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




 
    KEEPING THE FUEL FLOWING FROM THE GULF: ARE WE PREPARED FOR THE 
                           HURRICANE SEASON?

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON ENERGY AND RESOURCES

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 7, 2006

                               __________

                           Serial No. 109-213

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform


                                 ______

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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

                  Subcommittee on Energy and Resources

                 DARRELL E. ISSA, California, Chairman
LYNN A. WESTMORELAND, Georgia        DIANE E. WATSON, California
ILEANA ROS-LEHTINEN, Florida         BRIAN HIGGINS, New York
JOHN M. McHUGH, New York             TOM LANTOS, California
PATRICK T. McHENRY, North Carolina   DENNIS J. KUCINICH, Ohio
KENNY MARCHANT, Texas

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                   Lawrence J. Brady, Staff Director
                 Dave Solan, Professional Staff Member
                          Lori Gavaghan, Clerk
          Richard Butcher, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 7, 2006.....................................     1
Statement of:
    Greco, Robert, group director of upstream and industry 
      operations, American Petroleum Institute; and Tyson Slocum, 
      energy program research director, Public Citizen...........    68
        Greco, Robert............................................    68
        Slocum, Tyson............................................    90
    Johnson, General David L., Director, National Weather 
      Service, NOAA; Admiral Thomas Barrett, Administrator, 
      Pipeline & Hazardous Materials Safety Administration, 
      Department of Transportation; and Guy Caruso, 
      Administrator, Energy Information Administration...........    11
        Barrett, Thomas..........................................    21
        Caruso, Guy..............................................    36
        Johnson, David L.........................................    11
Letters, statements, etc., submitted for the record by:
    Barrett, Admiral Thomas, Administrator, Pipeline & Hazardous 
      Materials Safety Administration, Department of 
      Transportation, prepared statement of......................    23
    Caruso, Guy, Administrator, Energy Information 
      Administration, prepared statement of......................    38
    Greco, Robert, group director of upstream and industry 
      operations, American Petroleum Institute, prepared 
      statement of...............................................    71
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................     3
    Johnson, General David L., Director, National Weather 
      Service, NOAA, prepared statement of.......................    14
    Slocum, Tyson, energy program research director, Public 
      Citizen, prepared statement of.............................    92
    Watson, Hon. Diane E., a Representative in Congress from the 
      State of California, prepared statement of.................    64


    KEEPING THE FUEL FLOWING FROM THE GULF: ARE WE PREPARED FOR THE 
                           HURRICANE SEASON?

                              ----------                              


                        WEDNESDAY, JUNE 7, 2006

                  House of Representatives,
              Subcommittee on Energy and Resources,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2203, Rayburn House Office Building, Hon. Darrell E. Issa 
(chairman of the subcommittee) presiding.
    Present: Representatives Issa and Watson.
    Staff present: Larry Brady, staff director; Lori Gavaghan, 
legislative clerk; Tom Alexander, counsel; Dave Solan, Ph.D. 
and Ray Robbins, professional staff medmber; Richard Butcher, 
minority professional staff member; and Jean Gosa, minority 
assistant clerk.
    Mr. Issa. The subcommittee will come to order, a presumed 
quorum being present.
    Last year's Hurricanes Katrina and Rita provided the 
government and energy industry with a painful education. 
Emergency communication systems were rendered inoperable. The 
electric power on which refineries and pipelines depend was 
unavailable for much longer than the baseline scenarios had 
predicted.
    We were also made acutely aware that, although we have a 
strategic petroleum reserve of crude oil, we do not have a 
strategic reserve of refined fuels such as gasoline and diesel.
    I remind everyone that, following Hurricane Katrina, I 
introduced a bill, H.R. 4043, to have the National Academy of 
Science study the feasibility of creating a strategic gasoline 
reserve.
    The lessons of 2005 go far beyond a wake-up call. Not only 
should we expect the unexpected, but we should be prepared for 
the unimaginable. Anything less could be catastrophic.
    Besides the extraordinary and tragic loss of human life of 
two 100-year storms in the same season, we are left with almost 
$3-per-gallon average gasoline prices entering the 2006 
hurricane season. The production of petroleum and natural gas 
in the Gulf of Mexico is just now getting back close to normal 
levels. Petroleum refining capacity was already stretched to 
the limit before the 2005 hurricanes.
    The importance of the Gulf to the United States cannot be 
overstated.
    It is the energy breadbasket for our Nation.
    For the 2006 hurricane season--and I do not want to preempt 
the testimony--but NOAA forecasts that we will have above-
average activity.
    One noted forecaster has calculated that there is almost a 
40-percent chance of the area of Florida or the Florida 
panhandle, into Brownsville, TX, being hit by a category three, 
four, or five hurricane in 2006, and I am sure we will hear 
much more detail as the witnesses begin.
    Bearing this in mind, it is critical that we assess 
government and industry's preparedness efforts to keep the 
critical fuels flowing from the Gulf of Mexico to the rest of 
the country. Spiking fuel prices are a grave concern, but even 
higher prices pale in comparison to the consequence of 
widespread fuel shortages. During the crisis after Hurricane 
Katrina, parts of the country were within hours of running 
short of critical fuels. It was only through the ingenuity and 
determination of government and industry personnel that the 
fuel crisis was averted and the U.S. economy did not grind to a 
halt.
    Much was learned from the events of last year. It is 
imperative that the lessons learned be applied in a systematic 
manner.
    Government and energy industry must closely coordinate 
their preparedness in response efforts.
    In short, are the Federal Government and industries 
prepared to keep the fuel flowing from the Gulf of Mexico this 
hurricane season? The answer to this question must be 
affirmative, and it must be answered in actions, not only 
words.
    Today, we have experts from government, industry, and the 
marketplace to help answer this over-arching question.
    For our first panel of witnesses, we are privileged to have 
General David Johnson, director of the National Weather 
Service; Admiral Thomas Barrett, recently sworn in as 
Administrator of Pipeline & Hazardous Material Safety 
Administration, Department of Transportation--congratulations, 
Admiral--and once again, we are joined by the Honorable Guy 
Caruso, Administrator of the Energy Information Administration.
    [The prepared statement of Hon. Darrell E. Issa follows:]

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    Mr. Issa. I look forward to hearing from our distinguished 
panel today. When our ranking member is able to join us, we 
will undoubtedly pause, if she would like, for her opening 
remarks. Since we have no other requests for opening 
statements, I would ask that each of the witnesses stand, along 
with anyone who is going to provide information, to take the 
oath, as is required by this committee.
    [Witnesses sworn.]
    Mr. Issa. Let the record show that three witnesses and four 
in the back row have all been sworn.
    Before we begin, I would like to thank all who have 
attended.
    This is a real showing of the level of interest to have 
this committee room filled to the brim when, often, 
subcommittee hearings are echo chambers. I think that speaks 
well of the gravity of what we are going to hear today. With 
that, I would like to begin with Gen. Johnson.

   STATEMENT OF GENERAL DAVID L. JOHNSON, DIRECTOR, NATIONAL 
 WEATHER SERVICE, NOAA; ADMIRAL THOMAS BARRETT, ADMINISTRATOR, 
     PIPELINE & HAZARDOUS MATERIALS SAFETY ADMINISTRATION, 
 DEPARTMENT OF TRANSPORTATION; AND GUY CARUSO, ADMINISTRATOR, 
               ENERGY INFORMATION ADMINISTRATION

                 STATEMENT OF DAVID L. JOHNSON

    General Johnson. Good afternoon, Mr. Chairman and members 
of the committee.
    I am General David Johnson, Assistant Administrator for 
Weather Services and the director of the National Weather 
Service at the National Oceanic and Atmospheric Administration 
[NOAA], in the Department of Commerce. Thank you for inviting 
me here today to discuss the outlook for the 2006 Atlantic 
hurricane season.
    Last year's hurricane season set records for the numbers of 
hurricanes and tropical storms. However, whether you are 
predicting an above-average hurricane season like this year or 
even a below-normal season, such as in 1992, the crucial 
message is the same: prepare, prepare, prepare. It only takes 
one powerful hurricane like Andrew or Katrina to expose our 
vulnerabilities.
    First, let me express my sincere gratitude to the members 
of your committee. Your continued support of NOAA and our 
hurricane program enables us to make the best forecast possible 
in order to help protect lives, property and livelihoods.
    There is a great interest among the media and public in the 
research community about the upcoming hurricane season. People 
want to know how many hurricanes there will be and the chances 
of one hitting their area. This attention generates needed 
awareness about the potential effects of hurricanes and helps 
ensure people take the right actions at the right time.
    The official hurricane season began just a week ago, on 
June 1st, and runs officially through November 30th. The 
average peak activity occurs with the warmest water 
temperatures from the middle of August to the end of October. 
NOAA's official prediction for the 2006 Atlantic hurricane 
season is for 13 to 16 named tropical storms, with 8 to 10 of 
those storms becoming hurricanes. Of those, we predict four to 
six will be major hurricanes, or what we call a category three 
or higher, packing winds over 110 miles per hour. It is these 
category three storms that are the ones likely to cause the 
most extensive damage.
    This hurricane season, we are predicting an 80-percent 
likelihood of an above-average number of storms in the Atlantic 
basin, and that is the highest probability we have ever 
predicted in a May outlook.
    This high degree of confidence in our seasonal forecast 
comes from many favorable conditions, including warmer sea 
surface temperatures in the Atlantic basin, combined with a 
lower wind shear, low surface pressures, and an African 
easterly jet stream.
    Many believe these favorable conditions, which started 
coming together around 1995, are part of the multi-decadal 
climate pattern which peaked in the 1950's and 1960's.
    This multi-decadal signal could keep us in an active period 
for major hurricanes for another 10 to 20 years or more.
    One question that is raised frequently is the role of 
climate change and how that affects hurricane frequency and 
intensity, and this issue is important to NOAA. Our 
meteorologists and research scientists are actively engaged in 
ongoing research to better understand how this climate 
variability and change may impact hurricane frequency and 
intensity.
    Steering patterns for major hurricane landfalls can 
sometimes persist over years. During the 1940's, many major 
hurricanes hit Florida. During the 1950's, the focus of land-
falling hurricanes shifted to the U.S. east coast, and during 
the 1960's, the central and west Gulf States were again hit by 
hurricanes. This pattern might lead one to assume that, given 
the recent major hurricanes in 2004 and 2005, Florida and the 
Gulf coast are likely targets again this season. However, in 
each of those decades, there were exceptions, with some 
hurricanes impacting other areas of the coast.
    While it is possible to observe these trends and make 
generalizations, it is important to understand that, in any 
given year in the Atlantic, a hurricane can impact any part of 
the U.S. coastline from Texas up to Maine, and it only takes 
one hurricane over a given community to make a bad year.
    In 1983, there was only one land-falling hurricane in the 
United States, but it was category three Alicia that hit the 
Houston and Galveston area, and in 1992, we only had one 
hurricane make landfall in the United States, but that was 
category five Hurricane Andrew, which hit southern Miami and 
Dade County, FL.
    The message from NOAA's National Weather Service is very 
consistent.
    We want every business, every family, every individual, and 
every community or industry that operates on or near the coast 
to have a hurricane preparedness plan and have it in place at 
the start of the hurricane season.
    I must emphasize that any city or community along the coast 
can be devastated by a hurricane and that a hurricane is not 
just a coastal event. The strong winds, heavy rains, flooding, 
and tornados from weakening tropical systems can spread well 
inland.
    The damage created can hinder recovery or continued 
evacuation efforts, and lead to increased loss of life and 
property.
    While NOAA has made great strides in the accuracy of our 
hurricane track forecasts, much more work needs to be done, 
especially on intensity forecasts, and we have been very honest 
about that.
    NOAA has asked outside experts to review our research and 
our programs to improve our forecast intensity capabilities, 
and NOAA also continues to test new products and models to 
improve our overall hurricane forecast.
    We do intend to introduce a new hurricane modeling system 
called the Hurricane Weather Research and Forecasting Model, 
developed by the National Center for Environmental Prediction. 
We appreciate the Congress' support of this effort and its 
overall support for the satellites, the aircraft, the buoys, 
and most importantly for the people who make these critical 
forecasts possible.
    While NOAA will continue to do its best to provide accurate 
forecasts with as much warning as possible, it is my hope that 
each family, each business, and each community on or near the 
coast will develop and be able to execute a hurricane 
preparedness plan. We must all be ready to protect lives and 
property from the power of hurricanes.
    I thank you for your time today, sir, and look forward to 
the questions.
    [The prepared statement of General Johnson follows:]

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    Mr. Issa. Thank you, General, and without objection, all of 
the witnesses' written and oral testimony will be in the 
record, and without objection, we will also leave the record 
open for 5 days for additional inclusions or answers that come 
from today's panel.
    Admiral Barrett.

                  STATEMENT OF THOMAS BARRETT

    Admiral Barrett. Good afternoon, Mr. Chairman. Thank you 
for your leadership in scheduling this hearing and on this 
issue, and the invitation to appear and discuss PHMSA's 
response to last year's hurricanes and our preparedness for 
this year.
    Secretary Mineta is keenly focused on the Department of 
Transportation's crisis response responsibilities, as I am for 
Pipeline and Hazardous Materials Safety Administration. In my 
view, PHMSA personnel and the pipeline industry did a terrific 
job last year, under very difficult conditions, to keep fuel 
flowing from the Gulf following the storms. Lessons learned 
from that experience have helped us prepare for the current 
season.
    Secretary Mineta and PHMSA both understand the role our 
pipeline transportation systems play in the national energy 
supply, and the risk of fuel shortages from mid-Atlantic States 
that could followupon a major storm.
    When Katrina and Rita hit last year, PHMSA moved quickly 
and aggressively to help industry return transmission lines to 
full service.
    As you may be aware, the hurricanes did not do extensive 
damage to the underground transmission pipelines, and 
historically, above-ground pipeline facilities have performed 
well during hurricanes. However, the storms did cause extensive 
damage to the electric power transmission network that pump 
stations rely on for power, and restoring power to those major 
pumps rapidly emerged as the critical issue.
    Immediately after landfall of Katrina, PHMSA personnel 
surveyed damage and monitored pipeline service restoration 
activities throughout Louisiana, Mississippi, Alabama, and 
Texas.
    Through contacts with pipeline operator and their 
customers, PHMSA was able to forecast fuel shortages throughout 
the southeast and mid-Atlantic within 48 hours of landfall. If 
you will look at the first chart, you can see the storm track 
up through central Mississippi would have affected a number of 
major pump stations on both Plantation and Colonial lines, 
which are major feedings to the northeast.
    PHMSA personnel from headquarters were dispatched by 
Secretary Mineta to provide onsite coordination with local 
emergency response centers. They worked with the FAA to 
facilitate emergency fly overs for damage assessments and with 
the Federal Motor Carrier Safety and Federal Highway 
Administrations to obtain police escorts and waivers of hours 
for service and weight restrictions to safely and rapidly move 
19 large generators from around the country, as far away as 
Washington State, to restore pumping capability.
    Dedicated PHMSA personnel traveled to remote storm-damaged 
areas to help industry personnel assure manual pipeline 
startups were safe. PHMSA issued special permits to 
Mississippi, Alabama, Louisiana, Florida, and later, Texas, for 
Rita, to accommodate emergency transportation, and rescue and 
relief materials, and facilitate removal of debris.
    The bottom line is potential fuel shortages that could have 
had major impacts up to the mid-Atlanta were averted by rapid 
response and solid teamwork between industry, PHMSA, FERC, and 
multiple other Federal, State, and local agencies, and if you 
look--you can see the track on restoration and how it worked.
    This is Katrina, but on the Plantation lines, you can see 
that, within several days--August 30th would have been Tuesday, 
so it is 2 days after the storm hit, a day after landfall 
there. Restoration was crucial and moved rapidly.
    On Colonial, you can see the same thing. It took a little 
longer.
    It is a much larger line. This line is over a 2-million-
barrel-a-day capacity, and so, it took a little longer to 
restore, but it was promptly brought back in service.
    Following the experience of the 2005 season, we have looked 
at lessons learned and steps we could take to prepare for 
future challenges. Our approach will be to analyze risk prior 
to an event, bring rapid assessment of potential impacts, help 
mitigate releases, facilitate safe restoration of fuel supply, 
and approve special permits as warranted to facilitate movement 
of supplies.
    We have been meeting regularly with the pipeline industry, 
FERC, DHS, DOE, and FEMA officials to execute responsibilities 
under the national response plan. Our regional and headquarters 
personnel have participated in numerous drills and training 
exercises to more effectively deal with potential emergencies.
    In the office of our chief safety officer, we have 
established a new focal point for security and emergency 
preparedness.
    Last week, Secretary Mineta visited the Gulf coast to 
discuss with State and local leaders ways to improve large-
scale emergency response plans. In addition, PHMSA staff met 
with Mississippi and Louisiana officials, including the staffs 
of Governor Barbour and Governor Blanco, to discuss emergency 
response actions, held discussions with the Mississippi 
Emergency Management Agency, the Louisiana Department of 
Natural Resources, Louisiana Department of Homeland Security, 
on the best ways to resolve potential pipeline and related 
transportation emergencies, and we intend to continue those 
meetings with local officials in other States as we move 
forward.
    Mr. Chairman, like you, DOT and PHMSA are committed to safe 
operation of our Nation's pipeline transportation system under 
both normal and emergent conditions. We understand how 
important this is to our economy and to the safety and security 
of our citizens.
    I will be glad to respond to questions, and I thank you and 
the committee for your interest and attention on this issue.
    [The prepared statement of Admiral Barrett follows:]

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    Mr. Issa. Thank you, Admiral.
    Mr. Caruso.

                    STATEMENT OF GUY CARUSO

    Mr. Caruso. Thank you, Mr. Chairman, and I appreciate the 
opportunity to present the Energy Information Administration's 
energy market outlook and discuss the potential effects of the 
hurricane season. As you know, EIA is the independent 
statistical and analytical agency in the Department of Energy.
    As of today, we released our Short-term Energy Outlook for 
June, and we see crude oil prices continuing to rise this year 
and into next year. As you know, they are set in international 
markets based on world oil supply and demand, and recently, 
strong economic growth worldwide has accelerated the demand 
growth, while global production capacity has struggled to keep 
pace. This is an industry straining to meet the demand it is 
facing.
    At the same time, the perceived risk to supply caused by 
political instability and other factors, such as natural 
disasters, continually affect the market.
    In our current short-term outlook, the monthly average 
price of crude oil is expected to average $68 per barrel in 
2006 and 2007, with retail gasoline prices projected to average 
$2.60 per gallon in both years. Looking at the 2006 summer 
driving season, we expect gasoline to average about $2.75 per 
gallon, nearly 40 cents higher than last summer.
    U.S. crude oil production should increase this year, 
recovering from last year's hurricane damage, but only moderate 
increases in both OPEC and overall non-OPEC production are 
expected.
    At the same time, world demand for oil is expected to 
increase by 1.7 million barrels per day in 2006, and 1.9 
million barrels per day in 2007, with China accounting for 
about half-a-million barrels a day of the growth in both years.
    Limited surplus capacity and concerns about potential 
supply problems, not only due to natural disasters but geo-
political events, continue to keep upward pressure on oil 
prices.
    Turning to natural gas, total demand in 2006 is expected to 
be slightly lower than last year, due mostly to the mild winter 
conditions that reduced heating needs earlier this year.
    However, industrial demand is expected to increase with the 
recovery in the natural gas-intensive industries following last 
year's hurricanes.
    It is important to note that our projections do not include 
any production losses or outages from hurricanes this season.
    However, significant amounts of U.S. oil and natural gas 
production and refining capacity are potentially vulnerable to 
hurricane-related disruption. In 2004, the federally 
administered areas in the Gulf of Mexico contributed 27 percent 
of the total U.S. crude oil production and 20 percent of total 
natural gas.
    There was also significant production in the off-shore and 
on-shore of the State administered areas in Alabama, Louisiana, 
Mississippi, and Texas.
    In addition, Gulf coast States account for more than 46 
percent of U.S. refinery capacity.
    Hurricanes Katrina and Rita passed through the heart of the 
Gulf producing region.
    According to the Minerals Management Service, as of June 
1st this year, total production of crude has been reduced by 
more than 160 million barrels, and production of gas by nearly 
800 billion cubic feet due to the effect of last year's 
hurricanes. That amounts to about 30 percent and 21 percent of 
a normal year's oil and natural gas production from the Federal 
off-shore fields.
    About 228,000 barrels a day of Gulf production and 1.1 
billion cubic feet per day of natural gas still remain off-
line, some permanently.
    At the height of the refinery outages in late September, 
nearly 30 percent of U.S. refinery capacity and over 60 percent 
of refinery capacity in the Gulf coast region were shut down. 
From August 26th through the end of 2005, about 105 million 
barrels of refined products were not produced as a result of 
refinery shutdowns. In addition, some refinery maintenance that 
would normally have occurred last fall was deferred to this 
spring.
    The effects of Katrina and Rita and, to a lesser extent, 
Hurricane Ivan in 2004 were unusually severe compared to past 
experience.
    As discussed in my written testimony, the impacts of 
Katrina and Rita on refinery operations were even more 
exceptional, pushing the normalized index of refinery capacity 
utilization in the Gulf coast during October and September far 
below levels experienced at any time over the past 20 years.
    As General Johnson has just detailed, NOAA has issued its 
preliminary outlook for this year's hurricane season, with an 
80-percent probability of above-average hurricane--number of 
hurricanes, and particularly major hurricanes. There is 
considerable uncertainty, as General Johnson has indicated, in 
predicting disruptions to oil and natural gas operations due to 
hurricanes, because it depends on the precise locations and 
intensities of the storm. However, based on our analysis of the 
last 45 years of production losses and taking into account the 
current NOAA forecast, we expect the total reduction in crude 
production from Federal off-shore to range from zero to 35 
million barrels during this hurricane season, with a reduction 
in natural gas ranging from zero to 206 billion cubic feet.
    In addition to the potential damage from production--to 
production and refinery operations, hurricanes have other 
potential effects, such as disruptions in transportation, as 
Admiral Barrett has just indicated, electric power supply, and 
other necessary infrastructure.
    Last year, EIA assisted DOE's Office of Energy Delivery and 
Energy Reliability, and the Office of Fossil Energy, in their 
emergency response efforts during the hurricane season. We 
stand ready again to support them and the agencies represented 
at this table, and others, in responding to any potential 
disruptions this year.
    Mr. Chairman, this completes my oral testimony, and I would 
be happy to answer questions at the proper time.
    [The prepared statement of Mr. Caruso follows:]

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    Mr. Issa. Thank you, and I will start off with 5 minutes of 
questioning.
    Mr. Caruso, you know, I think facts and figures are great, 
and I have a staff that goes through them and runs the numbers 
and pours over them, but in layman's terms, if we are to assume 
the upper end of those shortages that you just described occur, 
and since last year we came within, I believe it was hours, 
sometimes adding up to a day, sometimes not, of running out of, 
for example, jet fuel here in Washington, DC.
    If we hit the upper end due to an outage, not similar to 
last year but based on your forecast, do the pipelines go dry 
for a period of time, and if so, what can we or are we likely 
to be able to do as far as preventing aircraft trapped on the 
ground in airports and unmanageable lines for other fuels?
    Mr. Caruso. Well, if the intensity is limited to those 
numbers that I have just discussed--and we also know that there 
is certainly a potential for revisions upward--it would put 
upward pressure on price, but this level is so much less than 
last year, I do not think there would be a issue of anywhere 
near the reduction in supply or the potential disruptions that 
you indicated.
    So, I would say it would probably be limited to price 
impacts, and depending on how long the refineries or pipelines 
were off-line, I do not see it approaching anywhere near the 
intensity or disruption level of last year.
    Mr. Issa. I hope you are right. I guess I would followup 
with one quick question, which is that, since inventories are 
generally--and capacity is not as good as it was going into 
last year's hurricane season, and since jet fuel does not enjoy 
the elasticity of demand, if prices go up, it does not change 
the amount of fuel necessary to make the amount of flights that 
we have people demanding, and even raising the cost of a ticket 
doesn't reduce that many people who physically use aircraft to 
travel, we can presume that aviation fuel, particularly, is not 
going to go down over even days or weeks of short supply. So, 
price is not going to change that.
    If price does not change that, are we reasonably at risk 
that, as close as we came last year, we could find ourselves 
unable to supply, if there is a refinery outage even close to 
last year, the aviation fuel in the northeast?
    Mr. Caruso. I think the other element that you have to take 
into account is inventories, and as of now, the starting of the 
season, inventories of jet fuel and other--what we call middle 
distillates--are in reasonable good shape. So, we do think 
that, again, based on the assumption that we do not get above 
the numbers that I have talked about, we should have adequate 
supply, but as I mentioned, there would be an impact on prices.
    Mr. Issa. General Johnson, as a southern Californian, I 
often ask too many questions about the southwest part of the 
United States, so please note that my biggest concern right now 
is: if a hurricane were to hit the Washington to Maine coast, 
particularly along New York and New Jersey, where we import 
fairly substantial amounts of gasoline and distillates, what 
would be the effect?
    General Johnson. Well, sir, any coastal community or port 
is certainly at risk, and New York, for example, has had 
significant hurricanes in 1985 with Gloria and with Bob in 
1991.
    I think probably the most memorable one was 1938, where a 
category three came in with 10 to 12 foot surge going in.
    That is a pretty significant surge. Katrina had doubled 
that in the Gulf coast, and the Mississippi coast had about 
double that, but that is a significant surge and could disrupt 
port operations; I defer to the port experts on that.
    Our job is to provide on accurate, timely forecast, and so, 
we will be watching the east coast and the Gulf coast very 
carefully this year.
    Mr. Issa. Would you say, based on your predictions that we 
have a higher-than-normal opportunity to have that kind of hit 
to New York and New Jersey this year versus previous years?
    General Johnson. I have heard speculation on geographic 
proximity, and I believe that is exactly what that is.
    That is speculation at this point in time. There are so 
many factors that go into where the hurricane will actually 
track.
    I think there is, however, sir, a direct correlation with 
higher-than-average and an above-normal season and with a 
higher probability for land-falling hurricanes. However it is, 
in fact, scientifically less believable that we can associate 
with a geographic proximity at this point in time.
    Mr. Issa. Well, I do note that, yesterday, on June 6, 2006, 
with the prime rate at 6.6, they said there was only a 1 in 
100,000 chance that it would be the end of the world.
    General Johnson. I will defer to you, sir.
    Mr. Issa. Those were odds I could live with, but obviously, 
the odds are dramatically more likely than 1 in 100,000.
    For all practical purposes, isn't this, particularly at 
this high level of activity--we are sort of in that it is going 
to happen once in a 100 years and it is going to happen more 
likely at this point in the 100 years than some other points, 
from a weather standpoint?
    General Johnson. Sir, we do see that cyclical, multi-
decadal signal, and since 1995, we have only had 2 years in the 
last 11 that have been below normal, and those were both El 
Nino years.
    So, at this point in time, I believe that we are in this 
above-normal decadal signal and we will remain there for the 
next decade or so.
    So, yes, sir, I think that this is something that all 
America needs to pay attention to, especially those on the 
coast, but as you point out, those effects can go inland 
through energy and other industries, as well.
    Mr. Issa. Thank you.
    Mr. Caruso, did you have a partial answer to that first 
question?
    Mr. Caruso. Yeah. One point to keep in mind about New York 
and the east coast----
    Mr. Issa. New York, New Jersey, Connecticut. Let's not 
forget Connecticut.
    Mr. Caruso. I could never forget my home State. The 
refining concentration in the Gulf coast, 46 percent of the 
country's refining capacity, makes it obviously far more 
critical to the supply. For example, there are 1.5 million 
barrels a day of refining capacity in the east coast, and 7 
million in the Gulf coast, but as the General just pointed out, 
the ports are critically important, because they import 
substantially more product into the east coast, as a share of 
their final consumption, than any other region.
    So, that is the area where I would be most concerned about 
in terms of weather-related disruptions: port activity 
disruption, as opposed to refineries themselves or even 
pipelines.
    Mr. Issa. Admiral, that probably brings us very logically 
to you.
    All of you spoke a little bit about where we are this year 
versus last year, but that is the short run. That is how much 
we could patch together with string and a little glue.
    What is left to be done for this year that you are in the 
last minutes of trying to figure out how to do it? Obviously, 
down in New Orleans, we are very acutely aware that they are 
welding and pushing to try to get things done, and they are 
past what was their deadline. Admiral, what is it we have to 
do, perhaps with additional emphasis from the Congress, for the 
long run, for this entire 10-year period in which we are 
probably at triple or quadruple the chances of a 100-year flood 
occurring or a 100-year hurricane cycle?
    Admiral Barrett. Sir, in terms of this year, and 
particularly in light of your earlier question, I would point 
out, there is a little more resiliency and flexibility once you 
get above Baltimore in terms of--you have multiple modes, as 
Guy mentioned, you have stuff coming in, in terms of restoring 
capacity or capability. You do have pipelines coming up. You do 
have pipelines coming up to the midwest and coming across, and 
you have barge and shipping transportation.
    So, there is a little more flexibility up there once you 
move up into the Baltimore-Washington-New Jersey corridor. I 
think fundamentally, if I take your question, I think Secretary 
Mineta has an initiative to reduce, over the long term, 
congestion on our Nation's highways.
    It is an impediment to economic growth and a national-level 
issue that needs attention.
    Well, in a similar sense, I think we need to be creative 
about ways, with the industry and with the Congress and the 
administration, to reduce congestion on the energy highways, if 
you will, the means by which we move energy around this country 
and provide the reliability of those supplies to American 
citizens.
    So, I think, long-term, we need to take a look at that 
issue: the congestion of the energy highway, as well as the 
Secretary has clearly stated the need to pay attention to our 
national highway system. That is what I think needs attention.
    Mr. Issa. Obviously, we, as Californians, are acutely aware 
of what happens when a highway becomes a parking lot, and that 
is just every day, and that is without earthquakes or 
hurricanes. But Admiral, following up, the pipelines that we 
depend on in the northeast, the Colonial and Plantation, we 
depend on them operating at virtually peak level.
    First of all, what happens if we have widespread flooding, 
we lose electricity, they shut down? What are we doing to 
prevent that, to really attack the fact that we are an electric 
economy, that we depend on electricity to get petroleum, rather 
than we think that petroleum creates electricity?
    Admiral Barrett. I think the industry, following, again, 
the lessons learned--and we certainly have been looking at this 
from last year--have been much more aggressive in positioning 
in place emergency generators, food and water supplies. In 
addition, they are paying more attention to how they can get 
their employees into these sites, gaining appropriate access, 
and I do think it is going to depend on what we encounter. 
Despite the increasingly accurate predictions, it is a little 
hard to know exactly what will be hit, but I know they have 
been moving aggressively, and we have been monitoring their 
efforts to put more capability in place, to be more immediately 
responsible to any outage that is caused by loss of electrical 
grid.
    Mr. Issa. I am just going to ask one closing question, and 
you have been a great panel, but last year, we discovered two 
things.
    First of all, we did not know where a lot of the assets 
that we needed were. We might not have known we needed them 
until the incident occurred, but once we did, we did not know 
where they were.
    It took a while to find out where generators were. You 
included the fact that some came from as far away as Washington 
State to the Gulf.
    Then, second, once we had located them, contracted them, 
crews were driving them in, we discovered that they had been 
stopped by the very people who were intending to provide 
relief.
    One, what have we done about the first part, to your 
knowledge, and this includes both liquid assets in the way of 
replacement fuels and solid assets--for example, generators--
and two, to the extent that each of you has overseen this, what 
are we doing to guarantee that if the asset is located and 
heads in, that it will arrive uninterrupted?
    Admiral Barrett. Thank you, sir.
    In response to your first question, there has been a lot 
more planning this year at multiple levels within the Federal 
Government, partnering with industry and at the State and local 
levels, to make sure that the assets, to the extent they can be 
anticipated, are identified, that mechanisms are in place to 
prioritize and assign them to where they are needed. I know for 
a fact that the industry has been very aggressive, at least the 
pipeline industry, in making sure they have in their pocket, if 
you will, a little more depth to deal with emergent conditions, 
and I think, two, the Federal Government, led by the Department 
of Homeland Security, and from our perspective at Department of 
Energy, and FERC, specifically, have been paying much more 
attention to how, in an emergency, at both the national level 
and down at the local level at emergency operations centers and 
command centers, appropriate prioritization, with law 
enforcement support, would be in place.
    Last year, I know my deputy, Brigham McGown, was very 
heavily engaged in arranging escorts from law enforcement to 
move this equipment onto the sites where it was needed. Our 
hazardous material folks worked with other agencies, Federal 
motor carriers, to get the special permits we needed.
    I believe, from what I know that those mechanisms will be 
much more regular this year, and we are still working on that. 
We are exercising regularly, and we will continue to do that, 
and pay attention to where we identify any risks.
    Mr. Issa. Thank you.
    I am going to break my own promise where I said this was 
the last question.
    There was one other piece of testimony that came out, and 
it was maybe an offhand remark, but I do not know that most of 
us on this side of the dais are used to the term ``and some 
assets in the Gulf are permanently off-line.''
    Mr. Caruso, that was in your opening testimony.
    Can you provide the committee--because I do not think we 
are aware of what and why assets--and I am basically talking 
about wells--are abandoned as a result of last year and what 
the impact of that is, to the extent that it can be quantified.
    Mr. Caruso. I would be happy to do that. Minerals 
Management Services has made that estimate.
    Mr. Issa. I appreciate it.
    All congressional committees pride themselves on knowing 
everything. I would appreciate it if you would help me in 
getting that.
    Mr. Caruso. I would be happy to do that, Mr. Chairman.
    Mr. Issa. In closing, I would like to thank all of you for 
excellent testimony, excellent question and answers. We were 
very fortunate to have you with us here today.
    This is no surprise that, if all goes well, we will not 
have you back, but if any concern develops I have no doubt that 
we will all be together again.
    Thank you again, and we will hold the record open for 5 
days.
    We will now hear from our second panel.
    With us today, we have Mr. Robert Greco, group director of 
upstream and industry operations for the American Petroleum 
Institute, and Mr. Tyson Slocum, energy program research 
director of Public Citizen.
    Before we proceed with the second panel, I apologize, but I 
do not believe you have been sworn in yet.
    Mr. Slocum. No.
    Mr. Issa. Would you please rise to take the oath? Is there 
anyone with you that is going to advise? It is harmless. It 
does not hurt a bit.
    Thank you.
    [Witnesses sworn.]
    Mr. Issa. Let the record indicate all were in the 
affirmative and smiling, and before we begin, I would like to 
recognize my ranking member, Ms. Watson, for an opening 
statement.
    Ms. Watson. Mr. Chairman, I would like to apologize for 
being so late to this meeting. It was unavoidable, but thank 
you for proceeding on, and I also want to thank you for 
convening this most important hearing.
    This subcommittee can play a vital role in examining the 
issues regarding the availability of fuel supplies during this 
upcoming hurricane season. Protecting the gas and oil 
infrastructure in the Gulf of Mexico is essential to ensure 
that gas prices do not exceed the record highs they are at this 
time.
    The Gulf produces 20 percent of domestic natural gas 
production and 28.7 percent of domestic off-shore crude oil 
production.
    In the upcoming weeks, we must work diligently so we will 
not be faced with the same fuel supply problems that we 
encountered during the 2005 hurricane season. A repeat of last 
year's unpreparedness would be devastating to our Nation's 
economy.
    Mr. Chairman, gas prices rose above $3 a gallon in 
September 2005, creating record highs.
    Constituents in my home State, and yours, of California 
experienced situations where gas stations did not have any oil 
to sell.
    In northern California, along with a few other States in 
the union, constituents faced jacked-up prices in excess of $6 
per gallon of unleaded gasoline.
    We do not want America to experience this kind of financial 
strain again.
    The Gulf of Mexico also provides an estimated 47.4 percent 
of the total U.S. domestic refining capability. A shutdown or 
even partial shutdown of this region would have a disastrous 
effect on our Nation's oil and gas processing.
    The National Oceanic and Atmospheric Administration has 
predicted a very volatile hurricane season in this year, 2006.
    In 2005, there were an unprecedented 28 storms and 15 
hurricanes.
    This season, scientists are predicting at least 13 to 16 
named storms, with 8 to 10 becoming hurricanes.
    Powerful storms can and do cause tremendous damage; we 
witnessed that.
    A destructive storm has a ripple effect on every citizen's 
pocketbook, as well as on every citizen's life.
    Oil companies are in a very powerful position. The global 
thirst for oil has placed American consumers in a very 
difficult situation.
    An investigation by the Government Accountability Office 
finds that recent mergers in the U.S. oil industry have 
dramatically increased concentration in the refining sector. In 
the last 30 years, there have not been any new refineries built 
in the United States.
    The increase in market concentration has allowed oil 
companies to withhold supply, thereby increasing prices. This 
makes it easier for companies to drive up gas prices while 
holding consumers hostage.
    Mr. Chairman, we must look at ways to decrease demand, 
increase fossil fuel efficiency, and explore alternative fuel 
sources.
    Couple those thoughts with the expanding refining capacity 
of existing industry, and we will start to move down the right 
path.
    So, thank you again for holding this hearing, and with the 
Gulf region comprising almost half of this Nation's domestic 
oil refining, one-third of America's domestic oil production, 
and one-fifth of the natural gas production, the safety and the 
security of the Gulf of Mexico should be at the forefront of 
our agenda.
    I look forward to questions and dialog with our witnesses 
today, and I hope we will not have to go through the travesty 
suffered last August and September in New Orleans and the rest 
of the Gulf, or at the pump, ever again.
    I yield back my time.
    [The prepared statement of Hon. Diane E. Watson follows:]

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    Mr. Issa. I thank the gentlelady, and I particularly thank 
you for noting that our efforts to go toward bio-diesel and 
ethanol, including in California, where there are a number of 
new facilities under construction, will take us away from a 
dependence on nearly half of all our refined fuels coming out 
of the Gulf, but for today, I am pleased to have a panel that 
can help talk about how we get through this season.
    I would ask that you bear in mind we have already received 
unanimous consent that your written statements be put in the 
record, and additionally, you will be allowed to augment with 
extraneous or pertinent information, as you see fit, and 
answers to any questions you are unable to answer today.
    So, I would encourage you very much to stay within the 5-
minutes for your opening statements, and to use as much of the 
ideas not already preprinted as you possibly can.
    Mr. Greco.

  STATEMENTS OF ROBERT GRECO, GROUP DIRECTOR OF UPSTREAM AND 
 INDUSTRY OPERATIONS, AMERICAN PETROLEUM INSTITUTE; AND TYSON 
    SLOCUM, ENERGY PROGRAM RESEARCH DIRECTOR, PUBLIC CITIZEN

                   STATEMENT OF ROBERT GRECO

    Mr. Greco. Thank you, Mr. Chairman.
    Good afternoon.
    I am Bob Greco, group director of industry operations and 
upstream for API, the national trade association of the U.S. 
oil and natural gas industry. We appreciate this opportunity to 
discuss the oil and natural gas industry's hurricane 
preparedness.
    During and following last year's hurricanes, API and the 
industry worked closely with Federal agencies, including the 
Departments of Energy, Transportation, Homeland Security, 
Minerals Management Service, the EPA, the Coast Guard and 
others.
    We want to thank these agencies for their cooperation and 
support as we work together to learn from last year's 
experiences and prepare for this year's hurricane season. The 
suggestions which follow are meant to improve on an already 
positive and very successful working relationship between the 
government and the oil and natural gas industry during this 
past hurricane season.
    Our industry is proud of its hurricane record.
    The off-shore infrastructure in the Gulf, which includes 
4,000 platforms and 33,000 miles of pipeline, survived the 
hurricanes well, with no loss of life and no significant off-
shore exploration and production releases.
    Our industry's on-shore operations were safely shut down as 
the storms approached, and then safely restarted.
    Finally, the industry worked with Federal and State 
authorities and electric utilities to get pipelines moving 
product as quickly as possible.
    Improved operational coordination is now underway with 
government agencies at all levels.
    In March, API held a 2-day hurricane conference to discuss 
lessons learned and identify areas for improvement. Government 
participation included DOE, DOT, MMS, DHS, EPA, the Coast 
Guard, and State and local agencies. Many industry participants 
also attended a DOE-sponsored meeting in Mississippi.
    Last week, API joined with DOE and MMS at a joint press 
conference to discuss hurricane preparedness, and just this 
past Monday, API hosted a hurricane round-table of all sectors 
of the industry and relevant Federal agencies and trade 
associations.
    As we enter the hurricane season, it is critically 
important that agencies communicate and coordinate hurricane 
response efforts. We need to work together to eliminate overlap 
or duplication of effort by multiple government agencies, which 
can result in duplicative requests for information from 
companies, misdirection of requests within companies, and other 
inefficiencies.
    It is even more critical that government, to the extent 
possible, helps to ensure that a high priority is given to 
facilitating a company's transportation and use of emergency 
back-up generation and restoration of commercial power to 
pipelines and refineries.
    Companies also need to work closely with emergency 
responders and local law enforcement to ensure that back-up 
electrical generators and other essential equipment are not 
commandeered for other purposes, which was another concern last 
year.
    In addition, government authorities need to ensure that 
company personnel have access to refineries, pipeline 
facilities, and other infrastructure to assess damages and 
provide repair quickly. Denial of such access was a problem in 
some cases during last year's hurricanes and delayed restart of 
operations.
    Our industry's experience responding to Katrina and Rita 
underscored a fact that was already well known. Our employees 
are our most important asset. In preparing for the upcoming 
hurricane season, API member companies have taken a number of 
activities to ensure that their employees are, first and 
foremost, safe during and after a hurricane, that they have the 
needed supplies and resources for survival, and ultimately can 
return to their jobs when conditions permit.
    Examples include coordination of personnel evacuation plans 
to ensure that companies know where employees are and can 
communicate with them; establishment of distribution centers to 
provide food, potable water, and other essential products to 
employees in need; and identification of alternative housing 
arrangements for employees who have lost their homes.
    API and the industry will continue to work closely with 
government agencies, and continually reviews our industry 
standards and operating practices.
    The development of consensus industry standards is one of 
API's oldest and most successful programs, dating back to our 
first standards in 1924.
    Today, API maintains some 500 standards that promote 
safety, efficiency, and environmental protection for all 
segments of the oil and natural gas industry, and over 100 of 
these standards are referenced in Federal regulations.
    In recent weeks, API published the first two interim 
recommended practices, or RPs, to improve the performance of 
drilling rigs, several of which drifted off location during 
that hurricane.
    These interim RPs can be downloaded free of charge at API's 
Web site, www.api.org, and MMS has already quickly incorporated 
these guidelines into their regulations.
    While the drifting of these rigs did not cause spills, both 
industry and government were concerned and saw a need to 
improve rig performance.
    In conclusion, these interim RPs and our sponsorship of and 
participation in hurricane preparedness meetings and 
conferences are just a few examples of how the industry is 
moving ahead rapidly to be better prepared as the next 
hurricane season begins.
    Working together, industry and government can meet the 
challenges we face.
    Thank you again for this opportunity, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Greco follows:]

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    Mr. Issa. Thank you very much, and Mr. Slocum, very good to 
have you back with us.
    Please give us your best and--I always note that you work 
off of a lot of personal notes and have done a lot of personal 
presentations, and I always appreciate that, as does, I think, 
the entire committee.

                   STATEMENT OF TYSON SLOCUM

    Mr. Slocum. Well, thank you, and thank you, Mr. Chairman 
and Representative Watson, for the opportunity to be here 
today.
    Again, my name is Tyson Slocum, and I'm the director of the 
energy program at Public Citizen. My organization is America's 
largest consumer group. We represent over 100,000 people across 
the United States.
    We heard some excellent testimony earlier today from some 
of the government witnesses, and I want to provide more of a 
bird's eye view of some of the challenges that we're facing 
today. What I see from my view is an oil industry that is not 
prepared to meet America's energy challenges, especially in the 
refining and other downstream aspects of our sector.
    What I see from the economic investment decisions by the 
oil industry, complemented with statements that they have made 
to the media and to investigators at the Federal Trade 
Commission and others, is that they will not make adequate 
investments in downstream, particularly in refining, because it 
is not in their financial incentive to do so, from various 
statements that they have made to the media and to Federal 
investigators. It is their personal financial self-interest to 
maintain as tight supplies as possible, because that guarantees 
larger profit margins for their operations. Now, that is what 
they should be doing for their shareholders, and I think what 
the job of Congress and Government is to do is to make sure 
that citizens are represented well in this equation, and that 
is why Public Citizen has a reform plan to address some of 
these systemic problems that we see in America's energy 
markets.
    First, we agree with the chairman's call for a strategic 
refining reserve of some sort, because it was clear after 
Hurricane Katrina that America's strategic petroleum reserve 
worked wonderfully.
    All of this oil production was knocked out of service, and 
we have over 800 million barrels of crude oil in reserve that 
we were able to immediately release and supply refineries.
    I do not know why the market price of crude oil jumped the 
way it did, because there was no justification for it from a 
market perspective, because there was never any threat to crude 
oil supplies.
    Now, the same could not be said for refined products, 
because America does not have a Federal refined product 
reserve.
    Luckily, we were able to quickly import it from Europe, but 
I do not think that we should rely on that to happen again.
    So, we are definitely calling for a strategic refining 
reserve, and having the oil industry help finance the 
establishment and maintenance of such a reserve through 
something like a windfall profits tax, since the industry is 
clearly reaping huge financial windfalls from their control 
over crude and refined product supplies that they are selling 
to the American people.
    The last time I checked, the Federal budget is running 
annual deficits of about a half-a-trillion dollars, whereas oil 
company profits are the largest in the U.S. economy. Clearly, 
they can afford to help finance such an initiative.
    Second, doing something about U.S. energy demand would also 
help.
    I know that, Mr. Chairman, you have discussed the need for 
improved fuel economy standards, and that is a major issue that 
Public Citizen also promotes. While we are the third largest 
crude oil producer in the world--only the Saudis and the 
Russians produce more oil every day than we do--we are far and 
away the largest consumer. We use one out of every four barrels 
of oil consumed every day, and we use oil very inefficiently. 
Our competitors in Europe and Asia use about half the oil per 
person that we do. Implementing strong fuel economy standards 
will make our use of oil and gas far more efficient, and that 
will reduce some of the pressures that we are seeing.
    Third, I think investing in alternatives to oil and gas is 
another important strategy, but right now, it is going to take 
billions of dollars to do this.
    For example, in promoting ethanol and bio-diesel, there are 
going to be challenges to bring these products to the 
marketplace.
    We currently do not have any ethanol pipelines in the 
United States.
    So, I think that government is going to have to take the 
lead on that kind of investment, and again, I think a windfall 
profits tax on the oil industry is an excellent and equitable 
means of financing such an investment.
    Last, I think that revisiting some of the deregulation 
legislation over energy trading markets, where the prices of 
gasoline and crude oil are set, are very important for this 
committee to investigate, because with under-regulated trading 
markets, you are removing transparency, and any time you do not 
have an adequately transparent market, you increase the 
opportunity for nefarious activities to take place.
    So, Mr. Chairman, thank you very much for your time, and I 
look forward to your questions.
    [The prepared statement of Mr. Slocum follows:]

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    Mr. Issa. Thank you.
    I have a lot of questions for Mr. Greco, but I want to lead 
off with one or two for you, Mr. Slocum.
    First of all, I think we probably, from the citizen's 
standpoint, can agree that lower prices for citizens' cost of 
energy is a goal but that lower prices fly in the face of the 
incentive to save, that, unfortunately, we want one but the 
other causes us to consume less. Would that be a fair 
statement?
    Mr. Slocum. Yes, sir, that is definitely true. I also think 
that the increased prices that we have seen have not 
necessarily been an incentive for consumers to use less, and I 
think that is because economists call gasoline consumption 
inelastic. It is not a luxury consumption but, rather, a 
necessary consumption. So, for example, in the last year, you 
have seen gasoline prices go up almost 80 cents, but there has 
not been a corresponding significant impact on consumption, and 
most economists say that, in order to see a real impact on 
consumption, you would have to see prices rise to probably $5 
or $6 a gallon, which I think would then be punitive, not only 
for consumers but to the entire economy.
    Mr. Issa. I appreciate your saying that, because of course, 
we are just about at that point in Europe.
    So, I think I will buy off that perhaps we do not want to 
adopt that portion of the European model, although we certainly 
have prices that are closer to Europe than they were a decade 
ago. But you know, concentrating on the windfall profits tax, I 
watched the windfall profits tax implemented in the past, and 
of course, it was a tax.
    It may have affected where the money went, but it did not 
put the money into the long-term investment that we had hoped 
for.
    If I understood your testimony, I believe what I heard--and 
I am very positively affected by it--that to the extent that a 
windfall is declared by the Federal Government relative to 
earnings by petroleum companies, your goal would be to ensure 
that went into investment. So, if I understand correctly, what 
you are calling for here today is perhaps not identical to the 
previous windfall profit tax but, rather, a windfall investment 
funding or requirement. Would that be fair as a very overview 
brief statement?
    Mr. Slocum. Yes, sir, that would be correct, and it would 
not necessarily be a mandate on the oil industry to make that 
investment.
    You know, if they chose to do that, that would be 
fantastic, but it would be also for the government to take the 
proceeds from that new revenue source and make the necessary 
investments in our energy infrastructure that are required 
right now.
    Mr. Issa. I appreciate that, and you know, I was an 
observer of that, and Mr. Greco, I am sure, will have an 
opinion on it, too, but you know, one of my deep concerns is 
that we manage to get the money, but government is funny about 
revenue.
    We do put a lot of dollars, Federal dollars, into energy 
resources, promoting infrastructure, and so on, but usually 
what happens, if we get a new revenue source, we suddenly take 
money and put it somewhere else.
    So, the net effect often is there is no additional 
investment.
    Mr. Greco, I have given you some food for thought with my 
first questions, but I want to get back to the hurricane, 
because in the long run, we have a lot of things we can do; in 
the short run, we have a matter of days before the first 
hurricane is going to be spotted or tropical storm is going to 
be spotted in the Atlantic.
    Besides the action taken for the current hurricane season, 
what measures are government and industry taking to address 
preparedness for the long term?
    Mr. Greco. First off, some of the short-term actions that 
we are taking now do have long-term implications. When you are 
talking about redundant communications, cell towers, 
prepositioning supplies, you are developing infrastructure 
needs and setting up systems that are good for business 
continuity and will be helpful in the long term, as well, for 
future hurricane seasons, as well as other potential 
disruptions.
    Longer term, our refineries and our facilities are looking 
at their systems to see what they can do to harden them.
    For example, from a refining standpoint, you are seeing 
people looking at installing additional co-generation, which 
basically allows you to generate electricity very cleanly, very 
efficiently, onsite. That would certainly help in the instance 
of future power shutdowns.
    Refiners are considering whether they need to raise the 
level of some of their equipment, because there are tidal 
surges.
    Again, those are longer-term issues that they are looking 
at.
    Similarly, API, as I mentioned--we got two of our interim 
standards out very quickly, in record time. We are undergoing a 
comprehensive review of all of our standards to see if there 
gaps that need to be addressed longer-term to make sure that we 
fully anticipate future events and are prepared for those.
    Then, from a policy standpoint, you have a number of 
activities that the Congress and the agencies can take a look 
at.
    Clearly, diversifying our sources of supply is something we 
should look at. Our resources are concentrated in the Gulf of 
Mexico, because that is where we are allowed to build, and we 
are not allowed to build elsewhere. The ability to access oil 
reserves off our Outer Continental Shelf elsewhere, in the 
mountain west, in Alaska, would certainly diversify sources of 
supply and allow us to cushion any future disruptions that are 
concentrated in the Gulf, as well as L&G terminal siting, where 
should those be, should those be more diversified, as well as 
looking at research and development into alternatives, 
promoting conservation, streamlining permitting processes.
    Those are all longer-term activities that would certainly 
help us diversify our supply and make the economy more 
resilient to these disruptions.
    Mr. Issa. Excellent. I appreciate that.
    This is probably a longer question than the answer, because 
I think we have already touched on it, but I want to make sure 
it gets in the record.
    If a hurricane or hurricanes were to hit the Gulf of Mexico 
this year, would the recovery time be greater or less than last 
year for a given level of hurricane?
    Mr. Greco. That would be a very difficult question to 
answer.
    I think one of the challenges of last year was having----
    Mr. Issa. Generally, you know, if the word is good and we 
are better off, it is not that hard to answer. So, would it be 
fair to say that it is difficult because we may not be better 
off this year, we may not actually be able to deal with it 
better than we could last year?
    Mr. Greco. I think we have taken a number of steps to 
improve our responsiveness, to harden our facilities and to 
make them more resistant to future hurricanes. If you have two 
category five hurricanes spaced a couple of weeks apart, with 
the level of impact they had on our off-shore and on-shore 
facilities, it is difficult to predict what the impact would be 
of those. It is very hard for me to say that, but I do think we 
are better prepared this year than last year based on the 
lessons learned and the actions we have taken.
    Mr. Issa. Following up on that, as we enter the 2006 
hurricane season, the Federal Government's coordination 
efforts, are we better prepared today, are we going to respond 
better, from your observations and your coordination and your 
training, than we were last year?
    Mr. Greco. I think we are already at a very high level of 
coordination and cooperation with the industry, as I mentioned 
in my comments.
    For example, we had very good success working closely with 
the EPA, DOT, and Coast Guard on various temporary waivers that 
we needed to minimize the disruption and allow us to get our 
facilities back up and running as quickly as possible. The 
system worked, and we are justifiably proud of the government's 
response, as well as our employees' response, in those 
situations.
    So, what we are looking at is trying to improve the 
education, and thereby better understand how the government is 
coordinating.
    Much of this is done at the local level. Clearly, we need 
to continue to focus on what the people on the ground are doing 
to respond, and how can we work closely and educate them about 
the importance of getting pipelines up and running; about 
restoring electrical generation to pipelines and refineries to 
ensure supply in the areas outside the Gulf of Mexico.
    Clearly, that is the type of issue that we have been 
focusing on.
    Mr. Issa. I appreciate that.
    My last question: I introduced a piece of legislation 
calling for a study leading to a strategic refined fuels 
reserve, but in a sense, there is a strategic reserve of fuel, 
which is every other refinery in the world.
    As Californians, both the ranking member and myself, we 
deal with some 28 different blends just in California, 
depending on the time of the year, as does the rest of the 
country.
    In your opinion, would it be a worthwhile goal to have 
executive authority in the case of an event like last year for 
a predetermined fuel mixture or mixtures available around the 
world to be approved--in other words, the logical fuels that we 
could import in order to not have shortages. That would not 
meet every possible blend, but a blanket waiver for certain 
known mixtures available at certain known refineries so that we 
could, by one Executive order, whether it was in California or 
in the Gulf or in New York, have large amounts of refined fuels 
be able to be purchased and brought in fairly seamlessly.
    Today, we do not have that authority. There was controversy 
about the President even allowing some purchases and what they 
were.
    Would that be helpful, both from an industry standpoint, to 
relieve temporary shortages, and just as important, from a 
standpoint of consumer benefit?
    As you said, we had large spikes, unexplainable in the case 
of crude but explainable in the case of refined distillates and 
gasoline.
    Mr. Greco. I think your first point was a valid one.
    The fact that, despite a 30-percent drop in gasoline 
production in the United States, suddenly and unexpectedly, the 
market adjusted, we were able to import fuel, and we were able 
to get through it.
    The price did come back down quickly, and there were only 
spot shortages.
    The market worked, and from our perspective, given the 
severity of those two hurricanes, I think that supports the 
fact that the market can work when it is allowed to and when we 
work closely with government to take advantage of market 
mechanisms.
    I think when you're talking about product reserve, you get 
into a whole host of issues that are completely separate from 
oil reserves, because products do vary by season, they do vary 
in different parts of the country. Refineries are optimized to 
make particular fuels.
    So, when you talk about making a particular default fuel, 
for example, that may not work if your refinery is optimized to 
make something else. It may not be quite as quick as you are 
suggesting that it could be done, as well as storage issues you 
have with fuels.
    Where are the tanks going to be to store these fuels? Who 
is going to own the fuels? Who is going to make the decision 
when you release those fuels, and what would those impacts be 
on the market?
    So, I think, when you look at the performance of last year, 
the market worked very well and we should continue to utilize 
the power of the market.
    Mr. Issa. I appreciate your belief that last year was an 
example of industry's performance, under the circumstances, at 
its best.
    Mr. Slocum, how would you view this?
    Mr. Slocum. I think it makes a lot of sense to try to have 
better lines of communication and authority to work with other 
countries and outside storage systems to try to import during 
times of emergency. I do not necessarily agree with trying to 
streamline domestic so-called boutique fuel blends.
    Mr. Issa. That was not my suggestion. I am simply saying, 
in case of an emergency, for example, having at least one 
single fuel that could potentially be shipped to substantially 
all or major sections of the country, for only the emergency 
period, you know, recognizing that if, hypothetically, that 
were a California-approved blend, one of the blends, it might 
not be perfectly ideal, but it would be substantially up to or 
above Federal standards.
    You know, one of the problems we as Californians--I want to 
make sure I explain it--is that when we run out of fuel--when 
Long Beach's refinery had a fire, there was nobody else that 
could make the fuel, I think, except Norway.
    So, we were in an odd situation of the market could not 
work because when one place was off-line, nobody could react in 
any reasonable time to prevent a shortage.
    Looking at last year and making the assumption that the 
world has enough gasoline, particularly gasoline refining 
capacity, and they can refine at least one blend acceptable in 
the United States, and yet they may not be able to send it to 
this State or that State or this district--and I'm not talking 
about, at all, narrowing any jurisdiction or any fuel that is 
determined.
    I think dismissing this option is not appropriate to 
emergency response. During a bona fide emergency, do we want 
our hospitals' generators running, do we want emergency 
vehicles to be able to operate, or do we want to say not if it 
means that there is a slightly different blend of gasoline 
inside the tank that might have, you know, two noxes 
different--and I am not trying to belittle those two noxes--but 
for that short period of time, hypothetically, the first 30 
days after there has been a severe outage and not beyond.
    Mr. Slocum. Yes, sir, Mr. Chairman, I think it makes a lot 
of sense to give the President that authority or to investigate 
this further, to try to better coordinate, you know, transfers 
of--and you know, negotiating with these other countries in 
order to have them help us respond to any emergencies that we 
have here, and any supply disruptions.
    I think that would be extremely beneficial.
    Mr. Issa. Thank you, and I appreciate the gentlelady's 
patience on that question.
    Thank you.
    Ms. Watson. This is a question to Mr. Greco.
    Last August, during Katrina, we saw prices go up as high as 
$5 in some places. We saw those who had cars and could get them 
out of the flooded areas lined up for miles to get the 
gasoline.
    I hear the explanation about how we can get the resources 
we need, but what were your feelings about the oil industry 
making the largest profits ever? I guess you do the accounting 
per quarter, and I understand billions of dollars were made, I 
would say at the expense of the consumers during a time of 
crisis.
    Now, how is that justified?
    You know, you made profits for your stockholders. I heard 
discussions on TV and radio and saw all about the bottom line, 
but at a time when our country is attacked by nature, people 
died and so on, why would you look at the bottom line?
    Can you explain that to me?
    Mr. Greco. During the hurricane, at its peak, nearly one-
third of our gasoline production was suddenly off-line. We lost 
that much of our supply.
    Nearly one-third of our oil production was suddenly off-
line.
    Twenty percent of our natural gas production was off-line.
    That is a tremendous drop in a supply in any market, 
particularly one as tightly balanced as the U.S. market is.
    Not surprisingly, given that huge drop in supply, there was 
upward pressure on prices. Just as quickly as imports came in 
from Europe, from the gasoline side, we did see prices drop 
back down.
    Just recently, at the request of Congress, the FTC looked 
at this issue and tried to assess what the impacts were of that 
price pattern. Was there anything else going on? According to 
the FTC, ``the post-hurricane gasoline price increases at the 
national and regional levels were approximately what would be 
predicted by the standard supply and demand model of a market 
performing competitively. The conduct of firms in response to 
the supply shocks from the hurricanes was consistent with 
competition.''
    Ms. Watson. Let me just say this. I understand very clearly 
what you said, but you registered the largest profit margin 
ever, billions of dollars.
    So, it does not really compute to say you had to go and get 
petrol from other sources, but you still made so much money off 
people who had to escape, who probably did not have money, and 
you ripped them off for the bottom line.
    So, I just see a matter of the lack of social 
responsibility. I recognize all the other problems, but to 
register that kind of profit and to say it is competition and 
we have stockholders does not compute with the kind of 
emergency we were under.
    Mr. Greco. May I respond to that, please?
    Ms. Watson. Let me go with Mr. Slocum. I think I heard your 
response.
    Mr. Greco. Well, no, I think the response--the other piece, 
which I meant to say, would like to say, is that this was more 
than just an industry impact. The men and women of our 
employees were spread to the four winds as a result of this 
disruption.
    We had immediate concerns that we needed to find our 
employees, get them back to a position where they could work in 
a safe condition, while looking out for their families, where 
they lost loved ones, as well, and family members in this 
disaster. So, this was a body blow to our industry that our 
companies took very personally, and was a significant hit on 
them, as well.
    Regarding the profits, when you look at the size of our 
industry, the profits are not out of line with the size of our 
companies.
    Ms. Watson. There is no way to socially justify that, at a 
time that this Nation was paralyzed with this disaster--we 
could not even get people in there for 3 days to remove the 
folks that were there, but when people were able to get in 
their automobiles, you just jacked those prices up as high as 
you could, and I do not think you needed $400 billion just to 
take care of your people.
    Let me go on to Mr. Slocum.
    How do we plan and prepare for the future so that there is 
social responsibility?
    The consumers were suffering greatly. We are still 
suffering.
    I saw where a man had to pawn his grandmother's jewels in 
order to fill up his truck, and so, how do we need to plan?
    I am sorry. This might have been discussed before I got 
here, Mr. Chairman.
    Mr. Issa. Not by you.
    Ms. Watson. Of course.
    You know, I am from California. Everyone has not only one 
car but two or three, you know.
    Their cars are a status symbol.
    Mr. Slocum. Not just a status symbol.
    I mean you have to have a car to----
    Ms. Watson. You have to have a car.
    Mr. Slocum [continuing]. Sometimes to work.
    Ms. Watson. We are very sensitive to these issues. How do 
we prepare so we do not rip off consumers, we take into 
consideration that we do have to get alternative sources and we 
do have to go maybe off-shore, other countries and all, to get 
the resources we need?
    How can we prepare so we do not have to have the same kind 
of tragedy, and you know, the whole world was watching. The 
greatest country in the world, and we could not even meet the 
needs for our people for 3 days, and then when we did get 
gasoline, the prices were so high, they could not even afford 
it.
    Now, tell me what you would do in order to protect the 
consumers.
    Mr. Slocum. Well, first, I think we need to aggressively 
start investing in alternatives----
    Ms. Watson. Absolutely.
    Mr. Slocum [continuing]. To our high dependence on oil to 
fuel our economy, and it is going to take billions and billions 
of dollars to do that. Like I said earlier, the Federal 
Government is currently in this fiscal year alone, set to run 
approximately a half-a-trillion-dollar budget deficit, and we 
have almost $9 trillion of outstanding debt. Our Federal 
Government spending is unsustainable, and we simply do not even 
have enough money for our basic government services, let alone 
for investments in energy I take a look at the oil industry 
profits, which are huge not just in dollar terms but also in 
profit margin terms.
    Ms. Watson. Staggering.
    Mr. Slocum. When you look at their return on their capital 
investment, which is what the oil companies emphasize when they 
are talking to Wall Street and to shareholders, they look at 
return on capital investment, and Exxon-Mobil, for example, a 
46-percent rate of return on their oil production activities, a 
59-percent profit margin on their U.S. oil refining.
    Those are huge levels of profit, and I think that justifies 
some sort of new level of income taxation on the oil industry, 
dedicating the proceeds to financing the investments that are 
necessary in alternative fuels and alternative fuel 
infrastructure, in energy efficiency, so we become more 
efficient at using energy, so we do not use as much; in mass 
transit, which is desperately needed in places like Los Angeles 
and elsewhere.
    I am lucky that I can take the subway very easily to my 
office here on Capitol Hill. Not every American can do that in 
every American city.
    Also, I think providing some financial protections to 
moderate and low-income working families from the impact of 
these higher prices is also required. As you emphasized, ma'am, 
higher prices are having a huge negative impact on basic 
affordability issues for working families.
    So, in a nutshell, I think that is what we would emphasize 
first.
    I think, second, we need to look at some of the systemic 
market failures in U.S. energy markets, particularly in the 
refining and downstream sectors.
    I think that we have allowed far too many mergers. For 
example, Exxon and Mobil used to be two global competing oil 
companies. Now they're the same company. Same with Chevron-
Texaco and Conoco-Phillips.
    Valero was allowed to acquire three different refining 
competitors.
    All of that has resulted in a high level of concentration 
that has really reduced competition. I think that is a huge 
reason why we need a strategic refining reserve. As Rex 
Tillison told the Wall Street Journal on May 1st of this year, 
they do not have any plans whatsoever to build any new 
refineries, not because of our environmental laws, but because 
it is not in the financial interest of the company and its 
shareholders.
    They do not want to create huge surpluses of refining 
capacity, because it is going to have a downward impact on 
prices to consumers, which would have a downward impact on 
profits to the company.
    So, as long as it is not in their financial interest to 
make the necessary investments, we are going to have to take 
the lead.
    Ms. Watson. Well, let me just say this, and I will yield 
back to you, Mr. Chairman.
    I think this country will have to respond to what President 
Bush said.
    We are addicted to gasoline, and in responding, I foresee 
that it is going to take us decades. We cannot convert our 
systems over.
    In the meanwhile, I would like to know what the American 
Petroleum Institute would have in mind.
    Are we going to see the same situation? I am sure we are 
going to have a hurricane this year, probably at the level of 
what it was last year because of climatic conditions, and I see 
those climatic conditions only getting worse rather than any 
better, because we are not attending to them.
    So, is the institute looking at ways so that the burden 
will not be on the consumer totally in another disastrous 
situation? I do not think that levee that we just rebuilt at 
the 17th Street down in the lower ninth ward of New Orleans is 
going to hold up under a level four hurricane, three last time, 
four this time, and so, we are going to have the same kind of 
crisis, I feel, that we had. It is just that there are going to 
be fewer people to evacuate, because they never have gone back.
    So, I am looking at our globe and its atmosphere and the 
conditions--I am looking at that for the very near future as 
repeating itself in terms of disaster.
    What would you propose, and what do you see? I mean how can 
you bring some relief to consumers for people who are suffering 
greatly?
    Mr. Greco. Well, first off, thank you for the question, a 
number of things I'd like to address to that one.
    First, our industry is investing its profits back into 
finding new sources of energy, alternative sources of energy.
    For the past decade, our investments in new energy sources 
have exceeded our earnings. Also, contrary to what Mr. Slocum 
might have you believe, we have been investing in our refining 
capacity.
    We have added the equivalent of one new refinery every year 
for the past 10 years.
    There are announced plans to add another six new refinery--
equivalent, not new facilities, because we cannot get them 
sited either, but we have expanded the capacity to the 
equivalent of six new ones over the next 5 years. Those are 
announced----
    Ms. Watson. Will you yield a minute? Can you give us that 
in writing?
    Mr. Greco. Sure.
    Ms. Watson. Will you let us know where your new refineries 
are going to be located, those you have not started yet?
    Mr. Greco. I am sorry. I was not clear. It is not new 
refineries. It is expanded capacity.
    Ms. Watson. OK. Well, your expanded capacity----
    Mr. Greco. Yes.
    Ms. Watson. Would you let us know the geographical 
locations where they are?
    Mr. Greco. Yes, we can do that.
    Ms. Watson. And those that you have expanded up to this 
date.
    Mr. Greco. I am not sure if I can give you all of the 
information about past announcements, because I can show you 
the data that shows that refining capacity--government data 
that shows the amount of expansion.
    Ms. Watson. Mr. Greco, you are making a statement.
    You said that Mr. Slocum was not correct.
    Mr. Greco. He was not.
    Ms. Watson. You are correcting him. So, I am asking, the 
corrected information that you are giving the committee now--
you are sworn in--that you give it to us in writing and state 
the geographical areas that you are extending and expanding.
    Mr. Greco. I will do the best I can.
    Ms. Watson. Please. Thank you.
    Mr. Issa. Actually, the committee has some of it, but we 
would appreciate it included in this record. Both of us enjoy 
the fruits of the expansions in Long Beach and other areas, but 
I think it is important, because both sides of the aisle here 
in Congress often talk about the fact that we have had no new 
refineries built in ``X'' time. That certainly has forced a 
concentration of refineries. A matter of this hearing is our 
excess reliance on relatively few locations such that, if a 
hurricane hits, we do not have 300 new refineries spread around 
the United States, we have 46 percent of them coming from the 
Gulf.
    Mr. Greco. Yeah. As we mentioned earlier, you are correct, 
the concentration of the oil and gas resources are in the Gulf, 
refining and upstream, primarily because that is where they 
have been allowed and invited and welcomed to be. We are 
looking and supportive of efforts to diversify sources, both 
supply and refining. Much of that will be done, however, on 
existing refineries, whether in California or in other States, 
but I would be happy to give you some information about 
announced refinery expansion plans and past expansions, as 
well.
    Mr. Issa. We will just take it for the record. Appreciate 
that.
    OK. I will just sum up very quickly. I thank our witnesses 
for your testimony today, particularly your candid questions 
and answers.
    I think I would like to close by finding some things that I 
believe both the first and second panel exposed.
    One is that we need to diversify our fuel sources, because 
diversifying our fuel sources helps diversify our fuel supply 
locations.
    The gentlelady from California and the gentleman from 
California certainly agree that ethanol and bio-diesel, because 
of their very nature, will be produced much closer to locations 
in which they are consumed. That is a goal of not only this 
committee but the Energy and Commerce Committee.
    Last, I would like to share with the gentlelady my 
agreement on an observation. Certainly, my background in 
business makes me an appreciator of the elasticity of demand, 
of supply and demand, and of opportunistic markets. It is 
interesting, however, for this committee to note that, during 
the crisis after Hurricanes Katrina and Rita, a McDonald's had 
dozens, hundreds, perhaps, but certainly dozens of their 
McDonald's facilities off-line and unable to supply hamburgers, 
french fries, shakes, and the like, but it did not result in an 
increased price in California for hamburgers, shakes, or french 
fries. So, it is relatively unique to this particular industry 
that, although they were consuming MREs in the Gulf, they were 
consuming dramatically less petro-chemicals at the time, we in 
California, from the refineries, which had imported oil into 
Long Beach and refined them in Long Beach, found our prices 
spiking just as much.
    It is the difference between a commodity product, perhaps, 
and my McDonald's example, but I think that the gentlelady and 
I both are sensitive, for good reason, to the fact that the 
consumer paid throughout the Nation for a shortage which may, 
in many cases, have had nothing to do with the cost and the 
normal elasticities, since these were products that could not 
easily be shipped from Long Beach to some other location, and 
with that comment and agreement with the gentlelady, we stand 
adjourned.
    [Whereupon, at 3:38 p.m., the subcommittee was adjourned.]

                                 
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