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




                   EIA'S REPORT ON SHORT-TERM ENERGY
                    OUTLOOK AND WINTER FUELS OUTLOOK

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 19, 2005

                               __________

                           Serial No. 109-80

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________




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                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

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

                                 ______

                 Subcommittee on Energy and Air Quality

                     RALPH M. HALL, Texas, Chairman

MICHAEL BILIRAKIS, Florida           RICK BOUCHER, Virginia
ED WHITFIELD, Kentucky                 (Ranking Member)
CHARLIE NORWOOD, Georgia             MIKE ROSS, Arkansas
JOHN SHIMKUS, Illinois               HENRY A. WAXMAN, California
HEATHER WILSON, New Mexico           EDWARD J. MARKEY, Massachusetts
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi                          GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
GEORGE RADANOVICH, California        LOIS CAPPS, California
MARY BONO, California                MIKE DOYLE, Pennsylvania
GREG WALDEN, Oregon                  TOM ALLEN, Maine
MIKE ROGERS, Michigan                JIM DAVIS, Florida
C.L. ``BUTCH'' OTTER, Idaho          HILDA L. SOLIS, California
JOHN SULLIVAN, Oklahoma              CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania             JOHN D. DINGELL, Michigan,
MICHAEL C. BURGESS, Texas              (Ex Officio)
JOE BARTON, Texas,
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
Caruso, Guy F., Administrator, Energy Information Administration.    16

              Additional Material Submitted for the Record

Caruso, Guy F.:
    Written response to questions from Hon. Ralph M. Hall........    41

                                 (iii)



 
                   EIA'S REPORT ON SHORT-TERM ENERGY
                    OUTLOOK AND WINTER FUELS OUTLOOK

                              ----------                              


                      WEDNESDAY, OCTOBER 19, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
                    Subcommittee on Energy and Air Quality,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Ralph M. 
Hall (chairman) presiding.
    Members present: Representatives Hall, Norwood, Shimkus, 
Shadegg, Radanovich, Walden, Otter, Murphy, Burgess, Barton (ex 
officio), Boucher, Ross, Markey, Wynn, Green, Allen, and Solis.
    Staff present: Mark Menezes, Chief Counsel for Energy and 
Environment; Maryam Sabbaghian, Counsel; Peter Kielty, Clerk; 
Bruce Harris, Professional Staff; and Sue Sheridan, Senior 
Counsel.
    Mr. Hall. Okay. Thank you. The subcommittee will come to 
order. Without objection, the subcommittee will proceed 
pursuant to Committee Rule 4(e), which--hearing no objection.
    Prior to the recognition of the first witness for 
testimony, any member, when recognized for an opening 
statement, may defer his or her three minute opening statement, 
and instead, have three additional minutes during the initial 
round of witness questioning.
    And I recognize myself for an opening statement. I first 
want to welcome our witness today, Mr. Guy Caruso, 
Administrator of the Energy Information Administration, and 
thank him for sharing this time, the time it took for him to 
get over here today, the time it took for him to gain the 
knowledge that he has, and I look forward to his testimony. I 
have had a brief discussion with him and enjoyed it, and 
learned a lot in five minutes. And I know we are going to get a 
lot of--B.S. in business administration, an M.S. in economics 
from the University of Connecticut, and earned a master's of 
public administration from Harvard University. And he has 
worked here, domestically, he worked at the Paris-based 
International Energy Agency, IEA, first as a head of the Oil 
Industry Division, and later, as Director of the Office of 
Nonmembers Countries, so we have, we are really blessed with 
good testimony, and we have a witness that will give us 
testimony.
    Just to give him some comparison of how we value his input, 
it took, I think, 15 the last time we had a hearing, to provide 
us the information we needed. So, Caruso, we are looking 
forward to hearing from you, and so you are, of course, you are 
welcome. And it is trite to say that the United States is 
facing an energy crisis. Even before the hurricanes, the prices 
for oil and natural gas were on the rise, and in response to 
that, and after years of trying, Congress passed a 
comprehensive energy bill, H.R. 6, and our chairman, in 
conjunction with both Democrats and Republicans, worked through 
some hard times during the hearing of H.R. 6, and for the first 
time in 10 years, we did get a bill to the President's desk, 
and he signed it.
    After the hurricanes, Congress responded, again, with the 
GAS Act, which built on the first bill and focused more on 
increasing our supply of refined oil. Now, we are faced with 
the winter heating season, that is forecasted to cost people an 
average of, I think, the testimony is going to show 40 percent 
more than last year, and if the weather is colder than 
expected, the number could reach 70 percent for those that heat 
their homes with natural gas.
    It has been said by many of us, and we have made speeches 
and written articles, the papers have reviewed it, how 
unfortunate it is that such a tragedy as Katrina had to happen, 
but actually, it served us the purpose of opening our eyes to 
the country's energy vulnerability, and pushed the discussion 
of our current energy infrastructure and future energy needs to 
the forefront, where it needs to be. We can no longer put off 
to tomorrow what needs to be addressed today, or actually, 
should be addressed yesterday.
    We are holding this hearing to discuss EIA's short-term 
energy outlook and winter fuels outlook, which tells us that it 
is going to cost more to heat our homes this winter, and that 
prices for petroleum products and natural gas will remain high, 
and that the price for crude oil is going to remain high. So, I 
hope as a result of this hearing we can all get a good 
understanding of what to expect this winter, what our 
constituents can expect as well. I hope that all of my 
colleagues will then join me in trying to find a way to ease 
the burden on them, because I for one feel that they have had 
enough of the high energy costs, and deserve a break. I want my 
constituents to be able to spend their disposable incomes 
however they want, not on having gas for their cars and heat 
for their homes.
    Mr. Hall. With that, I yield back the balance of my time, 
and I recognize Mr. Allen for the time he chooses to take under 
the rules, and I thank you for your opening statement.
    Mr. Allen. Thank you, Mr. Chairman, and thank you, Mr. 
Caruso, for being here today.
    The numbers that you are presenting to us are shocking. Gas 
prices continue to be at near record highs, and you estimate 
that the average price of gasoline nationwide will be $2.68 per 
gallon, and will not drop significantly in the near future. EIA 
also estimates natural gas costs to increase, on average, by 48 
percent nationwide, with areas in the Midwest to increase 
nearly 61 percent. New England, where I am front, doesn't fare 
any better. Home heating oil costs are expected to rise more 
than 32 percent nationwide, and prices in the Northeast are 
expected to average more than $2.55 per gallon. My constituents 
are very, very worried about that price. I will come back to 
that in a moment.
    Now, what was not in your report, but was reported 
yesterday by the Bureau of Labor Statistics, is that the 
Producer Price Index increased by 1.9 percent in September, 
mostly because of soaring energy prices. It was the single 
largest jump in 15 years. Last week, BLS reported that consumer 
prices rose 1.2 percent last month, and 4.7 percent in the 12 
months that ended in September. That was the largest monthly 
advance since March of 1980, and the steepest annual rise since 
May 1991. Clearly, energy prices are affecting our economic 
competitiveness.
    How do we get here? What has this committee and this 
Congress been doing? I do have a different view than my friend, 
Chairman Hall. We passed an energy bill this summer that would 
do nothing to help consumers cope with higher energy prices. In 
fact, your agency, Mr. Caruso, estimated that legislation 
similar to the Energy Policy Act would actually increase 
gasoline prices. In the last month, this committee rushed to 
the floor a bill, the GAS Act, that would also do next to 
nothing to help consumers. Like the Energy Policy Act, it 
provided huge subsidies to already incredibly profitable 
industries. It also gutted environmental laws for no apparent 
reason, other than that the oil industry wanted it done.
    We have done next to nothing for development of renewable 
fuel technology, at least on the scale that this crisis calls 
for. We have stubbornly refused to consider raising fuel 
economy standards, and we have balked at even the most modest 
conservation measures, such as labeling and rating replacement 
tires for efficiency. And now, we have a report from EIA which 
should surprise nobody. Fuel is going to be very expensive this 
winter. Small businesses will suffer. Consumers will suffer. 
The poor and the elderly will suffer.
    This is just one example. The average LIHEAP benefit in 
Maine is about $440, if the program's funding levels remain 
constant. The average oil tank in Maine is 200 to 250 gallons. 
You estimate the price of oil to be at $2.55 per gallon. That 
means the LIHEAP benefit won't even buy one tank of oil for my 
constituents who qualify. During an average Maine winter, most 
households use four tanks, and many use considerably more than 
that. So, increasing the amount of money that is appropriated 
for LIHEAP is one short-term fix that Congress must consider. 
Another is, through the Tax Code, to find some way to help 
small businesses. I have introduced legislation, H.R. 3944, the 
Small Business Fuel Cost Relief Act, to give small businesses a 
tax credit for fuel costs above the Labor Day 2004 price. Now, 
I know that tax legislation is not under the jurisdiction of 
this committee, but the committee's bill, the Energy Policy 
Act, contained robust tax credits for the oil, gas, and nuclear 
industries. I believe, simply, small businesses and family 
farmers and fishermen deserve the same attention.
    Mr. Chairman, we need to find innovative solutions to the 
immediate energy crisis while developing a long-term energy 
plan to wean us away from foreign oil, to promote cleaner 
alternative energy sources, and reduce costs to consumers and 
control pollution in the air. If we do not act soon, our 
economic competitiveness and our children's future will suffer.
    Mr. Caruso, thank you again for being here. Mr. Chairman, I 
yield back.
    Mr. Hall. I thank the gentleman. I would like for the 
record to reflect that you used the word next to nothing 
several times, and that it is the opinion of the chair that 
next to nothing is better than nothing, and that is what we 
have had, and that it is what this hearing is about.
    The chair recognizes the chairman, Mr. Barton.
    Chairman Barton. Thank you.
    Mr. Hall. For whatever time he takes.
    Chairman Barton. And I will yield to Mr. Allen time to 
answer me whenever he wants to.
    Mr. Allen. Thank you, Mr. Chairman.
    Chairman Barton. I, too, want to thank Mr. Caruso for being 
here. I wish that this hearing room was full. You know, it is 
odd to me that we are going to face some of the highest energy 
prices we have ever faced as a nation this winter, especially 
in the Midwest and the Northeast, and as those Congressman and 
Congresswomen go to their districts, they are going to be 
besieged by constituents, rightly so, asking what we are doing 
or not doing about it, yet one of the most important hearings 
we are going to do in the next two months. As far as I know, 
there is no television coverage of this, and there is no great 
media coverage. This is very important, what we are going to 
talk about. I have reviewed the EIA outlook, and I have taken a 
glance at your testimony, and I am sure that you are going to 
tell us that winter fuel prices are going to be higher this 
year because of supply constraints. And that is a true 
statement.
    Two weeks ago, we passed on the House floor the GAS Act, 
which is intended, and I think would increase the supply of 
gasoline. It passed 210 to 212. Not one Democrat voted for it. 
Not one. It is a disappointment to me. That act would give the 
Federal Government the authority for the first time to 
investigate price gouging. That act, for the first time, would 
make it easier for governors of states that were willing to 
build new refineries to get an expedited permitting process 
without changing one environmental law that is currently on the 
books. And that is only if that governor and the constituents 
of his or her state were willing. If they don't want to do it, 
they don't have to ask for the expedited procedure. Would 
reduce the number of boutique fuels, make it easier and more 
fungible for fuel gasoline to go around the country. Most 
people think that is a good idea, not a bad idea. Yet we didn't 
get any of our friends on the minority side to vote for that 
bill.
    Today's hearing, we are going to look at winter fuels like 
natural gas and home heating oil. It is expected that 
households that heat with those fuels are going to pay about 
$350 more a year this winter for fuel, depending on the fuel 
source that they are using. That is a real price increase, 
approximately $100 a month, that is real money. They are going 
to hit real Americans. These price increases carry a message. 
We need less politics and we need more energy policy, which 
results in more fuel. Today, and this winter's high energy 
prices are driven by the need for supply. Do we really want to 
tell the American people that the way to solve the energy 
problem is to freeze to death by lowering your thermostat? I 
don't think so.
    And it is with great concern that I review the list of 
energy projects, and these are real projects, folks. These 
aren't make believe. These are real projects that have been 
delayed, killed, postponed, in the very areas of the country 
where the prices for winter fuels are expected to be the 
highest. And let us go through some examples. In the West, 62 
percent of all the households rely on natural gas. California, 
the largest state by population in the Union, is the second 
largest natural gas consuming state in the country. There are 
at least two liquefied natural gas projects that would have 
brought significant LNG supply to California, but they have 
been delayed. One is in Long Beach. It is delayed by the 
California Public Utilities Commission. The other is at 
Cabrillo Port, and again, it has been held up by the state of 
California regulatory hurdles. In the Northeast, where the 
winters are somewhat colder than they are in California, 51 
percent of the households rely on natural gas. That is over 
half. Again, projects that would have provided more natural gas 
to heat Northeastern homes have been stopped cold. To name a 
few, the Islander East Gas Transmission Pipeline Project, from 
southern Connecticut across Long Island Sound to western Long 
Island, and to New York City. Initially, Connecticut denied the 
CZMA approval. After the project sponsors overcame that hurdle, 
Connecticut denied the project its Clean Water Act permit, and 
that dispute is dragging through the state court. The 
Broadwater Energy Offshore LNG Terminal Project, located nine 
miles north of Long Island in New York state waters, both New 
York and Connecticut Congressional delegations have come out in 
opposition to this project. These projects don't help Texas. 
They don't help Oklahoma. They help New York. They help 
Connecticut. They help New England. And yet, their own areas 
are opposing them. The Weaver's Cove LNG project in Fall River, 
Massachusetts. This project showcases the lengths opponents 
will go to stop a project. After the Federal FERC approved the 
application, the opponents slipped a provision in the highway 
bill to prevent the demolition of the Brightman Street Bridge 
in order to block LNG tankers from using the river to get to 
the project.
    Now, we know who is going to complain about high gas prices 
this winter. And they should. I am not saying we should support 
higher natural gas prices. The real conspirators seem to be the 
very people we are trying to help, the people of New England 
and places like Fall River, Massachusetts. I give a direct 
quote from the mayor of Fall River, Massachusetts. I have never 
met the person. I am going to state that he or she is probably 
a very decent human being, so I have got absolutely no 
animosity towards this individual. But here is what the mayor 
of Fall River said about a project to bring more fuel to that, 
to his or her own town: ``I will make it bleed with a thousand 
paper cuts until its investors lose interest and go away.''
    Increasingly, energy policy of some states and localities 
in the Northeast seems to be let us freeze in the dark. For the 
most part, Northeastern homes that don't use natural gas use 
home heating oil instead. In the Northeast, 30 percent of the 
households use heating oil as their primary heating fuel. 
However, 50 percent of the Northeast distillate consumption, 
which is where home heating oil comes from, must be brought in 
from other areas or overseas. When Northeast constituents raise 
concerns about the prices, and again, rightfully so, that they 
will be forced to pay for home heating oil, the need for 
increased domestic refining capacity should be clear.
    And yet, even as we face dramatic price increases at the 
beginning of what is likely to be a cold winter, no refinery 
seems likely to ever be built in the Northeast, ever. Why is 
that? In my Congressional district of Texas, it will produce, 
this year, over a trillion cubic feet of natural gas. My 
district doesn't use a trillion cubic feet of natural gas. I 
have natural gas drilling rigs within 10 miles of my backyard, 
about a half a dozen of them, and I wish I had a dozen. My 
Congressional district, at one time, was the eighth largest oil 
producing country in the world, if it were a country instead of 
a Congressional district. My district is going to do its part 
on the supply side. And a lot of the natural gas, and a lot of 
the oil that we still produce is going to go all over this 
great Nation, as it should, so it really, really upsets me when 
I look around the country, and we see these high prices, and we 
have a clamor to do something about it, but when we try to do 
something about it, the very people we are trying to help say 
no.
    So, Mr. Chairman, I am looking forward to this hearing. I 
hope we can put on the record the facts about what the price 
situation is going to be, and the supply situation is going to 
be, and then I hope we can work together on a bipartisan, 
bicameral basis to really try to do something about it. I don't 
want to do this kind of a hearing every year.
    Thank you, Mr. Chairman.
    Mr. Hall. Thank the chairman. The chair recognizes Ms. 
Solis for three minutes.
    Ms. Solis. Thank you, Mr. Chairman, for holding this 
important hearing this morning, and I want to thank Mr. Caruso 
for also being here and appearing before us to testify on the 
Energy Information Agency's winter fuel report.
    And I have to tell you, just briefly reading, I concur with 
much of what your statement, that you will be presenting to us, 
in terms of rising costs. And I, too, am very concerned, 
because I realize that in the state that I represent, 
California, one of the most populous in the country, the 
gasoline prices have been way, way high, for the last, almost I 
would say year. So, we have seen prices of gasoline, in my 
district alone, $3 and above for I would say a steady six 
month, at least. And we know that folks out there are looking 
for relief, and the last two energy bills that came through 
this committee, in my opinion, have not provided any sort of 
immediate relief. California also has some very high standards, 
in terms of environmental regulations that protect our 
environment, and those have been put in place many years before 
I got here to Congress, and I can see that there is a slow 
erosion that is occurring here in terms of support for those 
regulations.
    When our own attorney generals are stripped of the ability 
to protect our communities and our local governments, who are 
helping to enforce protections. It is not to say stop all these 
processes and projects that need to be developed, but I think 
communities of interest have to have a say-so in where these 
projects are placed. And as the chairman of our committee 
stated, Long Beach, California, yes, there is a proposed plan 
to put a liquefied natural gas facility there, but the 
community residents in the area do not want it. They still do 
not believe that that is the most efficient way of providing 
support in that local area, and their input has been very loud 
and clear to many of the elected officeholders there in that 
region.
    So, I for one am for having a discussion, but let us be 
very clear about who that discussion includes. In many cases, 
those witnesses that are opposing those kinds of efforts are 
not allowed to come and testify before this committee. So, I 
think that we have to call it for what it is. And I am very 
concerned that, again, this last energy bill did not do enough 
to provide relief to consumers, working families, that right 
now, as a last resort, are still trying to pay their bills from 
last year, their winter bills. In California, we are having 
very unseasonable weather. Right now, I mean, we are having 
some tremendous rainstorms and flooding that is occurring. We 
have had some brownouts in Los Angeles with the DWP there, and 
so we know we have to do something, and we are not about saying 
no. We are saying about let us have a discussion that is 
inclusive, and that includes all of the diversity of our 
communities.
    So, I want to thank you, Mr. Caruso, for being here, and I 
do intend to be a part of the discussion, so that my community 
has representation at the table. Thank you very much.
    Mr. Hall. Thank you very much. The chair recognizes Dr. 
Norwood, the gentleman from Georgia, for three minutes.
    Mr. Norwood. Thank you very much, Mr. Chairman, and I want 
to say to my friend, Mr. Allen, I think that the chairman laid 
it out pretty clear. I would like to just add a little bit to 
it, maybe be a little more blunt.
    You have made a case that you have considerable concerns 
for your constituents this winter, and we are all in sympathy 
with that, but you know, we had an energy bill three or four 
years ago. It got stopped by the Democrats in the Senate. You 
voted against the LIHEAP provision, where the Southern states 
were trying to have just a little share of that LIHEAP money, 
because more people are killed from heat than cold. You voted 
against the energy bill. You voted against the GAS bill.
    Now, I want to tell you, Mr. Allen, with all respect, it 
makes me a lot less concerned about your concerns when you do 
things like that. I yield back.
    Mr. Hall. The gentleman yields back. The chair recognizes 
Mr. Green, the gentleman from Texas.
    Mr. Green. Thank you, Mr. Chairman. I ask unanimous consent 
for my full statement to be placed into the record.
    Mr. Hall. Without objection.
    Mr. Green. I want to welcome Mr. Caruso, and having read 
your statement, I think, you know, those of us who lived 
through the energy bill and the GAS bill two weeks ago 
understand that that was happening. Let me follow up on what my 
colleague from Georgia said. Our committee had a chance to 
reform LIHEAP during the energy bill, and we voted down an 
amendment that would have made it based on need, for people who 
need energy assistance. I find it amazing, the last two weeks, 
I see the New York Times, the Boston Globe, Chicago Trib, the 
New Jersey Leader, they have headlines talking about how high 
fuel heating costs and natural gas costs.
    Well, in my home state of Texas, from May to September, and 
we have 90 degree temperatures this week, we could get no 
sympathy from the folks because of the formulas weighted for 
the Northern states. And so, I follow up on my colleague from 
Georgia, that you know, I guess it is location, location, 
location, that those newspapers are only in the North, but we 
were trying to reform LIHEAP to make it fair, based on need. We 
could not get the votes in this committee. We did get a study 
on the energy bill, but again, I have more people die and 
suffer from heatstroke and heat-related than they do from cold, 
and this Congress, because of something that happened years and 
years ago, will not change it.
    The LIHEAP formula is ancient, and now, I hear that my 
colleagues from the North are asking for additional emergency 
funding. Well, we tried to get additional funding in the 
authorization for LIHEAP, simply because that would then put us 
on par with the certain level, but if emergency funding is 
approved, that doesn't benefit those of us, the half of the 
country that lived south and have heat problems. So again, I 
know we need to do better on conservation, but I couldn't tell 
my constituents this summer that I am sorry you are paying high 
gas prices because you want to cool your home, or you want to 
turn on your attic fan, but you better check the air in your 
tires to make sure you are efficient. I don't think that is the 
way to work, and I think this Congress needs to look at 
exploring for more domestic sources for natural gas. And it is 
interesting. It is not Congress that is keeping some of that 
off the table. It is a Presidential moratorium in the eastern 
Gulf of Mexico, in Section 181, that we might have more natural 
gas that would lower the prices, because you bring in more 
supply, but we are not doing it. So, there is blame enough 
going around both for Congress and the President that we need 
to have more domestic production of natural gas. So, maybe we 
can lower the heating costs in the Northeast. At the same time, 
maybe lower our cooling costs in the South from May to 
September.
    And again, I yield back my time.
    Mr. Hall. I thank the gentleman. The chair recognizes Mr. 
Shimkus, the gentleman from Illinois, for three minutes.
    Mr. Shimkus. Thank you, Mr. Chairman, and Mr. Caruso, 
welcome. And you can hear the frustration. We are going to hear 
sobering numbers from you, and we are struggling, obviously, 
with this. I believe an ideology, and I believe how you view 
government, and my frustration is those who would try to 
control the free market, to prohibit it from providing the 
goods and services at the lower cost, then claim and cry for 
government subsidies to either the individual consumer, who now 
is hurt because of high costs, or the individual small 
businesses.
    It is really counterintuitive, unless you get a competitive 
market, and that is what an energy bill does. Part of our 
natural gas problems is because we had no energy plan. We have 
shifted electricity to natural gas. I mean, what a terrible use 
of natural gas. We could no longer put it in caverns and save 
it over the summer. We are using it to generate electricity. 
So, as the demand goes up, the importance of the energy bill, 
these are all interwoven. The problem with natural gas is also 
a problem with our electricity generation issues, and that is 
why it is important to diversify.
    So, you are getting all of the frustrations of our public, 
as we are trying to shift out how to do this. The natural gas 
is of a major concern for much of the home heating and also 
manufacturing. When Russia is paying $0.95 per million BTUs, 
and we are paying $14 for BTUs, we are competitively 
disadvantaged. You want to talk about the damaging to the 
manufacturing, base, that is the damage to the manufacturing 
base. China is paying $4.85 per million BTUs, $10 less than we 
are for natural gas.
    Now, here is a map of the United States. We are the only 
developed nation in the world without access to our outer 
continental shelf. All the OCS on the West, all the OCS on the 
East. As Mr. Green said, all the eastern Gulf, off-limits. Look 
at my friend John Shadegg's area. Off-limits. I think the 
public, if they would understand that here we are complaining 
about subsidizing people because they can't afford heating, and 
we can't allow people to have access to these natural gas 
reserves. It is criminal negligence, and it has to stop, and 
that is why it is important.
    We need to hear these sobering numbers, because we are 
going to hear it from our constituents. And what I am going to 
say is, we do not have access to our OCS reserves. We do not 
have access to our facilities, and we are continuing to work on 
this issue. Thank you for being here, and I look forward to 
asking a few questions with respect to that. And I yield back, 
Mr. Chairman.
    Mr. Hall. I Thank the gentleman. The chair now recognizes 
Mr. Ross, the gentleman from Arkansas, one of my favorite BRAC 
fighters, for three minutes. Mr. Ross.
    Mr. Ross. Thank you, Mr. Chairman, members of the 
committee, for holding this hearing in an effort to address 
natural gas and home heating oil prices that are, and have 
been, and will continue to adversely impact Americans, 
especially as we enter into the fall and winter seasons.
    Our country was experiencing record fuel costs before the 
hurricane season, and in their aftermath, our Nation's domestic 
energy production and distribution infrastructure encountered 
significant damages, causing fuel prices to increase even more. 
I am hopeful the efforts to reestablish energy operations in 
the Gulf of Mexico will move swiftly, as both demand and price 
continue to increase.
    I am extremely concerned that energy and winter fuel prices 
will be unbearable for many Americans during the 2005-2006 
heating season. In fact, in Arkansas' Fourth Congressional 
District, the average household income is about $29,000 a year. 
One of the 29 counties I represent has an average household 
income below $9,000 a year, one of the poorest counties in 
America. The people I represent cannot afford $3 gasoline, and 
they certainly cannot afford $12 or $15 per thousand cubic feet 
for natural gas. Natural gas is the primary heating fuel for 
most of the households in my district, and 55 percent of them 
in America. This means families who heat their homes with 
natural gas are expected to spend about $350 more, which is 
about a 48 percent increase this winter on their gas bills, 48 
percent increase on their gas bill, and yet, the minimum wage 
in this country has not been raised in a very long time, and 
has the buying power that it had back in 1980. And for those of 
you that want to believe that minimum wage is something paid to 
high school and college students, I have got constituents, I 
have got working families in my district trying to get by on 
$5.15 an hour.
    This significant price increase will cause considerable 
negative impact on all Americans, especially the working poor, 
the elderly, the disabled, and also, industries that rely on 
natural gas. My Congressional district in Arkansas ranks fourth 
among all Congressional districts in America in poultry 
production. Poultry producers depend on natural gas to heat 
poultry houses during the winter months, and these outrageous 
natural gas prices will make it impossible for many of our farm 
families. The electric power sector's reliance on costly 
natural gas to produce electricity will translate into 
increased electric costs, and nearly 30 percent of all 
households in this Nation rely on electricity as their primary 
heating fuel.
    I am hopeful this committee will continue to increase 
funding authorizations for programs such as LIHEAP, Low Income 
Home Energy Assistance Program, and rethink and address the 
discrepancies and the funding formula that surrounds LIHEAP, a 
program that truly helps those families in need. These are 
serious issues that will seriously impact the citizens of our 
Nation, and I hope my colleagues on both sides of the aisle 
will join me in researching all options, and taking the 
necessary actions to provide relief to our constituents in the 
coming months.
    Mr. Chairman, thank you for allowing me to use up all of my 
time, plus 35 seconds of somebody else's.
    Mr. Hall. I thank the gentleman. The chair now recognizes 
Mr. Murphy from Pennsylvania, three minutes.
    Mr. Murphy. And thank you, Mr. Chairman.
    I just want to follow up on a couple elements here that we 
know are part of this, as we look at and lament the high cost 
of natural gas. I hope that our discussion just doesn't go in 
terms of there is a high cost, and we need to look at other 
ways of subsidizing this. We have made several efforts in this 
committee, which as the chairman pointed out, ended up being 
not bipartisan, and that is tragic, because we could have 
benefited greatly from bipartisan input and influence on this. 
In the coming weeks, I hope we can deal with some of the 
aspects that are driving up natural gas costs.
    These include the issue of our energy plants, which could 
be using clean coal technology, which we included in the energy 
bill, continue to move more towards natural gas use. That 
increases demand and increases price. If we are able to 
sincerely look at new source review, and how that punishes 
plants who are wanting to combine maintenance with some 
cleaning up, and instead, telling them that they have to do 
everything, and so, the plants choose to do nothing. We would 
be able to use our abundant coal energy instead of continuing 
to deplete our natural gas resources. We also note that that 
would increase jobs. That would increase jobs for boilermakers 
and teamsters and carpenters and laborers and sheet metal 
workers, and all the folks who could be rebuilding our 
infrastructure of our energy power plants, which are so 
inefficiently continuing to use a system now.
    If we are going to use this, and really look at this 
carefully, about natural gas costs, we also have to look at the 
costs on jobs. We are losing our petrochemical industry. We 
have lost 90,000 jobs in the chemical industry alone. It drives 
up fertilizer costs. That affects our agricultural costs, our 
farmers, and ultimately, the meals that we put on our tables. 
These are the kind of things we all need to put in perspective, 
and working together on comprehensive energy bills means doing 
all the parts for this. This also means that when we are 
looking at such things as the GAS bill we passed a week ago 
without any votes from the other side of the aisle, it is 
unfortunate that the only option offered was to have the 
Federal Government design, construct, and mothball until we 
need it, oil refineries. That is not the way we have a 
comprehensive energy policy, and we are much better off all 
coming together and say how do we have further exploration, 
diversification, and conservation of our resources together. 
That has to be part of the package.
    And so, I hope that what comes out of this hearing is not 
just more political talk, but real policy that allows us to 
come up with some plans for the American people, who are going 
to be paying a lot more, and it will be sad if all we can tell 
them is that more bills were blocked, more progress was 
stopped, we are still not using coal, we are not using nuclear, 
instead using more and more natural gas in less effective ways. 
And that is what we need to be working on, Mr. Chairman, and 
that is what I hope comes out of this with some sound 
legislation as well.
    I yield back.
    Mr. Hall. The gentleman yields back. The chair now 
recognizes the gentleman from Massachusetts, Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Last Thursday, for the first time since its creation, the 
Northeast experienced sustained levels of home heating oil 
prices high enough to trigger the exercise of your discretion 
to protect heating oil consumers by releasing product from the 
Northeast Home Heating Oil Reserve.
    This is, without question, an opportunity for us to begin 
to discuss when the Bush Administration is, in fact, going to 
exercise that authority. The report right now, from the 
Department of Energy, is that home heating oil prices are 
likely to rise 31.5 percent this winter, for the average 
consumer. That will be an increase of $378 per consumer across 
the whole Northeast for this winter, and that is if it is a 
normal winter. If it is an above normal winter, it would be 
$774 per family for this coming winter.
    So, what we are seeing is a dramatic spike. It is occurring 
on a sustained basis, and we need a plan. The plan that we have 
heard thus far from the Republican side is that we will build 
new refineries in the years ahead. Unfortunately, we have 
already heard from the President of Shell Oil, who says that 
his company has no plans of building new refineries, even if 
the bill became law, and we also have a word from the Senate 
that they don't intend on passing legislation to that effect.
    So, what are we left with? Well, we are left with the 
existing Home Heating Oil Reserve in the Northeast. Now, I must 
point out that the chairman of this committee, Mr. Barton, was 
good enough when he was chairman of the Energy Subcommittee, to 
make that possible, and it sits there, its existence, largely 
because of his support for it, in partnership with me. The 
question now is, when will the Administration use it? Because 
that, ultimately, is the only time and place in which the 
facility will make any sense.
    Conversely, the Bush Administration, the Republicans in 
general, are opposing increases in the funding for LIHEAP, the 
program which is used in order to help people with higher home 
heating oil bills. So, if we release the Home Heating Oil 
Reserve, prices will go down. If we don't release it, then 
prices go up, and we need more LIHEAP money for the people who 
will suffer from these higher prices. But we can't have a black 
hole here, where neither one of those avenues is, in fact, 
used. And that is where we are right now, and that is why I 
believe that this hearing is so important, and I yield back the 
balance of my time.
    Mr. Hall. I thank the gentleman. The chair recognizes Mr. 
Otter, the gentleman from Idaho, for three minutes.
    Mr. Otter. Thank you, Mr. Chairman.
    Mr. Chairman, some wise man once said that insanity is 
doing the same thing over and over again, and expecting 
different results. And as I have served on this Energy 
Committee, I am reminded of that often, that one side of the 
aisle says no, let us let the marketplace work. Let us 
incentivize the system to build new plants and drill new holes 
and lay new pipelines, and create more, rather than get the 
government in the business, as the other side of the aisle 
continues to suggest. No, let us get the government in the 
business of passing out and distributing the scarcity, and that 
is basically where we find ourselves today.
    As I look back over the energy history of this committee 
and of this Congress, I find very little effort on the side of 
those who wish the government to be in the business of 
distribution and drilling and separation, and then, of course, 
passing out favors, and passing out heating oil, in order to 
keep the folks happy. I see they actually have created an 
environment in which the big boys can exist, the big boys they 
now decry as making way too much profit, and actually taking 
advantage of the market. Yet, it has been their handiwork at 
regulations, whether it is the EPA or the ESA or the lack of an 
energy bill that has, quite frankly, created an environment for 
the big boys to exist, and the little folks to pass out of 
existence. They are thereby restricting competition.
    I was in the oil business in the early '80s. I had a 
company called Kyn-Ten Drilling Company, and we drilled over 
500 oil wells in Kentucky, Tennessee, and Ohio. And when I was 
running that little company, I was pretty excited when we went 
into the business, because oil was about $30 a barrel, and all 
I needed to turn out was about four or five barrels a day, in 
order to actually amortize the system, and amortize my costs of 
getting into the business.
    But then, I found out I couldn't sell the oil, and I found 
out one of the reasons I couldn't sell the oil is because there 
wasn't a distribution, there wasn't a way, there wasn't a 
pipeline. There wasn't a way to get it there, and so we said, 
well, that is easy, let us build a pipeline. And then, we ran 
into the restrictions of having to go across government land, 
and nobody wanted to build a pipeline across government land. 
And nobody wanted to build a grid system across government 
land.
    And so, I find it just a little ironic, in fact, economic, 
perhaps, economic ignorance, for those who would spend $700 
million a year, a year, on the West Coast, for environmental 
purposes, and $2 billion, and then ask for another $2 billion a 
year for LIHEAP. I find it a little disingenuous, in fact, 
because they, in fact, have created the environment in which we 
have restricted supply. It put me out of business. It put all 
the little companies out of business. There is no question why 
there is only four left, and that is because of the handiwork 
of restriction and government regulation has put these folks 
out of business, and caused that restriction.
    And so, I am interested in hearing what we are going to do 
to create more supply, not more government, and I invite you to 
speak to those when you get the opportunity, Mr. Caruso. Thank 
you.
    Mr. Hall. I thank the gentleman. The chair now recognizes 
Mr. Wynn.
    Mr. Wynn. Thank you, Mr. Chairman, for calling this 
hearing. It is indeed an important issue.
    The outlook is not good for our citizens. Sixty million 
households that use natural gas in the United States could see 
their home heating bills increase by an average of 50 percent. 
This translates to an increase of about $350 more than last 
winter's costs. In my district in Maryland, 60 percent of my 
residents use natural gas for their homes. This means that from 
about $750 last year, they could see an increase to about 
$1,100 this year, almost 100 percent increase.
    In terms of home heating oil, we have 8.5 million homes 
that use home heating oil across the country. Residents can 
expect an increase in their heating bills of about 32 percent, 
which translates into an increase of $378 more in home heating 
expenses this winter. For the almost 7 percent of my district 
residents that use home heating oil, including myself, this 
means that last year's average expenditure of about $1,200 
could be as high as $1,600 this year.
    The point that I would like to bring home in the context of 
this hearing is that while we need to do a lot of things in 
terms of alternative energy development, increasing supply, 
people are going to be cold this winter. We need to prepare to 
do something for this winter. Increasing home energy costs will 
disproportionately impact low income and elderly citizens. All 
of a sudden, we in America have discovered the poor. Well, they 
are going to be not only poor. They are going to be cold, 
unless we do something.
    Consider the following. Low income households spend a 
whopping 14 percent of their annual income on energy 
expenditures, while non low income households only spend about 
3.5 percent. That is the face of poverty in America. In fact, 
two thirds of the families that utilize LIHEAP for assistance 
have annual incomes of about $8,000. This makes low income 
Americans have to choose between heating their homes and 
putting food on the table. Thus, I think it is essential, since 
our task is to create a better quality of life in America, that 
the Administration fully fund the Low Income Home Energy 
Assistance Program, LIHEAP, and to authorize $5.1 billion a 
year level, and that we consider appropriate increases to 
correspond to the increase in energy costs that we are 
experiencing.
    There are a lot of perspectives on this issue, and I am not 
going to belabor the point further, except to say that there 
are a lot of people who are poor who are going to see 
significant increases in their energy costs, and it is our 
responsibility to do something to help them. We cannot just 
stand by and watch, as they shiver in their homes, and take 
comfort that we are not in their unfortunate circumstances. I 
hope this hearing will lead to concrete action on the part of 
Congress to both preserve the existing levels, and hopefully to 
expand to new levels the LIHEAP program.
    Thank you.
    Mr. Hall. Thank Mr. Wynn. The chair at this time recognizes 
Mr. Shadegg from Arizona for three minutes.
    Mr. Shadegg. Thank you, Mr. Chairman, and thank you for 
holding this hearing. I want to associate myself with the 
comments of both Mr. Murphy and my colleague, Mr. Otter. Mr. 
Murphy is correct. We cannot continue to rely solely on oil and 
other fuels of that character to go into the future. We need a 
diversified portfolio, but my colleague Mr. Otter is also 
right. It is the height of hypocrisy for a Member of Congress, 
particularly one who has been here for years, to sit in this 
room and complain about the high cost of fuel. It is, indeed, 
the exact parallel to the child that murders both parents and 
then complains of being an orphan.
    Year after year, decade after decade, this Congress has 
imposed higher burdens on the construction, exploration, 
development, and refining of fuel. My colleague Mr. Shimkus 
just held up this map. All of the East Coast is off-limits. You 
can't go get the oil there. You can't go get the gas there, not 
because it is not there, but because the government, the people 
in this room, the people in this Congress who have been here 
for decades, voted to put it off-limits. All of the oil and gas 
on the West Coast is off-limits. All of the oil and gas under 
all of the Federal land in the western part of the United 
States where I live is off-limits. So, we put all this oil and 
all of this gas totally off-limits, and then we are shocked, 
stunned, mystified, and outraged that prices are higher. Well, 
you know, it seems to me some Members of Congress ought to go 
back and take Economics 101. We tried to pass a bill last week. 
Thankfully, we did pass it by a bare two votes, that simply 
eases the siting and permitting restrictions, by letting the 
President designate areas where you could build a refinery, 
including closed military bases, to get around the NIMBY 
syndrome. Many Members of Congress voted against that. Indeed, 
every single one of my colleagues on the other side. You talk 
about the cost of $3 a gallon gasoline, and how expensive it 
is. In part, it is that expensive because we have 17 different 
boutique fuels. That bill tried to solve the problem by saying 
no, we don't need the 17 to have clean air. We can indeed get 
by with six. Nonetheless, people voted against that. Well, 
where has that brought us?
    Natural gas, the subject of this hearing, is $13 per 
million BTUs in the United States. In China, it is less than 
$5, and in Australia, it is less than $4. We have a problem, 
ladies and gentlemen, that is bigger than home heating bills. 
You bet. We need, as my colleague from Maryland just said, to 
help the people who will be cold this summer who can't afford 
to pay their bills. But by God, we better look beyond that. We 
better look at the long-term problem. We better take a rational 
look at the restrictions we have put on this map to say you 
can't explore anywhere in the United States. You can't buy or 
build anywhere in the United States. My colleague from 
Massachusetts says well, Shell says they are not going to build 
a refinery even though we passed a bill letting them build a 
refinery under easier restrictions. Guess what? Shell doesn't 
want more refineries, because Shell is getting rich off of the 
shortage of refineries. But thank God, in a free market 
economy, other investors will figure that out, and small 
investors will put together capital to build that refinery. How 
do I know that? Because it is happening in Yuma, Arizona, in my 
state, right now. Small investors are putting together the 
capital to build the first refinery in this country since Elvis 
was impersonating Elvis. So, we need to look at supply in this 
country. We need to look at a rational balance in this country, 
and we need to move forward with this hearing, and I commend 
you, Mr. Chairman, for holding it.
    Mr. Hall. I thank the gentleman. The chair recognizes the 
good doctor from Texas, Dr. Burgess, for three minutes.
    Mr. Burgess. Thank you, Mr. Chairman. I appreciate, also, 
you holding this hearing.
    I was just going to submit my statement for the record, but 
that map that Mr. Shimkus brought, if you look at that map, 
about the only place left to drill for natural gas in the 
United States is my district in North Texas, so Cooke, Denton, 
and Terry counties are enjoying a boom, and we thank the 
restrictions on the other parts of the country, but maybe it is 
time to relax those somewhat. And I will yield back.
    Mr. Hall. I thank you, and Mr. Ross and I are going to try 
to have your refinery over at Texarkana, to bring you 
something. The chair now recognizes Mr. Walden, the gentleman 
from Oregon.
    Mr. Walden. Thank you very much, Mr. Chairman.
    I appreciate your holding this hearing, and look forward to 
reading the text of our witness. I had a meeting this morning 
with a gentleman who represents and works with some 2,500 wheat 
farmers out in northwest, especially the east part of Oregon 
and Washington, and let me just tell you what $14 natural gas 
is doing to farmers, who have to use nitrogen fertilizer. It is 
driving them out of business, and I sit here, as I have for a 
number of years, and I listen to all the information that comes 
out about the lack of supply, the lack of access to product, 
and I was a journalism major, not an economics major. But if 
you constrict supply, and you don't go replace it, and demand 
continues either at pace or increases, price is going to go up. 
And you get a natural catastrophe like Katrina and Rita, and 
you get a new spike, and you see that in these charts that this 
gentleman gave me, that show just what has happened to the U.S. 
nitrogen producer costs of ammonia, the price per ton. The dark 
blue on here is the component of natural gas. And I listen to 
some of my colleagues time and again talk about well, we can't 
drill there. We can't import here. We don't want to produce 
that kind of power. We don't like windmills off the coast, 
because we can see them. But we all want to turn on the lights, 
and we want $1.50 gasoline, and we want natural gas back to $2. 
You can't get there if you don't go find it, produce it, and 
get it to where it is being consumed, the effect of which is we 
are having an incredibly corrosive effect on the economy, on 
the men and women whose pocketbooks we all care about, we all 
care about.
    Now, I was just suggesting to the chairman, I have tried to 
figure out why the Northeast has their own Home Heating Oil 
Reserve. We don't have one in the Northwest, and it gets kind 
of chilly out there from time to time. I have supported your 
efforts on the Northeast Home--I have supported increasing 
funding for LIHEAP, and I understand those are patchworks. 
Those are the safety net. That is the safety net, when what we 
fail to do to provide adequate supply to meet market demand, 
causes a problem, along with perhaps a natural occurrence, or 
unnatural, like Katrina and Rita. And when you look at the 
price of natural gas around the world, and you understand we 
have failed to go get the natural gas we need here, even though 
we have enormous deposits, then don't come and complain to me 
about jobs being outsourced and off-shored in plastics and 
fertilizers. Don't come and complain to me about those sorts of 
trade issues, when one of the fundamental ingredients in our 
economy is energy, and we are not doing our part to go find it 
in an environmentally safe and sound way, and I fully believe 
we have those capabilities. We can do this, folks, if we quit 
throwing rocks at each other, come together as a committee and 
as a country, and say there are resources. We understand we got 
a real problem. We need to go tap them, and get them to the 
people, so that we don't have to reach into these what should 
be one time emergency reserves. And now, we are looking at them 
as just a sort of everyday experience. That is not what we 
ought to be about.
    So, I hope we can move forward on some of these 
initiatives, and resolve this energy problem that we know is 
there, and we have the tools and the capability, the science, 
the research, to do it right. Thank you, Mr. Chairman.
    Mr. Hall. All right. I thank the gentleman. I believe that 
is all the opening statements we have, and I am sure, Mr. 
Caruso, that you have supplemented your degrees from 
Connecticut and Harvard. This last hour, you have patiently 
listened to all of us, and if one thing you have gleaned, it is 
probably that we all agree on one thing, that is, that we have 
a problem, and we are going to listen to you for your 
suggestions, and recognize you at this time for whatever time 
it takes. I hope it doesn't take over about five minutes, but 
we will yield to you, and thank you very much for being here, 
and being so patient.

 STATEMENT OF GUY F. CARUSO, ADMINISTRATOR, ENERGY INFORMATION 
                         ADMINISTRATION

    Mr. Caruso. Thank you very much, Chairman Hall, and 
Chairman Barton, members of the committee. I appreciate your 
invitation to present the Energy Information Administration's 
winter fuels outlook.
    As you know, the EIA is the analytical and statistical arm 
of the Department of Energy, and we do not formulate or take 
policy positions. If we were holding this hearing on August 28, 
I would have been telling you that the world oil market is 
tight. Crude oil prices were high. Gasoline prices are high, as 
we find the reserve being heavily utilized, and natural gas 
prices were very high, due to a very warm summer, in 
particularly, those areas that require air conditioning. And on 
August 29, 54 days ago, Katrina, Hurricane Katrina made 
landfall, and since that time, we have had more than 60 million 
barrels a day of our domestic oil production shut in, more than 
300 billion cubic feet of natural gas shut in, and that is 
continuing. About 10 percent of our refinery capacity is still 
offline, due to both Katrina and Rita.
    [Chart.]
    So, this is the situation as we prepare our winter fuels 
outlook, and the first chart I want to call your attention to, 
which you have in your handout, shows the summary of the 
different costs to our consumers in the various regions of the 
country, and by fuel type. On average, the average U.S. 
household will pay about $260 more for heating oil this winter, 
but that varies considerably. Natural gas bills will be 
averaging about $350 more, a 48 percent increase. Heating oil, 
about $380 more, a 32 percent increase. Propane, $325, 30 
percent. Electricity gets off a bit better, with only $38, or a 
5 percent increase, and that is largely because 70 percent of 
our electricity in this country is generated by coal and 
nuclear. However, the expenditures for individual households, 
as a number of the members have pointed out, can vary 
significantly from those national averages, and even regional 
averages, based on the size and efficiency of the home, and 
their equipment that is using their fuels.
    [Chart.]
    The next chart shows the impact of the shut in production 
of crude oil on oil prices, and where we see that going over 
the coming months, and we do see the shut in capacity gradually 
coming back online, and we do anticipate that crude oil and 
natural gas production will be fully back online by the end of 
the winter. But nevertheless, there will be a continued shut in 
production of both oil and natural gas in the Gulf of Mexico, 
and the price of crude oil, in our view, will stay relatively 
high, at about $64 to $65 per barrel this winter.
    [Chart.]
    For the refineries that have been shut in, you see in the 
next chart, that they are coming back online. At one point, 
more than 20 percent of our refinery capacity was offline. Now, 
it is about 10 percent. And we see all of the refineries being 
fully back online by the end of the year. Nevertheless, 
gasoline prices, as has been mentioned, and diesel fuel, 
heating oil, and jet fuel prices remain very high, and 
particularly, middle distillates will stay high, because of the 
particular problems in producing, and the demand for those 
fuels. We see the prices coming down, but still remaining $2.55 
for gasoline in December, and $2.73 for diesel.
    For natural gas, as was mentioned, we are now looking at 
about $14 for the spot price of natural gas on the New York 
Mercantile Exchange, and on the Henry Hub Spot Markets. This 
will come down, but slowly, because so much natural gas 
production is still shut in, and the processing facilities 
onshore remain offline and affect the processing of that 
natural gas.
    [Chart.]
    If there is an element of good news, the next chart shows 
where we are with respect to working gas in storage. Every 
year, our local distribution companies and gas companies--oh, 
sorry. The next chart, please. It does show that natural gas 
storage, as we approach the winter season, is approaching the 3 
trillion cubic feet level, which industry considers about 
normal for going into the wintertime, so that we feel that even 
with a colder than normal winter, there will be sufficient gas 
in storage to meet this increased demand. Just for your 
information, during the peak months of January and February, 
about one third of our gas consumption comes out of this 
storage, so it is critically important that we go into the 
winter with high levels of natural gas storage, and indeed, one 
of the reasons gas prices, natural gas prices, have been under 
such pressure is that the local distribution companies have 
been bidding up the price in order to make sure there is enough 
gas in storage, in order to serve their customers. So, this is 
part of the picture.
    [Chart.]
    On the individual regions of the country, the next chart 
shows natural gas heating bills by region, and as some members 
have already mentioned, it does vary considerably, and indeed, 
for natural gas, the Midwest, which uses, about 75 percent of 
the homes use natural gas for heating, will experience about a 
61 percent increase in expenditures. But other regions will 
also see from 32 percent up to that 61 percent increase. 
Electricity expenditures are going to be more, increases will 
be more modest, as shown in this next chart, although that also 
varies by region, with the South being the area where the 
largest percentage of households use electricity as their 
primary source of heating.
    [Chart.]
    Heating oil, in the next chart, is very much concentrated 
in the Northeast, as Mr. Allen and others have pointed out, 
with 30 percent of the homes there using heating oil for 
heating their homes, and we expect about a 30 percent increase 
in that price for the Northeast. Finally, the Chairman, the 
last fuel we examine in our winter fuels outlook is propane, 
and the expenditures there are going to be up, on average, 
about 30 percent, and that affects about 4 percent of the homes 
in the United States.
    Mr. Chairman, once again, I would like to thank you for the 
confidence in letting me present the Energy Information 
Administration's outlook for this winter, and I would be 
pleased to answer any questions that you may have.
    [The prepared statement of Guy F. Caruso follows:]
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    Mr. Hall. Thank you, and I will start with the first 
question. Your outlook base case projects a colder winter, as I 
understood you, than last winter, and I think, as you know, 
there are other projections. A lot of other people are 
projecting, some even, for some reason, projecting a warmer 
winter. Well, that is something we can hope for and pray for, 
but what are your winter weather projections based on, and can 
you explain why others have been projecting a warmer winter, 
and why you differ with them?
    Mr. Caruso. Thank you, Mr. Chairman. Our weather forecast 
is based on the latest outlook of the National Oceanic and 
Atmospheric Administration's Climate Prediction Center, NOAA. 
They have released this in late September, and their 
indication, as we convert their temperature projections into 
heating degree days, into our model, indicates a slightly 
colder than normal winter, when weighted by population, which 
is what we do for our modeling exercise. But it will be several 
percentage points colder than last winter. So, both of those 
factors go into the numbers I have just presented with respect 
to consumption estimates by region.
    There are others who look at the same NOAA forecast, and 
come up with slightly different conclusions, but mainly, it is 
the methodology that we use to convert the temperature 
estimates into heating degree days, and weight that by 
population for our model. That gives you a slightly different, 
but nevertheless, we are looking at slightly colder than normal 
winter, but about 3 to 4 percent colder than last winter.
    Mr. Hall. And as you know, there are primarily three 
distillate fuels, diesel, home heating oil, and jet fuel. I 
guess my question is, what percentage of distillates are used 
for home heating, as opposed to transportation, if you have an 
estimate of that?
    Mr. Caruso. Yes. We do. Approximately one million barrels a 
day of heating oil is used during the winter heating season, 
but I can give you a much more precise breakdown for the 
record, but of the total barrels, about 33 percent is middle 
distillate. Of that 33 percent, jet fuel, which is part of 
that, is 7 percent, and then, the remainder is diesel fuel 
mainly used for transportation, and heating oil. That breaks 
down to 25 percent for those two fuels, and during the winter, 
it is about 50/50 between home heating and diesel fuel in 
trucks. But I will give you more precise figures for the 
record, sir.
    Mr. Hall. And if you will, for the record, just tell us to 
what extent will the increase in diesel consumption affect home 
heating oil supply.
    Mr. Caruso. That is an excellent question. One of the 
problems in this country we face is not only the lack of total 
refining capacity, which has been mentioned by several members, 
but the conversion capacity of turning crude oil into specialty 
products, most notably gasoline, but in recent years, the 
demand for the middle distillates, diesel fuel, heating oil, 
and jet fuel, has been rising in this country, in Europe, and 
in Asia, all of which has put extremely heavy pressure on our 
refineries, on European refineries, and in Asian refineries to 
meet that demand.
    The middle distillate part of the barrel has actually 
increased more than gasoline, and as you can see from the chart 
I showed on the refinery outlook, distillate prices are now 
higher than gasoline, which is rather unusual, and the reason 
is the competing uses for that middle part of the barrel are 
putting upward pressure on price. Therefore, we expect higher 
heating oil prices this winter, not only because of the 
increase in crude oil, but because the heating oil component of 
barrel competes with jet fuel and diesel fuel, and as you also 
are aware, the airline industry is suffering in this picture as 
well.
    Mr. Hall. Yes. And if you can, without answering it now, my 
time is about up, how interchangeable are these two products, 
and what are the typical, we talked about profit and profit 
margin. We have had a hearing on that and what caused the 
escalation at the gas pumps. What are the typical profit margin 
differences between diesel and home heating oil? If you can do 
that, I will appreciate it, and I think my time is up.
    I now recognize the ranking member, Mr. Boucher of 
Virginia.
    Mr. Boucher. Well, thank you very much, Mr. Chairman, and 
Mr. Caruso, thank you for taking your time with us this 
morning, and preparing your always very thorough presentation 
for us.
    One of the pressures on natural gas prices is the 
tremendous demand for natural gas on the part of electric 
utilities. And I wonder if you could give us some indication of 
whether you see any kind of changing in the long-term plans 
that utilities are making with respect to the fuels for their 
new generating units. Do you, for example, based upon natural 
gas prices today, at I think you said $14 per million BTUs, see 
utilities beginning to look more toward coal? In their early 
planning, does coal play a larger role? You might also make 
reference to the new coal technologies that are now reaching 
commercialization, and in particular, integrated gasification 
combined cycle. American Electric Power and Synergy have now 
both announced plans to build commercial units for IGCC. And I 
am wondering if you are seeing a broader look at that 
technology by other electric utilities in the wake of those 
decisions by those two, and the fact that this new technology, 
which is far more environmentally friendly than the current 
pulverized coal technology, is now at the commercial stage, and 
is being utilized by two major utilities.
    So, generally, what is the outlook? Is there going to be 
relief on gas because of a shift to coal?
    Mr. Caruso. Thank you, Mr. Boucher. The broad answer to 
your question is, we definitely see utilities taking another 
look at their fuel mix, and we anticipate, in our long-term 
outlook, that partly because of new technologies such as IGCC, 
and other cleaner coal-burning technology, that utilities will 
add new coal-fired power plants in the future. Most of the 
projects we are looking at are looking at about a 10 year lead 
time, so we are expecting much new before 2015. And of course, 
the energy bill, which you are very familiar with, did also 
provide some incentives for technologies such as IGCC, that 
will further enhance that.
    The other area where we see a new look is nuclear, and when 
we come out with our new long-term outlook in the coming 
months, probably late November, early December, we will include 
new nuclear plants for the first time in our outlook, for the 
first time in many years. We have not had any prospects for new 
nukes for a number of years. We do think beyond the 2015, 
particularly towards 2020, because of the longer lead time, we 
will have new nuclear power. So, in general, we do see, because 
of high natural gas prices, and because of the incentives from 
the Energy Policy Act, a shift slightly, not a dramatic shift, 
but a shift towards fuels other than natural gas. As you know, 
natural gas has comprised more than 95 percent of new 
generation capacity in the last seven or eight years, and we 
see that surplus of gas-fired, particularly combined cycle, 
turbine gas-fired plants, working its way through the system 
over the next 10 years, and when new investment decisions are 
made by utilities, they will be looking much harder at coal, 
nuclear, and in some cases, renewables also as a result of the 
EPACT '05.
    Mr. Boucher. The report that you will put forward in 
December is going to analyze the longer term picture, in terms 
of the fuel mix for electricity generation. Did I understand 
that correctly?
    Mr. Caruso. That is correct.
    Mr. Boucher. And as a part of that, you are going to 
analyze the potential for new nuclear plants to be a part of 
that mix. Are you also analyzing the potential for coal-fired 
facilities?
    Mr. Caruso. And coal. Yes.
    Mr. Boucher. And--
    Mr. Caruso. All fuel sources, and alternative sources, as 
well.
    Mr. Boucher. Right.
    Mr. Caruso. And we are going to incorporate, for the first 
time, the effects of EPAct '05, which is the one of the 
reasons, and the other reason is the higher natural gas price 
assumptions, which will clearly make a difference in investment 
decisions, not only in the electric power sector, but as 
someone mentioned, ammonium nitrate fertilizers for example, so 
heavily dependent on natural gas, there will be a huge shift 
outsourcing out of the country.
    Mr. Boucher. All right. That is good, Mr. Caruso, and I 
look forward to seeing that report. Let me shift now to 
gasoline. I note from your presentation today that in 2006, we 
can expect prices at the pump for gasoline to be on the order 
of about $2.34 per gallon. That is a pretty substantial 
improvement from where we are now, but it is still a 
significant increase from what were the previous norms, the 
pre-hurricane norms. And my question focuses on the increase 
from the pre-hurricane norms to $2.34 per gallon, which is what 
we expect next year. To what extent is that increase 
attributable, in your opinion, to a shortage of refinery 
capacity?
    Mr. Caruso. It is a combination of the continued 
expectation of a very tight world crude market. Therefore, our 
expectations are for, in this case, west Texas intermediate 
benchmark crude to stay in that $63 to $65 per barrel range 
that it is selling at today. That is the number one factor. The 
second one is this increased pressure on the refineries, and 
the difference between the crude price and the gasoline price, 
the so-called crack spread, has widened, and we expect that to 
stay wide, because of the inability of our refiners to meet the 
demand for not only gasoline, but probably even more 
critically, diesel fuel and other middle distillates.
    Mr. Boucher. And aviation fuel.
    Mr. Caruso. And aviation fuel, exacerbated by--
    Mr. Boucher. And so--
    Mr. Caruso. --the new requirement that refiners now must 
produce ultra-low sulfur diesel fuel, beginning in the middle 
of '06. We have some concerns about their ability to do that, 
and if they do it, it certainly will be done at a higher cost 
and price.
    Mr. Boucher. Have you done an analysis, or do you intend to 
do one, of whether or not the refinery companies, the petroleum 
companies and others, that build and operate refineries, intend 
to add capacity, in light of that increased demand?
    Mr. Caruso. Yes, we follow very closely, and indeed, we put 
out a report annually on what companies--
    Mr. Boucher. Well, what--
    Mr. Caruso. --additions to refinery capacity--
    Mr. Boucher. What conclusion can you make about that today?
    Mr. Caruso. Well, I would think, first of all, what we have 
been saying is that the typical refiner will add capacity over 
time at existing facilities, by adding these conversion units, 
and indeed, in some cases, overall primary distillation 
capacity. But we were not expecting any new, grassroots 
refineries to be built in this country. That is what we said 
last year.
    Mr. Boucher. Well, it really matters less about whether it 
is a Greenfield build, or an extension of an existing facility, 
as long as the capacity that is necessary gets added. Let me 
just say that there is a fair amount of skepticism about 
whether the refineries really intend to add that capacity, in 
light of the fact that it has been fairly widely reported that 
over the period from September '04 to September '05, that one 
year period, the profits of refineries in the U.S. increased by 
255 percent. I would be very interested to see any projections 
you are making as to the amount of capacity that actually is 
going to be added when there are a lot of people who are 
arguing that refiners are making more money by refining less 
gasoline, and if you add capacity, that means your profit per 
gallon decreases, so the financial incentives would appear to 
be, at least arguably, keep the current capacity, and just let 
the price continue to rise. Do you have any response to that?
    Mr. Caruso. Sure. Our long-term outlook was we expected, 
first of all, starting with history, we have added about 3 
million barrels a day of capacity in this country in the last 
20 years. There is a lot of focus on the fact that 300 
refineries in 1980 is now down to 149 refineries. What is not 
focused is those 300 refineries had the capacity to produce 
about 18 million barrels a day of oil, and those 150 refineries 
that have been closed, of course, have reduced that, but the 
existing 149 have all, many of them have been expanded, so that 
we are now back to about 17, so it has been like a U shape. We 
have added capacity at the existing facilities, even though 
many small refineries have closed.
    The second thing is we expected that the profit incentive 
will be increased by the recent margins, not just the one year, 
but we have now had about three of the last four years have 
been very good years for the downstream, and the profit 
incentive is there, and--
    Mr. Boucher. Is there to build new capacity?
    Mr. Caruso. --is there to build additional capacity, and we 
think it will happen, because although you presented one side 
of it, which is if we hold back on capacity, prices will go up. 
The other side of it is, if we would make the investment, we 
will increase our market share, and I think that incentive, in 
the history of the oil industry, has outweighed the other one.
    Mr. Boucher. Okay. Thank you, Mr. Caruso. My time has 
expired. Thank you, Mr. Chairman.
    Mr. Hall. Thank you, Mr. Boucher. The chair recognizes the 
chairman of the Energy and Commerce Committee, the gentleman 
from Texas, Mr. Barton.
    Chairman Barton. Thank you. Mr. Caruso, back in 1981, when 
our refinery capacity was at its peak, which is, I think, 18.1 
million barrels a day, what was our demand for refined products 
then?
    Mr. Caruso. 1981.
    Chairman Barton. Wasn't it less than 18 million barrels a 
day? It was about--
    Mr. Caruso. I would have to check, but it was probably was 
less.
    Chairman Barton. I think it was about 16.
    Mr. Caruso. Yeah. Probably was about--
    Chairman Barton. I think we had about a 2 million barrel a 
day surplus capacity. So, you know, we closed all these 
refineries, and now, you say 17 million. My number is about 16 
million. But what is our demand for refined products today?
    Mr. Caruso. 20.5.
    Chairman Barton. 21.
    Mr. Caruso. Yeah.
    Chairman Barton. 21 a bigger number than 16 or 17?
    Mr. Caruso. Even the head of a statistical agency has to 
agree with that.
    Chairman Barton. So, when we had the most refinery capacity 
in this country, we had less demand than capacity, and so 
margins were not good, but it was good for the American 
consumer, because we got a lot of competition, for a lot of 
different reasons. A lot of those refineries that were closed 
were really old refineries. They were in Pennsylvania in Texas, 
from the late 1890s, and small, 50,000 barrel, 25,000, so it is 
a good thing that a lot of those refineries have closed, from 
an environmental position, and an efficiency position, but 
since we have not built a refinery in this country in 30 years, 
we are now in a situation where we have a demand that is over 
20, and a capacity that is 16 or 17, so we have this capacity 
gap, and Mr. Boucher is 100 percent right that demand has 
continued to go up, and the profitability of the existing 
refineries has gone up. So, we need to, and I think Mr. Boucher 
thinks, his alternative, he had a strategic refinery 
alternative in the Democratic substitute, so we both agree that 
we need more refineries.
    I want to ask you a question. It costs about $1 billion per 
hundred thousand barrels of new refinery capacity, whether it 
is brand new or expanded. So, that is basically $10 million, 
1,000 barrels. If you had $1 billion that you wanted to invest, 
and you looked at the refinery situation in this country, and 
said you know, there is some money to be made. Now, if I start 
the process, it is going to take me nine or ten years to get 
the permits. So my billion dollars is just going to sit around. 
Or, if the poor little old bill that passed the House a week 
and a half ago by two votes were to become law, and we get an 
expedited permitting procedure that a governor can opt into, 
that you get all those 40 some odd permits, you still have to 
get them, but we consolidate with the Department of Energy and 
the EPA, so that you get concurrent review and timelines, and 
current law is actually met, if it says the permit decision has 
got to be made 90 days or 180 days, you got to do it. That is 
current law. That is not new law. That is current law. That you 
could get a permitting decision within a year, six months to a 
year, what makes you more likely to want to invest your billion 
dollars to build a new 100,000 barrels, a permitting process 
that takes ten years, or a permitting process that takes a 
year?
    Mr. Caruso. Regulatory uncertainty has clearly been one of 
the impediments, in addition to the very low rate of return on 
capital invested in the--
    Chairman Barton. But wouldn't you be more likely--
    Mr. Caruso. Definitely.
    Chairman Barton. --to make the decision, if you would get a 
decision within a year, as opposed to within nine or ten years?
    Mr. Caruso. Definitely.
    Chairman Barton. That is just common sense.
    Mr. Caruso. Yes, sir.
    Chairman Barton. Well, I just wanted to make that point, 
because we, as you pointed out, you know, what you call it, the 
crack gap, is going up. You know, crude oil prices are going 
up, but retail prices are going up more rapidly. It is because 
we have got a refinery constraint in this country. And if we 
are going to import our way out of it, you have got to pay the 
people from overseas. You have got to pay them all their 
transportation costs, plus the profit on top of that. So, we 
are not going to lower refined product prices by imports. If we 
are going to get that gap back down, we are going to do it by 
building more refineries in this country.
    And I want to ask you some questions about natural gas. 
What, if anything, has been done in this country to expand 
underground natural gas storage capacity in the Midwest and the 
Northeast?
    Mr. Caruso. There has been some gradual expansion by the 
owners of storage facilities, but it has been motivated by 
commercial--
    Chairman Barton. What is some? What percent of 
underground--
    Mr. Caruso. I don't have the specific number, but we have 
about 4 trillion cubic feet of capacity existing in working gas 
in storage for this winter.
    Chairman Barton. Can EIA put a number on--
    Mr. Caruso. Yeah. We have the numbers. I can certainly 
provide that for you.
    Chairman Barton. Isn't it true that if my producers in 
Texas and everywhere in the country produced as much as they 
could, we would still have a price problem, because we can't 
store the natural gas for the demand that exists in the Midwest 
and the Northeast?
    Mr. Caruso. I definitely think we would still have a price 
problem, because the problem is, ultimately, we are not 
producing enough new gas to meet the growth and demand in the 
last decade or so.
    Chairman Barton. I mean, if you were me and this committee, 
would you consider natural gas storage an issue we need to try 
to address in some way, underground natural gas storage, or 
even aboveground natural gas storage? Don't we need to get more 
storage capacity closer to the markets, so that if we can get 
the production capacity up, you have to store in the summer 
months, in the fall months, so that you have it available for 
the peak winter months? Isn't that a true statement?
    Mr. Caruso. That is true, and I would say it is certainly 
worth studying. I think it is the whole system. It is from the 
wellhead through the burner tip.
    Chairman Barton. Okay. Are you aware of what the prospects 
are for some of these LNG projects being permitted? Do we have 
any that are close to being approved? I know we got about 50 
that are under consideration.
    Mr. Caruso. Yeah, there is more than 50 under 
consideration, and I believe the last numbers I saw FERC and/or 
the Coast Guard, if it were offshore, have approved about five.
    Chairman Barton. So, we could see--when might me see a new 
LNG facility actually in operation?
    Mr. Caruso. You know, I believe the first--
    Chairman Barton. Two years from now?
    Mr. Caruso. --new regasification facility we have in our 
outlook is late '07 or early '08.
    Chairman Barton. '07, '08. And finally, what percent of the 
natural gas that is consumed in this country is consumed by 
electrical power plants for electricity generation?
    Mr. Caruso. I believe that is around 20 to 23 percent, but 
I will--
    Chairman Barton. So, that is 20 to 23 percent, put that in 
trillion cubic feet. Is that about 4 trillion cubic feet, 8 
trillion cubic feet?
    Mr. Caruso. We are consuming about 22 trillion, about 80. 
Yeah.
    Chairman Barton. 80 trillion, so to follow up on what Mr. 
Boucher was saying, if we were to really revitalize the coal 
sector for power generation in, as you pointed out, the nuclear 
sector, that would take a lot of pressure off of natural gas 
prices, if we could go--you know, back in the 1970s, we had a 
Fuel Use Act that said you couldn't use natural gas to generate 
electricity.
    Mr. Caruso. Yeah.
    Chairman Barton. So, if we can do something to help Mr. 
Boucher's constituents in the coal regions, and get the nuclear 
industry, that would help our natural gas situation.
    Mr. Caruso. Yes, sir.
    Chairman Barton. Okay. And one last. Why do we have the 
price disparity on natural gas prices by region, from a 61 
percent to a 31, 34 percent of total expenditures, and from a 
55 percent to a 29? Why such a big gap in the average price 
increase, when natural gas, I would think, would tend to be a 
fungible commodity? Is that a supply constraint situation?
    Mr. Caruso. I believe it is a combination of supply 
constraints, and in this case, these are the residential 
consumers, and it also affects the pace at which the individual 
local utilities--
    Chairman Barton. So different--natural gas at retail is 
regulated, so is this a regulatory issue?
    Mr. Caruso. Yeah. It is partly regulatory. It is partly the 
earlier point you mentioned, in terms of regional differences.
    Chairman Barton. Could your staff elaborate on that, and 
give us--I would like a little more definition as to--I don't 
argue with the fact that prices are going up. I mean, that is a 
given. But it is somewhat puzzling that we are having that wide 
of a disparity of price increase.
    Mr. Caruso. Yes.
    Chairman Barton. Okay. Thank you.
    Mr. Caruso. I will provide more detail on that for the 
record.
    Chairman Barton. Thank you.
    Mr. Caruso. Mr. Chairman.
    Chairman Barton. Thank you.
    Mr. Hall. Gentleman yield back. I thank the chairman. The 
chair recognizes Mr. Allen.
    Mr. Allen. Thank you, Mr. Chairman.
    Just a couple of comments, Mr. Caruso, and then, I have a 
couple of specific questions for you. I let the chairman's 
remark go by, but I can't let all the remarks that were made 
earlier go by without some response, because several of my 
friends on the other side of the aisle were suggesting that the 
whole problem here is we have to do more drilling, and 
certainly, we need to do more drilling for oil. We have to 
increase our supplies of natural gas, but the implication that 
several of them made was that if only we drilled more, more oil 
and more natural gas, well then the people who are getting 
LIHEAP today, to take one example, wouldn't need it, because 
the prices would be lower. And you know, from where we sit, 
that is the most bizarre thinking, to be kind, because if you 
are thinking of someone, there is, I would suggest, no evidence 
to suggest that the price of oil, or the price of natural gas, 
can be driven low enough so that people earning $11,000 per 
year, living on $11,000 per year, can get by without some sort 
of subsidy. And that is where I think we get, you know, the two 
sides here get crossways with each other.
    Some day, we will have an energy bill which is as energetic 
on renewable fuels and conservation as it is on subsidies to 
the oil and coal industry, but we haven't had that particular 
bill yet, and when we do, we ought to make some real progress. 
So, we do have a different approach.
    Now, what I am really concerned about is a couple things. 
One is, the suggestion was also made that if we only drilled 
more natural gas, then the price would come down. Well, in the 
past, when there has been more natural gas available, then we 
have turned to electric generation from natural gas. You said 
it is 20 to 23 percent of the natural gas supply. I guarantee 
you that keeps the price up. The bottom line is, with respect 
to oil, we have 2.5 percent of the world's oil reserves, we 
have 4 to 5 percent of the population, and we consume 25 
percent of the oil in the world. You can't drill your way out 
of those numbers, no matter how much you do, though more supply 
is appropriate.
    My immediate concern, Mr. Caruso, is the effect of the 
narrow margin of natural gas supplies on the electric grid, 
particularly in the Northeast. Natural gas producers are 
required to provide product to their gas utility customers, but 
they are not under obligation to provide product to electric 
utilities. Especially in the Northeast, this often results in a 
significant reduction in wattage of gas-fired power plants. 
They may be taken offline in the winter months. And so, can you 
comment on the effect that tight natural gas supply margins 
could have on electric supply, particularly in the Northeast? 
Is there a risk of disruption in the electricity marketplace?
    Mr. Caruso. Our outlook does not anticipate that there was, 
and we certainly look at that closely, but we do not anticipate 
that. There may be some, as you point out, interruptible 
customers that choose to shift to a different fuel, where that 
is possible, but that is rather limited in the Northeast.
    Mr. Allen. It is very limited in the Northeast, because I 
think virtually all of the power plants constructed in the 
Northeast in the last 10, 15 years have been natural gas.
    Mr. Caruso. Correct.
    Mr. Allen. And there is a related issue, which is that if 
we, if the response of people in the Northeast, say, is to use 
space heaters and not their furnaces, then we may find an 
increase in demand for electricity in the Northeast, and I 
wondered if, I mean, I suspect that you may have the same 
response, but it is an issue.
    Mr. Caruso. Yeah. We are worried about it. As you can 
appreciate, the peak demand for electricity is, on a national 
basis, is in the summertime, for air conditioning, mainly 
because the space heating is--although it is used at about 29 
percent of our households, it is not the majority. So, I think 
in a normal winter, and we are not anticipating the kind of 
behavior you just pointed out, we would expect there would be 
sufficient generation capacity. But clearly, it is something 
that the utilities would be watching closely.
    Mr. Allen. I would encourage you to take a look at it, 
because this won't be a normal winter in the Northeast, because 
the rapid increase in price for home heating oil has my 
constituents, businesses, and homeowners very, very worried. 
Our thermostat's going down, I know, but you know, we don't 
really know what kind of a winter it will be.
    And one last point. If you have data comparing the 05-06 
projections to the 03-04, not 04-05 winter, but the 03-04, that 
would be very helpful, because that was a cold winter, and if 
we have another one like that, it could be quite serious.
    Mr. Caruso. We have every year, and certainly, I would be 
happy to provide that for the record.
    Mr. Allen. Okay. I would appreciate it. I see my time has 
expired. I yield back, Mr. Chairman.
    Mr. Hall. The gentleman complete? Thank you. The chair 
recognizes Mr. Shimkus, the gentleman from Illinois.
    Mr. Shimkus. I hate doing that. I need to turn off the 
microphone before I move it over. My friend, Mr. Allen and I, 
continue to debate this over the years, and I imagine we will 
continue to debate it from decades to come.
    But I have to remind him and, in the first energy bill, we 
increased the authorization for LIHEAP to $3 billion. We did, 
Bobby Rush's amendment. I also have to remind him that we 
increased, in the last refinery bill, we increased the 
Northeast Home Oil Heating Reserve from 2 to 5 million barrels. 
It is in there.
    So, we made the attempts. But it is--again, I will go back 
to the premise. I don't mind trying to debate this issue. 
Natural gas, if you are from a region of the country that uses 
natural gas to generate electricity, which is because we didn't 
have them diversify the energy portfolio, and then you do not 
allow exploration for natural gas off your coast, I find that 
really challenging to accept how in the world do we move to a 
position where this whole debate of we want to use electricity, 
we want to use gasoline, but we don't want to look for it. We 
don't want to explore it. We don't want to drill it. I mean, we 
just--it is tremendously frustrating. 85 percent of our outer 
continental shelf is off-limits. And in those 85 percent, there 
are natural gas reserves. And we ought to be there. And we 
ought to encourage that.
    We are going from, in 1981, $1 per 1,000 cubic feet. I 
don't even know the terminology. It is now $15. It is totally 
disruptive of our own prices. And what is our response? Let us 
give tax breaks to the businesses so they can afford high 
natural gas prices. Let us give home heating resources, so the 
poor--instead of saying let us get more supply, or let us 
change our electricity generation away from natural gas to coal 
generation. Oh, no, we don't want to do that. Okay. Let us move 
to nuclear power. Oh, no, we don't want to do that. Well, what 
do we want to do? How do we want to use energy in this country, 
and where do we want to get it from? And that is our 
frustration, and I will take this debate anywhere in the 
country, with these principles.
    I want to ask, do we see an easing up of the demand for 
natural gas in the future?
    Mr. Caruso. Well, I think that very much depends on the 
price, and as you pointed out--
    Mr. Shimkus. You mean the market might have some role in 
this?
    Mr. Caruso. I think it would have a big role.
    Mr. Shimkus. In fact, it does, doesn't it?
    Mr. Caruso. Yeah.
    Mr. Shimkus. What is happening to the natural gas 
generation of electricity in this country, because of the high 
natural gas prices?
    Mr. Caruso. Well, we do anticipate there will be a 
reduction in natural gas demand this year.
    Mr. Shimkus. So, those environmentalists who like 
electricity generation by natural gas, but will not allow us to 
get to the outer continental shelf, are actually hurting their 
debate, because of the high natural gas prices, we are going to 
turn off the electricity generations. The market is going to 
turn it, because the price is going to be too high.
    Mr. Caruso. In many instances, it is not as economically 
efficient to dispatch even new natural gas-fired combined cycle 
plants, in particular, in the South and Southwest. So, that is 
happening. Nuclear and coal are the base loads, and those will 
be dispatched first, and at a lower cost.
    Mr. Shimkus. In fact, we are seeing great interest in new 
coal generating facilities, and of course, those of us from 
coal regions, the natural gas prices are going to probably help 
renew coal generation in this country, which is great for 
America, and we are obviously very excited about that.
    I mean, there are so many issues in this debate. I do want 
to ask about two provisions. Have you done any analysis on the 
future, part of the refinery bill was defining coal to liquid 
technology as refineries, and then, if that is the case, in 
your analysis and the future analysis, it would probably be 
very helpful to say what are our coal reserves, and how would 
new technologies, because of the high prices, how do we roll 
that into, you know, in essence, fuel production for 
automobiles? We do know there is foreign, you know the Fishcer-
Tropsch technology and now, because of the high prices, that is 
going to be affordable and within reach. So, that should be 
part of it. Also, the whole debate about the renewable fuels, 
and the component of renewable fuels. I come from the Midwest, 
and have been very, very fortunate, because of the refineries 
that have been built have been renewable refineries. The new 
ones, we have seven in Illinois, we have nineteen on the 
drawing board, and I am paying, on average, $0.30 less a gallon 
to fill up my Ford Explorer with 85 percent alcohol-based fuel, 
and hopefully, the other states will be able to take advantage 
of that.
    So, is there a renewable fuels component in your 
calculations?
    Mr. Caruso. Yeah. We do look at all the fuels, including 
renewables, and in particular, with the higher price 
assumptions that we did even last year, with the high, we did 
four price assumptions. In the highest one, you do get a 
substantial amount of coal to liquids coming on-stream at about 
$40, between $40 and $45 crude oil costs in real terms, over 
the long term. And we will be looking at that even more 
carefully this year, because we will be raising our, as you can 
imagine, our price assumptions yet again in our long-term 
outlook. So, it has an impact on coal to liquids, and it has 
some impact on renewables, although most of the renewables in 
our outlook last year were as the result of renewable portfolio 
requirements on a state basis. There are about 14 states that 
have renewable portfolio requirements.
    Mr. Shimkus. And that is mostly in electricity generation. 
You are not talking about the fuel--
    Mr. Caruso. Almost all of it--
    Mr. Shimkus. Right.
    Mr. Caruso. --in electricity generation.
    Mr. Shimkus. All right. Well, I thank you. Mr. Chairman, I 
have gone over my time. I appreciate it. Thank you, and I yield 
back.
    Mr. Hall. I thank the gentleman. The chair recognizes the 
gentlelady from California, Ms. Solis.
    Ms. Solis. Thank you, Mr. Chairman.
    Mr. Caruso, I wanted to draw your attention, we have been 
talking a lot about refineries and capacity, and I wondered if 
you were familiar with a case in Arizona, Yuma, and I want to 
just start by saying I would like to ask unanimous consent to 
submit for the record an article by the Yuma Sun, and also, an 
article from the Arizona Clean Fuels, an article that is 
printed on their website.
    If I can request unanimous consent to have that submitted 
for the record.
    Mr. Hall. Without objection.
    [The information follows:]
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    Ms. Solis. And I would like to just go into this discussion 
about the refinery. We have talked about the fact that there 
hasn't been any refineries built in the last 30 years, and the 
one that was permitted actually was in Arizona, Yuma, and this 
was back January 16, 1992. The Arizona Department of 
Environmental Quality actually issued a permit. They did not 
move ahead at that time. They said that they didn't have enough 
financing. They let that go dormant, and then, they come back 
April 14, 2005. The Arizona Department of Environmental Quality 
again, then, issues another permit. Now, we are finally hearing 
that they are looking back at plans now to open it up, but my 
understanding is that they are looking for financing from the 
Mexican government, from President Fox, and that they have a 
plan to transport, I would say, maybe half of the capacity of 
that refinery, whatever they are able to provide, to Mexico.
    Do you know anything about that?
    Mr. Caruso. I am not familiar with that specific request 
for financing. I can say that we export a fair amount of 
gasoline to Mexico currently, so it fits in with the current 
situation.
    Ms. Solis. Would you know how much, offhand? What are we 
talking about here?
    Mr. Caruso. I have it. It is about 100,000 barrels a day.
    Ms. Solis. And what is that? What does that--
    Mr. Caruso. Well, we consume 9 million barrels a day, so it 
is relatively small, compared with our total consumption, but 
it is our largest recipient of our exports of gasoline. Mexico 
is our largest. And most of that comes from the Gulf Coast 
refineries, some of which have been, have, or continue to be 
shut in. So, it is--the reason--I had a chance to look at that 
more carefully lately is looking at the impact of the 
hurricanes on those refineries, part of which is the exports of 
gasoline to Mexico.
    Ms. Solis. One of the concerns I have is that there has 
been statements made that the fact that we haven't had refinery 
capacity is because of environmental regulations, when in fact, 
we are really looking at financing here, and the compression of 
these refineries, and the fact that those that are in 
operation, that do exist, are the ones that are actually 
reaping these profits. And I just find it ironic that somehow, 
now, we are trying to negotiate with Mexico to ask them for 
support, and in that agreement, that we will also provide them 
with, I believe, half of the capacity that would come out of 
that refinery in Yuma would go to Mexico.
    I think the public is not fully aware of these items that 
are coming to us, and I would love to have more detail from 
you, Mr. Caruso, about any other projects like that that you 
may be aware of, or not aware of.
    Mr. Caruso. Well, financing has been a major issue with 
respect to refinery projects. I mean, most sources of finance 
in the last 20 years have not seen that to be a worthwhile use 
of capital, because of the low rate of return during the '80s 
and '90s. That may be changing now, with the higher margins. 
And the Yuma case is a specific example I have heard from the 
financial community that the main obstacle, in addition to 
permitting, was financing of the Yuma project.
    Ms. Solis. That was the main obstacle?
    Mr. Caruso. Yes.
    Ms. Solis. Thank you very much. I yield back.
    Mr. Hall. All right. I thank the lady, and Mr. Otter, we 
will recognize you. Apparently, you will be the last witness.
    Mr. Otter. Thank you, Mr. Chairman.
    Mr. Hall. We are expecting a vote in the next five, ten, or 
fifteen minutes.
    Mr. Otter. About two years ago, the Speaker of the House 
put together what he called the HEAT Team, which was the House 
Energy Attack Team, and the questions that we were asked to 
answer, there was ten of us, I think there was ten of us on the 
committee, and the question that we were asked to answer was 
how can we keep home heating bills lower? How can we get 
affordable natural gas was the primary question.
    So, we went about the business of trying to assess that by 
having twelve meetings throughout the United States. At nearly 
every meeting, one of the questions that continued to come up 
through the testimony was why do we have such terrible 
restrictions on drilling and exploring on Federal lands, and 
not only drilling and exploring, but also accessing right of 
ways through Federal lands for pipelines, for power grids, and 
that sort of thing.
    And I remember the testimony that we received in Colorado, 
at the Colorado School of Mines, which was particularly 
interesting to me, because that is where we got some good, hard 
facts. In other words, in the Great Basin, that is between the 
west bank of the Mississippi River and the toenails of the 
Rockies, there is estimated to be 193 trillion cubic feet of 
natural gas. Most of that, of course, lays under ground that is 
hard to access, because it is either BLM or Forest Service, or 
some kind of government ownership, and therefore, an 
environmental restriction, or you are in for a lot of 
environmental lawsuits.
    The testimony that was particularly interesting to me was 
whether it was in Colorado or Wyoming. It was estimated that it 
takes 15 days to get a drilling permit to drill on private 
ground, 15 days, and the cost of that permitting process is 
about $1,000 a day, 15 days on private ground. If you are 
wanting to drill on the state of Idaho public lands, it took 
about 30 days, or Wyoming public lands, or Colorado public 
lands. Over 500 days to drill on U.S. land. Now, some of it was 
three or four or five or six years, because of the lawsuits 
that ensued, development and exploration.
    Would you agree with those figures, 15, 30, and over 500 
days?
    Mr. Caruso. I have heard similar numbers. I can't subscribe 
to those specifically, but those are not out of the range of 
which I have heard from private sector.
    Mr. Otter. If it stands to reason that we have got a 
reservoir, a known block of gas, of 193 trillion cubic feet, 
would you agree with that, in the Great Basin?
    Mr. Caruso. I think that sounds about right. I have the 
actual specific numbers that the Department of Interior has 
published, and the USGS.
    Mr. Otter. What I would like to do, Mr. Caruso, is have you 
and your staff put together the amount of known, identified gas 
blocks, whether it is in the Gulf, or anyplace in the U.S. 
intercontinental shelf, or if it is within the Great Basin, or 
whatever.
    Mr. Caruso. Sure.
    Mr. Otter. And give us, and Mr. Chairman, for the record, I 
would like to have that submitted for the record on this 
hearing.
    Mr. Hall. Without objection, it is submitted.
    Mr. Otter. Give us the total amount of gas that is within 
the dominion of Federal lands, or is off-limits as a result of 
Federal regulation or rules. In many cases, we found out that 
Congress hadn't done anything, and so, either the Environmental 
Protection Agency, through the Endangered Species Act, the Army 
Corps of Engineers, through the Wetlands Act, or some 
government bureaucratic office, through some rules that they 
had promulgated themselves, and Congress had never questioned 
and tested and vetted, that actually put these areas--but my 
point in bringing all this up is there wasn't one industry 
interest group that came before the HEAT committee in all our 
hearings that said that they wouldn't rather spend $15,000 on a 
drilling permit or $30,000 on a drilling permit, as opposed to 
a half a million.
    And so, I think, you know, perhaps I ought to make a 
motion, too, Mr. Chairman, to put in the record, in this 
record, Economics 101, the entire textbook on Economics 101, so 
that we can get away from this silly debate as to whether or 
not--but I will not make that motion.
    Mr. Hall. It would probably die for--
    Mr. Otter. But I think it is--
    Mr. Hall. It would probably die for a lack of a second.
    Mr. Otter. Probably. I couldn't get a second out of the 
chair?
    Mr. Hall. Well, you might.
    Mr. Otter. Thank you, Mr. Chairman. Thank you very much, 
Mr. Caruso, for being here.
    Mr. Hall. And I thank you and Mr. Caruso, we thank you. You 
are one of the few witnesses that has had total respect from 
both sides. No one has doubted your conclusions, or argued with 
you. You are unusual and very resourceful, and we thank you.
    Mr. Caruso. Thank you, Mr. Chairman.
    Mr. Hall. And thank you for your time. We are adjourned.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows.]
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