[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 deg.
 
                  ANWR'S BENEFITS FOR SMALL BUSINESS
=======================================================================



                                HEARING

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                      WASHINGTON, DC, MAY 19, 2005

                               __________

                           Serial No. 109-16

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff
          Phil Eskeland, Deputy Chief of Staff/Policy Director
                  Michael Day, Minority Staff Director

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

W. TODD AKIN, Missouri Chairman      MADELEINE BORDALLO, Guam
MICHAEL SODREL, Indiana              ENI F. H. FALEOMAVAEGA, American 
LYNN WESTMORELAND, Georgia           Samoa
LOUIE GOHMERT, Texas                 DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York                  ED CASE, Hawaii
STEVE KING, Iowa                     LINDA SANCHEZ, California
TED POE, Texas                       GWEN MOORE, Wisconsin

                     Tom Bezas, Professional Staff

                                  (ii)























                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
King, Hon. Steve (IA-05), Congressman, US House of 
  Representatives................................................     2
Hood, Mr. Gerald, Government Affairs, Artic Power................     6
Wright, Ms. Karen, President/CEO, Ariel Corporation..............     8
Goodstein, Mr. Eban, Professor of Economics, Lewis and Clark 
  College........................................................     9

                                Appendix

Opening statements:
    Akin, Hon. W. Todd...........................................    21
Prepared statements:
    King, Hon. Steve (IA-05), Congressman, US House of 
      Representatives............................................    24
    Hood, Mr. Gerald, Government Affairs, Artic Power............    31
    Wright, Ms. Karen, President/CEO, Ariel Corporation..........    34
    Goodstein, Mr. Eban, Professor of Economics, Lewis and Clark 
      College....................................................    39

                                 (iii)






















                   ANWR'S BENEFITS FOR SMALL BUSINESS

                              ----------                              


                         THURSDAY, MAY 19, 2005

                   House of Representatives
    Subcommittee on Regulatory Reform and Oversight
                                Committee on Small Business
                                                     Washington, DC
    The Subcommittee met, pursuant to call, at 3:07 p.m., in 
Room 2360, Rayburn House Office Building, Hon. Todd Akin 
[Chairman of the Subcommittee] Presiding.
    Present: Representatives Akin, Westmoreland, and Bordallo.
    Chairman Akin. The hearing will come to order. This is a 
hearing on the subject of ANWR, and I believe that we are going 
to have a double panel situation with our first witness being 
my good friend Congressman Steve King. But let me start with a 
quick opening statement.
    I would like to extend a warm welcome to those that are 
here and have taken time out of their busy schedules to testify 
before this committee. First of all, we are here to discuss an 
issue which I think all of us recognizes as one of high 
importance, and it is important particularly not just to the 
oil and gas industry but the whole future of our country and 
our energy needs as a nation.
    We are going to be taking a look at the question of 
drilling in ANWR, and it is a sensitive topic for a variety of 
people and one that deserves to be considered with diligence 
and care. Now, opponents of this policy decry what they call 
the inevitable apocalyptic fallout of the environment.
    Yet, over the next 20 years, America's oil consumption will 
continue to rise even after increases in renewable energy 
supply and energy efficiencies are factored in. That is why 
safe and efficient drilling in ANWR is so essential. Today our 
witnesses have been asked to come to speak about this issue 
from an often overlooked perspective, that of business, 
particularly small business. The intent of the hearing is to 
illustrate the benefits ANWR will have on small business 
owners.
    There is no doubt that small business owners are leaders in 
innovation. They pay the majority of our nation's taxes, employ 
the majority of our nation's workforce, and more specifically, 
according to recent Bureau of Labor Statistics data, employees 
of small businesses in the oil and gas exploration industry 
average an income of $3,214.16 per month. This wage is higher 
than any other non-mining industry.
    Keeping this in mind, at current levels, U.S. crude oil 
production is expected to decline by 1.5 barrels a day by the 
year 2020. This drop in production translates directly to 
thousands of lost jobs in an industry that has already lost a 
half a million jobs over the last 10 years. Oil exploration in 
ANWR will revitalize this important industry, creating millions 
of dollars in opportunities for our small businesses, not just 
in Alaska but throughout the Nation.
    One of our guests today, Ms. Karen Wright, president and 
CEO of Ohio's Ariel Corporation, has travelled all this way to 
explain to us how manufacturing in the Midwest will get a much-
needed jolt from oil exploration.
    The subject of energy exploration in ANWR is not a new one. 
A segment of Alaska labeled 1002 was set aside by Congress in 
the Alaska National Interest Claims act of 1980 to study the 
feasibility and potential yield of production area; 1002 would 
only use 2,000 acres of ANWR's 1.5 acre coast line and could 
yield up to 700,000 jobs.
    My friend, Congressman Steve King, who has been very active 
in this issue, has offered to share some critical insights on 
our need to proceed with energy exploration as well as how to 
best go about it from a legislative standpoint.
    [Chairman Akin's opening statement may be found in the 
appendix.]
    Welcome, Steve.
    Mr. Gerry Hood is also in attendance today to explain what 
impact drilling in ANWR will have on the overall development of 
small business domestically, the opportunities small 
businessmen have been able to take advantage of as a result of 
projects under way in Prudhoe Bay, the Nation's largest energy 
complex.
    Professor Eban Goodstein of Lewis and Clark College has 
come here from Portland, Oregon, to discuss certain economic 
ramifications that he feels should be taken into account when 
discussing this important issue.
    Witnesses, I thank you for coming.
    Before we get started, I would just like to greet my 
colleague, Ranking Member Ms. Bordallo of Guam who is, I am 
told, on her way immediately, and we will have her make a 
comment. But we like to keep things moving here.
    So in her absence, also, Congressman Westmoreland, thank 
you for being here because, if you weren't here, we couldn't 
get started. I like to keep the hearings moving.
    Chairman Akin. So let us go directly to our witness, Steve, 
welcome. We are eager to hear what you have to share with us. 
Thank you.

  STATEMENT OF THE HONORABLE STEVE KING (IA-05), US HOUSE OF 
                        REPRESENTATIVES

    Mr. King. Thank you, Mr. Chairman, I appreciate you holding 
this hearing today, you and Ranking Member Bordallo and the 
gentleman from Georgia. As I listen to your opening comments, a 
lot of things about energy raced through my mind. I would ask 
also unanimous consent to revise and extend my remarks and 
enter those into the record.Chairman Akin. So ordered.
    Mr. King. Thank you. That will allow me then to maybe flow 
a little more freely about some of the things that I think are 
important with regard to ANWR.
    My involvement, first, I represent Iowa's Fifth 
Congressional District. It is the western third of Iowa. We 
sell--we are fourth in the Nation of Congressional districts on 
the value of agricultural products sold. Yet we sell large 
commodities, so we are producing a lot of agriculture.
    Natural gas costs are killing us there. We get beat up on 
both ends, because it is an input cost. It is a grain-drying 
cost, and it is a harvesting cost, et cetera, both gas, diesel 
and natural gas, or all three of those. So it is essential to 
us. We also produce ethanol and biodiesel on it. We are an 
energy export center from that perspective. We have a lot of 
wind energy up, about 359 huge wind chargers are right here 
where I live. So we are not proprietary on energy.
    My point is that there is a huge energy pie out there that 
is comprised of crude oil, natural gas, wind energy, 
hydroelectric, ethanol, biodiesel, go right on down the line. 
What we need to do is continue to increase the size of that pie 
so that the overall energy supply is greater. When we do that, 
then, we can slowly increase in cost or actually diminish the 
cost of all of our energy which is a component of everything 
that we sell.
    Well, I got involved in ANWR from this perspective: Back in 
1970, I was signed up to go up to Alaska to be one of the first 
people working there in the North Slope area of Alaska. I was 
signed up with a company at that time named Green & Grossbeck. 
We had 600 miles of right away from Fairbanks north.
    Well, I planned everything to do that, adjusted my life 
schedule to do that, and I got poised to go up there into the 
frozen north land and make some of the best wages ever known to 
the construction business for a worker, but a court injunction 
was slapped on that project of developing North Slope. So it 
was lifted 2 years later, and 2 years later was a different 
type of requirement for my life, and so I didn't go.
    Yet I always watched Alaska. I watched that energy supply. 
I watched that pipeline supply be built. I watched those 
tankers go out of Valdez. I watched what happened to our 
overall energy supply in the North American continent because 
we had the courage and the vision to go up and address the 
North Slope issue of Alaska.
    It supplied a lot of oil and built a pipeline, a pipeline 
today, if it is left to go dry, will erode on the inside of it 
and may not be salvageable if it sits empty for a period of 
time.
    I went up to ANWR a year ago last August, thinking I was 
going to see the Arctic National Wildlife Refuge. I thought, 
when we flew across that 1.5 acres of coastal plain, that you 
had spoken to in your opening remarks, that I would see vast 
herds of caribou and pristine alpine Forests. But what I saw 
was, long before we ever got to the coastal plain, we had seen 
our last tree.
    The definition of the Arctic Circle is a line north in 
which trees do not grow. So when those commercials say, don't 
disturb a pristine alpine forest, that is not a problem. There 
is not a single tree in that entire coastal plain, not enough 
for a lath or a picket fence. There is not a single resident 
caribou on the coastal plain at ANWR, not a single resident 
caribou, not one.
    There is a herd that comes in from Canada about thefirst 
part of May until about the middle of June. They have their 
calves over there in the ANWR region, and then they leave and 
go back--
    Chairman Akin. Mr. King, I don't want to interrupt you, but 
you might want to know you have amendment on the Floor. So if 
you would like to scoot and do that, we will try to fit you 
back in. It is up to you, but we have a message you are 
probably needed on the Floor.
    Mr. King. Mr. Chairman, in order to keepin the good graces 
of my wonderful staff, as you would do, I appreciate the 
opportunity to have a moment, and I will come right back.
    Chairman Akin. We will have you right back and give our 
ranking member a chance to give her opening statement. We will 
fit everything in and still get it all done in time.
    Mr. King. Thank you.
    [The Honorable King's statement may be found in the 
appendix.]
    Ms. Bordallo. Thank you very much, Mr. Chairman, I 
apologize for being late, but I was down on the Floor as well.
    I want to thank you, Mr. Chairman, for calling a hearing 
today on the issue of oil and natural gas extraction and 
development in the Arctic National Wildlife Refuge, ANWR. 
Issues surrounding the development of ANWR transcend 
traditional public policy jurisdictions as legislation to 
permit drilling in ANWR will have far-reaching consequences in 
terms of energy trade, the environment, foreign policy and 
national defense.
    I am pleased that our chairman here has taken pains in 
organizing today's hearing in order that we may thoroughly 
investigate the specific consequences for small businesses of 
enacting legislation to permit ANWR development.
    For the record, I have voted in favor of allowing natural 
gas and oil exploration and extraction in ANWR during 
consideration by the House Resources Committee of the energy 
bill.
    However, this was not an easy decision for me. In reviewing 
the many competing facets of this debate, I decided to join a 
congressional delegation to visit ANWR in order that I might 
meet the people living in the region and hear firsthand their 
views on development of the coastal plain.
    I learned that they are generally supportive of oil and gas 
extraction in the region for reasons of local self-
determination and local economic development. They dreamed that 
the economic infusion of oil and gas extraction will translate 
into jobs, education for their children.
    In fact, I remember one that came to a public hearing said, 
I would like to see my granddaughter go to Harvard, and the 
opportunity for the development of presumably small local 
businesses that would serve as mainstays of the development of 
their communities. Therefore, despite my many concerns about 
the environmental impact of ANWR drilling, I have lent my 
support to this initiative.
    There are parallels between the desires of Alaskan natives 
and the sentiments of the people of my home district in Guam. 
Most of Guam's economic development was made possible by years 
of Federal investment, supporting military installations.
    The ability to provide support services to the military has 
translated into economic opportunities for our locals in Guam. 
Local entrepreneurs have developed numerous small businesses in 
areas such as waste management, construction, transportation, 
housing, banking, insurance, retail and other industries to 
support the military infrastructure. The result has been the 
opportunity to retain wealth on the island for continued 
development of other industries and the accrual of economic 
benefits to local entrepreneurs who, in turn, provide jobs and 
contribute revenues for public services.
    I want to stress, however, that the benefits of economic 
growth will not automatically accrue to local residents if 
strategic plans do not prioritize the development of and the 
support of locally-owned small businesses. Today's witnesses 
will largely focus can on potential small business gains at the 
macro-economic level, and I am hopeful that energy development 
in ANWR will yield benefits that will be felt throughout the 
Nation.
    However, national small business growth and national energy 
policy are abstract in the context of local economic 
development, and I hope to learn from today's witnesses about 
how economic benefits of drilling in ANWR will be used to allow 
residents of these villages in Alaska to develop economically 
sustainable communities and how developing local small 
businesses will fit into the larger plan. Thank you, Mr. 
Chairman.
    Chairman Akin. Thank you, Ms. Bordallo. That was eloquent, 
very well done.
    I think what we will do now, since Steve is over on the 
Floor working an amendment there, that we will just go ahead 
and call our second panel.
    Gerald Hood, Karen Wright and Eban Goodstein, please have a 
seat. Okay.
    Gerald, who heads Government Affairs with Arctic Power's 
office in Washington D.C.--what we usually do in terms of these 
hearings, we try to start off with--I will give each of you a 
chance to make a 5-minute opening statement. If you want to 
submit written comments for the record, you can do that. So if 
you want to be just more relaxed-- I prefer to run it--it is 
not like we have thousands and thousands and thousands of 
people in here. I like to run it a little bit more like a 
conversation, but we try to keep more or less at 5. That is 
what that little box is. It turns red when you have run out of 
your 5 minutes.
    What we will do is come back and try to do some 
interacting. I will ask some questions. If I can, I usually 
like to wrap these things up within an hour of when we start. 
So it should be fairly quick.
    Obviously, the material that you are giving us is being 
distributed to other members of the committee. It is actually 
public record and everything. So this has some influence in the 
way the course of decisions are made down here. We are so 
thankful for your taking time, especially coming all the way 
from the West Coast, to join with us.
    Chairman Akin. I think we will just go ahead and start 
with--is it Gerald or Gerry?
    Mr. Hood. I like Gerry.
    Chairman Akin. Gerry Hood, please go ahead and share with 
us.

             STATEMENT OF GERALD HOOD, ARTIC POWER

    Mr. Hood. Thank you, Mr. Chairman, Ranking Member Bordallo 
and the gentleman from Georgia. I appreciate the opportunity to 
come here today and the development of ANWR and how it affects 
small business. I expect considerable time educating the 
members of Congress and the general public about the positive 
aspects of opening ANWR, and I appreciate the opportunity to 
focus today on small business.
    America's 23 million small businesses employ over 50 
percent of the Nation's private workforce, generate more than 
half of the Nation's gross domestic product and are the 
principal source of new jobs in our economy, according to the 
Small Business Association.
    These small businesses must have a stable, reliable source 
of energy to fuel their continued success and contribution to 
our economy. The surge in oil and gas prices has tremendously 
impacted America's small businesses.
    Senator Stevens from my home State of Alaska reported on 
the Floor of the Senate last year, for every $0.01 increase at 
the gasoline pump, we lose $1 billion in consumer spending. A 
recent poll conducted by the International Profit Association 
found that over 66 percent of small businesses are feeling the 
impact of rising fuel costs.
    Gregg Steinberg, President of International Profit 
Associates said, and I quote, "small business owners and 
managers are caught in an environment where costs are 
escalating and margins are being squeezed." this situation is 
forcing small business owners to decide between passing on 
their increased costs to the customers, absorbing them or 
cutting jobs.
    Kenny Crenshaw, owner of a small lawn-care company in 
Memphis, Tennessee, recently told MSNBC that the spike in gas 
prices has--and I quote him--"put pressure on everyone to raise 
prices for everything. If there is a 20 percent price increase 
and 10 percent of our customers leave us, we are going to have 
to lay somebody off."
    Well, the United States is vulnerable. Declining domestic 
production coupled with decreasing dependence on foreign 
sources of oil, especially from a region of the world that is 
hostile to U.S. interests, is leaving Americans and American 
businesses defenseless against higher fuel prices. They are 
threatening American jobs, and it is costing the United States 
economy.
    Small business owners are feeling the brunt of this as 
their costs go up and the consumer spending goes down. 
Increasing domestic oil production through responsible ANWR 
development is one component of a commonsense approach to this 
problem.
    Although economists vary in opinion on the degree to which 
ANWR development will affect the price of oil, it is more than 
reasonable to assert that increasing domestic production will 
ease our energy crisis and the burden that it has placed on 
small businesses. The mean estimate of recoverable oil in ANWR 
is 10.4 billion barrels, none of which, under the proposed 
legislation, will be exported. That is more than twice the 
proven reserves in all of Texas, nearly half of the United 
States proven reserves of 22 barrels and represents a 20 
percent increase in domestic production by the year 2025.
    New technology will allow us to produce ANWR's 10.4 million 
barrels from just 2,000 acres of the 19.6-acre refuge. That is 
just one-tenth of 1 percent of the entire refuge. While 
minimizing environmental impact, responsible development in 
ANWR will create hundreds of thousands of new jobs for 
Americans in every State of the Nation. It will generate 
billions of dollars in revenue.
    A job study conducted by the Wharton Economic Institute at 
the University of Pennsylvania concluded that ANWR development 
will create 735,000 jobs nationwide. It also forecasts where 
those jobs would be created and calculated, for example, that 
14,100 new jobs will be created in Missouri; 15,500 in Indiana; 
18,000 in Georgia; 60,000 in Texas; and 48,000 in New York. 
This study has been criticized as being overly optimistic, as 
it has assumed a price of $40 a barrel at a time when oil was 
running under $20.
    However, based on current prices hovering around $50 a 
barrel, the study's findings are more relevant today than ever. 
Moreover, it should be noted that the study was conducted under 
the assumptions of 1990s recovery technology. Since that time, 
advances in Arctic technology have reduced the cost to 
producing a barrel of oil and increased the amount of 
technically and economically recoverable oil. Given those 
facts, the study's conclusion on the number of jobs that ANWR 
development would create seems to be not only relevant but 
conservative.
    In addition, between 1997 and 1994, the oil industry spent 
roughly $60 billion throughout the United States on the 
products and services required to bring that oil to market. 
Literally, thousands of small businesses across the country 
benefitted from this consumer spending.
    For example, Mr. Chairman, small business shared in the 
roughly $203 million spent in Missouri; over $15 billion in 
Texas; $1.5 billion in New York; and $236 million in Georgia.
    Mr. Chairman, oil fuels America's small businesses and 
small businesses in turn fuel our economy and employs over half 
of the country's private workforce. Everything we can do we 
must do to ensure their growth and success.
    Chairman Akin. We are about out of time here.
    Mr. Hood. In closing, if I could just have 10 seconds, 
more, sir.
    ANWR development will not only enhance our energy security 
and affordability, it will create jobs for Americans and yield 
America's small business billions of dollars in consumer 
spending. Thank you.
    [Mr. Hood's statement may be found in the appendix.]
    Chairman Akin. Thank you very much. You had some 
interesting statistics. I am sure they will come back up in 
some of the questions and discussion.
    Now we have Karen Wright, President and CEO of Ariel 
Corporation, Mount Vernon, Ohio.
    Welcome.

          STATEMENT OF KAREN WRIGHT, ARIEL CORPORATION

    Ms. Wright. I am glad you corrected the name. It is Ariel, 
and it was named after my dad's Ariel Square motorcycle. Our 
company is a small business.
    Chairman Akin. If you could just slide the mike a little 
closer. Thank you.
    Ms. Wright. Is that better?
    Chairman Akin. I think so. Is it on?
    Ms. Wright. I think so, yes. My company employs about 700 
people. We are in a small town in the center of Ohio. We 
manufacture natural gas compressors, which is a capital good. 
You will never buy one, probably. We are the largest 
manufacturer of this type of compressor in the world. We are a 
small private family business, started by my father in our 
basement in 1966.
    So I am the second-generation owner and president of the 
company, and I am grooming my four sons to succeed me 
eventually, I hope. So, consequently, I have a pretty good 
perspective on family businesses, manufacturing, the oil and 
gas industry, which we are right in the heart of, and also 
motherhood, not necessarily in that order.
    That being said, I have been involved in this business for 
about 26 years, and I can say with a lot of certainty that we 
are a patriotic business, both manufacturing and the oil and 
gas industry.
    Oil, which is kind of the thing that everybody talks about 
as regards to ANWR, is not the only thing that is there. There 
is also a great deal of natural gas.
    The interesting thing about natural gas is it is not a 
global commodity. It is a regional commodity; 96 percent of the 
gas consumed in the United States is produced here in Canada 
and in the United States.
    Even if all of the blockades are removed for LNG, which you 
see a lot of stuff about, even if all of those blockades are 
removed, only about 10 percent maybe could be produced by about 
2010. So that isn't something that we can count on to supply 
the gas needed for heating homes, generating electricity, 
agricultural and industrial feedstock, steel production and, 
more importantly, the military equipment that is needed to 
maintain our strength in the Nation, manufactured here, and 
maintain our strength as the peacekeeper of the world.
    It is really up to our industry to meet the increased 
demands for a growing vibrant economy. In short, it is 
important that we make sure America doesn't run out. It has to 
come from here. We don't get much thanks for that. We are on a 
roller coaster with regard to price and profit margins. The 
public perception of our industry is that we don't care about 
the environment. While we are at it, if you look at the media 
representation of our industry, the average American thinks 
that oil and gas and manufacturing are dirty, rotten, dishonest 
and insensitive.
    I beg to differ. The public doesn't realize that hundreds 
of thousands of people, as Gerry pointed out, are employed in 
the oil and gas industry right here in America.
    These jobs cannot be exported overseas. They are not going 
to go to China. The public doesn't realize that the strength of 
the American economy rests on our shoulders, First, energy and 
then manufacturing. The two go hand in hand.
    The public doesn't realize that American manufacturing 
alone, if it were a country, would be the fifth largest economy 
in the world. Over 14 million people are employed in 
manufacturing with about 40 million people directly affected, 
if you count their families, so a lot of people. That is 14 
percent of the population.
    Manufacturing contributes about 13 percent to the GDP. But 
the energy industry--and without us, the manufacturing that it 
supports, there wouldn't be a service economy, because there 
would be nobody to provide service to.
    The other thing that I think people fail to realize is that 
we live here, too. We are concerned about the environment. We 
do care about ANWR and other places in this Nation. We don't 
want to see it ruined either.
    I think the great thing that has happened today is that 
technology has caught up with conscience. We can produce the 
natural gas that is required and the oil that is required for 
our manufacturing and for our whole Nation's strength without 
damaging the environment. The technology available today allows 
us to act in good conscience. I think we can be like the Boy 
Scouts. We can leave it like we found it or better.
    This applies to ANWR and is really probably the most 
important factor in my mind. We can only develop it if we make 
sure that we set the rules out and make sure that it stays 
pristine. We need to take care of it. But I think that that is 
possible today.
    I see that I am running out of time. So I will skip a few 
pages, and I will just go to the end.
    I think the most important thing today is that energy is 
the base of our economy. It is absolutely essential, especially 
natural gas. We have to produce it here. We are not going to be 
able to get it anywhere else. We probably are not going to be 
independent, as far as oil production is concerned, but 
certainly this will make a big difference. And it is affordable 
energy. It is critical to our Nation's strength across the 
board.
    So I think ANWR is just part of that, but we also need to 
open up the continental shelves. We need to open the Rockies. 
We need to start producing and turn this industry loose, let it 
do what it does well but set the rules. Okay. Sorry.
    [Ms. Wright's statement may be found in the appendix.]
    Chairman Akin. Thank you very much.
    Both of you have raised a lot of very interesting points 
and questions. It is clear that you are well prepared. We just 
appreciate your coming.
    Last but not least is Eban Goodstein.
    You are a Professor of Economics, I believe, at Lewis & 
Clark College, Portland, Oregon.
    Mr. Goodstein. That is correct.
    Chairman Akin. Proceed, please.

      STATEMENT OF EBAN GOODSTEIN, LEWIS AND CLARK COLLEGE

    Mr. Goodstein. I thank you for the opportunity to testify 
today. I am a economics professor. I teach natural resource 
economics and am author of a widely-used college textbook, 
Economics and the Environment, as well as another book and a 
number of articles related to energy policy and the 
environment.
     Small businesses are particularly vulnerable to oil price 
increases like the doubling we have seen this past year, both 
because of the direct bottom line impact but also because of 
the macro-economic slowdown that major price shocks can create. 
I want to emphasize one point today on which economists agree: 
This vulnerability does not have anything to do with our 
dependency on oil imports, but instead depends on our overall 
economic dependence on oil, whether that oil is imported or 
domestic.
    Given this economic fact, Arctic Refuge development will do 
nothing to reduce the exposure of small businesses to high and 
volatile world oil prices. In addition, it will not create many 
jobs outside of Alaska. Instead, small business would be better 
served by policies that reduce the oil intensity of the 
economy, win/win solutions that would improve energy security 
for businesses, create jobs and save consumers money to spend 
on domestic goods.
    I would like to make five quick points. First, quoting the 
Energy Information Administration,"The impact on world oil 
prices of ANWR is not expected to be significant." in their 
optimistic scenario, the EIA projects a price decline of $0.30 
per barrel--that is not per gallon--a less than 1 percent price 
decline.
    More likely, OPEC will respond to any increase in Arctic 
production capacity with a slight decrease in their own rate of 
field development, and as a result, there will be no noticeable 
effect on world oil supply or prices.
    Second point, since the 1970s, the U.S. economy has become 
much less petroleum intensive and is, as a result, much less 
sensitive to oil price shocks. Most noticeable is that, in 
spite of price increases of around $4 a barrel during 2000 to 
2002, the economy rebounded solidly out of the 2000 recession.
    It wasn't until the dramatic price increases last year, 
near doubling, that analysts have begun to pin negative macro 
effects on rising oil prices. So any small reduction in world 
oil prices from refuge development will thus have no noticeable 
effect on job creation from accelerated national growth.
    Third point, as the past year has shown, the U.S. economy 
does remain vulnerable to large and sudden increases in world 
oil prices. However, because this vulnerability depends on 
overall consumption of oil and not the percentage of oil that 
we import, there is simply no economic security argument to be 
made in favor of Arctic oil development.
    Fourth point, oil development in the Arctic will likely 
create U.S. jobs as a result of the increase in aggregate 
demand from the expenditure on oil field development and, some 
years later, from a reduction in oil imports. A likely increase 
in jobs nationwide would be around 40,000 to 50,000 jobs. A 
large percentage of these jobs will be in Alaska. To put that 
number in perspective, for the past 15 months, the economy has 
been adding about 140 jobs every month.
    Last point, unlike Arctic Refuge oil development, reducing 
overall petroleum dependence would create jobs and help protect 
small businesses from damaging oil price volatility. As one 
example, if the trend in fuel efficiency improvements that were 
seen in this country from 1978 to 1988 had continued instead of 
actually reversing, then the average small business owner would 
today be experiencing a greater than 50 percent savings on his 
or her gasoline bill. Improving vehicle efficiency by 3 miles 
per gallon would reduce oil imports and provide the same 
addition to U.S. aggregate demand as development of Arctic 
Refuge oil with the same small positive impact on jobs. It 
would also provide valuable insurance against sudden oil price 
increases.
    Finally, the National Academy of Sciences has recently 
concluded that much larger improvements in fuel efficiency than 
3 miles per gallon can be achieved with no net cost to 
consumers since increased up-front vehicle costs would be 
offset by fuel savings.
    Bottom line, over the next 45 years, the U.S. will consume 
almost 500 barrels of oil. That is half a trillion barrels of 
oil. The Arctic Refuge is thought to contain about 1 percent of 
that.
    Overall, dependency is a reality that we cannot drill our 
way out from under. Ultimately, we can only escape dependence 
on foreign energy sources by reducing our overall economic 
dependence on oil. Small businesses remain vulnerable to oil 
price shocks.
    Our oil dollars are fueling terrorist activities in the 
Middle East, and oil combustion is a leading cause of global 
warning, which in my State and throughout much of the West 
threatens to wipe out around half of the water flow in our 
streams and rivers by mid-century with huge impacts on farms 
and small businesses in rural areas. Development of Arctic 
Refuge oil fails to address these costs of petroleum dependence 
for small businesses and offers only very small increases in 
actual employment.
    Thank you for the opportunity to talk today.
    [Mr. Goodstein's statement may be found in the appendix.]
    Chairman Akin. Thank you very much.
    Well, we have got enough information to start a pretty good 
debate, I would think, already. I am going to allow us to hear 
from Congressman Westmoreland. If you would like to start with 
a question, and you have had a chance to make a statement. I 
will let you go next, and then I will follow up.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    Mr. Hood--by the way, thank you, Mr. Chairman, for having 
this hearing.
    I have often wondered at the impact that the drilling would 
have on small business and especially Georgia--and I couldn't 
figure out how we could work that out to get some business down 
that way. But you mention in your testimony, it is about 18,000 
jobs, I believe, and about $236 million. Exactly where are 
those jobs going to be created?
    Mr. Hood. From vendors that supply the industry that brings 
that oil to market in various forms, those northbound, by the 
way, Congressman, come from actual vendor lists from the period 
that I mentioned, from the major oil producers on the North 
Slope of Alaska, where they actually spent those dollars. So 
that is a pretty hard dollar figure that was spent in the State 
of Georgia during that period of time. So it is industries and 
small businesses in your State that provide services and 
materials that we use on the North Slope of Alaska to bring 
that oil to market.
    Mr. Westmoreland. Thank you.
    Ms. Wright, I want to thank you. I read your--I guess the 
history of your company and your dad was--is he still alive?
    Ms. Wright. Yes.
    Mr. Westmoreland. That is a real tribute to the 
entrepreneurial spirit. I loved the way he named things, so 
that was a good thing.
    Mr. Goodstein, just one comment to you. I don't know, you 
know, I am not going to doubt your statistics or anything that 
you have got. I think they are quite different from what the 
other two people in the panel have. But the one thing I will 
tell you about being an American is that I will be proud to be 
burning some American oil and not having to be so dependent on 
foreign oil. If even just a little bit, at least I will know 
that it is coming from American soil and that we are doing 
something. It is a starting point to solve some of our energy 
problems.
    Thank you, Mr. Chairman.
    Chairman Akin. Thank you.
    Anybody want to respond or answer? As I said, I like to run 
things a little more as a discussion. We have a few minutes 
here.
    Mr. Goodstein. I could respond to the issue about the jobs 
in Georgia. Those jobs that came from the Wharton--the WEFA 
study. Most of those jobs were not jobs that were direct 
spending from the oil industry. The WEFA study gets all that 
three-quarters of a million jobs estimate by asserting that 
Arctic oil would dramatically reduce the price of world oil 
which would lead to more rapid economic growth and which would 
generate jobs throughout the country. That is inconsistent with 
what serious economists think about the impact of Arctic oil.
    Chairman Akin. We are just getting started. Obviously, some 
of the testimony wasn't agreeing with each other, so that is 
interesting to hear how that comes across.
    Ms. Bordallo.
    Ms. Bordallo. Thank you, Mr. Chairman.
    I enjoyed all the testimonies of our witnesses today, and 
it is a real insight to some of the statistics that were 
provided us. I guess we are all on the same line when it comes 
to job gains. We all have numbers there. They just are in such 
a wide disparity.
    Mr. Hood, you said 750,000, right?
    Mr. Hood. Thirty-five, 735,000.
    Ms. Bordallo. Dr. Goodstein, you said anywhere from 40,000 
to 50,000. That is quite a disparity.
    Are we sure we are all correct on these statistics? I mean, 
even if you should take in--besides the--I think you said 
associated jobs that come with the industry and so forth. But 
that is still a disparity. Do you have a comment on that?
    Mr. Goodstein. Yes. The study that Mr. Hood referenced, the 
WEFA study, was done in 1991, funded by the American Petroleum 
Institute. It generates these very large job estimates by 
asserting that there will be a bigger-than-expected find of oil 
in the Arctic, but primarily by asserting that that increase in 
oil will drive world oil prices down a lot, about 5 to 10 times 
as much as the government estimates in the recent Energy 
Information Administration study. So that is sort of step one 
in why those numbers are wrong.
    Step two is that it asserts that declines in oil prices 
generate sort of dramatic increases in economic growth, and 
that is how you get all these jobs.
    I mean, what we are saying here is that, somehow, 
development of a couple of thousand of acres of Alaska 
wilderness is going to create enough jobs to employ not only 
everybody in the State of Alaska but everybody in the State of 
Delaware.
    It is difficult to see how that could happen, unless you 
tell a story about how it is going to have dramatic increases, 
impacts on U.S. national growth. But both because there is not 
going to be any impact on world oil prices that will be 
noticeable; and, second, these prices, these days, the U.S. 
economy is very sensitive to declines in oil prices. We need to 
be focusing on the direct job creation associated with the oil 
expenditure by the oil industry of a few billions of dollars by 
oil development.
    Ms. Bordallo. Thank you, Doctor.
    Mr. Hood, would you like to comment?
    Mr. Hood. I do have a comment, Mr. Chairman, Ranking Member 
Bordallo. I am glad today we have made a little bit of history. 
The fact that we may disagree on jobs numbers from our 
perspective--
    Ms. Bordallo. But we all agree on jobs.
    Mr. Hood. But we have agreed now, for the first time, I 
think, that we will only impact 2,000 acres in the coastal 
plain.
    Ms. Bordallo. Thank you very much.
    I have another question for you, Mr. Hood. I assume that 
your company would have much to gain from ANWR drilling, and I 
also assume that, as an Alaskan-based businessman, you will 
make sure that the people of Kaktovik and other villages around 
the ANWR coastal plain would share in the benefits.
    What will you do to help these people develop locally-owned 
enterprises that will share in the economic benefits of 
extraction and set these communities on the path to long-term 
economic sustainability?
    Mr. Hood. First of all, Mr. Chairman and Ranking Member 
Bordallo, Arctic Power is a broadbased citizens group that, if 
the Congress opens ANWR, will be out of business. Our job will 
be finished. We will have accomplished our goal. So there is no 
advantage in a business sense for Arctic Power, because we are 
just an advocate on this issue.
    One of the things that all of Alaskans have fought for is 
the inclusion of the Inupiat Eskimos, who are directly affected 
by this development, to have input on what occurs from an 
environmental perspective and from their subsistence lifestyle 
perspective.
    You know, they don't have a 7-Eleven or a Safeway store to 
run to get supplies. They live off that land. They hunt the 
caribou. They hunt the whale. They fish for the salmon. They 
harvest the waterfowl eggs.
    And if they thought for a minute that that subsistence 
lifestyle was going to be harmed or damaged and harm their 
culture in any way, they would not be as supportive as they 
are, and they are supportive. They are the only people that 
live inside the boundaries of the Arctic National Wildlife 
Refuge.
    Section 1002 is not a part of the refuge. It is not 
wilderness. It is an area in that land that was set aside in 
ANILCA for future exploration and potential development for 
hydrocarbon resources. That is a misnomer that a lot of people 
think, that we are going into a wilderness area to drill for 
oil. That is, in fact, not the case.
    The Inupiats, through ANILCA, and the other natives of 
Alaska, through that legislation, have created corporations, as 
opposed to the reservation style that Native-born Americans in 
the lower 48 live under. They have developed native 
corporations, which are small to medium to large businesses 
that have benefitted from the oil development on the North 
Slope of Alaska.
    They intend to be a large part of the ANWR development in 
two ways, in a business sense to enhance their business 
opportunities, and also to make sure that that land is 
protected forever. They were the environmental stewards of that 
land for thousands of years before we all came up and 
discovered oil.
    Ms. Bordallo. Thank you, Mr. Hood. I will agree with you. 
When we were up there for the Resources public hearing, Mr. 
Chairman, one of the witnesses, he said that he had traveled 
300 miles on a snowmobile to get to the hearing. I know it is 
truly a wilderness up there. It is beautiful. I have never, 
ever experienced such beauty in my life.
    Ms. Wright, I agree with you. I think that, whatever we do, 
however this goes, that as long as we set up strict policy 
guidelines to protect the people there, we are in good shape.
    I have to agree with one of my colleagues here when he says 
that he feels very comfortable when he knows that drilling is 
coming from our country, and I feel the same way.
    Thank you. Mr. Chairman.
    Chairman Akin. Thank you.
    I thought there were some good comments and thoughts of a 
couple of different perspectives.
    The first thing is, I have had a chance to see where the 
American dollar goes after we buy Middle Eastern oil, because I 
was in Pakistan, and I heard about the madrasas schools where 
we are using American oil money to train terrorists, to 
destabilize Pakistan, or Pakistan has nuclear weapons. I have a 
son over in the Middle East. I understand that there are some 
supply-and-demand questions, costs of oil, how it affects jobs, 
everything, but, ultimately, funneling money into the pockets 
of terrorists is counterproductive. The greater our dependence 
on that source of oil is, the less we have flexibility in 
trying to deal with that. So that is a factor that I have had a 
chance to actually see where that money is going.
    Just a thought. In this committee, you are allowed to have 
questions and answer, and that is in the answer department.
    Changing the subject a little bit here, Karen, just from a 
technical point of view, my background is in engineering. I 
wasn't much of an engineer, or they wouldn't have let me in 
politics. But you said that there was a lot of natural gas in 
ANWR. Is that something that is also piped, just like the oil 
would be, or is that something that has to be impressed and 
shipped, or how is that transported?
    Ms. Wright. There are the--this whole country is a grid of 
natural gas pipelines; 55 percent of the households are heated 
by natural gas, and that comes through pipelines.
    So, yes, it could be put through a pipeline to bring it to 
Canada, for example, because there are pipelines then coming 
from Canada to the United States. So that would be--
    Chairman Akin. I think of that like an electrical grid, or 
isn't there a penalty for the farther you have to move it?
    Ms. Wright. No, that is what they use our impressers for, 
is to keep it.
    Chairman Akin. Move it a long ways is your point of view.
    Ms. Wright. Actually, this would be a great thing for us. 
But I think, you know, everybody keeps concentrating on the oil 
aspect. I think the natural gas part is really more important, 
because you cannot transport it very readily in tankers like 
you can oil.
     LNG, which is liquid natural gas, each one of those ships 
costs about $500 million. Nobody wants a terminal in their 
backyard. You know, we could put them in California on the 
various coasts and so on--
    Chairman Akin. Let me interrupt a little bit. LNG is 
chemically a little different than natural gas, right?
    Ms. Wright. No, it is just liquid natural gas that has been 
cooled.
    Chairman Akin. Super cooled.
    Ms. Wright. Super cooled, and then they keep it in liquid 
form because gas, natural gas, is a gas.
    Chairman Akin. You run it down a pipeline. You compress it, 
but you don't super cool it?
    Ms. Wright. Right, it is cooled.
    Chairman Akin. It is still a gas.
    Ms. Wright. It is still a gas, but it is compressed so it 
moves through a pipeline. Those pipelines are everywhere.
    Chairman Akin. Are there natural gas pipelines already 
coming through Alaska, or is that all oil?
    Ms. Wright. No. There are already natural gas pipelines.
    Chairman Akin. All oil--
    Ms. Wright. Yes. May I ask--no, there aren't. It is just 
oil?
    Mr. Hood. If I might just interject, Mr. Chairman, a couple 
of points. Number one, existing reserves of natural gas in 
Alaska is about 35 cubic feet of known reserves today. When you 
take into consideration what may be mixed with the oil in ANWR 
and also NPRA, the estimates are that we have about 155 
trillion cubic feet, 155 trillion cubic feet of natural gas on 
the North Slope of Alaska.
    Congress, in the last Congress, authorized incentives for 
the construction of the Trans-Alaska Gas Pipeline, which has 
paved the way for the State of Alaska to negotiate with the 
industry on getting that gas pipeline built, which would, as 
Karen said, connect them under the current proposal to existing 
pipelines in Canada and distribute gas through existing 
pipelines in the lower 48 and distribute that gas throughout 
the country.
    So that project is on the table. And we thank the Congress, 
all of us from Alaska, thank you all for providing those 
incentives that allowed us to finally, after 30-some odd years 
to get that project started.
    Chairman Akin. So the project to move natural gas from the 
North Slope or from Alaska anyway down to the lower States is 
not complete yet?
    Mr. Hood. No.
    Chairman Akin. But you are building it.
    Mr. Hood. The process that we are in now is the State of 
Alaska, under Governor Murkowski, is negotiating with the 
industry to put together a package that is economically 
beneficial to both the producers and the State of Alaska to 
allow us to be able to bring that gas--
    Chairman Akin. It is in the planning stages, is what you 
are saying.
    Mr. Hood. Yes.
    Chairman Akin. So we don't have any real flow currently of 
natural gas from Alaska to the lower 48?
    Mr. Hood. No. But other than--
    Chairman Akin. Relatively, what, just to try and understand 
in boxcar numbers, are we talking about, just in terms of the 
numbers of BTUs? Is there more natural gas or is there more oil 
on the North Slope, or just our best guess?
    Mr. Hood. I don't have the technical expertise to be able 
to answer that.
    Chairman Akin. You don't have a feel for that?
    Mr. Hood. With regard to BTUs, no.
    Chairman Akin. Is it your sense there is more natural gas, 
or there is just more oil in general? Don't you have a feel for 
that either?
    Mr. Hood. I think you have apples and oranges with regard 
to the amounts. You have got between 5.6 billion barrels of oil 
in ANWR to 16 billion barrels--it is different sources of 
energy. I am not expert enough.
    Mr. Goodstein. Could I make a comment on this point?
    Chairman Akin. Sure.
    Mr. Goodstein. At the request of a member of Congress, I 
can't remember who it was, last year, the Energy Information 
Administration was asked whether developing the Arctic Refuge--
because it would open up the natural gas deposits there--would 
make the construction of a natural gas pipeline more 
economically feasible. They concluded not, because the 
exploration that is ongoing in the National Petroleum Reserve 
and around the Prudhoe Bay areas, which is sufficient to drive 
that project if that project is going to get driven.
    So they concluded that although there is potentially 
significant natural gas deposits in the refuge, from an 
economic point of view, they are not going to be developed 
quickly or soon. They don't have any impact on the pipeline.
    Chairman Akin. What was the reason for why they wouldn't be 
developed, because there is too much of it down south already?
    Mr. Goodstein. Elsewhere on the Arctic coastal plain, there 
is much more advanced exploration development. So people know 
where the stuff is and where we are coming from. So at this 
point, there is not a shortage of natural gas deposits up 
there. There is plenty of it. The question is just whether or 
not a pipeline makes sense economically at this point.
    Chairman Akin. Do the other two of you agree on that agree 
or disagree?
    Ms. Wright. I guess I don't know enough about it to do 
either.
    Chairman Akin. Fine.
    Mr. Hood. Mr. Chairman, the economic viability of the gas 
is what is being discussed now to determine whether it is 
economically feasible to build that pipeline.
    Chairman Akin. Right.
    Mr. Hood. Those are the discussions that are ongoing in the 
State of Alaska.
    Chairman Akin. Hasn't the price of natural gas gone up a 
lot?
    Ms. Wright. Yes.
    Mr. Hood. There is an extreme natural gas shortage in the 
lower 48.
    Chairman Akin. Would it ever make sense to use natural gas 
there to create fertilizer in Alaska and then move the 
fertilizer; has anybody ever thought of that?
    Mr. Hood. That has been discussed. In fact, there are 
plants in the Kenai Peninsula that do that now with the Cook 
Inlet gas, not with North Slope gas, because there is no 
current mechanism to move the North Slope gas even to south-
central Alaska, let alone to the lower 48. The gas reserves in 
Cook Inlet are being rapidly depleted.
    Chairman Akin. I didn't mean to ask all of the fun 
questions and discussion here.
    Mr. Westmoreland. I just want to ask one question. When we 
are talking about liquid natural gas, all the ports for our 
liquid natural gas are on the East Coast right now. Is that not 
true?
    Ms. Wright. I think there are some in Louisiana, too.
    Mr. Westmoreland. Yes, there is one in Louisiana, and I 
think Boston.
    Ms. Wright. Right. There aren't too many, and they are kind 
of unmothballing a couple that had been shut down.
    Mr. Westmoreland. Right, but right now, a lot of our 
natural gas is coming from the Middle East, too, I guess.
    Ms. Wright. I think more, maybe Venezuela.
    Mr. Westmoreland. Trinidad.
    Mr. Hood. Mexico.
    Mr. Westmoreland. But they are converting it and shipping 
it over here on those tankers that you were talking about.
    Ms. Wright. Right.
    Mr. Westmoreland. I am assuming it is piped from these 
ports that we have to the West Coast. Is that not correct?
    Ms. Wright. Right. Once it gets into the grid on the East 
Coast or Louisiana, then it goes anywhere in the United States.
    Mr. Westmoreland. So there is some infrastructure.
    Ms. Wright. Yes. The infrastructure to deliver natural gas 
is 50-years-old and is very, very complex and very good. I 
mean, like I said, 55 percent of the houses in the country are 
heated by natural gas. I mean, it is in place. The great thing 
about gas is that it is clean-burning, you know. It doesn't 
pollute.
    We actually do have a lot of it, if you look at the 
reserves off the continental shelves and, you know, the Rockies 
area. There is a tremendous amount. But drilling for it is 
being held up time and again by, you know, various and sundry 
things that--environmental concerns, yes.
    Mr. Westmoreland. Plus, too, you know, if we could get a 
more abundant supply of natural gas, it would help us with our 
power-generating plants where we are using--
    Ms. Wright. Exactly. That is kind of something that was a 
switch. About 50 percent of the electrical generation is coal. 
Then, I am not sure, maybe 20, 30 percent is the natural gas. 
There is some fuel switching that goes on; some is nuclear. A 
lot of the new plants that were built in the last 10 years are 
gas fired, because it was clean burn, better than coal for that 
reason.
    The problem is, now, with increasing demand for 
electricity, it is putting a crunch on the supply of gas, and 
that is cause for the price to go up. Probably in the last 3 
years, it has almost tripled, and that probably does make it 
economically viable then to put a pipeline in. You know, if it 
is only $2 a million cubic feet, it is not worth it. But when 
it gets to $6, it is. So right now, actually there is a huge 
boom going on in my industry, because with $6 gas, it makes it 
feasible to drill deeper wells, more complicated wells, that 
kind of thing.
    Ms. Bordallo. Mr. Chairman, I don't have any further 
questions, but I would like to take this opportunity to thank 
you, Dr. Goodstein, Ms. Wright and Mr. Hood for your 
testimonies. I think I have a better insight of this subject 
matter, and hopefully, we will be able to work something out. 
Thank, thank you, Mr. Chairman.
    Chairman Akin. I had wanted to come back around a second 
time. This is sort of just trying to understand what you are 
saying, doctor. I think what I am hearing you say is that there 
is so much oil in the Middle East that these guys really can 
control it as a commodity. Isn't that the bottom line of what 
you are saying?
    So, in other words, if we bring something online, they can 
make adjustments and still kind of control the market, because 
they have got such a big chunk of it. Is that part of what you 
are saying in terms of an economic argument?
    Mr. Goodstein. Yes, the issue about energy security is, it 
somehow makes sense if we drill our own oil, we can control the 
price. But we won't. I mean, when the price of oil goes up, it 
is a world oil market. So if there is a supply disruption in 
the Middle East and oil prices rise to $40 or $50 a barrel, if 
Middle Eastern oil rises to that price, Alaskan oil will rise 
to that price. So there is no protection from small businesses 
by reducing the import share by just a little bit. It really 
depends on how much oil we use as an economy, not where it 
comes from.
    Chairman Akin. Everything is subject to the supply-and-
demand equation. The more that we have--supplies that we 
control, it makes us less wagged, you know, by the Middle 
Eastern prices. I suppose even though your point is that it is 
not a large percent, because of the huge supply over there. But 
it does have some influence if we can control some of the 
prices.
    Mr. Goodstein. Well, if the OPEC producers don't respond at 
all to Alaskan oil coming, the refuge oil coming online, then 
you would get a drop in oil prices, per barrel drop in oil 
price, the Energy Information Administration predicts about 
$0.30 a barrel. That is about a $0.01 price drop.
    But more likely, because the OPEC nations will see Arctic 
oil happening 6 or 7 years before it does, they will just ease 
off a bit on their development plans, because they don't want 
to facilitate a glut. That is basically why most economists 
would say there will be no impact on oil prices.
    But I had a comment related to Ms. Bordallo's concerns 
related to job growth or who will get the jobs in the Arctic, 
if I could. Historically, Alaska tracks workers during booms, 
out-of-state workers, who then leave when the economy turns 
down again. So during pipeline construction in the 1970s, 
actually, the State population actually grew by 25 percent over 
a 4-year period. In fact, Alaska's unemployment rate is 
typically stuck at about plus 2 percentages points above the 
national rate. Because when jobs pick up, Alaskan people tend 
to migrate in and migrate out. Actually, even during the 1990s, 
when the oil industry was in slow decline, about a quarter of 
the jobs in oil industries were held by out-of-state residents.
    So while it is undoubtedly the case that Alaskans will get 
jobs if the Arctic Refuge development happens, also you would 
anticipate there would be a big influx of skilled construction 
workers and that kind of work for folks who will come and go.
    In terms of the oil industry itself, in terms of the Alaska 
State government, around 83 percent of the employees in the oil 
industry work for the State's largest employers. It is 
obviously, again, the case that in the urban areas, Anchorage, 
Matsu Valley, Fairbanks, there would be spillover opportunities 
for small business.
    But the reality is, it is very hard for small businesses to 
survive on the North Slope. It is a very difficult environment, 
unless you are pretty heavily capitalized, to be able to do 
much.
    Ms. Wright. Wouldn't it be people though that would be 
there though to provide food, shelter, all the service 
organizations would provide jobs for local people, because that 
isn't going to come in?
    Mr. Goodstein. It actually does, though. There are big oil-
service companies like Halliburton that are sort of in the 
business of housing, feeding and entertaining workers.
    Ms. Wright. It still, to a certain extent, has to spill 
over into the community.
    Mr. Goodstein. To some degree.
    Ms. Wright. Doesn't it stay there, like what you are 
talking about in the North Slope and so on, there is something 
that has remained there, right?
    Mr. Goodstein. Well, that is because there is still oil 
development.
    Ms. Wright. Yes, that is what I am saying. In the long 
term, there will be more development than there was initially, 
because those things will stay there to support the oil 
development that happens. It isn't going to go away in 5 years, 
it will be there for 20, 30, 40 years.
    Mr. Hood. Mr. Chairman, a couple of comments with regard to 
the oil support services industry on the North Slope of Alaska. 
While companies like Halliburton and other major world 
conglomerates do operate on the North Slope, most of the oil 
support services, quite frankly, are Alaskan businesses owned 
by native corporations.
    I speak from personal knowledge, because, in my former 
life, I ran the Teamsters Union in the State of Alaska, and I 
represented most of those workers. So it is not the major 
conglomerates that have operations on North Slope of Alaska. It 
is, in fact, Alaskan businesses.
    Again, with the type of development that we are talking 
about in ANWR, we are not talking about the great influx of 
work and activity that we had during the pipeline construction, 
until such time as we build that natural gas pipeline. But ANWR 
will be--facilities will have to be constructed and moved into 
the area. But the degree of work in that regard for the people 
in the State of Alaska will not be as great or anywhere near as 
great as it was for the construction of the Trans-Alaska 
Pipeline, and in fact, more jobs will be created outside of the 
State than in the State.
    Ms. Wright. Can I say something real quick.
    Chairman Akin. Sure, you can. Yes.
    Ms. Wright. I was thinking on the way over here today, you 
know, we have 700 employees. But if you look at our supply 
chain and our customers, that is probably 20- or 30,000 people 
who are just involved in our one little business.
    And clearly, if this happens, it would affect our business. 
And it would affect all of our suppliers, and it would affect 
all of our customers, because we are all suppliers to the oil 
and gas business.
    So, you know, it is not going to be jobs in Alaska, but it 
is going to be jobs in a whole bunch of States in the United 
States, the Lower 48, because that is what we do. We 
manufacture equipment for that industry.
    Chairman Akin. Well, I appreciate the discussion, of 
course. It is all part of a larger question about the overall 
direction of the Nation. And one of the things we see in Armed 
Services and internationally is a tremendous increase in demand 
for oil, particularly from people like China and other 
countries that are competing for those resources.
    We also see some export of jobs in this country to a 
certain degree, although we are creating a lot of new jobs, as 
well. But certainly just from a common-sense point of view, 
there does seem to be a certain level of additional security if 
we have a larger percentage of our own natural resources or 
things that--you know, we are not quite as dependent on the 
foreign.
    But this is an interesting discussion. I believe it will be 
followed perhaps over in the Senate as they engage in this 
topic over there.
    As you were perhaps aware, the House has passed the 
drilling in ANWR. I think that a lot of the environmental 
questions are sufficiently answered, that this seems to, at 
least, convince the majority of the House, so we will see where 
things go.
    But I appreciate you all coming and your perspectives. And 
I think each of you has contributed a lot. And thank you so 
much for being part of it, Dr. Goodstein and Mrs. Wright and 
Mr. Hood. It is a good perspective from three different 
directions. Thank you.
    Mr. Hood. Thank you.
    Chairman Akin. This committee is adjourned.
    [Whereupon, at 3:12 p.m., the subcommittee was adjourned.]



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