen to also represent agricultural areas,
which I am sure is just happenstance. But it does. The energy
independence is ultimately one of our major goals. Those of us
who are conservatives are concerned that we haven't adequate
drilling in our country, that we haven't given adequate
incentives in addition to ethanol. And once you become
dependent, then you become vulnerable.
But as we move forward in the ethanol argument, we have to
be prepared to address this question. In other words, if--I
understood you to argue that the actual cost of ethanol is less
than the others, but if its blending adds above that, we kind
of need to know where that ultimate cost is, because to be able
to advocate on behalf of ethanol, that is going to be one
question of this, and part of my understanding from this would
be is, that is an argument that EPA should have factored in and
phased in if indeed there wasn't enough production capacity to
meet that. They could have even done a phase in. It doesn't
mean the policy was bad, because we are actually trying to
extend that policy, but it has to be a logical implementation
status, and we need to know what the cost is so it doesn't have
these big jumps and will set the whole ethanol campaign
backward.
The second thing is, as we start to look at this on a
broader scale, is how do we deal with questions of drought and
of the cyclical variations in the corn crop, because as we
become more dependent--could you kind of address that question
in a broader energy way, and what that could do to prices if we
become more dependent on ethanol?
Mr. Wilson. Well, I think what you have to look at is that
corn-based ethanol is what got us to the dance, but if we are
going to continue, we are going to have to look at biomass and
all types of other alternatives, whether it is methane-based or
other types of biomass ethanol, we need to look at gathering
more and more alternative sources. Alternative energy sources
have to be a component of the national energy policy, and I
firmly believe we need a national energy policy. If you refer
back to the 1970's when we were 35 percent dependent on foreign
oil, we are now over 50 percent dependent, and I am not going
to project how many years it will be, given the current course
we are running, to where we are going to be close to 60 percent
dependent. That is not good sense for any of us here.
Now, we can increase our domestic energy sources, and in my
testimony I talked about oil and coal and natural gas. Folks
that, at different times, we have been at each other's throats,
but the bottom line is we need renewables, we need to lessen
our foreign dependency, and we need to get on it now, because
we are on our second run, and I am afraid to think what will
happen to the next run.
Mr. Souder. And just as a matter of parochial interest,
which all of us politicians do, Ms. Oberweis, I do need to say
that I represent the largest ice cream factory in the United
States, Edy's, as well as No. 3, Good Humor, which is based out
of Huntington, Edy's out of Fort Wayne, and so I am sure your
ice cream is delicious, but we have delicious ice cream as
well.
Ms. Oberweis. It is good.
Mr. Burton. These commercials. Mr. Kanjorski.
Mr. Kanjorski. Thank you, Mr. Chairman.
The testimony I have heard so far allows us to jump to the
conclusion that EPA and their regulation is somewhat
responsible, and I think I agree with Mr. Wilson that is a
minimal amount. But in order to extract that from the problem,
I think, Mr. Hrobuchak, if you could tell a story of when we
first got together in January and February, EPA regulations at
the price of diesel and heating oil, had no effect on that, did
it?
Mr. Hrobuchak. Absolutely none at all.
Mr. Kanjorski. Tell this committee and the record what
happened in January and February, and how the companies spiked
the prices in the northeastern United States and New England.
Mr. Hrobuchak. The reason why I am here is because a
portion of my fleet runs up into the New England area. I do a
lot of local delivery. Well, that is a local, regional haul for
me. I do the West Coast. I do the southern. I do the Midwest. I
am subject to the prices in Chicago as well. And I would come
to work for--it is in my testimony--about a 10-day period, and
1 day I came to work, it was up 40 cents a gallon, diesel fuel,
and I just--over the course of 10 days it was up 78 percent. It
was actually at $2.25 a gallon, so that was actually a 125
percent increase. In New England it was as high as $3 a gallon.
I absolutely forbidded my trucks to buy fuel in New England,
and would not even go to New England. That is how bad the
crisis was. And it is more serious than you think.
I want to just say one more thing that I didn't say before.
An average driver that owns his own truck makes about $43,000 a
year, which is 35 cents a mile, OK? Since he is paying 50
percent more or 52 percent more in operating costs due to fuel,
that brings his yearly annual income down to $20,000, which is
16.8 cents a mile that man has to drive. OK? How do you support
a family on that type of money? And you know, once you are
accustomed to a lifestyle.
Mr. Kanjorski. Did we ever get an explanation from the oil
companies as to what happened in January and February and the
spikes of those prices?
Mr. Hrobuchak. I will tell you what, not one gas company,
not one fueling company, not one refinery, not one pipeline in
my area ever went dry or closed up or couldn't pump a gallon of
gas. And I kept track of prices starting in February on
forward.
Mr. Kanjorski. And I have made a request that FTC do a
study on that, and we are still awaiting the results in the
next several weeks, but that is 6 months later. Of course, they
indicated to me that they are overcome with the merger
examinations that are a priority to them and because of the cut
in finances, I dare say. And this isn't political, Mr.
Chairman. Because we have cut back the amount of money the FTC
has, they are not able to do the investigations with the speed
and accuracy that they would like to do.
But the other problem in your earlier testimony you gave,
and I am not sure the committee understood what you were
talking about, in that crisis in January and February, one of
your competitors had to drive his trucks to Kentucky to get
them fueled, because the people in Richmond, VA were shipping
their oil to New England so they could get $3 a gallon.
Mr. Hrobuchak. The oil parties that were responsible for
the Mid-Atlantic area at the time were pipelining their oil and
their fuel up into the New England area because it was such a
lucrative market. Therefore, the independent truck stops, where
the truckers go to fuel and take showers and stuff like that,
these companies had to send their trucks 300 or 400 miles away
to a different State in order to purchase fuel just to support
their truck stop.
Mr. Kanjorski. So, Mr. Chairman, the point I am trying to
make is that it isn't all or the EPA isn't completely removed
from some responsibility. We haven't had the testimony of the
oil and gas companies, and I think they are going to give us
answers for why they do this and how prices are used to make
profits, and that is our system, supply and demand driving the
price to wherever it can go.
The problem that I see exacerbated by all five witnesses
here today is that they seem to lean on the side of not
desiring the Federal Government to get involved in their lives
any more than they are. And I am just wondering whether or not
you have all given it some thought. If we don't do anything,
the market is setting what is happening in chicago and what
happened in New England in January. One of my colleagues said
we have the capacity to increase the supply or the capacity to
reduce the demand. And I don't know how that is done in the
United States with the economy as strong as it is, how we are
going to encourage people to drive less. We have a third
alternative. And that is we can discourage spiking, as some
people define as gouging, by making the oil companies pay a
windfall or excess profit tax. They don't have to go for the
$1.50 profit a gallon. But that takes governmental action. And
Mr. Schneider, I go to you because I listened to your
testimony. If you really don't want us involved, we probably
shouldn't have had you come all this distance, because the
government is not in the business of providing oil or
petroleum. We deregulated, to a large extent over the last 10,
15 years, what regulation and capacity we did have to affect
the marketplace. I don't think any of us want to assume it any
more. But I do have to be honest with you. We probably,
philosophically, disagree to an extent, but there is a role
sometime for government in our society, when individuals such
as yourself, or Mr. Bailey who has to spend $90 a week for
fuel, you have nowhere else to look, and if you say you don't
want government regulation and you want us totally off your
back and you want free market operation, then you are voting
for what happened in Chicago, and you are voting for what
happened in New England in January. And unless we find a
balance--and I think the answer is a balance, is Mr. Wilson's
answer--and you are talking about alternative fuels, new
supplies, more efficient cars.
I will point one thing out for the committee, Mr. Chairman.
I have been working in the fuel cell business for several years
now and encouraging that. It is a tremendous alternative. But,
you know, so that the committee is alert, and when it happens
we don't act like we were blind, deaf or dumb, the oil and
petroleum industry today in the United States is instrumentally
working very hard to be certain that the fuel used and the fuel
cell in this country is only a petroleum product so that they
will not lose their market or their profit.
And I think that is what Mr. Wilson was talking about. The
reason they spiked Chicago is they were going to do two things:
make more money, but discourage the ethanol use because they
don't control ethanol from corn. They wanted the gasoline to be
refrained with the product that they controlled and gained a
profit on. Is that what you were saying, Mr. Wilson?
Mr. Wilson. That is one of the scenarios that could be
painted, yes.
Mr. Burton. Thank you, Mr. Kanjorski.
Mr. Kanjorski. Mr. Chairman, just--I didn't make my formal
opening statement, so I ask unanimous consent that it be
entered in the record. I know Mr. Hrobuchak has a file that he
has prepared that is quite extensive, and I would ask unanimous
consent that his file be made part of the record.
Mr. Burton. Without objection, so ordered.
[The prepared statement of Hon. Paul E. Kanjorski follows:]
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Mr. Schneider. Mr. Chairman, if I could just respond to
what the Congressman was saying. I guess in your previous
remark, if I remember it correctly, I am here because I
advocate a free market economy, and I advocate the least amount
of government control as possible, and I make no bones about
that. That is why I am here, and I appreciate the chairman for
asking me to address you all.
All things being equal, your statement would be correct,
but if you are going to have a free market, and you are going
to have the market forces dictate price, it can be a one-sided
deal where you have government interfering in environmental
policy and regulations which affect from the top down, all the
way to the job or to the convenience store, or to the guy that
pumps the gas. All things being equal, yeah, you are probably
right, but we are not--the prices are--especially in Indiana,
when you have one county that is in the ozone non-attainment
area and one county that is not, and the prices are 30 cents
higher, there is only one explanation in my mind.
Mr. Kanjorski. No, no. And I am glad you brought it up.
There is another explanation. Mr. Schneider--and I think Mr.
Wilson may have referred to it. Look, we can pay now or we can
pay later. We can do away with any guide as to what kind of
gasoline or what kind of pollution pours into the air or goes
into our water. I happen to agree with my friend from Indiana
and his side, I think ethanol is a very smart choice to add to
gasoline instead of the chemical they are adding. The things I
am reading about the additive, we are going to have clean air,
but we are going to have awful damn dirty water, and spend a
fortune somewhere down the road when we start finding out how
many cancers get caused by whatever that pollutant will be in
the water.
So, you know, we are not magical. We use jurisdictional
lines that are false, but if you are living in a containment
area, and if we don't try to bring that into a reasonable
ability to breathe oxygen, we are going to pay the expense out
in medical care in the future, in limited capacity to produce
in the future, in all kinds of things that we can't even
estimate.
Mr. Burton. The gentleman's time has expired, and we could
get into a long discussion about this, and I might even be
tempted to get involved myself, but we will let that pass right
now.
Mr. LaTourette.
Mr. LaTourette. Mr. Chairman, I don't have any questions of
this panel other than to thank them for----
Mr. Burton. Would the gentleman yield to me for just a
second?
Mr. LaTourette. Be happy to yield.
Mr. Burton. One of the things that we have not talked about
and I mentioned in my opening statement was we have a 500-year
supply of natural gas, and with a attachment to our gas line at
home and a chance in our cars, we could fill up our cars right
out of our own gas line at night for about one-third the cost
of gasoline. The problem is we have a petroleum monopoly in
this country, and we ought to look at these alternative
sources. And I think Democrats and Republicans alike ought to
look at natural gas as a possibility of being used for motor
transportation in this country, because all of these people
right here, if they use natural gas, could cut their costs, all
things being equal, by probably at least half, and maybe more
than that. And so we need to look at natural gas an alternative
to the regular gasoline that we use.
Mr. LaTourette. If I can reclaim my time, then I am going
to yield it to Mrs. Morella. But when we were briefed by the
Energy Information Administration, they indicated that the
price of natural gas is going up, and one of the problems that
we are going to have is that now the refiners are going to have
to make a choice between RFG, regular gasoline, making
distillate fuels or building up stocks for the home heating oil
season, or we are going to have a repeat of exactly what we had
last summer that Mr. Hrobuchak was talking about again. And so
this is a big mess that needs a fix. I promised Mrs. Morella.
Mr. Burton. Before you yield, let me just say this: the
natural gas though has so few contaminants to the environment,
that you wouldn't run the risk of the things you are talking
about if we used that more.
Mr. Kanjorski. Mr. Chairman, could I add----
Mr. LaTourette. I promised Mrs. Morella. If she has a few
seconds, she can give it to my good friend from Pennsylvania.
Mrs. Morella. If the good friend from Pennsylvania only
needs maybe a half a minute?
Mr. Kanjorski. I think the chairman said something very
important that may make us more sensible----
Mrs. Morella. I yield to you, sir.
Mr. Kanjorski. I would like to join the chairman, and make
sure that the future fuels of America and the world are not
monopolized, and I think give these alternatives. And I think
you are coming close to the solutions, one of the solutions
that Mr. Wilson. So as a Democrat, I will join you, Mr. Burton.
Mrs. Morella. Splendid, and I thank Mr. LaTourette for
yielding time to me, because I really want to thank you for
being here. You have waited a long time, you have traveled a
distance. You all have personal experiences that you shared
with us.
Now, when you go back, you are probably going to be asked
about what happened in Congress with those members, what did
they ask you? What is it you want us to remember from what you
said? We want to learn from you. We are going to have the
Secretary of Energy appearing after you, and we are going to
have the EPA Director. Maybe something you want us to ask them,
or is there one thing you would like us as Members of Congress
to remember, and maybe we could do that kind of quickly,
starting with Mr. Schneider.
Mr. Schneider. Thank you very much. I did touch on this in
my opening statement, but if business--and I am sure Mr.
Kanjorski would disagree with me, but if business is given the
opportunity to operate without regulation and restriction, I
believe that you would see an economy that would boom even
faster than what it is now. And if there is one thing that I
could ask you to say, would be just to ease off on the
regulations, give us an opportunity to freely exercise our
talents and make a profit, because there is nothing wrong with
profit and there is nothing wrong with a profit motive. Thank
you.
Mrs. Morella. Thank you.
Mr. Hrobuchak. Thank you. I still want to make one point
very clear. I am concerned about jobs, and I am concerned about
my people and our State making money and then the United States
making money. And at the present rate, because of the fuel
situation, people cannot survive on a $20,000 income and work
80 hours a week. OK? And I just need to know that--or let Mr.
Richardson to know that people that were making 40,000 to
$43,000 last year are making $20,000 this year and still
working just as hard.
Mrs. Morella. That he should step up to it and do something
in terms of whether it is a concerted energy policy, strategic
petroleum reserve, OPEC nations responding, laying off
regulations. Have you, your employees, been able to see any
significant benefits at the pump from the recent decrease in
wholesale gasoline prices over the past week?
Mr. Hrobuchak. No. Our costs are still up 52 percent. Like
I said, they were up 125 percent initially in January, and you
know, I don't care if Mr. Richardson pulls it out of his hat.
You know, we need to get the oil from somewhere, because
without the trucking industry in America, a lot of things won't
happen in this country, and that is, No. 1, putting food on our
tables, and that is what I do best.
Mrs. Morella. Thank you. Mr. Bailey.
Mr. Bailey. Just need to remember that this fuel cost is
affecting the foundation of America, and that is us citizens,
and for every person out there like myself and my family, there
is 1,000 more that aren't speaking up, that maybe you are not
hearing, but we are, and that just goes to show by the contacts
that I have had----
Mrs. Morella. That something needs to be done is what you
are saying.
Mr. Bailey. Absolutely.
Mrs. Morella. Ms. Oberweis.
Ms. Oberweis. I am very intrigued by a lot of the long-
range thoughts and ideas that have been shared in terms of
alternative fuels, but I think that what we are dealing with
right now is a crisis, and a crisis doesn't need a long-term
solution, it needs a solution immediately.
The one thing that I guess I would like to have you go away
with is if there is an implementation of any sort of program
that causes total chaos, back off. Allow the chaos to settle
down. You can reimplement at a later date. But when I see an
implementation, and from my view the EPA's implementation has
affected gas prices, that has contributed certainly to total
chaos, and we can't control--government can't control the oil
industry, but they certainly can control our own organizations,
and that is when I would ask back off, allow it to settle, and
then let us look at it again.
Mrs. Morella. And finally Mr. Wilson.
Mr. Wilson. A couple of points. One thing that I would like
to point out, when I said 5 to 8 cents more for using ethanol-
blended reformulated gasoline, that includes the ethanol
component. So that does not, in my mind, add to the other cost.
We talk about the RFG program. I live in a nonattainment
area. Yet as I look at my gasoline prices for bulk delivery,
I'm looking at $1.95 for unleaded, I am looking at $1.94 for
unleaded with ethanol, and I am looking at $2.09 delivered to
my farm for premium gasoline. I already talked to you about the
rise we have seen in diesel fuel prices. RFG is what is taking
the brunt because that is where it seems to be the most out of
whack, and indeed it is.
There is a bigger issue here, and the gentleman from
Pennsylvania and Ohio said that they did not share the same
problems, but yet they suffer the same situation. And so I
think we need to look long and hard at what is going on. I am
tired, not only from the fuel and energy crisis, I am tired
from regulatory efforts that I am polluting the water, and
other issues I can't even begin to go into. It seems like we
farmers have been under attack for a long time. The bottom line
is we produce food, we produce energy, we produce it better and
cheaper than anyone else in the world. We have been able to
lower your share of what you spend on food from 17 percent down
to about 12 percent.
And quite honestly, I am getting tired of getting kicked
around on every issue that comes up. That something we produce
is renewable, and positive and helpful to this economy--in
Illinois, where agriculture is our No. 1 industry, and I think
that everyone needs to stop and think about what is happening.
It should not be taken for granted because if you want it grown
in South America, if you want it grown in the European Union,
you are not too many steps away from taking a lot more farmers
out with situations like this.
Mrs. Morella. Thank you, Mr. Wilson; thank you, panel;
thank you Mr. LaTourette; thank you, Mr. Chairman. It was an
excess of time I took.
Mr. Burton. That is all right. Thank you.
Ms. Schakowsky.
Ms. Schakowsky. Thank you, Mr. Chairman. I really want to
thank the panel very much, the Illinois representatives. I
appreciate it. Mr. Wilson, I really appreciate your testimony,
the contributions that your products have made to helping clean
our air, and hopefully the rest of the Nation as well.
I welcome the suggestion of the chairman, that Democrats
and Republicans work together to find alternative fuels that
can provide a reliable source of energy, and hopefully cleaner
energy. And we would just like to point out to Mr. Schneider
that that kind of suggestion is the kind of ways that
Government can work in a very positive way. I am really
disturbed by that image of yours of having to drag along the
business, and enterprise has to drag along Government
regulations. And I am sure that there are some things in your
business that Government has provided that actually help you, I
am sure, if you looked hard enough, even the roads that you
drive on.
I, also, just wanted to tell you, as the mother of a son
that has had breathing problems, I really appreciate
regulations that help him breathe easier, and just as an aside,
the oil companies have opposed waiving the phase 2 regulations
at this point and feel that it would add to the chaos, if that
is even an appropriate word; that it would make things more
difficult if, at this point, the phase 2 regulations were
lifted.
But most of all, I just want to thank you for your
testimony, your contribution to this debate and for coming here
today and being so patient.
Thank you.
Mr. Burton. Thank you, Ms. Schakowsky.
Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman. I have a statement I
would like to have entered in the record.
Mr. Burton. Without objection, so ordered.
Mr. Walden. Mr. Wilson, I wanted to followup on something
you said. I come from a very rural agrarian district out in
Oregon. Our gas prices in the West Coast did this blip months
ahead of the rest of the country, and we have had serious
concerns. But the comment I wanted to followup earlier today, I
was in a hearing involving the EPA and USDA on TMDLs, which I
know are certainly an issue that farmers must be facing, and I
am sympathetic to the, as a small business owner myself,
problems that we face from overzealous regulation. It is not
common-sense regulation, it is the overzealous regulation I
think you were referring to, wasn't it?
Mr. Wilson. Yes. If you look at my bio, I have a very
diverse background. I have been involved in environmental
projects. I am currently the president of the Illinois Council
on Best Management Practices. I have been involved in the
Mackinaw River projects, Vermillion River project and other
instances.
I am the first point--my family is the first point of
exposure to what I do on my farm. I do not want to contaminate
anyone. However, there is a balance between environmental
concern and economic understanding. And I think the old saying,
I had a friend that said a pendulum never stops in the middle,
it swings from one extreme to the other. And I think part of
what has caused some of our problems is the pendulum swinging
to where we have lost the ability to do more with domestic
energy. And I think that goes ways, from the development of
renewables to further implementing more of the energy that we
have available to us, that perhaps hasn't been as readily
available as it could have been. We have been willing to move
it to other countries, and we have been willing to subsidize
that dependency, both in dollars and in lives to defend an area
that supplies us a lot of our energy.
Mr. Walden. As we meet here today, there is a forum going
on elsewhere in this very building on renewable energy
alternatives that are out there.
Congressman Mark Udall and I chair the Renewable Energy
Caucus. And I think what we need to do is make these renewable
energy opportunities, whether it is wind or geothermal or
natural gas or, well, the other ones, the fuel cells, things of
that nature far more a part of a comprehensive energy plan for
this country. And it seems like I think we all share a little
blame in getting complacent in between energy crises. We kind
of get over the hump, the prices go down, we think we have
resolved it. And it is unfortunate that we wait until we are
all caught in a squeeze again, where family budgets are
dramatically impacted, small businesses are hit hard, farmers
and ranchers are really crunched, before we take a look at a
comprehensive policy.
I know the Secretary of Energy even said, is quoted as
saying the administration has been asleep at the wheel on this
one. And I am not being critical of him. I think he is right.
But I think perhaps we all share in that, to the extent that we
can have a positive step forward here to say, ``OK. How do we
deal with the emergency that is before us, as it affects our
economy?'' I think we need to be much tougher on the OPEC
nations if we are going to spill blood to defend some of them.
I think we need to figure out why we are unable to use the WTO
process to get at price fixing. That is what they do, and that
is not right.
So I appreciate all of your testimony, and I am very
sympathetic with what you have brought with us today, and
hopefully we can be of help.
Thank you, Mr. Chairman.
Mr. Burton. Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman. I, too, would like
to thank everyone for their testimony. It is a lot longer panel
or questioning than we thought because you have such
interesting testimony.
I would like to ask just one question of Mr. Wilson. And I
know ethanol is so important to the State of Illinois. In fact,
I think it is about 15 percent of our corn production goes to
ethanol, and certainly that has been very important. But I am
concerned about something that you said. It made it seem like
ethanol, the reformulated phase 2, was a question of just 5 to
8 cents, and that is an estimate by the EPA.
But the CRS Report, which is really a bipartisan study, it
is an independent study, says that it can be roughly estimated
that about 48 percent of the current price is due to the higher
crude oil costs in the region of Chicago-Milwaukee. Another 25
cents of the regional cost is due to transportation
difficulties, and that was the breakdown of a couple of the
pipelines, the cost of actually putting a reformulated gas into
the pipeline because of the difference. You know, in Illinois,
we have 12 or 16 different types of gasoline coming to
different areas, four zones where there are different costs.
And then another 25 cents could be due to the unique RFG
situation.
I don't think, and I would like to know if you agree with
me, but that the cost of ethanol is not the problem. It is the
cost of the uniqueness of the blend that we have to put in
because of the RFG phase 2. It is much more costly. And there
is also a patent from Unocal that really can make most of that
gas, and a lot of the refiners would like to go around that
patent so that they have to make a very expensive blend.
So I don't know. I would hate to have it just that it is 5
to 8 cents, when somebody else has said that it is 25 cents.
And I think that we have asked, the Illinois delegation, has
asked the EPA to really take a look at this and then report
back to us by yesterday. And we have not heard anything back
from them, and so I intend to ask them about that today.
Mr. Wilson. One thing I would point out about the report, I
have read it as well, in the beginning of their report they
talk about that this is an estimation. They did not have time
to study the problem and do analysis. In the past year, I have
talked with USDA, Department of Energy, the U.S. EPA and others
along that line. They have taken more time to do an analysis. I
would tend to feel that their analysis is a little bit more
accurate than the analysis done here. I am not discrediting
those folks. There are problems in how the prices have spiked.
But if I go on the basis of who has had time to analyze it,
because a lot of these agencies have been looking at the
problem for over a year, they perhaps maybe have a better
handle, and as you are very much aware, as is the rest of the
Illinois delegation. We have all been at their doorstep.
Mrs. Biggert. Well, we have asked them for a year, and
actually had a hearing in Springfield last year to request that
this be done. And the Illinois EPA actually recommended that
study. So I am not sure that that study has been done.
Mr. Wilson. Right.
Mrs. Biggert. And that is why we recommended that there
either be the waiver, because they had not come up with whether
we could have a carbon monoxide credit, which then would have
solved some of this problem and not had that definite spike on
June 1st. But I just wanted to clarify that.
Mr. Wilson. In my opinion, EPA knew they were taking a risk
by pushing the way that they did. The oil companies knew they
had a problem, but they also were taking a risk. I used the
analogy over a year ago in March, they are rolling the dice
with our economic future and----
Mrs. Biggert. Well, how could the refineries make that
product until June 1st, when they had to, since it is more
expensive to do? Wouldn't they want to keep the RFG phase 1
until June 1st, and then they have to provide for it. But to do
it ahead of time and store it I don't think was a good idea.
Mr. Wilson. I think there have been supply issues. I think
the pipeline has added dramatically to that. I flew out of St.
Louis this morning. When I drove into town last night, that is
an RFG city, it was $1.54.
Mrs. Biggert. And that is because they have had a waiver
from the EPA.
Mr. Wilson. I think the waiver expired June 12th, unless it
was extended, though. I think there is a knot in the system,
and I am hoping that supplies will improve. The last thing I
will reiterate is that the reformulated gasoline program has
helped improve air quality, and it has done it in a way that
has not been dramatically costly until now.
Mrs. Biggert. Absolutely. It is has been very good for
Illinois.
Mr. Wilson. And I think there are several ways to look at a
problem.
Mrs. Biggert. Thank you.
Thank you, Mr. Chairman.
Mr. Burton. Well, as you can hear from all of these buzzes,
that we have at least one vote, and probably a series of votes,
on the floor. I don't believe, Mrs. Maloney, do you have any
other questions or anything?
Mrs. Maloney. No, I don't.
Mr. Burton. We are going to go vote right now. And then
when we return, after the series of votes, we will go with our
second panel.
I want to thank all of you very much. You have put a human
face on the problems, and I can assure you that we are going to
do everything we can to help resolve them. Thank you very much.
We stand in recess until the fall of the gavel.
[Recess.]
Mr. Burton. The committee will reconvene. And if we could
get our guests to come to the table, we will try to get
started.
Here is the way we are going to work this because of the
time constraints. The guests, witnesses will be sworn. Then we
will go, according to the rules that were established earlier
today, the majority has 30 minutes on our side.
Mrs. Biggert will be recognized for 10 minutes, then Mr.
Ryan will be recognized for 10 minutes, and then Mr. LaTourette
will be recognized for 10 minutes, and then we will go to the
minority. And we may be able to expedite this in a quick way if
we get to the questions and get them answered.
So with that, would the three of you please stand and raise
your right hands.
[Witnesses sworn.]
STATEMENTS OF BILL RICHARDSON, SECRETARY, DEPARTMENT OF ENERGY;
CAROL BROWNER, ADMINISTRATOR, ENVIRONMENTAL PROTECTION AGENCY;
AND ROBERT PITOFSKY, CHAIRMAN, FEDERAL TRADE COMMISSION
Mr. Burton. Please be seated. And I ask unanimous consent
that your statements be submitted for the record. And I would
also like to ask you, if we send you written questions, if you
can respond to those if we don't get to them tonight. Thank
you.
[The prepared statements of Mr. Richardson, Ms. Browner and
Mr. Pitofsky follow:]
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Mr. Burton. Mrs. Biggert, you are recognized for 10
minutes.
Mrs. Biggert. Thank you, Mr. Chairman. I guess we probably
picked the worst day in the last month or something with this
commotion. So we are really sorry to keep you waiting and that
we don't really get to hear your testimony.
But first of all, I have a question for Mr. Pitofsky. The
FTC has launched a formal investigation into the retail prices
in Chicago and Milwaukee. And I am from Illinois, so I have a
lot of concern about what is happening in the nonattainment
area that I am in. So certainly the gasoline prices have
surpassed the $2-per-gallon.
Am I correct in understanding that your investigation will
focus on the allegations of collusion or price fixing involving
the oil and gas products?
Mr. Pitofsky. Yes.
Mrs. Biggert. And I also understand that the FTC's Bureau
of Competition already has been conducting a long-term probe
into price-fixing by California refiners.
Mr. Pitofsky. We have looked at California gas prices, yes.
Mrs. Biggert. What events instigated that probe in
California?
Mr. Pitofsky. In California, it really grew out of our
investigation of some mergers that had an impact on the West
Coast market.
Second, we were aware of the fact that prices on the West
Coast were higher at that time than in any other part of the
country. That's no longer true, but that was true at that time.
And then there were some----
Mrs. Biggert. Yes. I guess, we--excuse me. Go ahead.
Mr. Pitofsky. And then there were some practices that were
called to our attention that we thought deserved to be
examined.
Mrs. Biggert. What is the status of the California
investigation?
Mr. Pitofsky. It is ongoing.
Mrs. Biggert. Are there differences between that
investigation and the investigation that will be conducted in
the Midwest?
Mr. Pitofsky. I think so. The reason we are looking at the
Midwest is because of a very substantial sharp spike in prices.
That is a specific event that we are examining, and we will try
to find out why it is happening.
In California, or not just California, but the West Coast,
you have had a long-term elevated level of gasoline prices
that, in many ways, is more complicated and more difficult to
investigate.
Mrs. Biggert. How does your investigation then differ from
the EPA or the DOE or groups like the Congressional Research
Service?
Mr. Pitofsky. I think there's a great deal of overlap in
what we would examine, but we're doing it with compulsory
process, subpoenas, and we are focusing on whether or not a
possible explanation for this price spike is illegal behavior
under the antitrust laws.
Mrs. Biggert. Are you able to share information obtained in
your investigation with the EPA or with the DOE?
Mr. Pitofsky. Yes, we will be able to share information.
Mrs. Biggert. And are they sharing information with you?
Mr. Pitofsky. They certainly have been.
Mrs. Biggert. If there is evidence of price gouging or
collusion or if that was happening, why would an industry raise
such a dramatic amount rather than maybe saying 2 cents across
the Nation, which might go a little bit less unnoticed than 50
cents a gallon in the Midwest, which has caused such a
firestorm?
Mr. Pitofsky. I don't know why anyone would do that.
Mrs. Biggert. I hope you find out.
Mr. Pitofsky. And I hope we can find out promptly as well.
Mrs. Biggert. In your testimony, or in the record now that
you put into the record, you state that one of the possible
causes for high gas prices in Chicago-Milwaukee is that the
ethanol-based RFG use in those cities is supposedly the most
difficult to make.
Mr. Pitofsky. People have said that. I don't know that that
is true, but we will look at that question.
Mrs. Biggert. OK. So you haven't found that to be true or
gotten that far yet.
Mr. Pitofsky. We are very early in this investigation.
Mrs. Biggert. You said people have said that. What is the
source of that information?
Mr. Pitofsky. Mostly published reports from people who
speak for the industry have talked about the difficulty of
including this ingredient in the reformulated gasoline.
Mrs. Biggert. And then in St. Louis and Louisville, who
also use ethanol in the RFG, from what I understand, the prices
are not as high in those cities. How would you account for the
difference?
Mr. Pitofsky. Well, it's a very important aspect of any
investigation to compare one area to another. I am not going to
try to account for the difference today. What we are going to
ask is for the companies to try to help us understand why it
should be that prices are 30, 40, and 50 cents higher in
Chicago and Milwaukee and not in these other places.
Mrs. Biggert. How long do you expect your investigation to
take?
Mr. Pitofsky. I don't know. What I have committed to is an
interim report, a status report, before the end of July. I
doubt very much that in that short period of time, we can come
up with all of the answers to all of these questions. But we
will be able to report on what we found to that point. And I
think then we can perhaps make a commitment as to how long the
investigation will take.
Mrs. Biggert. Well, so much of the concern in the Chicago-
Milwaukee area is immediate. Will your investigation be able to
address these problems and have then a long-lasting impact on
the current price of gasoline?
Mr. Pitofsky. Let me repeat what I have said to several
delegations. Antitrust is not a quick fix. We don't have the
authority to roll back prices. We don't have the authority to
take steps that would immediately adjust these problems. We
will investigate, we will try to do it in a thorough, fair and
objective way. I don't think--well, you know, one consequence
of the investigation is, perhaps coincidentally, prices have
begun to come down. I am not saying that's the reason.
But as far as a final judgment as to why this is happening,
which is what we're about, we're going to do it thoroughly, and
carefully. I realize people want an answer quickly. But I think
a rush to judgment on an issue as complicated as this would not
be a good idea.
Mrs. Biggert. Thank you.
Ms. Browner, have you formally denied the Illinois and
Wisconsin waivers from the RFG program?
Ms. Browner. We have not made any decision on the waiver
requests. There are two different requests, as I am sure you
are aware. Your Governor has requested that you go back to the
phase I RFG Program. There is none of that currently being
produced. Governor Thompson has asked to go to conventional
gasoline. We have left all options on the table. As I shared
with you in the Illinois delegation meeting, there are concerns
at this point in time that you could cause disruptions in the
conventional gas market.
And while we are seeing the wholesale price, very dramatic
drop in wholesale price in Chicago and Milwaukee in the cleaner
gasoline, I think the real question right now is. why is it not
being immediately passed on to the consumers, and that is
certainly the question that we think the oil companies should
answer, and that is why we welcome the FTC investigation.
Mrs. Biggert. Twenty members of the Illinois delegation
sent you a letter at the beginning of--I think it was June 6th,
and we requested a response from you by June 27th, and that was
yesterday.
Ms. Browner. OK.
Mrs. Biggert. And I have still not seen your response to
the Illinois delegation. This was about the situation in
Illinois. And I would like to know why the EPA formally has not
responded to the----
Ms. Browner. We will certainly get you a response, and I
apologize if we have been tardy. We will certainly get you a
response. You are entitled to a response, absolutely.
Mrs. Biggert. And you have an answer for the questions that
we have asked?
Ms. Browner. We will answer your questions to the best of
our ability.
Mrs. Biggert. OK. Just to go back to the waivers and the
tax credit, which I think is--I'm sorry--the credit came from
taxes.
Ms. Browner. OK.
Mrs. Biggert. The role of ethanol in the phase II and work
on the carbon monoxide credit, you know, the Illinois
delegation did have meetings and has been concerned for the
past year that the new regulations would severely impact the
price of gasoline in Illinois. When did you start looking into
this situation?
Ms. Browner. Well, the issue of the carbon monoxide credit
or the RVP, the read-vapor pressure adjustment, is something
that we--as I think you are well aware--have been working on
for a while. The National Academy of Sciences has also looked
at the issue. As far as your own State environmental agency has
provided us with several proposals and thoughts on it. We have
always indicated that we would make a proposal on a read-vapor
pressure adjustment, RVP adjustment, once we have been able to
take into account all of that information. Illinois'
information did come in somewhat later in the process in the
National Academy of Sciences, but here I think that the point
that I would ask you to be aware of, within the next several
days, certainly by early next week, we will issue that
proposal. We will then begin a public comment period. No one
has ever suggested that an adjustment in this pressure, given
the constituencies of ethanol would have a price impact beyond
a penny. It may not even be that much, but we certainly
recognize that ethanol brings with it environmental benefit
that does have a lower toxic, that has lower carbon monoxide,
and therefore, that some amount of adjustment to the read-vapor
pressure may be appropriate, and we do intend to issue a
proposal in the next several days and take comment on that.
Mr. Burton. Mrs. Biggert, can we come back to you?
Mrs. Biggert. Yes.
Mr. Burton. We need to yield to Mr. LaTourette now for his
10 minutes.
Mrs. Biggert. Thank you.
Mr. LaTourette. Thank you, Mr. Chairman.
Chairman Pitofsky, if I could start with you for a few
minutes, there has been a good deal of discussion about how it
is that this antitrust, anti-competitive pricing thing came to
your attention. Do you recall who it is that first requested
that you look into the issue of price gouging relative to the
major oil companies in the United States and the Midwest?
Mr. Pitofsky. It first came to our attention because we
read the newspaper just like everybody else, and we see what is
going on. My recollection is that the first request for an
investigation came from Chairman Hyde.
Mr. LaTourette. And was that also Mr. Sensenbrenner, was he
associated with that as well?
Mr. Pitofsky. Yes, it was a joint request.
Mr. LaTourette. And that would have been maybe 3 weeks ago
Friday more or less?
Mr. Pitofsky. It would have been, yes, the 7th of this
month, as I recall.
Mr. LaTourette. OK. Now, as you go down the path of
collecting information and determining whether or not there is
gouging or a violation of the antitrust laws, would you maybe
just enlighten the committee in terms of what the difference is
in terms of your understanding between price gouging and
perhaps a company taking advantage of a supply and demand
situation?
Mr. Pitofsky. Yes, I would like to do that, because
actually, we bypassed that issue several times during the day.
Conspiracy, agreement, collusion, to fix prices or curtain
output is illegal behavior. It is a violation of the antitrust
laws, and it opens up companies to all sorts of fairly tough
remedies. Price gouging, as to which there is really no precise
definition of it in the law, but I take it to mean taking
advantage, being opportunistic, perhaps overreaching on behalf
of the seller. That may be very unattractive behavior, but I do
not take that to be a violation of law. I do think, however, in
a situation like this, that people who are paying these higher
prices have a right to know whether or not there is either
collusion or price gouging, and we will look into both.
Mr. LaTourette. I agree with you, and I made the
observation--you weren't here during my opening remarks--you
may find price gouging, but we couldn't figure out in Ohio how
come our prices went up, and we don't have this RFG-2
requirement, and the speculation is that the people that are in
the oil business could sell it for $2.20 in Chicago and $1.60
in Ohio, and they took it all to Chicago because they could
make 60 cents more per gallon. And I guess that some people
call it the American way, some people would call it something
else I suppose.
Secretary Richardson, welcome to you. We had a briefing,
the Ohio delegation, from the Energy Information
Administration, which is part of your department, and I want to
commend you on their work, and you should give them all a
raise, because they really did a great job of bringing a number
of us up to speed on what to many of us was a foreign issue.
But I would like to ask you and Administrator Browner a
couple questions about two situations in the Midwest, St.
Louis, and then the Chicago/Wisconsin situation. And it is my
understanding--and Madam Administrator, I will start with you--
that I think you have testified before that perhaps you don't
have the ability to offer a waiver of the Clean Air Act, but
you do have the ability to offer enforcement discretion on a
limited basis.
Ms. Browner. No, actually, the rules that were adopted in
1993 as part of the Reformulated Gas Program, the negotiated
rulemaking, does include provisions for a waiver. It lays out
standards for a waiver.
Mr. LaTourette. It is my understanding that you didn't
grant a waiver for St. Louis; you granted something called
enforcement discretion relief though; is that right?
Ms. Browner. I am happy to explain what we did in St. Louis
if you would like.
Mr. LaTourette. I would be happy to hear it.
Ms. Browner. The situation in St. Louis arose when they
had, I think, three of their six tanks or terminals that supply
the city, literally go empty. And in essence, what we did there
was allow them to delay the start of the program, of the clean
gas program, I think by 5 or 6 days. The mechanism we used,
because it is, for that particular situation, being the best,
was enforcement discretion. That was because the pipeline that
serves St. Louis had had a problem in it. St. Louis gets about
70 percent of their fuel from that pipeline. Chicago, Milwaukee
get something like 15 to 17 percent of their fuel from the
pipeline. It is a very, very different situation. But we do
have both enforcement discretion, and we do lay out in the
rules a waiver provision.
Mr. LaTourette. That was my understanding, and in the St.
Louis situation there was a pipeline difficulty with the
Explorer Pipeline, one. But, two, I also understood that your
agency relied on Secretary Richardson's agency to determine
what gas stocks and inventories might be available in an area
based upon what was going on with pipelines and other factors.
Is that also accurate?
Ms. Browner. We looked both to the Department of Energy, we
worked with the State. I think--did we have inspectors in the
field? We do have inspectors that can visit these facilities.
We may have used our own inspectors. We certainly have used
them in the Chicago/Milwaukee situation. I would be happy to
explain to you all of the resources we used in making that
decision.
Mr. LaTourette. Whatever resources were used though, a
decision was made that there was going to be a problem in St.
Louis about April 1st, I guess, was the date that things were
supposed to kick in, and for whatever reasons, due to low
supply and pipeline problems, this enforcement discretion
relief was granted on a short basis; is that fair?
Ms. Browner. That is correct. I think it was--again, it
delayed the startup of the clean gasoline program by, I think--
was it 5 days--6 days, while they could address the pipeline
problems and other issues. We never had this situation in
Chicago or Milwaukee. We didn't have tanks going dry the way we
did in St. Louis.
Mr. LaTourette. Oh, that is correct, but what we did have
in other parts of the Midwest, I think--and I am referring to a
memorandum written to the Secretary, Secretary Richardson, on
June 5th from Melanie Kenderdein, I guess, that talks about the
situation that existed in terms of low inventories, and also
the EIA, when they came to talk to us, I think said that they
were at 15-year lows, the lowest since 1981. Is that your
recollection, Mr. Secretary?
Mr. Richardson. Yes, Congressman. We found that there could
be physical shortages at a number of RFG terminals in St.
Louis, and as you know, Congressman--and thank you for the
compliment about the Energy Information Agency. They are
sitting right here. They're all chuckling. I will consider
giving them a raise.
But I will, for the record, state they're a statistical
independent agency at the Department of Energy. They don't
always predict what I want them to. What we do, Congressman, is
we do supply assessments. We provide that to EPA. And did you
want me to say anything more?
Mr. LaTourette. Well, that was my understanding, that you
do give them supply assessments, and you were asked to give, or
you gave a supply assessment for Chicago/Milwaukee as well, did
you not?
Mr. Richardson. Right, right. And what we found,
Congressman, is that in the Midwest, crude oil prices,
obviously remain high. That is a factor. There is higher demand
in the Midwest than the national average, 3 percent compared to
1.6 percent. Inventories, gasoline inventories in the Midwest
were low going into the summer driving season, about 15 percent
lower than last year, and RFG-2 was introduced--this is
ethanol, not the MTBE--was introduced into the Milwaukee/
Chicago market. And then you had the pipeline problem, the
Explorer Pipeline, in the Chicago/Milwaukee area, we estimated
it affected about 6 million barrels.
What we then did, is because we had all these factors, and
you still couldn't explain the 40-cent differential, that's
when Administrator Browner and I, like several Members of
Congress and yourself, sent a letter to the chairman here to
look at the rationale why there is such a broad and large price
differential.
Mr. LaTourette. All right. I think I am going back, before
we ask Mr. Pitofsky to jump in, and I guess what I'm trying to
get at, is I believe from what I've reviewed, and talking to
the EIA, talking to the refiners, that there were some warning
signs, that because the price was jacked up by the OPEC
countries, because we had a pipeline problem--we also had a
problem with the Wolverine Pipeline later on--because of the
tolerances where some refineries have now gone from 8 blends of
gasoline to 16 to 18 blends of gasoline, that it was sort of
ripe for a problem not only in St. Louis, but also in Chicago
and Milwaukee. And I'm wondering why in the days leading up to
June 1st, which sort of is the trigger date for the new
requirements, that there wasn't the same consideration given to
Chicago and Milwaukee as there was to Wisconsin? And because,
again, your excellent folks at the EIA, who I hope do get the
raise, indicated to us that the area--and I'm talking now about
the area of Chicago and Milwaukee--is functioning with no room
for error, and basically indicating that if one more bad thing
happens, you're going to have the whole market thrown into
chaos, and it does appear to me, at least, that the market was
thrown into chaos.
I gave a speech in Cleveland, and you know, I'm not an EPA
basher, and I said, you know, my information is that this RFG
program maybe adds 5 to 8 cents--and you may disagree with
that, Madam Administrator--and in the summer driving season,
historically we've gone up 3\1/2\ cents, 4 cents a gallon
because there's greater demand. So none of those things explain
what happened. But what I think can partially be led to explain
is that we had historically low inventories, we had some
changes coming in, EPA changes, supply difficulties, and so
forth and so on, and maybe Energy, maybe EPA, maybe the oil
companies, maybe everybody could have done a better job than we
did in the Midwest, and we've all contributed to the problem
that has now jacked up the oil prices. And if anybody disagrees
or agrees, I'd be more than happy to let you say so.
Mr. Burton. The gentleman's 10 minutes has expired. If you
care to comment on what he just said, that would be fine. No
comments?
Mr. Ryan, you're recognized for 10 minutes.
Mr. Ryan. Thank you, Mr. Chairman. Glad we finally got to
this point. Thank you for waiting.
I suppose the three of you have probably been here all day
long, haven't you, going to different chairs? I appreciate you
spending all the time with us today.
I, unfortunately, just arrived, so I was unable to hear
your opening testimony, but----
Mr. Pitofsky. You didn't miss a thing. We didn't have any.
Ms. Browner. We didn't do it.
Mr. Ryan. Oh, you didn't do one, OK. Well, then let me just
go on----
Mr. Burton. Submitted for the record.
Mr. Ryan. Well, Mr. Chairman, I would like unanimous
consent to add my opening statement into the record as well.
Mr. Burton. Without objection, so ordered.
[The prepared statement of Hon. Paul Ryan follows:]
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Mr. Ryan. I represent southeastern Wisconsin. Half of the
district I represent is in the RFG area, half of the district I
represent is outside of the RFG area. Now, if you recall, Ms.
Browner, we sent you, myself, Mr. Sensenbrenner, Senator Kohl,
Senator Feingold, sent you a waiver request on May 23rd. On May
26th you responded, saying it would be denied.
Then, Secretary Richardson, we have a memo, which I believe
you were just talking about, dated June 5th, where you went
through--your agency went through and showed that there were
severe supply shocks that were occurring. Basically you went
through and outlined six factors that were basically a
convergence of factors, culminating in the fact that we had
supply shocks, we had a unique RFG blend, we had a Unocal
patent, we had a lot of problems specifically with respect to
the upper Midwest.
We then asked for another waiver from you, Ms. Browner,
which we were denied again.
Mr. Sensenbrenner asked the CRS to study whether or not the
RFG mandate itself was a part of the problem or why were we
having these price increases? The report basically concurred
with the DOE's analysis, a convergence of several factors. So I
don't think one can point a finger at just one source. I don't
think those of us in this aisle can point to the EPA and say
it's your fault. I don't think the EPA can point to the oil
producers and say it's their fault. I mean, that's what the FTC
is about to figure out. And I think for any of us to say with
certainty that it's because of price gouging is just
inaccurate, and that's what--you know, Mr. Pitofsky, that's
what your investigation will do, so I think it's foolhardy for
a member of the administration or a politician to suggest they
know that price gouging is occurring.
But there are some things we do know, and the things we do
know, because of the DOE's report, because of the CRS's report,
is that this RFG mandate in the upper Midwest, specifically in
the Milwaukee and Chicago area, has contributed, by the CRS's
estimate, 25 to 34 cents a gallon. Why, when you knew this, did
we not receive a waiver? And if the answer is we didn't receive
a waiver because there was a short supply of conventional gas
in the area, the short supply of conventional gas in the area
is because of the EPA's banning of conventional gas in the
area. So our constituents are really caught between a rock and
a hard place. They're looking for answer. I don't think putting
it off to saying it's price gouging and the FTC will confirm
this in 6 weeks, that's not good enough. We're in the middle of
the summer months. You know, we do a lot of driving at this
time. Our consumers in the Milwaukee area are paying something
like $2.30 a gallon of gas. It's gone down recently, but what
is the answer other than price gouging? And let me start with
you, Mr. Richardson, and, Ms. Browner, if I could go to you
then?
Mr. Richardson. Well, I think the assessment that we made--
and by the way, Melanie Kenderdein is right here--EPA and DOE
have sent teams to the area. The Administrator and I felt that
we needed people on the ground in your region and in the
Congressman's region to get firsthand assessments. And
basically they came back with a multiplicity of problems. You
mentioned the supply issue. There is the pipeline problem.
There is refinery problems, RFG coming into the market. There
were other factors.
Another thing, Congressman that really is out there, is
there is unusually high demand in the country, and it's the
driving season, the economy is in good shape, everybody is out
there spending money, and that's good. We also have, because of
the international situation, regrettably, a lot of low stocks,
low stocks of crude, low stocks of gasoline, both nationally
and internationally.
So I think what the Administrator and I felt after we got
our reports, is that nonetheless, despite all these factors,
why is there such a high differential, why 40 cents, why 38
cents if it costs 3 to 4 cents for RFG-2. And so I think this
compelled us to write Chairman Pitofsky to see--and the
explanations we were getting from the oil companies were not
adequate, and not, by the way, as eloquent as you two did, the
three of you. It was, well, it was just OPEC or some other
reason. So this is why we've asked for this probe.
Mr. Ryan. Well, Mr. Richardson, if I could mention, I
believe, Mr. Pitofsky, the original FTC investigation was
instigated by Chairman Henry Hyde and Jim Sensenbrenner on June
7th; is that correct?
Mr. Pitofsky. It was the first or one of the first requests
that we received.
Mr. Ryan. And then I believe the Wisconsin delegation
followed up, where we met in Senator Kohl's office, before the
two administration officials asked for that. But, Mr.
Richardson, what I'm getting at is it sounds like you already
knew these factors were out there. It sounds like you knew
there was something unique in the upper Midwest, and yet you
proceeded with this RFG mandate. And given that you knew these
factors were out there, that you knew something unique was in
the Midwest, we had a different blend, we used ethanol, we had
these problems--we knew we had an Explorer Pipeline problem, we
knew we had supply shocks, you still went ahead with the
mandate. Then we find out we're paying 40 cents more a gallon
of gas, and now we're pointing fingers and we're trying to get
the FTC to give us an answer in 6 weeks. Meanwhile, Wisconsin
and Illinois consumers pay an average of 40 cents more a gallon
of gas for the summer months.
Couldn't we have not placed the mandate, given the
information you had in your hands at the time, found out what
was going on, then worked on this mandate?
Ms. Browner, let me ask you to----
Ms. Browner. I'm happy to answer the question. I think that
it is important that there was broad support for the FTC
investigation.
Mr. Ryan. I support it as well.
Ms. Browner. One of the reasons that EPA and DOE asked for
it is that we did send our own investigators out into the
field, and based on the answers they came back with, based on
the evidence they came back with, we did not see an answer to
the question, and thus, we felt the FTC investigation was
warranted.
The second point I would like to make is that the issues
that are presented particularly to Chicago or Milwaukee or both
of them, while they certainly are issues in those areas, they
are not necessarily unique to those areas, so they don't
explain why you have a price spike in Chicago and Milwaukee.
The example I'll give you is that ethanol is used in St. Louis.
About 50 percent of the Louisville gasoline is an ethanol
blend, and yet you don't see the same kind of high prices. If
the problem is ethanol, if the problem is that putting ethanol
into cleaner gasoline is costing money, then you should see a
price differential in other areas that use it.
Second, if the problem is the Explorer Pipeline, then you
should see a price problem in other areas serviced by the
Explorer Pipeline. And I said this before you came in: St.
Louis gets 70 percent of its product from Explorer. I think
Milwaukee, Chicago----
Mr. Ryan. They received a waiver though, didn't they?
Ms. Browner. They were affected by the pipeline break. They
had three tanks go dry. They requested a delay in the startup
of the program. Congressman LaTourette and I discussed this
previously. It was an enforcement discretion. There are waiver
provisions.
But the point I would like to make is that all of the facts
and all of the issues that we have all been looking at, the
pipeline, the issue of is it more difficult to make ethanol-
blended gasoline--we don't believe it is, but some people have
put that on the table. When you take all of those issues
together, nothing has changed with respect to any of those
issues in the last month. In fact, nothing has changed with
respect to any of those issues in the last several months. And
yet, what you are suddenly seeing is a precipitous drop in
wholesale prices. You cannot point to why wholesale prices are
suddenly coming down, because none of--if those are the
reasons, if it's because of the pipeline, if it's because
ethanol is harder to use--I don't believe that--but if those
are the reasons, then why suddenly, with no change in the
recipe for ethanol, with no change in the pipeline capacity, do
you see a drop in price? And that's what we're asking the FTC
to look at.
Mr. Ryan. So you're suggesting that once Mr. Pitofsky got
started, prices went down?
Ms. Browner. I certainly think it is fair to note that on
the date that the FTC, which I think was the day after the
administration's letter, which followed after our investigation
and other letters, prices did drop. That is a fact. They did
begin dropping, and we can show you----
Mr. Ryan. Isn't it true that the spot price started
declining much sooner than that though? Didn't the spot price
start going down, I think, June 7, and between June 7 and June
21 it went down about 40, 45 cents?
Ms. Browner. The price that we have been----
Mr. Ryan. Before the FTC?
Ms. Browner. The price that we have been watching is the
price that is posted on OPIS, the Oil Price Information
Service. That is a privately owned service that monitors the
price of what the trucker pays when he or she pulls up to the
tank farm to put the product in their truck and drive it to the
pump. That is the price that is changing on a daily basis. That
is the price where the vast majority of this product is moved
around, and that is the wholesale price that we have been
referencing that has dropped now on the order of 40 cents a
gallon wholesale.
And it's not being passed onto the consumer, which I think
is a question we all have. Why is the consumer not getting the
benefit of this dramatic drop in wholesale prices? And why,
with no change in any factor--and you and I may disagree on all
the factors--but it is true there's been no change in any
external factor--did you suddenly see this rapid decline in
wholesale price. Those are questions we should all get an
answer to.
Mr. Burton. Excuse me. Mr. Ryan, our time has expired on
this side. We have to yield to the minority for their 30
minutes, and if you can, we'll have you back.
Mr. Ryan. Second round?
Mr. Burton. Yes, second around.
The minority, who is going to control your time on your
side? Will you control it?
Mr. Tierney. I'll control it.
Mr. Burton. Mr. Tierney, you're recognized for 30 minutes.
Mr. Tierney. Thank you. Thank you all for joining us today,
and for lasting through the delays.
I want to cover some of this ground quickly, and then move
on to some areas particular to my district, but if companies
fail to keep their inventories up--and Mr. LaTourette suggested
that the EPA and Department of Energy and the companies all
might take some, or might have taken some participatory action
on that, but to my knowledge, DOE doesn't have any authority to
force a company to keep its inventories up. Does it, Mr.
Secretary?
Mr. Richardson. No, that's correct.
Mr. Tierney. And the EPA doesn't have any authority to do
that.
Ms. Browner. No.
Mr. Tierney. So I don't know why we're here talking about
why everybody has to share the blame. If there's enough oil out
there, and they choose to keep their inventories down and then
create more of a demand so they can jack their prices up, why
should we share the blame with them? And you have a pipeline
problem, if in fact there were one, one was a fire and one was
a leak, Mr. Secretary, do you have any control over the
pipelines?
Mr. Richardson. No, it's the Secretary of Transportation,
and we wouldn't----
Mr. Tierney. But he wouldn't have any control either.
Mr. Richardson. Right.
Mr. Tierney. And neither the EPA. And so there they are,
that's either bad operation or bad maintenance. And of course,
it doesn't affect their bottom line, they're just going to pass
their costs along and get it, but they'd like to share the
blame with you.
And the last thing, I guess, is like if 2 cents to 8 cents
is what the EPA regulations were going to put in for the
gasoline on that situation, holding off on June 1st wasn't
going to make a hell of an impact on that, was it?
Ms. Browner. If I might just say something, this recipe for
cleaner gasoline was agreed to with the oil companies in 1993.
They had 7 years notice of what would be required.
Mr. Tierney. But even if putting that aside, and assuming
they're as bad there as they were with their inventories and
with their pipeline maintenance, it was a 2 to 8-cent increase,
and that was that.
Ms. Browner. Right.
Mr. Tierney. So then I think we're chasing around a lot of
phantom people around here, and we ought to think of where this
situation really lies as those prices go up and those
situations get created.
Mr. Secretary, can I just ask you a couple of questions
about home heating fuel? You know, we had experience last year
in New England with a low supply and high demand for home
heating fuels. And what's your anticipated forecast for this
coming winter?
Mr. Richardson. Well, we are concerned, Congressman, we are
very concerned about the supply situation, and this is why I
think it is so important, the leadership that many in this
committee have shown, you and Congressman Sanders, for the
Northeast heating oil reserve that we need, because what we
need to establish is a reserve that doesn't deal with prices,
that deals with emergency supply situations. What we are
looking at is 2 million barrels, have it ready in the event,
have a trigger similar to the Strategic Petroleum Reserve based
on emergency supply situation.
We are concerned with the level of natural gas, with home
heating oil. We are concerned that unless we prepare now, there
may be some emergencies that we will not be ready for. And we
don't want to repeat what happened last winter with the
unusually cold January and some transportation problems that we
had in your region, as you remember. The Coast Guard had to
come in. We don't want to have the situation where the truckers
and many others, the home heating oil operators, are in an
emergency situation.
Mr. Tierney. Well, we know Mr. Sanders had a bill to set up
that Petroleum Reserve, Strategic Petroleum Reserve for the
Northeast area, and it lost by two votes. But, fortunately, and
miraculously, I guess, there was a swivel of opinion on that,
and the other night it was passed with some pretty good
support. But we haven't funded it yet, and it is not on the
President's desk. So I ask you, assuming that it hasn't moved
at the speed we want it to move, do you have authority to do
that unilaterally?
Mr. Richardson. We need full authority--this is a whole
issue involving the entire Strategic Petroleum Reserve. The
House has passed, but it has languished still, the
authorization for me to have authority with the Strategic
Petroleum Reserve, my lawyers are telling me we need the full
authority. So I would just urge as a national priority that
every effort be made to pass that and to move it forward so we
have that authority to use in an emergency.
Mr. Tierney. So you are saying basically without the
legislative action, you are not going to have authority within
your own position to take action?
Mr. Richardson. Well, you know, you don't want to make a
conclusion like that, but certainly we need the full authority,
Congressman, for a variety of activities regarding the
Strategic Petroleum Reserve. I was able--my lawyers said to me
that I could use it--I used it last week--a swap. There was a
dry dock problem in Louisiana, and we were able to exchange
some Strategic Petroleum Reserve oil with Citgo and other
companies, 500,000 barrels. This was an emergency. We had the
authority to move ahead.
But it is just very murky, and I would urge you, whatever
it takes, to get that authority fully passed. It should be
bipartisan, but it is somehow held up. I think it is just part
of the delays.
Mr. Tierney. I am going to ask you something that is the
flip side. On the one hand, we have people in their homes who
probably ought to know that they might be able to get a fixed-
price contract with their deliverers. Is there anything that
the Department is doing to give people that knowledge that that
might be an option for them, to at least help some people cap
what might be escalating prices?
Mr. Richardson. Well, we think that these fixed prices
protect consumers, and we have what are called consumer-
friendly information that we disseminate to consumers that we
do have. Through the Energy Information Administration, which
has been praised roundly by this committee, we are able to make
some of these forecasts, and through their public information
system, their Web sites, they can forecast energy supplies that
help consumers make good fuel purchase decisions.
Mr. Tierney. On the flip side of that, I have my dealers,
my folks that go out and deliver, and their concern is that the
companies are trying to lock them into some pretty significant
fixed-price contracts, and their concern is that those prices
might go down--they have two concerns: one is that there won't
be anything for them to deliver, and the other is that if they
set into a fixed price now and prices go down, they are going
to have unreasonably high costs.
Can you give them any comfort on the first?
Mr. Richardson. Well, I think your small home heating oil
operators should contact us, because I think we'd be ready to
work with them on how we can provide more consumer-friendly,
small business-friendly information on fuel purchases, on
heating oil supplies, or other factors that might be needed.
Mr. Tierney. Let's have them do that, and I thank you.
I am going to give 5 minutes to Mr. Sanders now.
Mr. Sanders. Thank you, John.
Let me begin by thanking Administrator Carol Browner for
your work on the environment. As we enter the 21st century,
there is no reason why millions of people should suffer
respiratory problems and other illnesses because of filthy air.
There is no excuse for that. And I applaud you for the work
that you are doing.
Secretary Richardson, thank you for the help that you are
giving us on the home heating oil reserve. I think you share
our feeling that we want to not see next year a huge spike in
home heating oil. The reserve makes sense.
As John just mentioned, we had significant bipartisan
support in the House the other night for it, but we are still
going to need the estimated $10 million to get the funding to
set up that reserve, and we would very much appreciate any help
that the administration could give us to make sure that that
happens.
Let me ask Mr. Pitofsky a question. I support the
investigation of price gouging in the Middle West, but as you
know, many of us in New England were asked last March to
investigate the increases in home heating oil that we
experienced. I think you received a letter from many, many
Members of Congress on that issue, and as of now, we have not
yet received a reply from the FTC.
Can you give me some assurance that we are going to be
getting some response in the very near future?
Mr. Pitofsky. Yes. The very near future.
Mr. Sanders. OK. I appreciate that. That is a brief answer,
and it is the answer I wanted to hear. Thank you.
Mr. Pitofsky, let me ask you another question, not talked
about as much, I think, as it should. In the last number of
years, we have seen significant mergers within the oil
industry, as you know. Major oil companies are merging with
other major oil companies. There are some people, including
myself, who believe that that is going to result in less
competition and the consumers getting less of a fair shake.
Is this something that the FTC is looking at? What impact
on mergers and less competition in the industry having on
driving prices up?
Mr. Pitofsky. It is a very interesting question, and it
deserves to be addressed.
As you may know, I and my colleagues are very concerned
about the move toward concentration in the oil industry. In the
last 4 years, we have reviewed four, what I think can fairly be
described as mega-mergers. We have not let any of them go
through without restructuring. On the last of these mergers,
BP/ARCO, we went to court and required restructuring.
I am generally concerned about where we are going in this
particular industry. However, as far as the Midwest was
concerned, which is the focus of our present investigation,
Midwest and West Coast, I took a look, and the fact of the
matter is that I don't think any of these mergers involve firms
that have much of an overlap in the Midwest. So there are
plenty of explanations, but I don't think the merger wave is
one of them.
Mr. Sanders. OK. At some other point, I would like to
pursue the issue of mergers in general with you.
Let me just ask perhaps you, Mr. Pitofsky, or anybody else
on the panel who wants to respond: I am not a great fan of many
aspects of globalization. I must be honest with you. It seems,
though, very clear to me that OPEC, by definition, is a cartel
whose goal is to limit production. I don't think there is any
debate about that. If we had the head of OPEC here, that is
what he would tell you the reason for existence of that
organization is. Correct? That is not a great debate.
What I don't understand--and I know this is not necessarily
your area as opposed to our trade people--why hasn't somebody
gone to the World Trade Organization and said, excuse me, OPEC
is violating every concept of free trade in terms of the
production and distribution of oil? Does anyone want to comment
on that? I mean, it seems so very obvious, and I am not a great
fan of WTO. Does anyone want to comment on that; Bill; Carol?
Mr. Richardson. Not really, Congressman.
Mr. Sanders. Am I missing something, or is this an
organization designed to limit free trade in a world which is
supposedly moving toward free trade? Mr. Pitofsky, what am I
missing here?
Mr. Pitofsky. I don't know that you're missing anything.
Let me break this down. As a matter of law, it is a cartel,
except that it is being run by nation-states.
Mr. Sanders. Right.
Mr. Pitofsky. And, therefore, as a matter of law, it would
be difficult, if not impossible, to get at it.
As a matter of negotiation and diplomacy, you are asking
why don't we challenge OPEC in some other way, but it is not
part of the role of an agency like mine to address that. It is
really a State Department issue.
Mr. Sanders. Well, I think it is a USTR issue, probably,
and I share the concern of many Americans that we went to war
defending Kuwait and Saudi Arabia, and I think we deserve a
little bit fairer shake.
I yield back the balance of my time.
[The prepared statement of Hon. Bernard Sanders follows:]
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Mr. Tierney. Thank you. I yield 5 minutes to Mr Kanjorski.
Mr. Kanjorski. Thank you very much. I know all of you seem
to be unwilling to postulate why the price is what it is, but
let me ask you some simple questions to start with.
Mr. Secretary, do you directly impact on the price of a
gallon of gasoline sold in the Midwest?
Mr. Richardson. No.
Mr. Kanjorski. You don't set the price?
Mr. Richardson. No. No, we don't, Congressman.
Mr. Kanjorski. It seems to me we are talking about 40, 50,
60, 70, 80 cents here, and we have been talking during the day
the question of supply and demand.
Just some things I may be conscious of, the world market
for a price of a barrel of oil was about $32 a barrel in
February. It is $31 or $32 a barrel today. The processing
plants, to my knowledge, refineries, etc., have not made any
investments in that last 6-month period for a recapture of
capital. There is no further investment there.
What explains the fact that in February, with relatively
the same supply, or a little less, and with a little higher
demand today, the actual or real cost of gasoline as opposed to
the price of gasoline, what explains that differential? Who
made the determination of what to charge?
Mr. Richardson. Congressman, if you recall--you were right
about your February statistic. In March, OPEC met and, as you
recall, we worked with OPEC to have their production increase.
What then happened was oil went from 34 to 23 in a short
period, but then it started coming back up. The reason is very
simple: Demand has outstripped supply, and demand growth, the
second quarter, worldwide demand growth has increased by 2.1
percent, which is a record, almost unprecedented demand growth.
And this is international, and a lot of it has been fueled by
us.
But since that time, Congressman, February, there are 3.5
million more barrels per day out there in the international
market. But you still have a low stock problem. You still have
unprecedented demand. And that is also accounting for low
gasoline stocks.
Mr. Kanjorski. But the real reality is that it doesn't cost
any more today to make a gallon of gasoline to put into a tank
in the Midwest than it did probably in February. So somebody
sets a differential price there, and the price, it seems to me,
is supply and demand and what you can get for it. It is a form
of rationing. You are going to push the price up until people
stop buying at a certain price so that you can provide the
demand out there. Isn't that the concept of price?
Mr. Richardson. Yes, that's accurate.
Mr. Kanjorski. So these people are wondering, you know, who
charged more. The oil companies could have maintained the same
income level they were making in February or March by keeping
the gasoline the same price in the Midwest as it was selling in
February or March.
There was a selection to set a higher price, whether it was
for purposes of discouraging purchases and demand, or for
whatever reason. But, nevertheless, does anybody there really
believe that they are not going to show an inordinate amount of
profit with that 40, 50, or 60 percent increase?
And what I am really wondering about is why are we so
fancily stepping around the issue. The Government doesn't set
the price. Let's tell the American people. That is what my
friends on the other side of the aisle have been arguing about
for 20 years. They want a supply and-demand free market. Well,
they have got it. If they want to charge $3 a gallon in the
Midwest, there is nothing we can really do about it, or $4,
whatever the consumers will pay. And I think we should send
that message to the American people. It is not what Ms. Browner
in EPA--2 to 8 cents, that didn't do a damn thing. It is not
the fact that you didn't get them to give us another billion--
or a million barrels a day in the negotiations. The fact of the
matter is a private organization organized for profit, saw an
opportunity to charge a higher price and make a greater profit.
We had earlier testimony from a trucker today that in
February and March he had that price with diesel fuel. Diesel
fuel in New England was selling for $3 a gallon. It was just
absolutely unreasonable. It would go up at the rate of 40, 50
cents a day. And his price went up 125 percent.
Now, the question is--you know, I think we should send the
message. It hasn't changed since the diesel fuel increase. It
is not changing now. The fact of the matter is what we do have
to watch is what you were saying, Mr. Pitofsky. If we don't get
competition out there and if we have people who control or
monopolize markets, they can literally set the price for energy
at any price they want. And I think the second thing we have to
worry about is in other energy fields, such as electricity, as
we deregulated electricity in this country, the electrical
companies will be able to set the price of supply and demand at
any price they wish, and the American people have to pay it. Is
that correct?
Mr. Pitofsky. Yes, it is--the price will respond to
competitive pressures, and if you have a monopoly or something
approaching a monopoly, then the sellers can set the price
anywhere they want.
But, you know, in the Midwest, where we are looking at this
tremendous price spike, there are seven independent refineries
that are operating, and two or three outside the area that ship
into the area. So you would have expected that competition
would not allow price to spike up that way, especially because
you can't attribute a price spike in the Middle West to OPEC.
OPEC is as guilty of raising prices on the East Coast and the
West Coast as in the Middle West. That's what's tricky and
that's what's challenging about this investigation.
Mr. Kanjorski. Thank you very much. I yield back.
Mr. Tierney. Ms. Schakowsky, 5 minutes.
Ms. Schakowsky. Thank you.
First, I would like to thank all three of you for being so
available to us in Chicago when we have had hearings and your
top staff have been wonderful. We really appreciate your
answering all of our questions. A special thank you also to
Administrator Browner. I want to make it clear that people in
Chicago are quite literally breathing easier because of the
clean air standards, and I think that in all of this, we have
to keep that clearly in mind.
I wanted to ask Secretary Richardson if he would react to a
bill that I am going to introduce that I hope will help us head
off some future problems. It would require the Department of
Energy to not only monitor petroleum inventories and refinery
production nationally and regionally, which I believe you do,
but when production rates or supplies indicate that a shortage
and subsequent price spike may occur, the Department of Energy
would have the responsibility and the authority to sound the
alarm and notify Congress and to offer suggestions for
appropriate ways that Congress could respond.
I wanted to ask you what you think of that.
Mr. Richardson. Congresswoman, it sounds like a good bill.
We support it. I think it makes sense.
The Energy Information Agency, which we have some
representatives here, which is a statistical independent
agency, does a lot of that tracking. But I think we need to
have better tracking of domestic and international petroleum
inventories.
One of the big problems we have right now is low stocks,
and what has happened in the international and national
community is oil data--if we could just have one oil data
statistics that we all believe in, oil companies and
governments, we'd be a lot better off.
There are a lot of different data there, so I would be
interested in working with you to find ways that we can do
this, tracking distillates, tracking inventories. So I think
the bureaucratic answer would be that we will work with you. I
will say that we will support your bill in principle if we work
together.
I would ask, though--and since there is quite a bit of
support for the Energy Information Administration--which is
independent, by the way. They don't report what I tell them to.
I wish they would sometimes. But they have some funding
problems in the conference right now, so any help you could
give us to give them the budget that they need--they do
excellent work. They work all night. They are all these
academic statistical types that crank these things up. But I
think if we can strengthen them, but also incorporate your
bill, I think we would have something that would be valuable
for the country and for the international community.
So I like your bill and in principle we can support it.
Ms. Schakowsky. I appreciate that. I look forward to
working with you on both issues, the appropriate funding and
the language of this.
I wanted to give the Administrator an opportunity to, I
think, correct some misunderstanding--I see Representative
isn't here. Oh, are you there? I am sorry.
Mr. Ryan [presiding]. It is Chairman Ryan.
Ms. Schakowsky. Excuse me, Chairman Ryan. [Laughter.]
The CRS report that I think you were looking at that
attributed 25 cents to the RFG that we were using----
Mr. Ryan. The unique RFG situation.
Ms. Schakowsky [continuing]. I believe was updated, and I
wondered if you could explain that.
Ms. Browner. Yes. We have seen--I want to make sure we have
all our facts right here. Mr. Chairman, Congressman Ryan, as I
understand it, you are referring to a June 16th memorandum from
CRS that didn't look at the production cost, what it actually
cost the refiner to make RFG, but simply looked at the consumer
price--which is important--looked at the consumer price in both
Milwaukee and Chicago, and it found exactly what we found,
which is that the RFG in those two cities was selling 40 to 50
cents more than the RFG ethanol fuels in other cities. I mean,
that is all they did. They went out and looked at current
consumer price issues. They didn't go to the refiners and say:
How much does it actually cost to make cleaner gasoline? Is
there any cost differential if you make that cleaner gasoline
with ethanol?
The CRS report that is being released today actually looks
at the cost for the refiner of making the cleaner gasoline
either with ethanol or one of the other additives, and it is
very, very much in keeping with what EPA itself said in 1993
when we reached this agreement for cleaner gasoline, which is
it would be approximately 3 to 7 cents, for the non-ethanol-
blended cleaner gasoline 4 to 8 cents, and I'll actually read
from the report. This is a quote from the CRS report of today
saying, ``The RFG program by itself has caused only limited
price increases on the order of 2 to 8 cents per gallon,''
which is precisely what we predicted.
And I think, Chairman Ryan, not to dispute what CRS said
previously, but they were looking at a different type of
number. They were simply looking at how much was an ethanol
blend selling for in, I don't know, Louisville or St. Louis
versus how much was it selling for in Chicago and Milwaukee,
and those are very different issues than how much does it
actually cost you to make ethanol-blended cleaner gasoline.
Thank you.
Mr. Tierney. Thank you.
Mr. Ford, 5 minutes.
Mr. Ford. I know the witnesses have been here some time. I
appreciate them staying. I wanted to personally say to both Ms.
Browner and Secretary Richardson--I might add, Chairman
Pitofsky, my cousin, who is in the room, was a student of
yours, I believe, at Georgetown and he commented--you wouldn't
remember him for anything, but I said, hey, I am on the panel,
he may at least pretend like he remembered you. [Laughter.]
He is sitting there in the back, but I would love for him
to have an opportunity to meet you. But I want to thank the
three of you for your patience today and certainly say to
Secretary Richardson you have a full plate at this point, and I
am one Member that appreciates your leadership and your
persistence. And I am quite confident that if you say you are
going to resolve the issues, all the matters that are on your
plate now at the Department of Energy, I am willing to wait and
see and willing to give you the benefit of the doubt.
I say to Ms. Browner thank you for clarifying some of these
issues for us with regard--it is amazing. Before you got here,
I listened to some of my colleagues on the other side, and all
of us now are experts on how ethanol mixes with all of this
stuff. I don't profess to be one, but in the last few days, the
amount of wisdom, scientific wisdom that somehow has befallen
my colleagues on that side of the aisle is nothing short of
remarkable. So I thank you for clarifying some of these issues
for us, and I don't look forward to seeing you before this
committee again dealing with this issue. I hope we let you get
back to work and get these doggone gas prices lowered for all
of us across the country.
Again, thank you for coming, and always excited to see
Chairman Ryan in the chair.
With that I yield back to Mrs. Maloney.
Mr. Tierney. Thank you.
Mrs. Maloney. Thank you.
I would like to particularly welcome Secretary Richardson.
Good to see you again, one of my former colleagues. Do you
agree--as a former Member of Congress, I would like to see how
you rate Congress. Do you agree that two essential components
of a coherent energy strategy are diversification of energy
sources and the reduction in the use of inefficient energy? And
how would you rate Congress' consideration of these two goals
so far?
Mr. Richardson. Well, the answer on the first is yes, and I
think, Congresswoman, the key here is--what has been outlined
is a number of problems that we have as a country. We need a
diversified energy policy that is a balance.
And let me just say that in administration we've have 7
years of unprecedented economic growth, but at the same time,
in Ms. Browner's area, sulphur emissions have declined
considerably. So I think it shows that as a Nation we have
balanced properly.
What we need is a number of initiatives that we have
proposed that the Congress hopefully will pass. We need tax
credits for energy efficiency. We need the Strategic Petroleum
Reserve reauthorized. We need funding for alternative sources
of energy--solar, wind, biomass. We need tax credits for energy
efficiency. We need renewable energy. We need the Northeast
reserve. We need a number of, I think, other measures that have
been brought up and that are still languishing. The Congress
has to legislate and appropriate many of the initiatives that
we feel are needed.
So I think the main message here is that we need to work
together to get soon many of these measures enacted, because,
otherwise, we won't have this diversified energy supply.
Otherwise, we will not be able to keep addressing some of the
problems that have come up. You can't just blame one entity or
one movement. We have a multiplicity of factors that have to be
dealt with.
Mrs. Maloney. I would like to ask anyone on the panel to
comment on the Unocal lawsuit.
Some people have alleged that it may have had some impact
on the raising of prices. Would you give us an overview if you
believe that is true or not, and if not, why?
Ms. Browner. I would be happy to share with you what the
oil industry, oil companies, have told us that they are
managing with the Unocal patent that they are able to work
around it. We specifically asked them--Bob Perciaseppe and
George Lawrence, who are here from my office, who participated
in our investigations and the meetings we had with the oil
companies--this question, and the sense that was conveyed to us
is that it was not an issue.
I would certainly hope that it would be part of Chairman
Pitofsky's investigation.
Mr. Pitofsky. We will take a look at it.
If the threat of paying royalties to Unocal has had an
effect here, it would have been a limited and modest effect, I
believe.
Mrs. Maloney. Could I just in a general sense say, what has
changed in the last recent history that could have caused these
prices to go up? Is there any change that you see? I would like
to ask any of the panelists to comment on that.
Ms. Browner. I would actually suggest it is--and then I
will defer to my colleague, but there is another way, maybe, to
think about it, with all due respect, which is what has changed
that caused them to come down. Nothing. Nothing caused them----
Mrs. Maloney. Well, what caused it to go up, and what
caused it to come down? I would like to ask all three panelists
if you have any insight on this, what caused it to go up and
what caused it to come down.
Ms. Browner. I think, unfortunately, everything we went out
and looked at could not find a factor or a group of factors
that you could directly tie a 40-cent-per-gallon wholesale
price increase. We could not find something, and that is why we
wrote to the FTC.
Mr. Pitofsky. And I think our role in life is not to try to
guess or speculate, as attractive as that activity is, but to
try to get an answer to the question that you raised.
Mr. Richardson. Congresswoman, I would just say in general
what has been in the last 20 years: No. 1, the return of OPEC
as a major entity; second, dramatically increased demand.
However, domestic oil production and domestic refinery capacity
has not kept up with that demand. So that is what is
characteristic, I would say, of the last 20 years, and as the
world becomes more globalized, you have got basically producer
and consumer countries recognizing that what is best for all is
not a high price of oil, but a stable stability in oil markets,
less volatility, and this is the point that we have been
making, that if we let the market, the international market,
dictate these prices and not artificially set prices, that we
will have that stability. What has been happening is there have
been production cuts. There have been other types of
international disruptions. I think if we just let the market be
the dominant factor, not have these other entities that have
been playing in this field--this is why we have had these
international dislocations.
It is like the international community is in the same boat.
You have got the producer and consuming countries. The United
States is a producer and consuming country.
Mrs. Maloney. Well, my time is up. Thank you very much.
Mr. Tierney. I yield back the balance of my time.
Mr. Burton. OK. Well, you had about 30-some seconds left.
That is fine. That is amazing.
Well, I will take 5 minutes now, since I have not asked any
questions. One thing I would like to start off with is we have
a 500-year estimated natural gas supply, and automobiles run
cleaner. The environment is better protected if you use natural
gas.
I have been told that you can buy some kind of a device to
hook onto your house where you can actually back your car up to
it and fill it up with natural gas overnight and have a gas
supply, and the cost would be somewhere around a third to half
of the current gasoline cost.
All I would like to say to you, all three of you, is that I
wish this administration would look into that. I think that
would be a real service to the country if we could start moving
toward a supply that is almost limitless right now, that is
clean-burning, that is going to help the environment, and is
going to cost less than half of what the current gas that you
are buying at the pump costs.
Once you started doing that, you could fill up at your
house, and if you did not have natural gas, once the gas
companies and the oil service stations around the country saw
that that was a growing thing, they would start supplying it. I
think it would help the whole economy and help with the
environment as well.
So I wish you would look into that.
Ms. Browner.
Ms. Browner. I just want to say that we are very, very big
supporters of that. In fact, the EPA fleet includes a number of
compressed natural gas vehicles, and----
Mr. Burton. Well, I understand that, and I----
Ms. Browner. You can buy it at gas stations now. That is a
great thing.
Mr. Burton. I applaud you for that. Probably 60, 70 percent
of the homes in this country have natural gas piped in. If we
could encourage the use of this, encourage people to buy cars
and the manufacturers to manufacture them, to have that, I
think it will be a real service for the country and the
environment.
Mr. Richardson. I will be very brief.
I am delighted you are interested in this. We have at the
Department of Energy a program, Compressed Natural Gas, that
deals with engines, that deals with vehicles, that deals with
on-board fuel storage, infrastructure, and we need some support
to get that more off the ground. We have started it, but the
administrator, I know, is very committed to this.
I think you have a--do you ride in a natural gas now?
Ms. Browner. Yes, we have it. Yes.
The problem with home use is they are going to need
compressors. It is compressed natural gas.
Mr. Burton. I understand.
Ms. Browner. That is what we have to figure out together.
Mr. Burton. I understand. Congressman Kucinich and I and I
think Congressman Kanjorski has consented to start the wheels
rolling toward looking into this. I am sure the oil companies
will view that with a jaundiced eye, but that is something we
want to look into.
I would like to ask you, Secretary Richardson, in February
1999, did you have a meeting in Saudi Arabia with Mr. Yamani,
the oil minister, over there?
Mr. Richardson. No.
Mr. Burton. You did not?
Mr. Richardson. No.
Mr. Burton. Did you meet with anybody in Saudi Arabia in
1999 about oil?
Mr. Richardson. Yes. You will recall, Congressman, Yamani
used to be an energy minister. He is not now. He used to be.
Mr. Burton. With whom did you meet in 1999?
Mr. Richardson. Well, I met with the Crown Prince of Saudi
Arabia. I met with the energy minister, the foreign minister.
Mr. Burton. Did you talk with them at all about the price
of oil?
Mr. Richardson. No, but I know what you are going to ask.
Mr. Burton. I know it is funny, but they always talk about
that.
Mr. Richardson. There was a false report that I had
advocated production cuts. I did not even talk to Yamani at the
time, Congressman, and you know, if anything, I have been an
advocate for production increases to the consternation of many
of these OPEC countries.
What I was there for at the time in February 1999 was Saudi
Arabia had said they were ready to talk to American companies
about upstream investment, and I went there to pursue this.
Mr. Burton. Mr. Secretary, with all due respect, I have
only got 5 minutes, and I do not want to go into--I mean, what
I want to find out is did you talk to anybody about production
of oil from the OPEC countries or Saudi Arabia----
Mr. Richardson. No.
Mr. Burton [continuing]. Or anybody.
Mr. Richardson. No. In that visit, no.
Mr. Burton. Or any visit.
Mr. Richardson. Oh, yes. Of course.
Mr. Burton. When did you talk to them?
Mr. Richardson. Well, I--just this year, I went to several
of--in fact, almost every OPEC country advocating production
increases.
Mr. Burton. Let me ask you. Did you at any time during the
last 2 years talk to anybody about oil production cuts?
Mr. Richardson. No.
Mr. Burton. Anybody?
Mr. Richardson. No. That was a false report that I----
Mr. Burton. You did not talk to any country or any oil
ministers?
Mr. Richardson. None whatsoever.
Mr. Burton. So the report that was in the paper was totally
wrong.
Mr. Richardson. Yes, it was wrong. I have not even met
Yamani.
Mr. Tierney. I am shocked, Mr. Chairman, that the papers
would be wrong.
Mr. Burton. I am just checking. I am just checking. He is
under oath. If that is what he says, then we will live with it.
Mr. Tierney. Put the journalist under oath. That would be
amusing.
Mr. Burton. There it is. That is what we ought to do.
Unfortunately, the first amendment would not allow us to do
that.
Let me go into another issue, then, and that is the
situation that we had at Los Alamos.
I am running out of time. I will catch this the next round.
Who has time on your side? Do you have any questions on your
side? We will go to Mrs. Chenoweth. She did not participate.
Mrs. Chenoweth, you have been waiting a long time.
Mrs. Chenoweth-Hage. Thank you, Mr. Chairman.
Mr. Chairman, in December 1999, the Idaho Attorney
General's Office issued a report on gasoline prices.
Actually, Idaho was one of the first to feel the increase
in prices, and the only possible reason that I could wish what
we had early on, on the Midwestern States, was that we finally
got everybody's attention. We are so small out in Idaho. We
could not get the attention, but I would like to ask unanimous
consent to insert this report into the record.
Mr. Burton. Without objection.
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Mrs. Chenoweth-Hage. Thank you.
Mr. Richardson, it is nice to see you again. After these
last few weeks, I think probably the Resources Committee looks
like angel food cake, doesn't it?
Mr. Richardson. Yes, it does.
Mrs. Chenoweth-Hage. I will not ask you to answer that, but
it was good to work with you then.
Mr. Richardson, I understand that the cost of ethanol
delivered to Chicago is 70 cents a gallon, and the cost for
gasoline is $1.30 in Chicago. I just had my staff check on
that.
So how is it that when you blend 70-cent ethanol delivered
to Chicago, $1.30 gasoline delivered to Chicago, that we get
$2.30-a-gallon blended?
Ms. Browner.
Ms. Browner. I am not sure I followed the numbers you were
using. I will tell you----
Mrs. Chenoweth-Hage. The price.
Ms. Browner [continuing]. That today the wholesale price
for the cleaner gasoline with ethanol and conventional gasoline
in surrounding Chicago areas, the wholesale price is the same.
It is $1.17 a gallon wholesale for the ethanol-blended cleaner
gasoline and $1.17 a gallon wholesale for what we refer to as
conventional gasoline. The prices are the same.
There has been a price differential, and that is why I
think all of us agree the FTC needs to conduct an investigation
of price differential that has not been explained, and then
specifically the question is why is it that the ethanol-blended
gasoline in Chicago and Milwaukee is significantly higher than
the ethanol-blended gasoline in all the other parts of the
country.
Mrs. Chenoweth-Hage. And that is your testimony?
Ms. Browner. That is a question which we have investigated,
and we have not found an answer to that we think is acceptable.
Therefore, we have asked the Federal Trade Commission to look
at whether or not there may be inappropriate pricing activities
on the part of the oil company--companies, I should say.
Mrs. Chenoweth-Hage. Ms. Browner, do you believe that by
opening up more drilling in Alaska, we could better control the
cost of oil nationwide?
Ms. Browner. I do not believe that the answer to our energy
prices--and I agree we all need to be about dealing with those
issues across the board, not because of cleaner gasoline, but
because of all of the issues that the Secretary has testified.
I do not believe the answer is opening up pristine areas of
Alaska. I think there are other solutions.
Mrs. Chenoweth-Hage. So then is it your testimony that we
are already at near maximum production here in the United
States, so we are dependent on foreign companies subsidizing us
and producing more oil would not help us?
Ms. Browner. I am happy to share with you my personal
opinion. In my professional job, I am not responsible for the
decisions in terms of oil production. That is not something
that falls within EPA's responsibility.
Now, I do accept responsibility for that portion of the
gasoline programs that are designed to reduce air pollution in
the dirtiest cities for the proposals that we have put forward
to take sulfur out of diesel fuel and to reduce fine particles
which yet another scientific study has found contributes to
respiratory illness, premature death.
I am happy to speak to the EPA responsibility for cleaner
gasoline and less air pollution.
Mrs. Chenoweth-Hage. I think, just very briefly, I would
like to ask Mr. Richardson with regards to an administration
energy policy.
I do remember in 1975 and 1976 when Jimmy Carter was our
President. We really engaged in a really sound energy policy.
We instituted and made a reality, the strategic petroleum
reserves. We had a policy that encouraged the production of
electricity, like Mr. Kanjorski early on mentioned that we may
be facing an electricity shortage very soon.
Carter instituted the Public Utility Regulatory Policy Act,
which opened up the whole market system to the plethora of
ideas for energy. The Supreme Court ruled on his policy in a
case entitled Mississippi v. FERC and AEP v. FERC, and in both
of those Supreme Court decisions, the Supreme Court ruled that
it is within the public interest and it is our national policy
to become energy-independent. Those decisions, of course, were
in 1982, both of them--1982 and 1983. Since then, we have
become more dependent on the unstable OPEC nations.
Mr. Richardson, I know you have kind of inherited this job,
but I keep being asked why can't we see an energy policy.
I remember living through the Carter energy policy, and it
really was sound and it responded right away to the crisis. So,
Mr. Richardson.
Mr. Richardson. Congresswoman, thank you for asking the
question so constructively.
I think something that we need to do that is fundamental is
to boost our domestic production, and we have--the
administration recently submitted--I know in your part of the
country and mine it is important--a tax credit package for
marginal wells, for G&G expensing, for delayed rentals, tax
credits for some of these independents that everyone thinks
they are making loads of money, but you know just as I do that
they were hurt bad when oil was at $10 a barrel.
We also have about $4 billion out there in tax cuts for
energy efficiency. This Congress has already passed $128
billion in tax cuts, but we have yet to deal with these tax
cuts for energy efficiency. We need more investment in domestic
production, alternative sources of energy, domestic sources,
energy renewables, as I said, energy efficiency.
This program that we have for more fuel-efficient
vehicles--I know Congressman Burton is interested in this--with
Detroit where we worked to create more fuel-efficient engines
for cars, sedans, and trucks by a date certain, distributed
power generation.
You mentioned electricity. You know, as westerners, I am
worked about the Southwest, the Pacific Northwest. In
California, especially right now, there could be some serious
power outages. We need to revamp and modernize our electricity
grid.
You mentioned the strategic petroleum reserve. It is not
fully reauthorized. We need to do that.
So I think there are a number of steps that we need to take
together to be able to say that we are dealing with energy
self-sufficiency, that we are not overly dependent on imported
oil, and this has happened through a number of administrations.
It keeps moving up. I think we need to move it in the other
direction.
Mrs. Chenoweth-Hage. Thank you, Mr. Richardson.
Thank you, Mr. Chairman.
In closing, I would just like to say I would really
appreciate seeing a decentralization of production.
Thank you very much.
Mr. Burton. Thank you, Mr. Chenoweth.
Mr. Tierney.
Mr. Tierney. Thank you.
Mr. Burton. Should I yield to you?
Mr. Tierney. If I were truly partisan, which I do not want
to go down that path here today, we would talk about the next
12 years after Mr. Carter who established the policy and where
it went and in what direction in terms of energy, but I do not
think we have to go there because I think history reflects what
happened in the downward spiral that we went for 12 years
succeeding the Carter administration on that.
I think the other thing is since 1994, I do not remember
anything in the so-called Contract on America dealing with
these very serious issues, if they really were that important,
but this Congress has to take some responsibility for giving
the administration the tools, in giving your respective
Departments the tools to move this country in the right
direction, and I think some people in the country have----
Mr. Burton. I am glad you did not go down that path.
Mr. Tierney. I am glad I did not, too. [Laughter.]
I think that Congress has to take some--and the people of
this country have to take some responsibility about conserving
fuel and looking at the way we consume.
With that, I will yield the balance of my time to Mr.
Sanders.
Mr. Sanders. Let me agree, as I very, very rarely do, with
the chairman. We do not agree on much.
He gave the example of natural gas not being fully
utilized. Let me just throw in something else. We have millions
of Americans driving cars today. They get 20, 22 miles a
gallon, which my guess is this is not a hell of a lot different
than we had 20 years ago.
We are looking at an explosion of technology in every
conceivable area. They just mapped our gene code and so forth.
Why is it that there has not been revolutionary breakthroughs
in terms of energy efficiency in this country?
Mr. Richardson. Well, Congressman, we are close to it. We
have a number of investments in fuel cell vehicles, in hybrid
vehicles. We work with Detroit on this partnership for new
generation of vehicles which, by the way, the funding was cut
last week in the house, which we needed back, because what we
are doing is saying--working with Detroit to develop those 40-
mile-per-gallon, 80-mile-per-gallon fuel-efficient engines in
sedans and SUVs.
So what we are saying to the American people is you can
have the SUVs, and we can make them more fuel-efficient.
Mr. Sanders. Mr. Secretary, I myself do not know that we
need taxpayer money to help Detroit develop these things. The
technology is--I have to believe that the technology is close
to at hand.
Ms. Browner.
Ms. Browner. I think you are right. Actually, starting last
month, you were able to buy here in the Northeast, the Mid-
Atlantic States, the hybrid cars.
Mr. Sanders. Right.
Ms. Browner. They bring with is a tremendous opportunity
for fuel efficiency, for much lower tail-pipe emissions, less
air pollution.
Mr. Sanders. Right.
Ms. Browner. We are seeing these.
I think the work the administration has done is incredibly
important because it almost leap-frogs that.
I would just say from our perspective at EPA, in addition
to the work we do on the fuel side with the automotive industry
with DOE, we also have a very aggressive program on simply
reducing energy use, on energy efficiency. Every time you use a
computer and that computer goes to sleep, the screen goes to
sleep when you walk away, that is an EPA industry invention to
save electricity.
We just reached an agreement with buildings like the World
Trade Center, the Sears Tower, the Nasdaq, huge, huge buildings
where we were able to show them that it was cost-effective to
reduce their energies, if they put in a better heating and
cooling systems, if they changed their windows, if they changed
their lighting systems.
What happened is the technology for energy efficiency has
advanced dramatically, and yet, we have found it all very, very
difficult to get the public to understand the opportunities
that exist for these efficiencies.
One of the things that Congress certainly can do, and many
of you have done this, is support these outreach programs where
we actually go out and show the business community that they
can do their part for less pollution, less energy use, and save
money, incredibly successful.
Mr. Sanders. I agree with you. Let me just ask you this. In
your judgment, has the automobile industry been as aggressive
as they might? I think the car that you are referring to is,
what, a Toyota?
Ms. Browner. There are several of them coming out. Toyota
and Honda are the first two to market.
Mr. Sanders. Has our automobile industry been as aggressive
as they might in your judgment?
Ms. Browner. I think that for a variety of reasons, the
investments necessary to get to the next generation, the 80-,
90-mile-per-gallon cars, was not, unfortunately, made early
enough, and that is why I do think Government participation,
which this administration has been leading, is very, very
important in these programs.
We do a lot of the research in our own EPA labs that lead
to these kind of cars. I think we would all agree we would like
to have seen it happen more quickly than it has happened, but
we are on the verge of having these vehicles.
Mr. Sanders. When I was mayor of Burlington, we pushed
light bulbs that were much more energy efficient. Has this
country done as good a job in that respect? There are light
bulbs out there that are very----
Ms. Browner. Yes. Unfortunately, we are not getting as much
conversion to these energy-efficient light bulbs.
It is hard. It is very hard because you go to the store and
there is the 67-cent light bulb that will run out in a couple
of weeks if you use it all the time, a couple of months
perhaps. Then there is the $5 or $6 light bulb which will burn
for 5 or 6 years. Convincing people to make that kind of an
investment has been something of a struggle, and it is
something that we are trying to do at EPA, but we all need to
work on doing. There are real energy efficiencies, savings, to
be had. The technology is there. It is getting people to use
it.
Mr. Sanders. My last question, because I think you have
raised an important point, does EPA or another Government
agency have money for outreach efforts to try to explain to the
public about the advantages of moving in that direction?
Ms. Browner. We do get some money. The Congress has not
been willing to fully fund the administration's request for our
energy efficiency programs; for example, EPA's Energy Star
program which is some of the programs I have been talking
about. I think each and every year, the request is probably cut
on the order of 30, 40, maybe as much as 50 percent in some
years, and I think right now in the appropriations process, we
are looking at a similar lack of funding.
We think these programs are hugely, hugely successful. They
do take a modest investment of Government resources, but the
returns, less pollution, less dependence on foreign oil, good
technology. It is a win-win.
Mr. Sanders. The technology is there.
Ms. Browner. Yes.
Mr. Sanders. It is a shame that it has not been utilized.
Ms. Browner. The energy-efficiency technologies are there.
American companies have led the way to create them, and what we
need to do is create the consumer demand and educate the
consumer on why it is in his or her interest to use it.
Mr. Sanders. Thank you.
Mr. Burton. The gentleman's time has expired.
Mr. LaTourette.
Mr. LaTourette. Thank you, Mr. Chairman. I just have what I
hope are three short questions to clean up where I was before.
I saw the administrator's stomach growling.
Ms. Browner. Sorry.
Mr. LaTourette. So I will try to be as quick as I can.
At the end of my 10 minutes the last time, I think I was
making the observation that perhaps there were things that
everybody could have done better now that we have the 20/20
hindsight to look back at what happened in the Midwest, and the
ever non-partisan/bipartisan Mr. Tierney then suggested since
you did not answer my question either yes or no that perhaps
there was no responsibility on the part of either of the
agencies that you proudly represent.
I do not know how that goes in Massachusetts, but in Ohio,
they would like an answer, I guess. So I would ask you again,
and this time, if the chairman will not give the option of
saying yes or no, knowing what we do today, is there anything,
Madam Administrator or Mr. Secretary, as you look at what
happened in the Midwest that your agency could have done better
than it did? And if it is no, that is fine with me, but if it
is yes, I would like to know what it is.
Ms. Browner. Congressman LaTourette, we were monitoring
this situation back in the spring, and the reason we were doing
that was because a new cleaner gasoline program was coming
online. We had been working with the oil industry for 7 years.
We had written the recipe 7 years ago. We did send people out
into the field to visit the tanks. We got questions.
I will honestly tell you that we were looking at
everything, and we could not see any individual thing that
would lead to this situation.
I will also tell you since the situation occurred, we have
not been able to point to any individual thing or any string of
things. I wish there was a different answer. I wish this had
not happened. I wish that we had seen something in the field
that would have allowed us to correct this in advance.
We went to the oil companies repeatedly. We asked were they
going to experiment problems. They did not anticipate problems.
The tanks, the terminals were required to have the cleaner
gasoline on May 1st. They had it on May 1st. Everything was
moving along, and then, suddenly, in just two cities, boom, the
price went up.
Mr. LaTourette. The only thing that did not fit with what I
had been told is I had thought that the folks that are going to
be on the next panel notified the EPA in June 1999, that they
expected this kind of problem. Is that your recollection?
Ms. Browner. My recollection of what we were told--I did
not meet with them. Other people in the agency met with them,
but they obviously shared it with me--is that generally
supplies were tight. They were tight in the conventional gas
market. They were tight in what is referred to as RBOB, which
is the blend that ethanol is added to, but that they were
adequate; that you did not have situations of terminals going
dry. You did not have the situation of a pipeline being dry.
You did have a pipeline that in March had come down for a few
days, but it was back up at 90-percent capacity.
You had trucks moving the product in. So all of the factors
we looked at and what we understood from the Department of
Energy--and I do not think we misunderstood something--is that
yes, the situation was tight, but that it was adequate. The
fact of the matter is for June, what we have been told and what
we ourselves have seen, is that you actually have an increase
in the amount of gasoline product in the Chicago-Milwaukee area
compared to last June. You actually have--what is it--650,000
more barrels in that market.
Now, as the Secretary said, you have more demand, but
everything we were looking at indicated that a smooth
transition was certainly in the offing, and there should be no
reasons for price spikes.
Mr. LaTourette. So the short answer to my question was no.
Ms. Browner. I wish it were different.
Mr. LaTourette. Mr. Secretary, anything you can think of
that maybe Energy could have done better?
Mr. Richardson. Congressman, I feel very satisfied that our
team collected data. They were impartial. We work well together
as agencies, and we responded effectively. I give you credit
for asking for this FTC effort, also.
Mr. LaTourette. Thank you.
The yellow light is on, and I will take your answer as no,
too.
Somebody asked earlier about why when the wholesale price
came down, you cannot understand why it is not at the pump.
Again, the guys that I think deserve the raise gave me the
observation that once the region begins to recover, there is
going to be some delay before the wholesale price improvements
are seen at the retail level, and I assume you agree with that,
one.
Two, my dad said I need to ask you this question, Mr.
Secretary. In Desert Storm, we went over and defended Kuwait's
oil fields. We sent young men and women over there to basically
protect their property. We were told again by your agency that
they have excess capacity.
Why the heck, since we now can travel the world through
your eyes--why the heck isn't this country repaying its debt to
the United States of America for what we did for them during
Desert Storm and helping us out of this situation?
Mr. Richardson. Congressman, right now, Kuwait does not
have excess capacity. They are a major producer.
By the way, they have just had a serious explosion there
that may affect some of their production. We hope that is not
the case.
I will say to you this, Congressman. When we went to Kuwait
and Saudi Arabia and said it is important for the international
community, for the United States, that they increase
production, they did.
Mr. LaTourette. Not enough to--I mean, you deserve a great
credit, with the chairman's indulgence. You deserve a great
credit because even though we are short, we are getting more
oil out of there than we ever did before because the demand is
higher. So you deserve credit for doing that, but the fact of
the matter is they have not increased it enough to make the
difference that we need not only in this country, but in the
world. Isn't that right? And they could do it. If Kuwait could
do it, Saudi Arabia could do it, could they not?
Mr. Richardson. Saudi Arabia right now, Congressman, is the
country with the most potential for increased capacity, but I
will say Kuwait right now does not. It is not there.
The Saudis, who have taken a leadership role in increasing
production, have the capacity to increase, but within OPEC,
they have taken the leadership position.
Mr. LaTourette. Thank you very much.
Mr. Burton. Mr. Kanjorski.
Mr. Kanjorski. Thank you very much, Mr. Chairman.
Several months ago at a meeting at the White House, Mr.
Secretary, I think you were there, and after an hour or two,
several of us and the President were talking about fuel cells
and nanotechnology. I do not know if that jogs your mind, but
we came up with the recognition that, one, fuel cell work in
this country is being directed back to the petroleum industry
as a fuel source as opposed to going to hydrogen, and I think
that could be a very serious mistake in terms of the volume of
material that would be available for energy production, not
only in this country, but in the world.
Second, some of the movement in nanotechnology could really
affect the composite industry and the manufacture of new
vehicles and all sorts of new processes, and the President that
night asked us to try and put together a summit, if you may
recall.
Mr. Richardson. Yes.
Mr. Kanjorski. I do not think we have done anything on it.
So I am taking this opportunity to say, look, I am waiting for
your call, or do you want me to call you?
Mr. Richardson. You are right. No, I think you should call
me. I have been a little busy lately.
Mr. Kanjorski. Right.
Mr. Richardson. You are right. I remember that commitment
for White House Summit on energy, on fuels. You are right.
Mr. Kanjorski. Shall we get together in the next week?
Mr. Richardson. Yes.
Mr. Kanjorski. Because I have been dealing with a lot of
the national laboratories, and I do find something--I mean, I
know the difficulty you had with some of them recently, but I
understand why you had that difficulty. They do not seem to be
in any way coordinated together in any respect.
I am running across laboratories that are working on fuel
cells and spending an awful lot of time and money, and another
laboratory in the same system has solved the problem and they
do not seem to be cross-pollenizing the ideas that they have
and the breakthroughs that they have.
So that, if we could in some way in the executive branch
and on the congressional branch bring some of these people in
for a couple of days, I think we could move the process along
significantly.
I think we talked about it that night reducing it from 5 to
3 years to get to the hybrid car.
Mr. Richardson. We should do that, Congressman.
Ms. Browner. And we would obviously like to participate. I
think we can be helpful.
Mr. Kanjorski. Very good.
Mr. Burton. Are you finished, Mr. Kanjorski?
Mr. Kanjorski. Yes, Mr. Chairman.
Mr. Burton. OK. Mr. Ryan.
Mr. Ryan. Thank you, Mr. Chairman.
Ms. Browner, let me just say I appreciate and admire your
commitment to your convictions. I know we may disagree on some
things, but I appreciate all three of you spending the time you
have. I know you are doing this in various committees. I know
it is getting late, but I would like to revisit the RFG issue.
I know that the conversation has gone beyond that.
I, too, read the CRS report that you cited, which you
accurately said 2 to 8 cents specifically to the production of
this RFG, and I cannot contest that, but three sentences
earlier in this report, it says that the unique RFG situation
in Milwaukee and Chicago could contribute to 25 to 34 cents on
a gallon of case.
So, yes, you can say 2 to 8 cents on this particular blend
and production, but what the CRS report says, possibly 25 to 34
cents. I am not asking for a comment. I am just making a
clarification.
I just want to ask you, briefly, do you rely on data and
information from the DOE and specifically the EIA?
Ms. Browner. Yes, we do.
Mr. Ryan. You do in promulgating the regulations?
Ms. Browner. Absolutely, absolutely. In fact, they were
very important to us in the work we did in 1993.
Mr. Ryan. Right.
Ms. Browner. Then, more recently, the work we did which
will not take effect for several years, but to remove sulfur
from the conventional gasoline, yes.
Mr. Ryan. Secretary Richardson, it is adequate to say that
Ms. Kenderdine, who is sitting behind you, was the author of
the memo here, the Acting Director of Office of Policy?
Mr. Richardson. Yes.
Mr. Ryan. I assume you rely on her and her memoranda for
the information.
Mr. Richardson. Yes, I do.
Mr. Ryan. I would like to ask unanimous consent, Mr.
Chairman, to include Melanie Kenderdine's memo dated June 5,
2000.
Mr. Burton. Without objection.
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Mr. Ryan. In this memo--and we all seem to be saying--we do
not know why these prices are going so high, we do not know
what is happening in Milwaukee and Chicago. There is no
explanation. We need to get the FTC to investigate price
gouging, but I must say the answer may be underneath our noses.
If the EPA relies on the DOE and the DOE relies on their own
personnel to investigate the unique problems and we have a
memorandum here which says that supply is short in Milwaukee
and Chicago and that the Milwaukee and Chicago area supply
situation is further affected by--and then it goes on to list
six factors, six pretty unique factors, and it is a convergence
of those six factors, not all just RFG, but other factors,
supply factors, none of which have to do with price gouging,
which may or may not be occurring. I await your report, Mr.
Pitofsky, but this is June 5th.
We have had repeated denials for requests for waivers.
However, the DOE, Ms. Kenderdine's memo, which I hope and
assume was sent on to the EPA, shows you an explanation for the
unique problem in the RFG situation in Milwaukee and in
Chicago. The CRC report says there is a unique situation in
Milwaukee and Chicago, could be contributed to 25 to 34 cents a
gallon of gas. The point is you had the information. There was
a unique problem in this area. The DOE--you have a memo
yourself suggesting that this problem is occurring, and there
is a convergence of factors.
Mr. Richardson, did you share this information with the EPA
after Ms. Kenderdine wrote her memo?
Mr. Richardson. Yes. The EPA and DOE on these Chicago/
Milwaukee problems have had a totally joint effort.
Congressman, since Ms. Kenderdine is here, if you would
like to hear from her, I do rely on her for this policy advice.
My point is what she gave to me and what we shared together
is totally consistent with a policy that we have sought. The
price differential still cannot be explained, and this is why
we have gone to Chairman Pitofsky, but do you want to hear from
her or you would rather not?
Mr. Ryan. I would be happy to. I do not know if we are
going to have much time. I would be happy to do that, actually,
if she could come up, but the point is she has identified six
factors, and the convergence of these factors is a significant
contributor to this phenomenon, this unique RFG situation. It
seems to me that that could have played a much more significant
role in the determination of whether or not we had a real
problem in Milwaukee and Chicago and whether or not we should
have addressed that with a waiver to find out what was actually
happening before we continued to push on the RFG mandate to try
and make sure that the supply shocks were answered, Unocal,
whatever these problems were, were settled. Yet, these waivers
were denied. So I would be happy to----
Mr. Burton. Mr. Ryan, do you want her to testify?
Mr. Ryan. Yes. I would defer to the chairman.
Mr. Burton. Do you swear to tell the whole truth, nothing
but the truth, so help you God?
Ms. Kenderdine. Yes, sir.
Mr. LaTourette. I would ask Ms. Kenderdine to get the raise
first before she testifies. Get the raise.
Mr. Ryan. Let me just say I think it is a very thorough
memo, and you should be commended for a very thorough memo. I
would be happy to get your take. I am not trying to play
``gotcha.''
Ms. Kenderdine. Would you put in a plug for the policy
office budget as well?
Mr. Ryan. OK. The point is not to try and play ``gotcha.''
I simply want to get the truth. I would simply want to find
some answers to the questions before 6 weeks, when the FTC
comes up to us with answers. I have got to assume there are
some other answers in addition to possible gouging that is
occurring.
Ms. Kenderdine. Let me start off by saying that the
Department of Energy does not look specifically at price. Our
job is to do supply assessments, and that is what this document
is. We work with EPA and the EIA policy office, our emergency
office. It is a physical contacting of the people out there to
assess supply, and so we do not look specifically at price. As
you have noted, we have identified factors that may contribute
to price.
What I would say--and we have talked about that a lot here
today--is that the cost differential between RFG and
conventional gasoline is 5 to 8 cents, and I think the point
that you are making is that cost is not price. There is a whole
distribution chain that is involved that adds to the price, and
there were a convergence of factors in the Midwest. It is a
transportation-constrained market.
On the East Coast, you have alternative means of getting
your product. You are pipeline-limited in the Midwest. You can
barge. You can truck. That is more expensive, OK? So cost is
not price.
We cannot assess the price value of any of these factors
because the differential was so large, the decision was made to
refer it to the FTC.
Mr. Ryan. Would you characterize this market as a
balkanized market, given all of these factors?
Ms. Kenderdine. It is a unique market in that both
Milwaukee and Chicago are ethanol RFG exclusively.
``Balkanize'' is not necessarily a word I would use.
I mean, California has a unique market as well.
Mr. Ryan. True.
Ms. Kenderdine. It has its own unique gasoline blends. It
is transportation-constrained as well. So there are several
unique markets.
Mr. Burton. The gentleman's time has expired.
Mr. Ryan. Thank you. I appreciate it.
I notice that Ms. Browner wanted to respond.
Ms. Browner. Yes, I do, if I might, Mr. Chairman, with
leave of the Chair.
Mr. Burton. Sure.
Ms. Browner. I am sure everybody knows this, but I do think
it is worth remembering why Chicago and Milwaukee are in the
cleaner gasoline program. That was a product of the 1990
amendments to the Clean Air Act, which is a very unique
provision.
Two things happened in the 1990 amendments to the Clean Air
Act which have really never been replicated in any other
environmental statute. First, while EPA was required to work to
develop the recipe, part of the recipe, Congress mandated an
oxygenate, a 2-percent oxygenate. That was done by Congress.
Illinois and Wisconsin made their own State decisions to limit
that oxygenate to ethanol.
The second thing that happened in the 1990 amendments--and
again, this was Congress, not EPA--is Congress said that those
areas with the worst air pollution problems--and they used a
definition--would be required to sell this cleaner gasoline,
and Chicago and Milwaukee both fall within that definition.
I think it is important to note these things because what
you have is a lot of advance warning, 10 years in some
instances, 7 I think it is fair to say when the recipe got
written, that these areas would have to go to this cleaner
gasoline. Many, many areas in the country have gone to it.
About a third of the gasoline now in the United States is this
cleaner gasoline, and we are not seeing these kind of issues.
I am not an expert on energy transportation and pipelines
or anything, and I would not want to pretend to be. That is not
our jurisdiction.
It may well be, as you suggest, Mr. Ryan, that here you
have a certain set of transportation limitations that may not
exist in other parts of the country, but the point I want to
make sure we all see is that the requirement for cleaner
gasoline in these two cities is not related to transportation.
That is a separate issue. That is an issue regardless of what
gasoline you sell in these areas.
Some of the other issues that were raised in this memo, we
certainly agree with, but they are not issues unique to cleaner
gasoline. When we look at the price spike in cleaner gasoline
in these two cities, we can find the exact same factors listed
here in other cities, and yet, we do not get the price spoke.
Mr. Ryan. Or they are unique to these two cities.
I mean, I think you touched on----
Ms. Browner. The pipeline issue--no, St. Louis actually
gets 70 percent of their fuel that comes off the Explorer
pipeline. Only 12 to 17 percent of the Chicago/Milwaukee fuel
comes off the Explorer pipeline. So you cannot say it is the
Explorer pipeline when St. Louis ethanol blend is much, much
cheaper than Chicago and Milwaukee. This is why we need this
FTC investigation. Clearly, something is amiss. Something does
not quite add up, and that is what their job is to figure it
out for us.
Mr. Ryan. I see that my time has expired. I thank the
chairman.
I think the ozone transport issue is a whole other issue I
hope that 1 day we can get into----
Ms. Browner. We would love to.
Mr. Ryan [continuing]. Which we in Wisconsin feel like we
are paying for somebody else's pollution, quite honestly
speaking, and I hope that next time this comes around that the
EPA will look at this on a regional basis as well, look at the
regions that are being affected, look at the uniqueness of the
situations in regions before moving through with these
mandates.
I yield my time.
Ms. Browner. Congress put the cities in the statute, with
all due respect, Mr. Chairman, not EPA. It was Congress. And we
would be happy to work with you to rewrite that portion of the
Clean Air Act. In fact, we had sent up legislative principles.
Mr. Ryan. Waivers----
Mr. Burton. Mr. Ryan, your time has expired.
Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
I think where we were when I last asked a question--I do
not know how long ago it was, and I will be quick--we were
talking about the carbon monoxide credit.
Ms. Browner. Yes.
Mrs. Biggert. In the letter that we are seeking an answer
to, you were going to look at that.
Ms. Browner. Yes.
Mrs. Biggert. What you said, just as we ended, was that you
would put this out for comment. Now, why can't we do this under
a direct final rulemaking which would shorten the process as
long as there is no one that objects to that?
Ms. Browner. Well, there will be people who would object.
This is an issue with some amount of--how do I put this
diplomatically--a range of views, shall I say. For example,
your own State of Illinois has a particular point of view. It
is outside the scope of what the National Academy of Sciences
looked at. They did not accept it. They did not reject it, but
it is outside the scope of what they actually looked at.
Therefore, I would simply say to you, for all of us who
care about preserving the opportunities for ethanol, this
administration has been at the forefront of ethanol as part of
a clean fuels program. The best way to make this adjustment--
and we believe an adjustment will be warranted--is to do it
through the appropriate notice and comment rulemaking so that
we can defend whatever final decision we make. This will not be
without its opponents, and we want to do it in the way that
allows us to make it based on a record with full comment, with
full information, so that whatever ultimate decision we make,
we can defend it.
Mrs. Biggert. We have been seeking that for quite a while
now. In fact, I think that after the NAS put that out, it was a
recommendation from the Illinois EPA that we proceed with that,
and that has been a year now.
Ms. Browner. With all due respect, what the Illinois State
EPA--it is not part of us. It is a separate entity. What they
are recommending is not in keeping with what the National
Academy of Sciences reported on to us. It is different.
However, we believe that there is enough there that it should
be part of what we take comment on, and much of the delay in
getting this proposal out was an effort to accommodate your own
State's thinking on this.
We had to go back and rewrite the document to take the
Illinois thoughts and recommendations, if you will, and
incorporate them. They did come to us late in the process. They
came to us after the Academy had finished their work.
Mrs. Biggert. So how long will the rulemaking take?
Ms. Browner. We are going to use a shortened comment
period. I am sure that will have its detractors. We are going
to go to a 60-day. We normally do a 90. Occasionally, we do a
120. We will do a 60-day, depending on the volume of comments
we receive, and we will be happy to report to you at the close
of the 60-day, the volume of comments. In some instances, it
can take several months.
I think the real trick here and in the commitment that we
are trying to make to everybody is to make sure--remember, this
is a summer fuels program. That is when smog is a problem. That
is when air pollution is the worst. So what we need to do is
make sure that any adjustment that we finally adopt is
available to both the ethanol industry and the petroleum
industry in time for its next summer's program. I think the
summer programs are required to start on June 1st.
Mrs. Biggert. How many companies produce the phase-one RFG
for the Chicago-Milwaukee area?
Ms. Browner. No one is making phase-one RFG anymore
according to our inspections.
Mrs. Biggert. How many did produce that when it was----
Ms. Browner. There were seven refineries that serviced the
Chicago area. I want to make sure that all of them in fact made
phase one, and we may need to answer that for the record. We
are not sure.
Eleven refineries are making the phase-two cleaner
gasoline. Whether or not all of them made the phase one is a
question I would like to answer for the record. There is reason
to think it is probably the same group, but there may have been
some adjustments.
Obviously, outside of the large Chicago area, you have
refiners providing conventional gasoline.
Mrs. Biggert. So my figure of seven is not correct for
phase one and then four for phase two?
Ms. Browner. I am sorry. Ask the question again. I
apologize. They were trying to give me the answer while you
were asking the question.
Mrs. Biggert. How many companies produced phase one, and
how many now produce phase two in the Chicago-Milwaukee area?
Ms. Browner. I think there is----
Mrs. Biggert. Markets, I should say.
Ms. Browner. I may have made a mistake because I may have
misunderstood your question.
There are the refiners in your area, and there are the
refiners that service your area that come up, the pipelines
that come over from other parts of that country. It is my
understanding that the total number of refiners selling cleaner
gasoline into the Chicago-Milwaukee area is seven.
In terms of how many refiners participated in the phase-one
cleaner gasoline program, if I might answer that for the
record, and we would be happy to give you lists and names and
all of that.
Mrs. Biggert. Thank you.
Mr. Chairman, if I might just have 1 minute?
Mr. Burton. Mrs. Biggert, for you, anything.
Mrs. Biggert. Thank you.
Secretary Richardson, we were talking about the auto
industry and the public-private partnership. I was very
disappointed when the PNGB funding was withdrawn from that
program.
I think that when it was on the House floor that there were
a very few Congressmen and women that really knew what that
program did and how it really does fit into an energy policy.
So I am hopeful that it will be put back in because I think it
is a very important thing.
I think just for comment, we really need to have more of an
active public awareness of what our policies are not only to
the public, but also to what is going on here for those of us
that serve on the Science Committee and are involved with the
national laboratories. What is really a very important public
and private policy needs to be addressed before we get to the
final appropriations bill so that we are not making major
errors in this area.
Mr. Richardson. Congresswoman, I agree with you, and I know
you have one of our national labs in your district.
Yes. The answer is more public awareness. This is an
excellent program, and hopefully, that floor amendment will be
reversed as we move through the process because this program is
really working. I have seen it firsthand. It is exciting.
Industry is committed to it. The Government is committed to it.
To Congressman Sanders, what this is, is a partnership. It
is not, OK, you guys in the Government pay for it. It is a
shared effort.
We want these vehicles eventually on the market. You can do
all the research and technology, which we are doing, but
eventually we want them in the market. You have got to show a
financial commitment, and this is what we are doing with
Detroit. We really hope this program is restored.
I agree with Congressman Kanjorski. We need to bring these
labs closer together. They do share a lot, but, Congresswoman,
you are right. They get very competitive with each other, and
there are ways that we can channel their efforts closer
together.
Mrs. Biggert. Thank you.
Thank you, Mr. Chairman.
Mr. Burton. I am not sure, but I believe I am going to be
the last questioner. I am not sure you saved the best for last,
but, nevertheless, I am going to hopefully wrap this up.
Let me, first of all, say that the energy problems and the
gasoline prices are not restricted to the areas that have been
discussed. All across the country, gas prices are higher than
they ought to be.
In Indianapolis, where we do not have the problems that we
have talked about, my son-in-law went to get gas for his SUV
the other day. It normally cost him about $28 or $30, and it
cost him almost $50 to fill up his tank. So the hue and cry
that you hear is not just coming from Chicago or Wisconsin or
from those other areas. It is coming from all over the place,
and there needs to be a very thorough review of all of this,
not just because of the ethanol issue, but because of the
exorbitant prices that are being charged for gasoline across
the Nation right now and we need to check that out.
I want to talk to you, Secretary Richardson, about another
issue, a year ago. I am not here to try to beat up on you. I
have seen some of your television interviewers, and I have
watched you undergo some difficult times. So it is not my
purpose to do that, but I do want to go over a few things with
you about Los Alamos.
A year ago this week, you were in my office and we talked
about the previous espionage that took place and whether or not
the Chinese had certain secrets that we believe they have and
how that investigation was going on. You urged me not to hold
hearings about certain parts of that because you were concerned
that we might be giving away national security information if
we did that. You assured me, and assured others, that we were
not going to have any more problems, that you were going to go
in there and clean that up.
I got to tell you, the thing that concerns me is the
Chinese have the largest standing army in the world. They are
buying submarines. They are buying everything that you can
think of in the area of military equipment, from the Soviets
and every place else, and I think they are going to be a major
threat to the United States at some point. I really believe
that. Now they have stolen a lot of our nuclear secrets, maybe
all of them. They now have the ability to have a mobile-
launched ICBM with 10 W-88 warheads, and we could not even use
the term ``W-88'' a year ago because it was so top secret. I
worry about my kids and my grandkids and your kids and your
grandkids, and I am sure you share that.
But the thing that I am concerned about is that we still
have lax security at Los Alamos. Now, I cannot go into some of
the details that I have learned from the FBI today about how
those hard drives were obtained and why the security was so
lax, but what I wanted to ask you is--there is the bell. What I
wanted to ask you is why in the world did that happen and what
is going to be done to make sure that this never happens again
because you assured us a year ago that that was going to be
stopped, and there were not proper procedures at Los Alamos
where those hard drives were.
Mrs. Biggert. Yes.
Mr. Richardson. Congressman, first, I appreciate the very
constructive way you have framed the issue in the question.
I am going to get to the bottom of this. What obviously
happened at Los Alamos after 21 massive security improvements
and 36 counter-intelligence improvements, including polygraphs
and more guards at Los Alamos and gates and making sure that
cyber security, computer security, you could not transfer, and
just stand down. I stood down all those labs. In other words,
you cannot do anything except undertake security training. That
we had this problem, it is inexcusable. It is wrong. I am
getting to the bottom of it.
You mentioned that the FBI right now is undertaking an
investigation. The good news is that the hard drives were
found. Their----
Mr. Burton. Let me interrupt you there. I cannot go into
the details about what was on those hard drives, and you cannot
either in a public forum, but the fact of the matter is it was
a real--it is a real problem for our national security. Those
hard drives and the way they got them out of there--and I am
not going to go into it, but you and I know the security
measures were taken. For somebody to take those out of there,
they had to do it for a reason. They just did not do it for
their health. And then to find them behind a copy machine would
indicate that they were trying to get them back as hastily as
possible. How do we have assurances that they were not copied
and given to the Chinese or to some other entity?
Mr. Richardson. Congressman, at this stage, I can
categorically state to you--and this is based on FBI
information--there is no evidence of espionage. There is no
evidence that they left that----
Mr. Burton. Is there any evidence that it was not
espionage?
Mr. Richardson. I think what is happening right now is
polygraphing. There is a focus on a few members of that team
that have made contradictory statements. You and I cannot go
into it here.
I will assure you that I will get to the bottom of this;
that we will take disciplinary action. We have already taken
additional procedures since then on encryption, on logging,
that should have happened before. I am reviewing the contract
of Los Alamos.
Mr. Burton. Mr. Secretary, Bill, my fellow Member, I had a
hearing in California. We had a Soviet former KGB and a GRU
agent in that said that there were nuclear devices that were
buried--possibly buried in the United States and 100 other
sites around the world--possibly. There have been two sites
that have been uncovered where equipment of the type they
talked about was buried in Europe, and they said that there
were numerous sites in the United States. One of the agents
said he surveyed a site in the Shenandoah Mountains.
The reason I am bringing that up is the information that
was at Los Alamos--and I am not going to go into what it was,
but the information could be detrimental to our national
security if nuclear devices have been buried and it has not
been proven that they are not buried here in the United States
right now.
The point I am trying to make is that is something that is
intolerable. The other things you did are great. The other
security improvements you made are great, but this is one that
was missed or overlooked. For what reason, I know not. We do
not have any evidence whatsoever that it was not taken by a
foreign entity.
So all I am saying is what steps are you taking now to make
sure this does not happen again if we do have any more secrets.
Mr. Richardson. I mentioned several measures. One, we are
encrypting this data so that this cannot occur again. Second,
some of those logging procedures have been established. We have
taken--you know, one of the problems, Congressman, is that I
put all these hugely tough measures, like polygraphing, and
civil libertarians, Asian-American groups, a lot of Members of
Congress, some of the scientists that I supervise went against
them.
Now, we are doing them, and it is happening, but I think,
if anything, one of the things that I wish I had done more,
despite all of these security experts and measures and
directives, is to deal with a culture. We are also changing the
combination to vaults. We are staffing the vaults. We are
putting alarm on vaults. We are putting serial numbers on
sensitive materials.
As you know, Congressman, you cannot change a security
classification of a document or a drive without making sure
there is inter-agency approval, and we are working on that,
too, but we are massively ordering increased security measures
for some of these encyclopedia data bases. We are going to get
to the bottom of this.
Mr. Burton. I know you have been involved in the political
realm over the past few months, and I can understand that, but
because of the significance of the threat to our national
security, are you going to devote all of your time to
correcting this measure?
Mr. Richardson. I have said publicly that my time right
now, this Los Alamos issue, oil prices, that is going to be a
large part, a majority part, full time.
Mr. Burton. I cannot tell you what to do. You were
appointed by the President of the United States, and I
understand the politics that are involved and I understand what
your commitments are, but I would just say this is of such
import that I would hope that you would devote more than just
the majority of your time. I would hope that you would devote
all of your time that is possible to making sure this is
cleared up.
Mr. Richardson. I will do that.
Mr. Burton. I will tell you, the people in the other body
and this body are really upset about the problems that have
occurred, and if you made that kind of a commitment, I think it
would take a lot of pressure off of you, rather than being out
there campaigning. I understand you want to do that, and you
can do that, but this is something of major significance and
should be given priority.
Mr. Richardson. Congressman, I made a pledge, and you saw
some of those news shows. My time will be focussed entirely on
these two issues.
Mr. Burton. All right. Without any further questions--do
you have any?
Mr. LaTourette. I do not have any further questions of this
panel, but if I have a unanimous consent request relative to
the third panel, if the Chair would entertain that.
Mr. Burton. I will entertain a unanimous consent request.
Mr. LaTourette. Mr. Chairman, the third panel has been
sitting here all day, specifically Mr. Red Cavaney and Mr. Eric
Vaughn, one from the American Petroleum Institute, the other
one from the Renewable Fuels Association. I would first ask
unanimous consent that the record reflect that they have been
here and are prepared to testify, and it is our schedule that
keeps them from doing that.
Mr. Burton. One of them has an anniversary today. Yes.
Mr. LaTourette. Then the second unanimous consent request
that I would make is any statement that they wish to have
before the committee in the record be accepted into the record
and that the committee in the future consider whether or not we
should have another hearing and invite them back to give their
views on what has been said today.
Mr. Burton. We will consider that.
[The prepared statements of Mr. Cavaney and Mr. Vaughn
follow:]
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Mr. LaTourette. Thank you.
Mr. Burton. We stand adjourned. Thank you very much.
[Whereupon, at 8:12 p.m., the committee was adjourned.]
[The prepared statements of Hon. Christopher Shays, Hon.
Henry A. Waxman, Hon. Benjamin A. Gilman, and additional
information submitted for the hearing record follow:]
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