[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




                  ENERGIZING HOUSTON: SUSTAINABILITY,
                     TECHNOLOGICAL INNOVATION, AND
                      GROWTH IN THE ENERGY CAPITAL
                              OF THE WORLD

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

                             FIELD HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON ENERGY AND
                              ENVIRONMENT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 29, 2008

                               __________

                           Serial No. 110-79

                               __________

     Printed for the use of the Committee on Science and Technology






     Available via the World Wide Web: http://www.science.house.gov

                                 ______


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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
MARK UDALL, Colorado                 LAMAR S. SMITH, Texas
DAVID WU, Oregon                     DANA ROHRABACHER, California
BRIAN BAIRD, Washington              ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina          VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois            FRANK D. LUCAS, Oklahoma
NICK LAMPSON, Texas                  JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
JERRY MCNERNEY, California           JO BONNER, Alabama
LAURA RICHARDSON, California         TOM FEENEY, Florida
PAUL KANJORSKI, Pennsylvania         RANDY NEUGEBAUER, Texas
DARLENE HOOLEY, Oregon               BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey        DAVID G. REICHERT, Washington
JIM MATHESON, Utah                   MICHAEL T. MCCAUL, Texas
MIKE ROSS, Arkansas                  MARIO DIAZ-BALART, Florida
BEN CHANDLER, Kentucky               PHIL GINGREY, Georgia
RUSS CARNAHAN, Missouri              BRIAN P. BILBRAY, California
CHARLIE MELANCON, Louisiana          ADRIAN SMITH, Nebraska
BARON P. HILL, Indiana               PAUL C. BROUN, Georgia
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
                                 ------                                

                 Subcommittee on Energy and Environment

                   HON. NICK LAMPSON, Texas, Chairman
JERRY F. COSTELLO, Illinois          BOB INGLIS, South Carolina
LYNN C. WOOLSEY, California          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
JERRY MCNERNEY, California           RANDY NEUGEBAUER, Texas
MARK UDALL, Colorado                 MICHAEL T. MCCAUL, Texas
BRIAN BAIRD, Washington              MARIO DIAZ-BALART, Florida
PAUL KANJORSKI, Pennsylvania             
BART GORDON, Tennessee               RALPH M. HALL, Texas
                  JEAN FRUCI Democratic Staff Director
            CHRIS KING Democratic Professional Staff Member
        MICHELLE DALLAFIOR Democratic Professional Staff Member
         SHIMERE WILLIAMS Democratic Professional Staff Member
      ELAINE PAULIONIS PHELEN Democratic Professional Staff Member
          ADAM ROSENBERG Democratic Professional Staff Member
          ELIZABETH STACK Republican Professional Staff Member
                    STACEY STEEP Research Assistant

























                            C O N T E N T S

                           February 29, 2008

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Nick Lampson, Chairman, Subcommittee 
  on Energy and Environment, Committee on Science and Technology, 
  U.S. House of Representatives..................................     6
    Written Statement............................................     7

Statement by Representative Ralph M. Hall, Ranking Minority 
  Member, Committee on Science and Technology, U.S. House of 
  Representatives................................................     9

Statement by Representative Roscoe G. Bartlett, Member, 
  Subcommittee on Energy and Environment, Committee on Science 
  and Technology, U.S. House of Representatives..................    10

Statement by Representative Gene Green, Member, Committee on 
  Energy and Commerce, U.S. House of Representatives.............    12

Prepared Statement by Representative Adrian Smith, Member, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................    14

                                Panel I:

Mr. John Hofmeister, President, Shell Oil Company
    Oral Statement...............................................    14
    Written Statement............................................    17
    Biography....................................................    19

Mr. Bill White, Mayor, City of Houston
    Oral Statement...............................................    19
    Written Statement............................................    21
    Biography....................................................    22

Mr. Thomas R. Standish, Group President of Regulated Operations, 
  CenterPoint Energy
    Oral Statement...............................................    23
    Written Statement............................................    25
    Biography....................................................    26

Discussion
  The Role of the Federal Government.............................    26
  How Can We Make Oil Production Cleaner?........................    27
  A Timeline for the Smart Grid?.................................    28
  Ultra-Deep Drilling and the Energy Policy Act of 2005..........    29
  The Domestic Manufacturing Tax.................................    30
  Balanced on the Razor's Edge: Strategies for the Future........    31
  The Low Income Housing Energy Assistance Program...............    34
  Shell's Emissions Clarified....................................    35

                               Panel II:

Dr. Walter G. Chapman, W.W. Akers Professor; Director, Energy and 
  Environment Systems Institute, Rice University
    Oral Statement...............................................    36
    Written Statement............................................    39
    Biography....................................................    40

Mr. C. Michael Ming, President, Research Partnership to Secure 
  Energy for America (RPSEA)
    Oral Statement...............................................    40
    Written Statement............................................    43
    Biography....................................................    44

Dr. Robert L. Hirsch, Senior Energy Advisor, Management 
  Information Services, Inc.
    Oral Statement...............................................    45
    Written Statement............................................    46
    Biography....................................................    48

Dr. Robert C. Harriss, President and CEO, Houston Advanced 
  Research Center
    Oral Statement...............................................    49
    Written Statement............................................    51
    Biography....................................................    53
0
Discussion
  Technology Commercialization Challenges........................    53
  H.R. 5146, Invest in Energy Security Act.......................    54
  Benefit of R&D in Peak Oil Scenario............................    55
  Peak Oil and Climate Change....................................    55
  The Changing Role of Government Research.......................    56
  Strategies: Will Conservation Work?............................    57

             Appendix 1: Answers to Post-Hearing Questions

Mr. John Hofmeister, President, Shell Oil Company................    66

Mr. Thomas R. Standish, Group President of Regulated Operations, 
  CenterPoint Energy.............................................    68

Dr. Walter G. Chapman, W.W. Akers Professor; Director, Energy and 
  Environment Systems Institute, Rice University.................    69

Dr. Robert L. Hirsch, Senior Energy Advisor, Management 
 Information Services, Inc......................................    700











 
   ENERGIZING HOUSTON: SUSTAINABILITY, TECHNOLOGICAL INNOVATION, AND 
               GROWTH IN THE ENERGY CAPITAL OF THE WORLD

                              ----------                              


                       FRIDAY, FEBRUARY 29, 2008

                  House of Representatives,
            Subcommittee on Energy and Environment,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:38 a.m. in 
Baker Hall, Suite 120, James A. Baker III Institute for Public 
Policy, 6100 Main Street, Rice University, Houston, Texas, Hon. 
Nick Lampson [Chairman of the Subcommittee] Presiding.



                         field hearing charter

                 SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

                  Energizing Houston: Sustainability,

                     Technological Innovation, and

                      Growth in the Energy Capital

                              of the World

                       friday, february 29, 2008
                         10:30 a.m.-12:30 p.m.
                      james a. baker iii institute
                            rice university
                             houston, texas

Purpose

    On Friday, February 29, 2008 the House Committee on Science and 
Technology, Subcommittee on Energy and Environment will hold a hearing 
entitled, ``Energizing Houston: Sustainability, Technological 
Innovation, and Growth in the Energy Capital of the World,'' at the 
James A. Baker III Institute for Public Policy, Rice University, 
Houston Texas.
    The Subcommittee's hearing will explore how the energy industry and 
cities like Houston are working to address challenges in areas such as 
energy supply and security, global climate change, and rapid economic 
growth.

Witnesses

Panel I:

Mr. Bill White, Mayor of the City of Houston, will discuss City of 
Houston initiatives to encourage energy conservation and clean energy 
technologies, while preserving the Houston region's competitiveness in 
an increasingly global marketplace.

Mr. John Hofmeister, President of the Shell Oil Company, will discuss 
energy challenges facing the Nation, and the major technical barriers 
to deploying a range of energy options including conventional and 
unconventional oil and gas and alternative energy resources.

Mr. Thomas Standish, President of Regulated Operations, CenterPoint 
Energy, will discuss the importance of federal funding of research and 
development to realize the potential of Smart Grid technologies, and 
other energy efficiency and emissions reductions efforts CenterPoint 
has underway in Houston.

Panel II:

Dr. Walter Chapman, Director of the Energy and Environment Systems 
Institute, Rice University, will describe how university-based research 
can provide new opportunities in conventional and unconventional oil 
and gas exploration, as well as renewable energy technologies. 
Professor Chapman will also address the funding challenges for energy 
research and need for education and outreach programs in energy fields.

Dr. Robert Harriss, President & CEO, Houston Advanced Research Center, 
will discuss research and technology development efforts in the Houston 
area to mitigate global climate change impacts of the region; to reduce 
energy consumption of homes; businesses and heavy industry; and 
encourage sustainable development.

Dr. Robert Hirsch, Senior Energy Advisor, Management Information 
Services Inc., will discuss the economic implications of oil shortage 
scenarios, how government and the energy industry should address a 
crisis of peak oil, and the potential impact of various energy 
technologies.

Mr. Michael Ming, President, Research Partnership to Secure Energy for 
America (RPSEA), will discuss the potential of public-private research 
and development efforts to access previously unrecoverable reserves of 
energy in ultra-deepwater offshore and unconventional onshore oil and 
gas reservoirs.

Background

    As the sixth largest metropolitan area in the U.S. with a 
population of 5.5 million, the greater Houston region continues to 
undergo rapid economic expansion and population growth. In every decade 
since 1850, the City of Houston's population has grown by at least 29 
percent. This growth is due largely to Houston's proximity to raw 
materials, sea ports, and related infrastructure. Houston is a major 
port for agricultural exports and a center for oil and natural gas 
research, exploration, and production. However, with this rapid 
development come immense challenges to consumers, city planners, local 
energy providers, and local industries that must stay competitive in an 
increasingly global marketplace. Witnesses on the first panel will 
discuss how local initiatives in cities such as Houston can address 
these issues.
    The challenge for all stakeholders lies in the need for the U.S. to 
obtain more energy from a variety of domestic sources, enhance the 
energy efficiency of communities and industry, become less reliant on 
energy sources and technologies that have an adverse effect on the 
environment, and to integrate these often-competing factors into 
policies and practices that lead to a more sustainable economy. The 
push for new technologies is especially urgent given the geopolitical 
and market forces that threaten global energy supplies and economic 
stability, finite fossil fuel reserves, the direct and indirect costs 
of energy to consumers, the looming threat of global climate change, 
and probable regulation of carbon dioxide emissions.
    Given the magnitude and complexity of global energy use, research 
and development must begin to address these competing needs soon for 
technologies to penetrate the market and have an impact on our long-
term energy and environmental goals. Complex challenges also call for a 
refined approach to energy R&D, one that incorporates the expertise and 
resources of the Nation's universities, government research labs, and 
private industry into cohesive efforts to overcome major technical 
barriers. Witnesses on the second panel will address how new models for 
technological innovation, including public-private research 
partnerships, and university-based basic research can be integrated 
overcome grand technical challenges in sustainable development.

Houston and Energy Technology

    Houston has grown to support a number of diverse industries in 
sectors such as aerospace and chemicals production, yet energy remains 
the largest sector accounting for an estimated 48 percent of the 
region's employment. According to estimates by the Greater Houston 
Partnership, Houston's energy industry includes the headquarters for 17 
Fortune 500 energy companies, more than 3,600 energy related 
establishments, 13 of the Nation's 20 largest natural gas transmission 
companies, 600 exploration and production firms, more than 170 pipeline 
operators and hundreds of energy-sector product manufacturers. This 
concentration of energy companies and expertise in the area has allowed 
the region to be a leader in international energy technology markets, 
beyond its role as a producer of oil and gas from the Gulf of Mexico. 
Houston has evolved into a global oil-technology development and 
distribution center, providing advanced oil and gas technologies for 
development of oil fields in the Middle East, the North Sea, Malaysia, 
Indonesia, South America and West Africa.
    While it will continue to be a center for the petroleum industry in 
the U.S. Houston, along with the rest of the state of Texas, is rapidly 
becoming a focal point for renewable energy and energy efficiency 
technology development. Wind energy is one of the most promising and 
commercially viable renewable resources. The wind industry in Texas 
grew substantially after a 1999 State law that required a base 
percentage of electricity sold by utilities in the state to be 
generated from renewable sources. Since then, Texas has surpassed the 
rest of the country in installing wind capacity, allowing cities like 
Dallas (40 percent) and Houston (20 percent) to acquire a significant 
portion of their purchased electricity from renewable sources. The 
utilization of renewables and end-use energy efficiency measures will 
be further optimized by the deployment of ``Smart Grid'' technologies 
that integrate new communications and control functions into the 
electricity distribution grid. Located at the center of a nationwide 
fuel distribution and agricultural transportation network, Houston is 
also quickly becoming a hub for the biofuels industry with several of 
the country's major biofuels firms located in the region.
    The City of Houston has also encouraged the use of renewable energy 
technologies and energy efficiency at the local level. The City has 
integrated renewable energy technologies into local infrastructure. For 
example, school crosswalks use solar energy and in 2005, Mayor Bill 
White announced plans to convert a substantial portion of the City's 
fleet of cars, pickup trucks and sport utility vehicles to hybrids by 
the year 2010. Houston also hosted the first conference on Carbon 
Emissions Trading with the British Consulate-General and the Greater 
Houston Partnership in January 2007.

Ultra-Deepwater Research and Development

    The hearing will also examine efforts underway to increase our 
domestic production of natural gas and other petroleum resources in 
ultra-deep offshore waters and in unconventional onshore formations. As 
offshore production declines in the shallow waters of the Gulf of 
Mexico, industry is looking to produce from oil and gas resources in 
deep-water (depths of 200-1,500 meters) and ultra-deepwater (depths 
greater than 1,500 meters). According to the Minerals Management 
Service, untapped fields on the outer continental shelf could account 
for 86 billion barrels of oil and 420 trillion cubic feet of gas.
    Establishing wells at these depths, however, presents significant 
technological challenges. Simply characterizing these reservoirs 
requires improved exploration and depth imaging technologies. Drilling 
under these extreme conditions will be a more daunting challenge. As it 
will require extensive seafloor infrastructure, more research is needed 
in new production materials and architectures, and the integration of 
multiple systems including power distribution and data communication.
    In May 2006, the Research Partnership to Secure Energy for America 
(RPSEA) located in Sugar Land was selected to administer R&D contracts 
for the Ultra-Deepwater and Unconventional Natural Gas and Other 
Petroleum Resources Program established in Section 999 of the Energy 
Policy Act of 2005. The law mandated new oil and gas research and 
development program with funding totaling near $500 million for ten 
years derived from royalties, rents, and bonuses from federal onshore 
and offshore oil and gas leases.
    Chairman Lampson. This hearing of the Energy and 
Environment Subcommittee will now come to order, and I wish all 
of you a good morning.
    It's with a great deal of pleasure that I welcome my fellow 
Committee Members, Congressman Hall, Congressman Bartlett, and 
we have others that are going to be joining us, also 
Congressional colleagues who are not on the Committee who will 
be coming, and our distinguished panel of experts.
    I welcome you all here to Rice University for what will 
undoubtedly be a lively and engaging conversation about the 
grand challenges that we face in energy. We have the pleasure 
of welcoming some Members here who are not on the Science 
Committee; and as they come, I will let you know who they are. 
I do ask unanimous consent that our colleagues be permitted to 
join us on the dais and participate in the hearing. Without 
objection, it is so ordered.
    I would like to offer my sincere thanks to Rice University 
President Leebron and to the James A. Baker, III, Institute for 
Public Policy for offering this very impressive facility to the 
Committee for our meeting today.
    So why, you might ask, is the United States House Committee 
on Science and Technology holding a hearing in Houston, Texas? 
Well, for one, my colleagues and I have ample opportunities in 
Washington, D.C. to hear from a myriad of experts, lobbyists, 
and interest groups; but the real way to gauge the importance 
of an issue and the impacts of our policies is to step away 
from Washington, D.C. and talk to folks in the field--
consumers, government and energy leaders, researchers, and the 
general public. This is our chance to take our show on the road 
and to hear from local leaders and experts who just happen to 
be the international authorities in their fields, and then to 
get these important perspectives on the Congressional record 
for the benefit of Congress as we continue what will be an 
endless effort to craft good energy policies.
    While I may be a little biased, I can't imagine a better 
place to have an open and honest discussion about energy than 
in the energy capital of the world, Houston, Texas. More 
specifically, Houston has long been associated with the oil-
and-gas energy that provides the backbone of our economy and 
helps to make our quality of life the envy of the world. Oil 
and gas will absolutely continue to play this vital role for 
the foreseeable future. Until we have better alternatives or, 
as one witness will testify to today, our global supplies 
simply cannot meet our growing demand, we should not be at all 
bashful in aggressively pursuing the cutting-edge technologies 
that will unlock previously unrecoverable hydrocarbon reserves. 
But we all must acknowledge, it is a new world, with a new 
range of environmental, economic, and energy-related challenges 
that threaten our very way of life.
    Whether you are most concerned with skyrocketing energy 
costs, $100-a-barrel oil, global climate change, energy 
security, job security, air quality, or competition from 
emerging nations, the one thing that we can all agree on is 
that the status quo is simply not sustainable and that we must 
adapt to this constantly shifting energy landscape. The world 
will not stand still for us. Our future will be determined by 
our ability to implement sound but aggressive policies 
accompanied by robust government and private investment in 
developing the entire range of advanced technologies and 
deploying them in the marketplace.
    The city leaders in Houston are well aware of the 
difficulties of balancing often competing priorities in energy, 
economy, and sustainability. Our local economy, more than any 
in the country, is dependent on the wellbeing of the thousands 
of energy-related firms located here; but the demands we face 
as a community are really not unique. Just as any healthy 
company will adapt to changing market needs and regulatory 
pressures, so, too, must the region look at this new energy 
paradigm and find opportunity in these changes, and strength in 
our unparalleled capacity for innovation.
    Houston has a good foundation to work from, as Texas 
happens to have some of the country's most progressive 
requirements for renewable electricity generation, allowing to 
us install more wind energy than all the other states combined. 
In fact, the American Wind Energy Association predicts that two 
thirds of the growth in U.S. wind energy will happen in Texas. 
There is also no shortage of sunlight in Texas to take 
advantage of solar energy as it becomes cost-competitive. Texas 
is not only leading the country in production in growth of wind 
energy but our production of biofuels and other biobased 
products, most especially biodiesel, will solidify our 
leadership role in diversifying the Nation's supply of cleaner 
energy and greener raw materials. In fact, after this hearing, 
some of us will get on a bus and travel to Oakridge North, 
where we'll see firsthand the Nation's first electric 
generation plant to run entirely on biodiesel. It may be one 
plant and one technology, but it represents a critical step in 
revolutionizing how we think about, use, and produce energy in 
the United States.
    There are probably no three people more qualified than this 
first panel to speak to the issues that Houston and, for that 
matter, the Nation faces in reconciling our energy needs with 
our economic foundation and environmental health. The President 
of Shell Oil Company and the former head of the Greater Houston 
Partnership, Mr. John Hofmeister, knows, as well as anyone, the 
realities of the world's grand energy challenges and how the 
magnitude of these challenges should not excuse us from taking 
aggressive action here at home. We're honored and privilege to 
have Mayor Bill White to discuss initiatives that the City of 
Houston is pushing to make our homes, businesses, and 
industries more efficient, and to encourage innovation to keep 
Houston competitive in the global marketplace. Mr. Tom 
Standish's long and distinguished career at CenterPoint Energy 
can provide us the kind of nuts-and-bolts perspective on the 
technology needs to optimize the electricity grid as we 
continue to experience unprecedented growth in energy demands. 
We look forward to your testimony and to that of our second 
panel of distinguished experts.
    With that, I will turn it over to the Ranking Member of the 
Science and Technology Committee, Congressman Ralph Hall from 
Rockwall, Texas. Thank you for joining us.
    [The prepared statement of Chairman Lampson follows:]
              Prepared Statement of Chairman Nick Lampson
    This hearing of the Energy and Environment Subcommittee will now 
come to order.
    Good morning. It is with great pleasure that I welcome my fellow 
Committee Members, my Congressional colleagues from the Houston area, 
and our distinguished panel of experts to Rice University for what will 
undoubtedly be a lively and engaging conversation about the grand 
challenges we face in energy and the exciting research being explored 
to meet these challenges.
    I would like to offer my sincere thanks to Rice University 
President Leebron, and to the James A. Baker III Institute for Public 
Policy for offering this impressive facility to the Committee.
    So, why, you might ask, is the U.S. House Committee on Science and 
Technology holding a hearing in Houston, Texas?
    While I may be a little biased, I cannot imagine a better place to 
have an open and honest discussion about energy than in the ``Energy 
Capital of the World,'' Houston. But that is not the only reason.
    My colleagues and I have ample opportunities in Washington to hear 
from a myriad of experts, lobbyists, and interest groups. But, each of 
us realize the best way to gauge the importance of an issue, and the 
impacts of our policies, is to step away from D.C. and talk to folks on 
the frontlines--consumers, government and industry leaders, 
researchers, and the general public. This is our chance to take our 
show on the road and hear from the local leaders and experts who just 
happen to be international authorities in their fields, and then record 
these important perspectives in the Congressional Record for the 
benefit of the country as we continue what will be an endless effort to 
craft good energy policies.
    Texas, and more specifically Houston, has long been associated with 
the oil and gas industry. This industry, which directly and indirectly 
employs 1.3 million Texans, or 10.5 percent of the workforce, provides 
the backbone of our economy and helps make our quality of life the envy 
of the world.
    Oil and gas will absolutely continue to play this vital role for 
the foreseeable future. We may someday have better alternatives or, as 
one witness will testify to today, we may find that our global supplies 
cannot meet our growing demand. Until then we should not be at all 
bashful in aggressively pursuing the cutting-edge technologies that 
will unlock previously unrecoverable hydrocarbon reserves. At the same 
time we must embrace new technologies that can make our use of fossil 
fuels cleaner and more efficient.
    But, as we all must acknowledge, it is a new world with a new range 
of environmental, economic and energy related challenges that threaten 
our very way of life. Whether you are most concerned with skyrocketing 
energy costs, $100 oil, global climate change, energy security, job 
security, air quality, or competition from emerging nations, the one 
thing we can all agree on is that the status quo is simply not 
sustainable, and that we must adapt to this constantly shifting energy 
landscape. The world will not stand still for us. Our future will be 
determined by our ability to implement sound but aggressive policies 
accompanied by robust government and private investment in developing 
the entire range of advanced energy technologies, and then deploying 
them in the marketplace.
    The city leaders in Houston are well aware of the difficulties of 
balancing often competing priorities in energy, economy, and 
sustainability. Our local economy, more than any in the country, is 
dependent on the wellbeing of the thousands of energy-related firms 
located here. But the demands we face as a community are really not 
unique. Just like any healthy company will adapt to changing market 
needs and regulatory pressures, so too must the region look at this new 
energy paradigm and find opportunity in these changes, and strength in 
our unparalleled capacity for innovation.
    Houston has a good foundation to work from. Texas happens to have 
some of the country's most progressive requirements for renewable 
electricity generation, allowing us to install more wind energy than 
all the other states combined. In fact, the American Wind Energy 
Association predicts that two-thirds of the growth in U.S. wind energy 
will happen in Texas. There is also no shortage of sunlight in Texas to 
take advantage of solar energy as it becomes cost-competitive.
    Texas is not only leading the country in production and growth of 
wind energy, but our production of biofuels and other bio-based 
products, most especially biodiesel, will solidify our leadership role 
in diversifying the Nation's supplies of cleaner energy and greener raw 
materials.
    In fact, after this hearing some of us will get on a bus and travel 
to Oak Ridge North, where we will see first-hand the Nation's first 
electric generation plant to run entirely on biodiesel. It may be one 
plant, and one technology, but it represents a critical step in 
revolutionizing how we think about, use, and produce energy in the U.S.
    We look forward to the testimony of our witnesses and with that, I 
will turn it over to the Ranking Member of the Science and Technology 
Committee, Mr. Ralph Hall.

    Mr. Hall. Mr. Chairman, thank you. It's your good luck and 
my good luck, too, that I can just barely speak. I'm honored to 
be here with Mayor Bill.
    (To Mayor White) You were a page, you know, when I first 
met you; and my how you've grown. Both of you. And the Chairman 
always has the right to speak as long--you notice he didn't 
yield himself so long. He just started talking. When he said it 
all, there wasn't really any reason for me to say hardly 
anything; and I will be brief.
    I'll start out by telling you I'm the oldest guy in the 
United States Congress. I'm 84. I ran three miles before I left 
Rockwall this morning. I do it every morning. (Applause).
    You know, God gives everybody something. He gives women 
beauty and good intelligence. He gives men handsome features 
and ranches and things. He gave me stamina, and I guess that's 
good to have.
    When I turned 80, the President gave me a party, over in 
the Oval Office; and all he did was tell old man jokes. I 
didn't like that at all.
    [Laughter.]
    He told one story about a fellow that was 93 and he was a 
great golfer and he could knock that ball a mile but he got to 
where he couldn't see where it went. He told his wife he had to 
quit golfing. She didn't want him to quit golfing, and he 
didn't want to. She said, ``You know, my brother-in-law, 
Orville, is 98 and he can't play golf, doesn't play golf, but 
he likes exercise and he has the best vision of anybody I know. 
He can still see like he did when he was 35 or 40 years old. 
Why don't you take him with you and let him watch where the 
ball goes when you hit it.''
    He did, and the very first day, he hit a ball that went up 
way high in the air and soared. He was standing there. 
``Orville do you see it.''
    ``Yeah.''
    ``You watching it.''
    ``Yeah.''
    ``Has it landed yet.''
    ``Yes. It's just landed.''
    He said, ``Where did it go.''
    ``I don't remember.''
    Those are the kind of jokes I have to tolerate all the 
time, but I am glad to be here and honored to be here. My voice 
will play out in just no time, but I thank you for having the 
hearing here in Houston and in Harris County, in this area.
    I think, like you, it's important to highlight the very 
vital role that your city, the city of Houston, the State of 
Texas as a whole, one of ten states that produces energy for 
all the rest of them, the position we play in the world of 
energy. Our state's always been known as an oil- and gas-
producing state, and I'm proud of what we've contributed to the 
Nation's energy supply and the leadership we've shown in 
renewable energy as well.
    I'd be remiss if I didn't point out something that many of 
you know better than I do. There's a war on energy today. A war 
exists out there on energy. It's in vogue to knock energy. It's 
in vogue to knock fossil fuels, and some do it for different 
reasons. Some are sincere. Others, in my opinion, their 
elevator just doesn't go quite to the top. There are others, 
you know, who want to write a book or make a buck writing a 
piece or making a speech for somebody. Some want a Nobel Peace 
Prize, but it's a shame because we have to rely on fossil fuels 
for a long, long time. It makes sense to; and if we don't wise 
up pretty soon and start drilling in ANWR and start drilling 
offshore and pay attention to the ultra-deep legislation that 
Nick helped passed, and know that we have to rely on fossil 
fuels for a while--of course, we have to keep seeking 
technology to make them less destructive--and that's something 
that we all have to do and we will do. But there is that war 
and right now, because of that war, China's allowed to be 
unfettered in their search off the coast of Florida, with the 
help of Cuba; and we can't drill there. There's just something 
wrong with that.
    If we don't start drilling in ANWR--and they say protect 
beautiful, perfect little ANWR. I heard it said that to say 
that is--and we want to drill on 2,000 acres. It's equivalent 
to saying that if you put a dollar bill in the end of Texas 
stadium, it will ruin the whole stadium. That's how ridiculous 
it is. We need to be doing that. It might keep our kids out of 
a war.
    That's a tangent I'm off on; but in addition to that that 
you want us to talk about today, efficiency and conservation, 
I've always believed in the importance of a reliable domestic 
supply of oil and gas. Therefore, I have always been a 
proponent of research and development that will secure that for 
our country. It's for this reason that I'm especially looking 
forward to the testimony of Michael Ming of Research 
Partnership to Secure Energy for America.
    The ultra-deep program has been a labor of love for me. I 
feel strongly about its worth and its potential for recovering 
substantial reserves of oil and gas. I will say that I, 
unfortunately, have to leave the hearing early and I won't get 
to hear Mr. Ming probably, but I do want to welcome our other 
witnesses, Bill White, Mayor, it's an honor to see you and hear 
you. I've read the testimony, and I look forward to hearing 
you.
    With that, Roscoe, thank you. Gene Green, thank you.
    And welcome to Texas. He's my neighbor, right across the 
hall from me in the Rayburn Building. Thank you, Mr. Chairman. 
I yield back the time that you didn't yield to me. You didn't 
say it, but I thank you.
    Chairman Lampson. I can only imagine how long he would have 
taken or what he would have said if he had all of his voice. 
Always great, Ralph. Thank you so much for being here.
    From the State of Maryland, Congressman Roscoe Bartlett. I 
recognize you for the time that you will consume.
    Mr. Bartlett. Thank you very much. I'm very pleased to be 
here. You know, I was thinking as I rode down here in the plane 
this morning--I got up at 3:30 this morning to leave at 4:00 
o'clock to catch a 6:00 o'clock plane, so I'm happy to be 
here--that we really shouldn't be coming to Houston today, the 
energy capital of our country, to talk about energy when oil is 
over $100 barrel, gold is $970, and our dollar is probably at 
its lowest level in a very long time.
    This saga began in Texas, interestingly enough, 52 years 
ago, the 6th day of March when M. King Hubbert gave a speech, 
that I think will shortly be recognized as the most important 
speech given in the last century, to a group of oil people in 
San Antonio, Texas. At that time the United States was king of 
oil--I think producing more, consuming more, exporting more 
than any country in the world. M. King Hubbert told the 
assembled group there that in about 14 years, by 1970, that the 
United States--and he was talking about the lower 48--would 
reach its maximum oil production. No matter what we did, we 
could produce no more oil after that.
    Right on schedule in 1970, we reached our maximum oil 
production; and in spite of finding a lot of oil in Alaska--and 
I've been to Dead Horse and seen the beginning of that four-
foot pipeline through which, for many years, 25 percent of our 
domestic oil flowed--and in spite of finding a lot of oil in 
the Gulf of Mexico where we have about 4,000 oil wells--which, 
by the way, is more than four times as in the country of Saudi 
Arabia--today we produce about half the oil that we produced in 
1970. I noted that, in response to the Arab oil embargo of '73, 
that Texas stepped up its production and produced 3.4 million 
barrels a day. Thank you. That was a big help. Today Texas 
produces 934,000 barrels of oil.
    Another very famous speech was given, and that will be 51 
years ago, the 14th day of this May; and I would encourage you, 
if you haven't read this speech, to do a Google search for 
Rickover and energy speech, and a really interesting speech 
will pop up. Hyman Rickover noted that we were in the age of 
oil, and he had no idea at that time how long the age of oil 
would last. Now we know pretty much how long the age of oil 
will last, but he said that how long it lasted was important in 
only one respect, that the longer it lasted, the more time we 
had to plan a transition to other sources of energy.
    Now, the same M. King Hubbert who predicted that we would 
peak in 1970, predicted that the world would be peaking about 
now. The question I've had in my mind for several years now is: 
Why, if he was right about the United States, shouldn't there 
have been some concern that he might just be right about the 
world? Shouldn't we have been doing something about that?
    There have been four major studies paid for by your 
government and ignored by your government. The first of these 
studies was the big SAIC report--and Dr. Hirsch is here and 
will testify at our next panel--known as the Hirsch Report, 
published in '05. The second was the Corps of Engineers, and 
theirs issued, I think, in September of '05. Last year there 
were two reports, the Government Accountability Office and the 
National Petroleum Council. In different words, each of these 
reports said that there was a very high probability that the 
world was either at or would be shortly at peak oil, that the 
consequences could be devastating. The Hirsch Report said the 
world has never faced a problem like this. There is no 
precedent in history to prepare us for what will happen or what 
we should do.
    Just very recently, the two major entities in the world 
that track the production of oil have issued a report. This is 
the International Energy Agency and the Energy Information 
Administration, an arm of our Department of Energy. They have 
issued a recent report showing that oil production worldwide 
has been flat for at least the last 30 months. During those 30 
months, oil went up from, what, about $40 a barrel to $100 a 
barrel.
    I say that we shouldn't be here talking about this because 
we have now blown 28 years when we should have been 
anticipating this and doing something about it. By 1980, we 
knew darn well that M. King Hubbert was right about the United 
States because we had already reached Hubbert's peak and were 
sliding gently down the other side. If he was right about the 
United States, why shouldn't he be right about the world?
    Now, incredibly, our solution to this problem is go out as 
quickly as we can, find the little bit of oil that remains out 
there, and then pump it dry. I have 10 kids, 16 grandkids, and 
two great-grandkids. If we could pump ANWR and offshore 
tomorrow, what would we do the day after tomorrow.
    Thank you very much, Mr. Chairman, for holding this 
hearing. We need to have these around the country. We need to 
engage the people. Thank you all very much. I see you're 
putting up extra chairs. Thank you so much.
    [Applause.]
    Mr. Hall. Would the gentleman yield to one question?
    Mr. Bartlett. I'd be happy to yield, sir.
    Mr. Hall. When ANWR was voted down, I had to call Boone 
Pickens and tell him. Do you know what his answer was?
    Mr. Bartlett. What was his answer?
    Mr. Hall. It will still be there.
    Mr. Bartlett. Sir, it's like money in the bank which is 
yielding really huge interest. Why in the devil would you want 
to take it out and spend it now.
    Chairman Lampson. Thank you, Dr. Bartlett.
    Our colleague on the Energy Committee, not on this Energy 
Subcommittee on Science, Congressman Gene Green from Houston, 
Texas.
    Mr. Green. I want to thank my friend Congressman Lampson 
for holding this hearing in Houston on energy. Between 
Congressman Lampson and Ralph Hall and I--Roscoe, we'll have an 
interpreter for you because we all understand Texan where we're 
from.
    It's an honor to be here and participate in the hearing. I 
think it's so pertinent, considering what the House considered 
just this last week and, actually, four times over the last 12 
months. It's no secret why Houston is known as the energy 
capital of the world. The energy industry is a cornerstone of 
our economy and our way of life. Many of the world's largest 
and most innovative energy companies reside in Houston, 
supported by a highly skilled workforce, strong partnerships 
between our local universities, including Rice, and businesses 
to help address the needs of our job base.
    Understanding the importance of the energy industry to our 
local economy helps me better represent our district in 
Congress; and our district is basically east of downtown 
Houston, which the energy corridor, I know, is I-10 West, but I 
consider the refineries and energy plants that Congressman 
Lampson and I share in East Harris County, the energy corridor. 
I'm not a Member of the House Committee on Science and 
Technology, but I do serve on the Committee on Energy and 
Commerce and with a broad jurisdiction over our nation's energy 
policy, and that I share with Congressman Hall.
    I've always believed that a balanced national energy policy 
must have three basic points: Energy conservation and 
efficiency; research and development in new clean-energy 
technologies; and environmentally responsible domestic energy 
production.
    First, the simplest and most effective way to reduce our 
needs for energy is to consume less energy and use it more 
efficiently. With new technologies, conservation does not 
necessarily mean doing without. Energy companies understand 
this fact and are working to reduce their greenhouse gas 
emissions by using less energy-intensive practices. Companies 
are employing co-generation, or combined heat and power 
technology, to harness the heat released by making energy 
products, to produce their own electricity. Advanced computer 
software is being utilized in refineries to optimize the energy 
consumption, as well as technology to reduce the wasteful 
flaring of gas. In fact, every time I go over the Beltway 8 
bridge, or 610 bridge, or even the Fred Hartman bridge, and I 
see a flare, I'm worried because that's product that's being 
lost and also going into our air.
    Second, I believe we need to invest in clean energy 
technologies that will wean us off our dependence on foreign 
fuels. Texas is a wonderful example of using this innovation to 
become the Nation's leader in wind energy production. Oil and 
gas companies need to instead be recognized as energy companies 
and continue investing in alternative energy sources. Wind, 
solar, geothermal, biofuels and other sources all deserve 
additional research and development by the private sector and 
the Federal Government to become cost-competitive in the 
marketplace. In fact, we need all of these sources to continue 
a growing economy in our country. Shell Oil, a witness at 
today's hearing, is breaking ground with research in hydrogen 
production and supply chains, a long-term but critical approach 
to meeting our future needs.
    Lastly, I believe we must continue to responsibly develop 
America's energy resources. We can't increase renewable energy 
if we take an unrealistic approach to oil and gas. We will fail 
to provide Americans with adequate supplies of fuel and energy 
at affordable prices. Energy companies have invested heavily in 
technological innovation to enhance our environmental 
performance and capabilities. Directional drilling technology 
allows more wells to be drilled from a single drill rig. 
Infrared and laser technology can be utilized to monitor 
refinery emissions and to minimize releases. Global satellites 
and 3-D seismograph technology are helping reduce environmental 
disturbance and surface impact before drilling begins.
    None of these strategies alone will be enough to protect 
our economic competitiveness and our sustainability. Through 
all of these efforts, the Houston energy industry has continued 
to fulfill the needs of our nation. That's good news because 
energy security is also our job. It's an issue of economic 
security and our national security. With that innovation and 
smart growth strategies, Houston will remain the energy capital 
of the world in years to come, and I would hope this hearing 
will set the stage for Congress to be able to provide that 
leadership.
    So thank you again for holding this hearing literally in 
our back yard.
    Chairman Lampson. Thank you, Congressman Green. I 
appreciate it.
    I would ask unanimous consent that all additional opening 
statements that may be submitted by other Members of the 
Committee be included in the record. Without objection, so 
ordered.
    [The prepared statement of Mr. Smith follows:]
           Prepared Statement of Representative Adrian Smith
    Thank you, Mr. Chairman. Every day, Americans and Nebraskans rely 
on energy in a variety of forms. We take this power for granted, but if 
we are to maintain an affordable and secure supply of energy we must 
create an environment which attracts innovators and inventors, who, 
like Thomas Edison, will brighten our future.
    Our ultimate goal is affordable energy independence. To accomplish 
this we will need a diverse portfolio of energy options. We must not 
allow our policies to choose winners and losers in energy solutions. 
There is a lot of talk about energy sustainability in terms of the 
environment, but we also must ensure our future energy options are 
economically sustainable.
    Energy efficiency is one means to this end. We are competing with 
China's and India's burgeoning demands for foreign oil, but I am 
encouraged by the vision of private organizations such as the X Prize 
Foundation which offers a monetary incentive to inspire innovation in 
energy efficient vehicles. When the prize is awarded to the first 100 
miles per gallon vehicle, one will be able to drive across my home 
State of Nebraska on just 4.5 gallons of fuel.
    While it is true that oil and gas companies have posted profits 
this year, this is good news for American investors who are the primary 
owners of these companies. More than 29 percent of oil company stocks 
are owned by mutual funds, 27 percent by pension funds, 23 percent by 
individual investors, and 14 percent by Individual Retirement Accounts. 
In other words, everyday Americans own a share of these profits. We 
need policies which will encourage more domestic drilling and the 
expansion of technologies which will facilitate recovery of oil from 
currently inaccessible sources.
    There are myriad other technologies which need to be explored and 
developed including smart grids, fuel cells, solar power, wind power 
(including growing transmission and dealing with intermittency), 
biofuels (both corn and cellulosic), clean coal, coal gasification, 
nuclear power, hydropower, and other technologies not yet imagined.
    Thank you, Mr. Chairman, and I look forward to working with you to 
further policies which will promote research, development, and 
entrepreneurship to expand technologies which empower energy consumers 
with more choices, more efficiency, and more affordable options.

    Chairman Lampson. Now, as our witnesses should know, you 
all have five minutes for your spoken testimony. Your full 
written testimony will be included in the record for the 
hearing; and when you have completed your testimony, we will 
begin with questions. Each Member will have five minutes to ask 
questions.
    Mr. Hofmeister, would you begin, please.

                                Panel I:

 STATEMENT OF MR. JOHN HOFMEISTER, PRESIDENT, SHELL OIL COMPANY

    Mr. Hofmeister. Good morning, Chairman Lampson, and Ranking 
Member Hall, Member Bartlett, and Member Green. I'm John 
Hofmeister. I'm President of Shell Oil Company, and I 
appreciate the opportunity to speak today as part of the field 
hearing the Subcommittee is holding here in the energy capital.
    My remarks today will focus on the short-term, medium-term, 
and long-term needs in the United States, how Shell anticipates 
the mix in the energy supply changing in the coming years and 
the evolving contribution Shell will make to meeting America's 
energy needs for decades to come.
    Shell has been a part of the Houston energy industry since 
the mid-1960s. In the Greater Houston metropolitan area, more 
than 13,000 Shell and Motiva employees go to work every day to 
bring energy to millions of Americans. Their work includes 
service at nearly 500 retail stations in the Houston area and 
44 Jiffy Lube locations. As one of the Houston's largest 
employers, Shell is a stalwart in the community.
    Houston's a vibrant city with a rapidly expanding economy 
and population fueled by energy. The energy market in Houston 
reflects the worldwide energy market in many respects. We 
recognize the challenge here and around the world of providing 
enough energy to meet rising demand in an environmentally and 
socially responsible manner. We are committed to managing the 
impact of our exploration and production and conserving energy 
where we can.
    America has a strong and growing demand for energy. Every 
second of every day, the United States consumes 10,000 gallons 
of oil--every second of every day--enough to fill a backyard 
swimming pool. We use 20 railcars of coal a minute in this 
country, and enough cubic feet of natural gas each day to build 
a tower to the Moon and back 25 times.
    We're balanced on a razor's edge of growing demand and 
tightening supply. Shell wants to help provide abundant 
affordable energy as far into the future as we can imagine.
    We consider abundant affordable energy a cornerstone of 
America's energy security, but we recognize that achieving this 
goal will require aggressive short-term, medium-term and long-
term planning.
    Short-term. First, I would like to outline the short-term 
U.S. Energy needs and the steps Shell recommends for the next 
decade. In the short-term, the United States will remain a 
fossil-fuel-based economy because very simply we cannot attain 
the commercial scale and infrastructure needed to meet energy 
needs as I've described through alternative energy. We won't 
have the pipeline system to pump ethanol. We won't have the 
transmission lines to bring hundreds of gigawatts of wind from 
remote, windy plains and mountains to cities. That kind of 
scale and infrastructure won't be available for decades to 
come. Largely for this reason, the International Energy Agency 
estimates that under a business-as-usual scenario, alternative 
energy will account for only 8 percent of U.S. Energy use in 
five years.
    In the short-term, then, we need more oil and gas now to 
meet growing demand. We can meet that demand in two primary 
ways. First, we can responsibly develop the more than 100 
billion barrels of technically recoverable oil and gas in this 
country that are currently off limits due to federal policy. 
Unless we intend to increase our reliance on foreign oil, we 
must have increased access to America's own energy resources, 
both onshore and on the outer continental shelf. Shell is 
committed to developing any resources in an environmentally 
sound and responsible manner.
    Second, we can increase the supply of natural gas to our 
country by using liquefied natural gas (LNG) technology that 
allows us to store and ship gas safely in a liquid state. As a 
nation, we must put aside our resistance to building the 
infrastructure necessary to receive LNG, especially on the east 
and west coasts. In addition to these two important avenues, we 
must continue researching environmentally sensitive and 
commercially feasible ways of developing unconventional oil-
and-gas resources, including the trillion barrels of oil that 
remain trapped in shale in Colorado, Wyoming, and Utah.
    In the medium-term, Shell anticipates that in the medium-
term, between the next 10 to 25 years, oil and gas will remain 
the primary energy sources, but biofuels and wind will play 
greater roles in meeting energy demands. Shell is one of the 
world's largest distributors of biofuels and one of the first 
companies to invest in second-generation biofuels that use 
cellulosic materials that do not compete with food crops. 
However, we are very concerned about the provisions of the 
Energy Independence and Security Act of 2007 that mandate a 
more than fivefold increase in the amount of alternative fuels 
such as ethanol, from 7.5 billion gallons a year in 2012 to 36 
billion gallons a year in 2022, to the Nation's energy supply.
    Wind offers another solution to carbon dioxide emission 
challenges and to increasing our energy diversity. In this 
country, Shell Wind Energy now has interest in or operates 
eight wind farms in six states. Wind technology, however, is 
often limited by lack of transmission systems to move the wind 
energy from remote hills and potential offshore wind farms to 
connect with the electric grid. We need sound federal and State 
policies that support new transmission systems to enable this 
technology to be adopted more widely.
    Also during the medium-term, Shell believes that our nation 
must move to clean coal technology, using our most abundant 
natural resource to generate electricity in a way that allows 
us to manage carbon dioxide emission. However, the introduction 
of this technology is hampered by the need for large, up-front 
capital investments. Public policy is needed to create the 
enablers to stimulate the production of clean coal technology 
and associated carbon capture and storage.
    Over the longer-term, spanning 25 years and beyond, Shell 
anticipates that the U.S. economy will continue to depend on 
oil and gas, with an ever-growing contribution from alternative 
fuels. We will see a strong growth of the clean fuels mentioned 
in the medium-term, but we will in the long-term see more 
alternative fuels, that are in their infancy now, become 
commercially viable components of the overall energy mix. 
Hydrogen is an example.
    Hydrogen is the world's most plentiful element, and it's 
part of the Shell portfolio of future low-carbon fuels. As a 
fuel, hydrogen offers the potential to substantially reduce 
emissions, reduce our reliance on fossil fuels, and increase 
America's energy security. There are obstacles to be overcome, 
but we think hydrogen could become a commercially viable 
transport fuel in the coming years. Shell is developing 
hydrogen supply chains which in the longer-term may rely 
increasingly on renewable sources of energy. We partner with 
car manufacturers and local and national governments to 
coordinate the construction of hydrogen fueling stations in 
areas where fuel-cell vehicles are being introduced. In the 
United States, those include Los Angeles and the New York City 
metropolitan areas.
    Since 2004, Shell has operated an integrated gasoline/
hydrogen station in Washington, D.C., not far from Capitol 
Hill. Last year we opened a hydrogen station in White Plains, 
New York, and plan to open our first hydrogen station in Los 
Angeles this Spring. It will probably take a couple of decades 
to make hydrogen a commercially available option. However, for 
our grandchildren's children, it may become the standard fuel 
of choice.
    Clearly, Shell believes that alternative energies will play 
an increasing role in the energy mix. We are planning for it. 
We invest a significant portion of our profits into developing 
energy technologies. We believe our commitment to technology 
and innovation distinguishes us from many of our competitors, 
but we must approach our energy challenges realistically. 
Because of the extensive lead time and financial commitment 
required to bring new technologies to market fossil fuels will 
remain at the core of global economies for the foreseeable 
future. Shell does not see that as an either/or proposition; it 
is a both/and proposition. The balance between conventionals 
and alternatives will be established by what is possible in the 
future. We will need all of those energy sources and others to 
fuel the world.
    As a nation, we face tough choices to balance our energy 
needs, our economic well-being, our quality of life, and our 
respect for the environment. At Shell, we are firmly committed 
to bringing energy security to America and specifically to the 
citizens of Houston.
    Thank you.

    Chairman Lampson. Thank you, Mr. Hofmeister.
    [The prepared statement of Mr. Hofmeister follows:]
                 Prepared Statement of John Hofmeister
    Good morning Chairman Lampson, Ranking Member Inglis, Members of 
the House Science Subcommittee on Energy and Environment and other 
Members of the U.S. House of Representatives joining this hearing. My 
name is John Hofmeister. I am the President of Shell Oil Company. I 
appreciate the opportunity to speak today as part of the field hearing 
the Subcommittee is holding here in the energy capital of the world, 
Houston, Texas.
    My remarks today will focus on the short-term, medium-term and 
long-term energy needs in the United States, how Shell anticipates the 
mix of the energy supply changing in the coming years and the evolving 
contribution Shell will make to meeting America's energy needs for 
decades to come.
    Shell has been a part of the Houston energy industry since the mid-
1960s. In the greater Houston metropolitan area, more than 13,000 Shell 
and Motiva employees go to work every day to bring energy to millions 
of Americans. Their work includes service at nearly 500 retail stations 
and 44 Jiffy Lube locations. As one of Houston's largest employers, 
Shell is a stalwart of this community.
    Houston is a vibrant city, with a rapidly expanding economy and 
population fueled by energy. The energy market in Houston reflects the 
worldwide energy market in many respects. We recognize the challenge 
here--and around the world--of providing enough energy to meet rising 
demand in an environmentally and socially responsible manner. We are 
committed to managing the impact of our exploration and production and 
conserving energy where we can.
    America has a strong and growing demand for energy. Every second of 
every day, the United States consumes 10,000 gallons of oil--enough to 
fill a swimming pool. We use 20 rail cars of coal a minute and enough 
cubic feet of natural gas each day to build a tower to the Moon and 
back 25 times. We are balanced on a razor's edge of growing demand and 
tightening supply.
    Shell wants to help provide abundant, affordable energy as far into 
the future as we can imagine. We consider abundant, affordable energy a 
cornerstone of America's energy security. But we recognize that 
achieving this goal will require aggressive short-term, medium-term and 
long-term plans.

Short-term:

    First, I would like to outline the short-term U.S. energy needs and 
the steps Shell recommends for the next decade. In the short-term, the 
United States will remain a fossil-fuel-based economy because, very 
simply, we cannot attain the commercial scale and infrastructure needed 
to meet energy needs through alternative energies. We won't have the 
pipeline system to pump ethanol. We won't have the transmission lines 
to bring hundreds of gigawatts of wind from remote windy plains and 
mountains to cities. That kind of scale and infrastructure won't be 
available for decades to come. Largely for this reason, the 
International Energy Agency estimates that under a ``business-as-
usual'' scenario, alternative energy will account for only eight 
percent of U.S. energy use in five years.
    In the short-term then, we need more oil and gas now to meet 
growing demand. We can meet that demand in two primary ways. First, we 
can responsibly develop the more than 100 billion barrels of 
technically recoverable oil and gas in this country that are currently 
off limits to development due to federal policy. Unless we intend to 
increase our reliance on foreign oil, we must have increased access to 
America's own energy resources both onshore and on the Outer 
Continental Shelf. Shell is committed to developing any resources in an 
environmentally sound and responsible manner.
    Second, we can increase the supply of natural gas to our country by 
using liquefied natural gas technology that allows us to store and ship 
gas safely in a liquid state. As a nation, we must put aside our 
resistance to building the infrastructure necessary to receive LNG, 
especially on the East and West Coasts.
    In addition to these two important avenues, we must continue 
researching environmentally sensitive and commercially feasible ways of 
developing unconventional oil and gas resources, including the trillion 
barrels of oil that remain trapped in shale in Colorado, Wyoming and 
Utah.

Medium-term:

    Shell anticipates that in the medium-term--between the next 10 to 
25 years--oil and gas will remain the primary energy sources, but 
biofuels and wind will play greater roles in meeting energy demands.
    Shell is one of the world's largest distributors of biofuels and 
one of the first companies to invest in second-generation biofuels that 
use cellulosic materials that do not compete with food crops.
    However, we are very concerned about the provisions of the Energy 
Independence and Security Act of 2007 that mandate a more than five-
fold increase in the amount of alternative fuels, such as ethanol, from 
7.5 billion gallons a year in 2012 to 36 billion gallons a year in 2022 
to the Nation's energy supply.
    Wind offers another solution to carbon dioxide emission challenges 
and to increasing our energy diversity. In this country, Shell 
WindEnergy now has interest in or operates eight wind farms in six 
states. Wind technology, however, is often limited by lack of 
transmission systems to move the wind energy from remote hills and 
potential offshore wind farms to connect with the electric grid. We 
need sound federal and State policies that support new transmission 
systems to enable this technology to be adopted more widely.
    Also during the medium-term, Shell believes that our nation must 
move to clean coal technology--using our most abundant natural resource 
to generate electricity in a way that allows us to manage carbon 
dioxide emissions. However, the introduction of this technology is 
hampered by the need for large, up-front capital investments. Public 
policy is needed to create the enablers to stimulate the production of 
clean coal technology and associated carbon capture and storage.

Long-term:

    Over the long-term, spanning 25 years and beyond, Shell anticipates 
that the U.S. economy will continue to depend on oil and gas with an 
ever-growing contribution from alternative fuels. We will see a strong 
growth of the clean fuels mentioned in the medium-term, but we will, in 
the long-term, see more alternative fuels that are in their infancy now 
become commercially viable components of the overall energy mix. 
Hydrogen is an example.
    Hydrogen is the world's most plentiful element and is part of the 
Shell portfolio of future low-carbon fuels. As a fuel, hydrogen offers 
the potential to substantially reduce emissions, reduce our reliance on 
fossil fuels and increase America's energy security. There are 
obstacles to be overcome, but we think hydrogen could become a 
commercially viable transport fuel in the coming years. Shell is 
developing hydrogen supply chains, which, in the longer-term, may rely 
increasingly on renewable sources of energy. We partner with car 
manufacturers and local and national governments to coordinate the 
construction of hydrogen fueling stations in areas where fuel cell 
vehicles are being introduced. In the United States, those include the 
Los Angeles and New York City metro areas. Since 2004, Shell has 
operated an integrated gasoline/hydrogen station in Washington, D.C., 
not far from Capitol Hill. Last year, we opened a hydrogen station in 
White Plains, New York, and plan to open our first hydrogen station in 
Los Angeles this spring. It will probably take a couple of decades to 
make hydrogen a commercially available option. However, for our 
grandchildren's children, it may become the standard fuel of choice.
    Clearly, Shell believes that alternative energies will play an 
increasing role in the energy mix. We are planning for it. We invest a 
significant portion of our profits into developing energy technologies. 
We believe our commitment to technology and innovation distinguishes us 
from many of our competitors.
    But we must approach our energy challenges realistically. Because 
of the extensive lead time and financial commitment required to bring 
new technologies to market, fossil fuels will remain at the core of 
global economies for the foreseeable future. Shell does not see that as 
an ``either-or'' proposition. It is a ``both-and'' proposition. The 
balance between conventionals and alternatives will be established by 
what is possible in the future. We will need all of these energy 
sources, and others, to fuel the world.
    As a nation, we face tough choices to balance our energy needs, our 
economic well-being, our quality of life and our respect for the 
environment. At Shell, we are firmly committed to bringing energy 
security to America--and specifically to the citizens of Houston.
    Thank you.

                     Biography for John Hofmeister
    John Hofmeister was named President of Houston-based Shell Oil 
Company in March 2005. In this position, he heads the U.S. Country 
Leadership Team, which includes the leaders of all Shell businesses 
operating in the United States.
    Hofmeister became President after serving as Group Human Resource 
Director of the Shell Group, based in The Hague, The Netherlands.
    Prior to joining Shell in 1997, Hofmeister served as Vice 
President, International Human Resources, for AlliedSignal (now 
Honeywell International), based in Hong Kong. He joined AlliedSignal in 
1992 as Vice President of Human Resources for its aerospace business.
    From 1988 to 1992, Hofmeister was employed with Northern Telecom, 
where he became Vice President of Human Resources in 1990.
    Hofmeister began his career in 1973 in the international marketing 
and sales department of the General Electric Lighting Business. During 
his 15-year career with GE, he held a variety of marketing, 
manufacturing, and human resources positions in five GE major 
businesses, including locomotives, telecommunications, factory 
automation and electric motors.
    Hofmeister serves as the Chairman of the National Urban League. He 
is a member of the U.S. Department of Energy's Hydrogen and Fuel Cell 
Technical Advisory Committee and also serves on the boards of the 
Foreign Policy Association, the United States Energy Association, and 
the National Association of Manufacturers. He is a fellow of the 
National Academy of Human Resources, and a member of the American 
Petroleum Institute's Executive Committee and Policy Committee. 
Hofmeister also served as 2007 Chairman of the Greater Houston 
Partnership.
    Hofmeister earned Bachelor's and Master's degrees in political 
science from Kansas State University.

    Chairman Lampson. Mayor White, you are recognized for your 
time in the presentation.

      STATEMENT OF MR. BILL WHITE, MAYOR, CITY OF HOUSTON

    Mr. White. Thank you, Mr. Chairman. I've submitted a 
written statement, and I'll just visit with you about a couple 
of high points and maybe pick up on a comment, a couple of 
comments the Members made.
    You know, too often we make the mistake of thinking that 
the answer in energy policy is all of one thing--like it's all 
on the supply or all on the demand side. Because, Mr. Chairman, 
you and the staff, we had such an excellent presentation on 
supply, I'm going to mainly talk about the demand side; but 
that's not posed as an alternative. I've been involved in every 
aspect of the energy business as a business person, and I will 
tell you that we need a lot of supply if we're going to 
accomplish our goals of trying to bring down utility bills and 
gasoline prices and make our nation more secure. We will have 
fewer emissions as we move forward, for reasons that I'll 
explain; but here's what we can do.
    I'm going to focus on two big things on the demand side. 
No. 1, oil is used as a transportation fuel. Congress made a 
step in the right direction, a step in the right direction, 
with these CAFE standards that the last Congress passed.
    Look, as a staff member of Congress working with Chairman 
Dingell in the first Subcommittee on Energy and Power, I helped 
write some of the first CAFE standards in 1975. If you go 
back--Mr. Bartlett talks about great energy speeches--go back 
and look at Gerald Ford's State of the Union Address in 1975 
where he summoned this nation to make this a national 
challenge, and Congress, on a bipartisan basis, worked to craft 
something that was significant.
    Some of the folks that are around, not many of us--I was a 
young kid--but Alan Greenspan was a White House staffer and 
George Mitchell represented the IPAA, Chairman Dingell was the 
first Chairman of that committee, and we did that. You know 
what happened when we did that? For light-duty vehicles, we 
almost doubled auto fuel mileage within ten years. Now, they 
carved out later exceptions to make sports utility vehicles; 
but, you know, me and my kids and my wife, we drive vehicles 
that get twice the miles per gallon in the city of Houston--
which is not some exotic, weird city, it's a mainstream city. 
We're using hybrids for our civilian vehicles. We're converting 
our buses to hybrids, getting good fuel economy. You know what 
would happen if within ten years the automobile fleet of this 
country were able to get double the miles per gallon? You know 
what would happen? We would reduce the petroleum consumption by 
six million barrels a day from what it otherwise would be, and 
that would create a downward pressure on price compared to what 
would happen if the world was having a demand for six million 
barrels a day more. We all benefit from that.
    So thank you, and keep your eye on that ball because 
there's nothing that we can do.
    Mr. Bartlett, I agree with many issues involving access, 
but you made the point just right. I was one who was skeptical 
about Hubbert's speech for a long time. I've been in the 
business. He proved himself right, for the right reasons; and I 
think he's in the ballpark on the world oil demand. So we need 
to be anticipating this, and this is not supply versus demand 
because, believe me, if you don't have supply, the depletion 
occurs far quicker than that. If we want to maintain our 
standard of living, then we need to be working on both sides 
and even higher auto fuel--everything else is small on 
transportation fuel, supply and demand, compared to what you do 
with automobile transportation.
    Next, buildings. Buildings consume a lot of energy. In 
Houston, this Spring, we will adopt the most forward-looking, 
technically advanced, aggressive building codes in the Nation. 
I'm not the mayor of Aspen or Oakland. This is a city that is a 
working city with a diversity of views, that's very business-
oriented; but we've found here in Houston that if you design 
buildings, using the state-of-the-art energy standards, they 
can consume 20 percent less. We've done it with our own city 
buildings for the last four years. I looked at the numbers. It 
doesn't cost very much more, and you save a lot of energy. Some 
of the companies here, without any mandate--but if you had 
standards from, let's say, local government and State 
governments, something that we all have an interest in the 
Nation, we could cut the growth in demand for electrical power 
in this nation significantly. Why? Well, you know buildings 
account for a substantial percentage in both our homes and our 
offices of our power consumed.
    That has two advantages which I think the people we 
represent like. No. 1, as you drop demand, you reduce utility 
bills; and last time I checked, that is not a bad thing. It can 
reduce utility bills more than any tax cuts I've seen for a 
long time. No. 2, you will have fewer emissions. That is not a 
bad thing. I do not know anybody who's for emissions. At most, 
somebody says, well, it's a necessary price of growth. So 
building efficiency standards is something where we can do a 
lot. In Europe, sometimes they've done better than us. There's 
states and localities that have done better than others, but I 
think that Congress needs to take a look at that.
    Finally, renewables. We talked about solar and wind. They 
have a role to play, an increasing role. They will not displace 
all other hydrocarbons, and I mention this, too, at the end. I 
think the time to act is now. I think the country's ready for 
this. I think it will be ready in the next session of Congress, 
on a bipartisan basis, to move forward for doing some things 
that result in real change in the way we approach energy in our 
country. If we do so, our economy will be stronger, there will 
be more American jobs, less balance-of-payments deficits, and 
we will have fewer emissions. Thank you.
    [Applause.]
    Chairman Lampson. Thank you, Mayor White. That was a very 
good presentation.
    [The prepared statement of Mr. White follows:]
                 Prepared Statement of Mayor Bill White
    Good morning Chairman Lampson, Ranking Member Inglis, Members of 
the House Science Subcommittee on Energy and Environment and other 
Members of the U.S. House of Representatives joining this hearing. My 
name is Bill White. I am the Mayor of Houston, Texas, and am pleased to 
be speaking before the Subcommittee today.
    Houston, the fourth largest city in the country, is growing and 
prosperous, with more than two million residents. We have added a 
quarter-million new jobs to our economy of the last four years and have 
seen our population grow in excess of five percent annually over the 
past several years. This includes nearly 100,000 relocations from the 
Katrina disaster. The Gross Area Product has also grown by 5.2 percent 
annually from 2004 through 2007. Houston is the Nation's No. 1 seaport 
in foreign tonnage, and No. 2 in total tonnage. Houston is home to 
almost two dozen Fortune 500 companies, second only to New York.
    Houston is an important microcosm of the world economy as witnessed 
by its dramatic growth over the past five years. In order to sustain 
our City's prosperity as well as that of the rest of the world, we need 
to de-link growth from resource consumption. Not doing so will lead to 
dire consequences, some of which we are already seeing. Energy prices 
have nearly doubled over the past few years and they will not stop 
here. Gasoline prices have gone from $1.50 to $3.00, electric power 
rates have gone from 6-8 cents/kwh in the 1990s to 12-15 cents/kwh 
today. The supply-side trend is only going to get worse. We need to fix 
this problem now.
    The City of Houston is aggressively addressing the issue of 
decoupling regional growth from energy consumption. The path forward 
for us is two-fold: energy efficiency and renewable energy. A watt 
conserved, or a gallon not used, is the lowest cost form of energy 
generated. We avoid $600/kwh by not building excess generation capacity 
and save 5.5 cents/kwh in avoided energy supply costs. Similarly, by 
migrating to more fuel-efficient vehicles or hybrids or eventually 
plug-in hybrids, we can make a real difference in our fossil fuel 
consumption. The complement to our energy efficiency efforts is the 
City's embracement of renewable energy, which is carbon free, pollutant 
free, and geo-politically free.
    Let me give you some specific examples of what we are doing here in 
Houston on Energy Efficiency. We are upgrading our commercial and 
residential building codes to make our new buildings more energy 
efficient. The City already has a resolution passed in 2004 that 
requires all new City facilities and major renovations over 10,000 sq. 
ft. to be LEED certified. We are also weatherizing existing homes 
through a ``neighborhood by neighborhood'' residential energy 
efficiency program. So far we have done more than 2,000 homes over the 
past 18 months and expect to do 3,000 this year, all in low-income 
neighborhoods, in partnership with CenterPoint. Homeowners have seen a 
10-15 percent heat-adjusted reduction in their kwh consumption with 
summer months as high as 20 percent.
    The City of Houston has itself taken a leadership role in embracing 
energy efficiency and renewable energy procurement for its facilities. 
The City of Houston is the first Clinton Climate Initiative and C40 
city to implement large-scale, energy savings performance work to 
retrofit 11 million square feet of city facilities including office 
buildings, convention center, libraries, fire stations, police 
stations, health service centers, and multi-service centers. We expect 
to see a 20-30 percent reduction in our energy consumption for these 
facilities. These energy efficiency efforts will be complemented with 
our renewable power procurement program. The City of Houston has 
purchased 262,800,000 kwh annually from Texas wind farms, or 20 percent 
of our consumption, under a fixed-price contract for delivery over the 
next five years. That is over 1.3 billion kwh in total, and our goal is 
to double that number.
    The City of Houston is also leading several grass-root efforts to 
inspire, educate and call to action our community at large. The City, 
in partnership with the American Institute of Architects, is hosting 
the region's first ``Green Consumer Expo'' to showcase energy efficient 
products and services that are available here locally. The Expo, 
scheduled this April, is free and open to the public. We are also 
developing a Youth Job Corp program for this summer to have young 
people hand out over 250,000 CFLs and energy efficiency tips door to 
door. Last year with the Power to People Campaign we handed out 10,000 
CFLs.
    Finally on fuel-efficient vehicles, the City's goal is to have 50 
percent of non-emergency, administrative fleet, roughly 2,800 vehicles 
total, to be hybrids. Currently we have 440 hybrids. Metro will 
purchase approximately 100 hybrid electric buses each year over the 
next three years, dramatically improving the fuel efficiency and 
emission control of our mass transit network. We are also working with 
our airport systems to migrate their fleets to clean fuel vehicles. For 
the general population here in Houston, we need help from the Federal 
Government to raise fuel standards even more aggressively.

                     Biography for Mayor Bill White
    Mayor White's leadership has brought Houston together, as shown by 
his overwhelming re-election to a third term. He uses business 
practices every day at City Hall to improve service and get things 
done.
    He has aggressively attacked our community's most difficult 
challenges, such as investment in neighborhood drainage, reform of 
municipal pensions, holding the line on property taxes with rate cuts 
and increased senior exemptions, attacking crime hot spots and even 
faster removal of stalled vehicles to reduce wrecks and traffic 
congestion.
    Americans witnessed Mayor White's hands-on management style when he 
helped lead Houston's competent, compassionate response to Hurricanes 
Katrina and Rita.
    Now in his third term, Mayor White is accelerating work to 
revitalize our City's most neglected neighborhoods, with foreclosure 
and hundreds of new housing starts on thousands of abandoned 
properties. He also initiated a program to weatherize thousands of 
homes in older neighborhoods, saving homeowners an average of 20 
percent on their electricity bills.
    In addition, Mayor White has aggressive programs to enforce 
pollution laws, reduce the flooding impact of new developments, raise 
high school graduation rates, and encourage more flexible working 
hours.
    Before serving as Mayor, White built one of the region's most 
successful businesses. Previously he served as Deputy Secretary of 
Energy of the United States, where he helped diversify national energy 
supplies and saved taxpayers billions of dollars with management 
reforms. Earlier in his career, he helped build and manage one of the 
Nation's most successful law firms.
    For decades Mayor White and his wife Andrea have helped lead 
numerous charitable and civic organizations. The Whites are parents of 
three students and attend St. Luke's United Methodist Church.

    Chairman Lampson. I was remiss in not making a comment in 
two introductions. Obviously none of this would happen without 
the professional staff that we have. Here, representing the 
Minority side, is Elizabeth Stack; and on the Majority side is 
Chris King. I just wanted to acknowledge them and thank you for 
the work that you do, and your colleagues on our Committee 
staff, as well as the staffs of all of the Members who are 
here. They do a tremendous job. They do the work of our 
offices.
    Now, Mr. Standish, you're recognized for your time.

    STATEMENT OF MR. THOMAS R. STANDISH, GROUP PRESIDENT OF 
            REGULATED OPERATIONS, CENTERPOINT ENERGY

    Mr. Standish. Thank you, Mr. Chairman. I wish to really 
follow on with what the Mayor was saying and talk in a little 
bit of detail on the focus on the electric grid and some very 
remarkable convergence that's under way that I think is going 
to completely reshape how we make electricity and how it's 
consumed.
    I'd like to make a comparison back from about the same time 
that if Orville Wright came back today and looked at a plane, 
he would be astounded at the progress of a modern airliner 
compared to the airplane he flew. If Thomas Edison came back 
today, he would be astounded that the electric grid he built is 
exactly the one that's in place today. We've essentially made 
no change to it.
    There's a good reason why that's so. A large central plant 
has served us well for a long period of time, but things have 
changed today and the concerns of very high fuel prices, of 
clean air, require a very different electric grid. What we're 
beginning to see is the development of a digital communications 
system that overlays the existing electric grid, what's being 
called a Smart Grid, and the ability to link individual energy 
consumptions to the Internet will completely change the way we 
view our use of electricity in three ways.
    For residential and commercial consumers, those consumers 
will be able to set consumption patterns and have this Smart 
Grid act to minimize their electricity consumption and their 
cost. In the movement that exists today towards a very large 
number of small sources of electricity, like plug-in hybrid 
cars, solar panels, and eventually fuel cells, we need some 
mechanism to be able to keep track of and communicate with this 
very large number of individual sources. It will require a 
massive communication network to optimize the efficiency of 
these resources as well as to properly build and credit those 
generation sources. And third, this Smart Grid gives another 
ability which is to create a self-healing grid--that is, a grid 
that can automatically detect problems, reroute the power 
flows, so that, for most consumers, power outages will last a 
matter of seconds.
    All of this technology exists today. I'm very proud to say 
that CenterPoint is one of the leaders in the world in 
developing a pilot. We currently have 10,000 very highly 
advanced meters deployed around the city that are capable of 
two-way communication and also communication within the house 
to allow the consumers to control devices within their home. 
This has been a very successful pilot. We've developed a 
technology center devoted to the Smart Grid. This technology 
center, I think, to emphasize the newness of it, is that we 
have conducted over 290 tours of this technology center today. 
By way of that, I would like to invite this committee, if you 
are in Houston again, to be able to come down and really see 
what the future of electric system operations will be.
    I'd like to touch on a couple of points, too, that are 
happening in Houston, that the mayor touched on. We have 
implemented energy efficiency programs that are in some cases 
mandated, in some cases sponsored by the government, to over 
29,000 homes in the Houston area. These energy efficiency 
upgrades are currently saving $12 million a year in energy 
costs. With the help of the City of Houston, we've deployed 
this to 4,700 hard-to-reach, low-income homes that are saving 
those individuals over a million dollars a year. The EPA Energy 
Star program has been very successful here. In fact, every year 
that that program's been in place, CenterPoint Energy has won 
the Energy Star award; and we are very proud to say that there 
are over 121,000 homes constructed in the Houston area that 
meet the Energy Star standard.
    Finally, Mr. Chairman, I would like to make two requests of 
the Committee. As you know, Title XXIII of the 2007 Energy Act 
was directed toward Smart Grid, and in there it funded $100 
million for research and development towards Smart Grid. I 
would ask this committee to work towards appropriating the 
dollars for that research and development. The ability to 
accelerate these funds and move forward with our research and 
development work will be one of the single largest keys to 
making energy efficiency a common event across all of this 
country.
    To that end, my second request goes simply to technical 
standards, your ability of this committee to support the 
development of common technical standards. We currently have 
this very interesting convergence that's occurring. You have 
the electric cars coming from the automobiles. You have 
utilities interested in this. You have appliance manufacturers 
beginning to see the ability of these appliances to talk to the 
Internet, as well as the electrical equipment manufacturers. 
The ability of your committee to promote a common standard so 
that across the country, we'll all be plugging in the same 
devices the same way and communicating the same, will again 
accelerate the application of the Smart Grid.
    Now, Mr. Chairman, the electric utility industry is not a 
very interesting business except when the power goes out, I 
guess, and it gets that way, but I think we're on the verge of 
changing that completely because I do believe in the next ten 
years or so we will see a complete renewal of our ability to 
use electricity and how it's consumed.
    So with that, I thank you and appreciate the time to 
testify before your panel.
    [The prepared statement of Mr. Standish follows:]
                Prepared Statement of Thomas R. Standish
    Good morning. My name is Tom Standish. I am Group President of 
Regulated Operations for CenterPoint Energy. I appreciate the 
opportunity to testify for the electric and gas delivery industry as we 
work towards improving both energy efficiency and the environment.
    Today in the United States, we are in the beginning stages of the 
digitalization of the electric grid--a grid which is essentially 
unchanged since the time of Thomas Edison. A digital communications 
grid overlaying the electric grid--or a Smart Grid as it is often 
called--brings the efficiency and information of the Internet to 
electricity consumers as well as to the operators of the electric grid. 
Technology exists to allow every electricity user to have real time 
information about their usage and bill amounts. Consumers will be able 
to actively manage their usage through inexpensive smart devices that 
will attach to any of the appliances in the home including the 
thermostat. Utilities and regulators will offer real time pricing that 
will be automatically acted upon by the smart meters within the 
parameters set by the consumer. Tests conducted by the Department of 
Energy in the Northwest United States have shown a 15 percent reduction 
in energy use can be achieved by providing real time usage and billing 
information, real time pricing signals and the ability of the Smart 
Grid to cycle appliances within limits set by the consumer. Further an 
analysis of data in Texas indicates that a five percent reduction of 
electric load during the peak hours of usage will double the available 
reserve of generation in the state. This not only produces an enormous 
savings to consumers in deferred power plant construction, it also 
produces significant clean air benefits as the lowest efficiency power 
plant will operate less.
    The movement away from central power stations toward a broad array 
of distributed generation such as solar panels, plug-in electric 
vehicles and, eventually, fuel cells can only be accomplished through a 
smart electric grid. For example, these innovations will require the 
grid to identify and track the billing and credits of electric vehicles 
that can be charged or discharged at any location, anywhere in the 
country. The grid must also be able to sequence these devices so that 
individual power lines do not become overloaded.
    This same technology will also allow the utility the intelligence 
throughout the electric grid to allow real time monitoring which will 
detect failures and reroute power flows to allow the grid to become 
self-healing. Our studies have shown that with the addition of smart 
sensors and computer controlled switches, both of which exist today, 
power outages for most consumers will last less than a minute.
    I speak with confidence about the Smart Grid because we at 
CenterPoint Energy are proud to be among the leaders in the world in 
developing advanced metering and intelligent grid technology. 
CenterPoint was the first utility to develop a Technology Center 
devoted solely to research and implementation of Smart Grid technology. 
We currently have ten thousand highly advanced meters deployed and have 
completed our pilot study of the system feasibility. To date we have 
conducted over two hundred and ninety tours of our Technology Center 
and we invite this committee to visit our Technology Center and see the 
state of the art in electric system design. We have worked closely with 
IBM on communications and software design and with ITRON on the 
advanced electric meters to create a system that we believe will have a 
broad appeal nationwide.
    I would like to briefly cover other efforts that are underway in 
the Houston area. Over 24,000 customers participated in our Energy 
Efficiency programs, reducing their annual electric bills by over $12 
million as a result. In conjunction with the city of Houston, we have 
developed programs to upgrade the energy efficiency of 4,700 hard-to-
reach low income home owners resulting in annual savings of $1 million. 
This program has been highly successful in reducing the utility bills 
for those who can least afford them. Also CenterPoint ENERGY STAR New 
Home program one of most successful in the country having received the 
EPA national ENERGY STAR award for seven consecutive years. Since the 
program started in 2001, 121,000 ENERGY STAR homes have been 
constructed in Houston.
    Finally, I would ask the Committee to consider two requests. First, 
as you well know, Title XIII of the 2007 Energy Act provides $100 
million of R&D money for Smart Grid technology. I would ask that you 
seek the funding of this research as soon as possible. The Research and 
Development money available for Smart Grid programs such as ours can 
greatly accelerate the understanding, practical application and 
deployment of these new technologies.
    And second, I would ask that you work towards establishing 
technical standards for the Smart Grid. The greatest value will come if 
all participants, utilities, automobile manufacturers, appliance 
manufacturers and electric equipment providers are working toward the 
same concepts concerning which component performs which function. The 
CenterPoint Energy Technology Center was founded on the principle of 
open communication architecture that allows any equipment manufacturer 
to design equipment that will communicate with any other similarly 
design equipment. CenterPoint Energy would welcome the opportunity to 
participate on the Department of Energy's Advisory Council to help 
develop these standards.
    This is an exciting time for an industry that is rarely exciting. 
Ten years ago few of us envisioned how many uses would be found for the 
Internet. Applying the same technology to the power grid will produce 
unthought-of opportunities for the efficient and clean use of energy. 
Thank you for the opportunity to present. This concludes my testimony.

                    Biography for Thomas R. Standish

Current Position: Group President, Regulated Operations. In this role 
Tom is responsible for the company's regulated electric transmission 
and distribution system and our regulated natural gas operations. Tom 
also serves as a member of the CenterPoint Energy Executive Committee.

Previous Positions: Standish began his career with the company in 1984 
and served in various management positions in marketing, rates and 
research, regulatory relations, and engineering. He formerly served as 
Senior Vice President of the company's electric delivery system before 
he assumed the position of President of CenterPoint Energy Houston 
Electric in 1999.

Education and Accreditation: He earned a Bachelor's degree in 
electrical engineering from the University of Texas at Austin and a 
Master's degree in business administration from the University of St. 
Thomas. He is a registered professional engineer in the State of Texas.

Affiliations and Honors: Standish is a member of IEEE and is the 
immediate past-Chairman of the Board of Directors for the Greater 
Houston Area American Red Cross. He is also a current member and past-
Chairman of the Salvation Army Houston Area Command. Standish serves as 
a member of the Board of Directors for the University of St. Thomas, 
and Rebuilding Together Houston (formerly PSI Homesavers). He is a past 
member of the Board of Directors for the Electric Reliability Council 
of Texas (ERCOT), the Texas Energy Coordination Council, the Edison 
Electric Institute (EEI) Transmission Access & Power Supply Task Force, 
the Association of Electric Companies of Texas' (AECT) Policy 
Committee, the U.S. Chamber of Commerce's Regulatory Affairs Committee, 
the Governor's STEPP Committee on Utilities, Strake Jesuit College 
Preparatory, the Saint Agnes Academy Board of Directors, and the 
Juvenile Diabetes Research Foundation-Houston chapter Board of 
Directors. He has also served on the EEI Rate Research committee and as 
vice chairman of the ERCOT Engineering Subcommittee. He holds two 
patents dealing with electronic controls.

Personal: Tom is married with three children and is a native 
Houstonian.

                               Discussion

    Chairman Lampson. Thank you very, very much for all of you 
for taking the time to come. We'll move into our question-and-
answer period; and I yield myself the first five minutes.

                   The Role of the Federal Government

    Let me start with you, Mayor White, if I may. Drawing from 
your former role as the U.S. Deputy Secretary of Energy, how do 
you think the Federal Government could better serve local and 
State governments in efforts to address these grand energy 
challenges that we speak of.
    Mr. White. Well, I think, first, that there needs to be a 
retention of the programs such as the weatherization program 
that currently exists. I know some have talked about 
eliminating it. Personally, I know that it's a little 
controversial, but sometimes I think that hot-weather states 
may get a bit of the short end on the equity funding. I think 
there should be strict standards of accountability, and I think 
those who do it and administer it in the most cost-effective 
way should get a little bit more money so that it shouldn't be 
just sort of an entitlement allocation based on this. For 
example, our program, about $950 a household we're averaging, 
about over 10 percent annual savings, 20 percent at peak, 
because we do it like a manufacturing operation, not like some 
kind of government program. So that would be one thing that we 
need to retain.
    The other is that you could help us and give us some 
flexibility on those areas where we may be preempted--and this 
is a technical matter--but come up with innovative standards on 
appliances and devices and help both State and local 
governments where states and local governments want to go 
farther than federal law permits. Often the regulated 
industries, with high-powered lobbyists and lawyers, try to sue 
to prevent local governments and State governments from taking 
innovative steps, by claiming that federal law preempts those 
actions.
    Now, in some case, I'd say view it on the merits, but I 
would just give you an example. I'm not endorsing, but I'm just 
giving you an example. If we were to say that in urban areas 
such as Chicago, L.A., and Houston that there would be certain 
requirements for the railroad engines coming in here and they 
could use certain devices where we have emissions problems to 
begin with. Then if we have a standard, then we would like some 
help from the Federal Government, rather than always running 
into the industry saying, oh, you can't do that because you're 
preempted by federal legislation.
    You know in, of course, California right now--I know it's 
not Congress--but the Administration is suing California to 
prevent them from having more aggressive rules on automobiles, 
where they're trying to adopt more quickly the hybrid 
technologies that Mr. Standish is talking about. The Federal 
Government is suing California, saying that we don't want you 
to do that because that's our game.
    So thank you. Those would be some ways.
    Chairman Lampson. Thank you very much.

                How Can We Make Oil Production Cleaner?

    Mr. Hofmeister, what steps is Shell taking to make both 
production and the end use of oil cleaner and more efficient.
    Mr. Hofmeister. Congressmen, there are a number of actions 
under way, and have been for almost a decade now, in which 
Shell has taken aggressive means to improve its own efficiency 
footprint. A good example would be in the recently announced 
expansion of the Port Arthur, Texas, Motiva refinery which, 
when completed, will more than double the size of an already 
large facility, from 300,000 to more than 600,000 barrels a 
day. We're operating in a way that will get every bit more 
molecule out of the barrel, by improving the efficiency of the 
processing of those molecules, and at the same time reducing 
the emission footprint on a per-barrel basis so that with the 
doubling of the expansion of that facility, we will actually 
see a net improvement in the emissions per barrel that come out 
of that production process. It's mostly through efficient use 
of our own energy consumption to make product that we're 
currently able, in refineries around the world, to find a more 
efficient use of production of energy.
    In addition to that, if the smart wells that we are 
developing are designed in a way to get more extraction from 
underground wells, enhanced oil recovery is another means by 
which we are improving the efficiency of the production of 
crude oil and natural gas from underground; but in the use of 
transport fuels, I think there's an interesting story to be 
told as well--that is, our laboratories and the chemical 
engineers in our laboratories are continuing to work on new and 
different catalyst materials which, when introduced into the 
gasoline or the diesel fuel, produce both more efficient use of 
the energy and cleaner use of the energy so that at the 
emissions tail pipe, you see the benefit but also in the miles 
per gallon, you see the benefit. We work very closely with auto 
manufacturers to make sure that what we're doing in the fuels 
is compatible with the engine design and the engine materials, 
but I think we can report over the last decade significant 
improvement--and while I'm not trying to sell the product here, 
if you've ever tried the Shell V Power product, which is the 
high-test gasoline, this is perhaps one of the most efficient 
fuels in the world. We can move on from there as well. For 
example, gas to liquids, which is a major innovation in 
bringing middle distillate fuel from natural gas into the 
diesel supply chain. It is a very, very clean and efficient use 
of energy in diesel engines. I think I'll stop there.

                     A Timeline for the Smart Grid?

    Chairman Lampson. Thank you very much. I have a minute, so 
your next entry will then be shortened. Let me ask. 
Potentially, the Smart Grid technology is really impressive; 
but the benefits will undoubtedly come in stages. So what do 
you see as the first step in establishing a smarter grid and 
how will it progress from there and what kind of time horizons 
do you see for wide-scale adoption of these technologies?
    Mr. Standish. Very quickly, I think the first steps will be 
the introduction of this smart meter in the home. That 
communication, if you simply have a device that sits on the 
counter in the house and shows the customer how much they've 
spent to date in the month, by the end of the month, what their 
expected bill would be if you continue to consume at that rate, 
that price signal, I believe, is the best energy efficiency 
item we can introduce in the electricity business. I think that 
will be the first thing, and you'll see this immediate 
feedback--the customer will see the immediate feedback of the 
price signal, and that will be the first step.
    Chairman Lampson. Can it also be connected to the Internet?
    Mr. Standish. Yes, sir. You can do it to the home or you 
can do it on the Internet. You could sit in your office and 
control the thermostat in your home; and that step, time-wise, 
we expect to be in full deployment of this by January of '09, 
the end of this year, probably taking somewhere in a four-year 
time frame to deploy the two million meters that would be in 
this area.
    Chairman Lampson. Thank you very much.
    Mr. Hall, you're recognized. Five minutes.

         Ultra-Deep Drilling and the Energy Policy Act of 2005

    Mr. Hall. Thank you, Mr. Chairman. I can still talk a 
little. We've heard testimony about the Energy Policy Act of 
2005, and I think most of you are well aware of Section 999 of 
that act that referred to the ultra-deep. I think most of you 
are aware of the fact that there's been some efforts on the 
part of the Administration to knock out those provisions that 
were in that act. I'd like to point out, Mr. Chairman--and I 
know you agree with me because you've been standing side by 
side with us to try to defend that act and to retain that 
opportunity to get, what, 60 or 70 years of gas from the ultra-
deep that we can't get now, and the act itself calls for the 
technology to get that, and that technology to be paid for with 
energy that we know is there that we can't get to the top now. 
It's a win-win situation. No increase in taxes to the people 
that it will benefit. So it doesn't make sense to me to try to 
knock that out.
    There's been two major efforts to knock it out after it's 
been signed by the President. Joe Bartlett and I flew out to 
New Mexico with him to sign that act, and since that time 
there's been a lot of efforts to repeal that part. So far we've 
fought them off. I think it makes so much sense because it 
doesn't cost anything. There's energy there that we won't get 
if we don't get the technology. The technology is paid for 
there with energy that we do get; and for anybody, that ought 
to make sense. I don't understand it, but there is an effort to 
knock that out and we're still fighting that. There was an 
effort on the floor some year ago, I guess, or eight or nine 
months ago; and it was turned down, I think, almost two to one.
    So I guess that's the question that maybe I might have of 
Mr. Hofmeister. How do you feel about the likelihood of the 
team that's working along that line and the efforts to knock 
that out, when it makes very little sense to knock out 
something that we could use to obtain long years of gas from a 
system that we're not getting anything out of now to speak of?
    Mr. Hofmeister. Congressman, the first thing I would 
comment upon is that ultra-deep technology and projects that 
move us into the ultra-deep area are long-term projects. These 
projects take years of engineering and design.
    Mr. Hall. How many years?
    Mr. Hofmeister. It could be anywhere from three to seven 
years.
    Mr. Hall. That's my understanding.
    Mr. Hofmeister. What is extraordinarily unhelpful is what 
would be called perhaps zigzag federal policy on support or 
nonsupport of specific laws. Once enacted, we in the industry, 
we take that as the governance that we should follow and then 
we begin to build business plans around what legal enablers 
there are. When we see uncertainty or when we see zigzagging in 
a law this year modified the following year or repealed in the 
subsequent year, it plays havoc with our planning process, 
which ultimately hurts our energy security because we don't do 
anything. So if we see uncertainty, we're not going to spend 
hundreds of billions of dollars in pursuing something.
    A project I would point to specifically which Shell is 
undertaking as we speak is a project called Perdido, which is 
very close to the Mexican border in the southern Gulf of 
Mexico, southern and western Gulf of Mexico. We're operating in 
8,000 feet of water, which is unprecedented for normal 
production operations. The reservoir itself is 28,000 to 32,000 
feet under the surface of the Earth once we get to it. This is 
a project in which Shell will spend $1 billion before producing 
a single gallon of crude oil--not a barrel--just a gallon of 
crude oil. A billion dollars sunk into this project is 
predicated on quite a number of financials. We believe it's a 
prolific region, and we have plans to expand in that region 
quite significantly. If, however, laws change and make this 
project no longer financially as viable as it once was, we'll 
move on to something else but America will be denied that 
energy in case we do.
    Mr. Hall. But you do understand there's been no zigzagging 
in the actual thrust. There's been zigzagging in the efforts to 
thwart the thrust, that have failed. The reason they've failed 
is we've put the word ``shall'' in there, I think, nine times 
in the last paragraph. Every time someone from Department of 
Energy--and I'm very fond of the Secretary of Energy--I think 
he's a great member of the President's cabinet--but they 
understand what the word ``shall'' means and there's been no 
deviation from that, nor any zigzagging, and there shouldn't be 
and I don't think there's going to be.
    So those are the things that I'm very interested in because 
if we're ever to rid ourselves of our problems and our fear of 
Saudi Arabia turning on us--they provide, what, 40 percent of 
the 60 percent that we have to rely on people that don't like 
us and we don't really trust--this would get us a long way down 
the road to easing that problem. I don't understand why 
anybody's against it, and we're going to fight our really you-
know-whats off to keep that on the books. Every time a 
Department of Energy guy comes over there to testify about 
this, I read those five or six or seven shalls to him and they 
agree to it, that it's in the books, they're complying with it, 
and it's an ongoing thrust at this time.

                     The Domestic Manufacturing Tax

    Now, I want to ask you a question. How would repealing the 
domestic manufacturing tax deduction--you're familiar with that 
and this is the thrust on that--affect your R&D into both 
conventional and alternative sources of energy like biofuels?
    Mr. Hofmeister. Again, this is a case of a zigzag in which 
it now seems to have passed in Congress this past week.
    Chairman Lampson. Only in the House.
    Mr. Hofmeister. In the House. Sorry. Thank you. It again 
presents a dilemma as we look at our business-planning process. 
Now, having said that, it's not for Shell, as a company, to set 
government policy. That's not our job; that's your job. We 
elect you to do that, but we do try to make business plans 
based upon what we see and how we see it predicted.
    One of the ironies of the bill that was passed in the House 
this week is, because it targeted only five companies by name, 
some of our competitors such as PDVSA and Citgo are not 
excluded from the deduction. So our competitors in this country 
are still able to make the deduction, while the five named 
companies would be unable to make the deduction.
    In addition, there's another little quirk, as we would call 
it, in the bill, which allows Hollywood producers the ability 
to take a manufacturing deduction in the making of movies but 
yet a company like Shell, which is making millions of gallons 
of gasoline a day, cannot take the deduction as a manufacturer. 
So it's an irony that we don't understand.
    I think over the longer-term, Congress has to decide what 
they'll do, and we will comply, but we scratch our heads 
seriously, Congressmen, when we see this kind of policy that 
emanates only two years or three years after the deduction was 
actually created.
    Mr. Hall. We thank you for your input. You know, we write 
those laws based on what those of you who make it happen 
testify; and I thank you for the testimony you've given to our 
committee back through the years.
    Mr. Chairman, I yield back.
    Chairman Lampson. Thank you, Mr. Hall. I think that you're 
somewhat a hybrid because you really created or helped create 
the RPSEA program when you were on the Minority side and you 
liked the Minority so much that you moved over and you 
continued to fight it.
    Mr. Hall. I may move back.
    Chairman Lampson. Well, we appreciate your effort because 
I, too, think it's a critically important thing.
    Mr. Hall. That's what Bill White would tell us to do--and a 
man I admire and respect. I knew him when he was young and have 
seen him grow and watched him operate under a great man, Mr. 
Dingell. He gave us a lot of advice and guidance when you were 
in D.C., but we're glad to have you back in Texas.
    Chairman Lampson. He's given us good advice and direction 
here as well.
    Dr. Bartlett, you're recognized for five minutes.

        Balanced on the Razor's Edge: Strategies for the Future

    Mr. Bartlett. Thank you. You know, in a very real sense an 
argument can be made that gas is too good to burn. It's a 
feedstock for an incredibly important petrochemical industry; 
and probably not one person in 50, other than our farmers, know 
that essentially all of our nitrogen fertilizer comes from 
natural gas. When natural gas is gone, nitrogen fertilizer is 
gone. How will we feed the world?
    I want to thank Shell Oil Company for your heroic efforts 
in trying to exploit the oil shales. Thank you, sir, for making 
a good try at getting oil from this. You said a trillion 
barrels. It's a good deal more than that. I generally say it's 
probably a trillion and a half barrels there. Potentially a lot 
of energy, but there's a huge amount of potential energy in the 
tides, too. Just because it's there doesn't mean it's in your 
gas tank.
    I'm very pleased, sir, that you have joined the chorus of 
voices who are warning that we're facing a supply-demand 
crisis. Your words were ``balanced on a razor's edge of growing 
demand and tightening supply.'' Meaning what?
    Mr. Hofmeister. Meaning that any disruption in the supply 
chain is immediately felt by the consumer. The best example is 
the supply shortfall after Hurricanes Katrina and Rita, where 
25 percent of the Nation's production capacity, both crude and 
natural gas and also refined product, were out of commission 
not just for days or weeks, but for months. During that period 
is when we saw such a huge spike in gasoline prices at the pump 
that I, for one, received letters from 48 Attorneys General 
suggesting that we should be investigated for price gouging, 
when in fact, this was a market reaction to what was a real 
shortage.
    There was an incident, a week after Rita, where I 
personally called Secretary Bodman to say that our Motiva 
refinery in Port Arthur had the last 300,000 barrels of 
finished product to put into the Plantation and Colonial 
pipelines to feed all the way up to Washington, D.C. And that 
if we didn't get our generators up and running over the 
weekend, we couldn't pump that inventory and we would actually, 
for the first time in the history of the Plantation and 
Colonial pipelines, be literally out of gas, which would have 
led to panic-buying, literally from the Texas border all the 
way up to Washington, D.C. Across the Southeast, involving 
states that would have been perhaps possibly fueling panic-
buying in other parts of the country. That's what I call a 
razor's edge. We do not have an abundance of inventory. We do 
not have near-term solutions for any kind of a disruption to 
the normal supply chain.
    Mr. Bartlett. Sir, I think your company has also said that 
by 2015, and perhaps before, that there will be a meaningful 
risk that production will not be able to meet the world's 
demand. That, sir, means peak oil, I think, in the terms that 
most people understand it; and I want to thank you very much 
for your voice of reason and coming out and saying that.
    When you talk about the short-term, the medium-term, and 
the long-term, for each of those, you say that our major 
reliance will be on gas and oil. That, sir, is sadly true; and 
it's true because of the statement you made that we cannot 
attain the commercial scale and infrastructure needed to meet 
energy needs through alternative sources. That's because we've 
waited too darn long to start and we can't start yesterday but 
I sure as heck would like to start today.
    I'm sure you're familiar with the Cantarell Oil Field, 
which was the world's second largest oil field. It has had, 
what, a 20 percent decline in the last two years. About three 
fourths of all the oil-producing countries in the world have 
already peaked, and it is very probable that the world has now 
peaked. I want to thank Shell Oil Company for being a leader in 
being honest with the American people and the world.
    Mr. Mayor, your emphasis on conservation is exactly right. 
That's where it's got to begin. I led a group of nine to China 
over the last, not this holiday but the year before. Spent New 
Year's Eve in Shanghai, and the Chinese begin their discussion 
of energy by talking about post-oil.
    We tend to think in terms of the next quarterly report 
here, and we in the Congress have a lot of trouble seeing 
beyond the next election, but in that part of the world they 
tend to think in terms of generations and centuries. There will 
be a post-oil world. It will not last forever. There will be an 
age--we're about halfway through it, by the way. We're about 
150 years into the age of oil. Another 150 years, ever less and 
less, more and more expensive, and we'll be through with the 
age of oil and gas and coal.
    I bought the first Prius in the Congress. I bought the 
first Prius in Maryland. I retired from the building business a 
number of years ago, but I'm still the largest builder of solar 
homes in Frederick County. So I anticipated a long while ago 
that we were going to--maybe it's the scientist in me, but 40 
years ago I started asking myself the question: Gee, you know, 
the Moon isn't made out of green cheese and the Earth isn't 
made out of oil and oil is not going to last forever. When do I 
need to start being concerned about it? Next year? Ten years? A 
hundred years? Maybe it's a thousand years? I had no idea, when 
I first started asking myself these questions, when I needed to 
be concerned about it. You know, it was about 30 years ago that 
we really needed to start being concerned about this as a 
world.
    You know, what we have done is just so incredible. This 
wealth that we found under the ground, one barrel of which 
provides the work equivalent of 12 people working all year, 
each of us today enjoy a lifestyle that, if it weren't for 
fossil fuel energy, we'd need 300 people out there turning the 
cranks and waving the fan so that we could enjoy the quality of 
life that we have today. When we found that wealth under the 
ground, we should have asked ourselves the question: What can 
we do with this to provide the most good for the most people 
for the long of time?
    That's sure as heck not what we did. With no more 
responsibility than the kids who found the cookie jar or the 
hog who found the feed door open, we've just been pigging out. 
Incredibly, that's what we want to continue to do, go out and 
drill as quickly as you can to get the last oil. What about my 
10 kids, my 16 grandkids and my two great-grandkids?
    You know, the next Congress, if age brings wisdom, you have 
two of the wisest people in Congress here because Mr. Hall and 
I are the oldest and the second-oldest people in the Congress 
next year.
    Mr. Standish, you very correctly point to the major problem 
of electricity is the grid. The future for electricity is very 
much brighter than it is for liquid fuels. We need to be clear 
on that. I'm very bullish on our future for electricity. Wind 
and solar and more nuclear and we should do more--I see very 
bright friends in the Congress who are devout opponents of 
nuclear. Very bright young men. I can mention one of them, Mark 
Udall, because he told me I could mention his name. He's a very 
bright young man, and he understands that a reasonable 
alternative to nuclear might be shivering in the dark. Nuclear 
is not looking all that bad when shivering in the dark is an 
alternative to nuclear. Solar and wind and nuclear and micro 
hydro. We might get as much from micro hydro as we can from 
macro hydro, but your focus on the grid is exactly where the 
focus with electricity ought to be.
    Thank you all very much for your testimony. I yield back, 
Mr. Chairman.
    Mr. Hall. You know, we had a young man in the legislature 
that makes speeches all over about energy and he made the 
statement--purportedly, Mr. Waxman and Mr. Markey accused him 
of making a statement, ``Let the Yankees freeze and starve in 
the dark.'' Wasn't that the way they came before our committee?
    He came up to testify and asked me, he said, ``When they 
finish beating me around up there on that stage, you ask me 
what I really said.'' Mr. Waxman and Mr. Markey and even Mr. 
Dingell worked him over. They had his statement made. He made 
in a speech on the West Coast. That's exactly what they were 
asking him about. He gave me the chance to ask him the 
question, ``Well, what did you really say there?''
    He said, ``I did not say `Let the Yankees freeze and starve 
in the dark.' I said, `Let the damn, thieving Yankees freeze 
and starve in the dark.' '' That's in the record up there. 
Bill, you might have been there when that happened.
    Chairman Lampson. With that, we'll recognize Congressman 
Green.

            The Low Income Housing Energy Assistance Program

    Mr. Green. I guess the audiences know that Congressman 
Bartlett represents the district just south of the Mason-Dixon 
Line.
    I want to again thank my colleague for allowing me to sit 
in, as not a Member of the Science Committee but spending a lot 
of time on energy because of the Energy Committee and our 
district. Congressman Bartlett, we've had hearings in our 
committee with you and the cousin of Mark Udall--Tom Udall--on 
peak oil, last year, and the concern. I think we all share that 
concern.
    I have a list of questions, but I really want to comment 
and not take up all the time of the Full Committee Members. One 
of the issues the mayor brought up was the Low Income Housing 
Energy Assistance Program (LIHEAP). The formula has been 
flawed. I don't know if you or your staff looked back on that, 
but it was drafted--and it's so out of date in today's world. 
We've tried to change that, and someday we tried it in the 
energy bill of '05 and couldn't get it done. So now we try and 
get above $2 billion so areas that have heat problems actually 
could get some equity to it. That's the frustration. So we'll 
continue to fight that LIHEAP battle.
    I've told our northern Members that I think we need one 
more pre-districting, that after 2011 we'll finally have enough 
Members below the Mason-Dixon Line. The science is with us; 
more people die of heat-related than ever they do of cold-
related. That's frustrating but, again, it's a political 
situation. Chairman Dingell is a good friend of mine, and he 
wrote that legislation. If I was from Michigan--I'd write the 
same thing--but there's going to be different Members now in 
the next few years.
    I agree with the need for a balanced approach, and that's 
our biggest question and battle in Washington. The bill was 
passed last week, not only the 17 billion, but you know some of 
us agreed earlier last year for a smaller tax increase on 
energy that would actually do some of the things that the mayor 
talked about, smart building and everything else, but we're not 
really to that point. We don't talk about increasing production 
of what we're going to need for the next 10 to 15 to 25 years. 
At the same time we're trying to pay for the research that we 
want to do for alternatives that are both cleaner. Until the 
House of Representatives does that balanced approach, you're 
going to end up with Members like Nick Lampson and I voting no 
on something that we'd really like to vote for, but just don't 
give us the number, just be part of the process because we 
produce energy in our area. We just don't consume it, although 
we do consume a lot; but that has to be the balanced approach.
    Let me talk about the issue about the transmission grid 
that both Mr. Hofmeister and CenterPoint mentioned. The energy 
bill of '05 actually created the transmission corridors around 
the country to help with getting that power from the West 
that's wind power, and just last year on the House Floor we had 
three different attacks on trying to eliminate those 
transmission corridors. They were defeated in the House of 
Representatives, but that's one of the things in the energy 
bill of '05 that was really good because we have to have a 
national management of energy, although typically the 
opposition comes out of the Northeast, the area that needs 
those transmission corridors the most. So we'll keep fighting 
that, and so far we've been able to win on the House side.
    The other issue--and I'm glad you mentioned about the 
request for funds for the technical standards. I think 
technical standards is actually the jurisdiction of the Science 
Committee and can deal with that, and on the other side the 
request for the R&D that was authorized in the energy bill from 
last year, the '07, and to see if we can get that funding in 
there for what we need to do. I'm glad you mentioned it. It 
hadn't hit my radar screen, but we'll see if we can put 
together some support through the appropriations process for 
that, to make sure we do.

                      Shell's Emissions Clarified

    You know, like I said, Mr. Chairman, I have lots of 
questions. We live, some of us live every day with this issue. 
My last thing is I want our Shell CEO to say it again so we'll 
hear it, that the Motiva facility in the Beaumont/Port Arthur 
area, actually you're almost doubling the barrels of production 
and you're cutting the existing--say you're at 230,000 barrels 
now and you're going up to whatever, 400,000, 600,000--you're 
actually cutting, though, the current emissions from producing 
the half that you're producing now.
    Mr. Hofmeister. I should say that more clearly, I think, 
Congressman. The net unit emission per barrel in total will 
come down; but because it's more barrels, there will be more 
emissions.
    Mr. Green. There are more emissions, but the net unit per 
barrel. Again, there's effort being made--and again the mayor 
has been a leader on this, in representing a district that both 
has the energy industry but also has a lot of constituents who 
work and live around it. I want to make sure we do much better 
on the clear air side and still we can do the production that 
our country needs. We learned, as you said, in Rita and 
Katrina, that if we shut down the Houston Ship Channel, which 
it was, you know, 45 percent of our refined product comes out 
of this area of the Gulf of Mexico. So that's why the whole 
country needs it. They may not know they need it until that 
price will go from 3.10 or 3.50 or whatever it is in other 
parts of the country to much more, because otherwise we'll let 
people in Pedavesa import it, which they don't have the refined 
product to even import.
    Anyway, thank you for having the hearing here and, again, I 
thank the Science Committee for doing this.
    Chairman Lampson. Thank you, Congressman Green.
    That brings this panel to a close, and I want to thank the 
panelists for taking their time and for their good thoughts. 
We'll do our best to follow through with the information that 
you have given us.
    We'll take a very short recess as we switch groups for this 
table and we will lose Congressman Hall.
    (To Congressman Hall) We thank you very much for joining 
us. Thanks so much for coming.
    We're in recess for just a couple of minutes.
    [Recess.]
    Chairman Lampson. I will call the meeting back into order, 
and I want to welcome our second panel of witnesses to provide 
their unique perspectives on energy from the academic and 
research sectors. We'll have Dr. Walter Chapman, who is the 
Director of the Energy and Environment Systems Institute, here 
at Rice University.
    Mr. Michael Ming, who is President of the Research 
Partnership to Secure Energy for America, otherwise known as 
RPSEA. Dr. Robert Hirsch is the senior energy adviser for 
Management Information Services, Incorporated; and Dr. Robert 
Harriss is President and CEO of the Houston Advanced Research 
Center, HARC, which has done some great things around here as 
well.
    We welcome all of you. As we said for the panel before, we 
ask that each of you have five minutes for your spoken 
testimony. Your written testimony will be included in the 
record for the hearing. When you all complete your testimony, 
we'll begin with questions. Each Member will have five minutes 
to question the panel.
    Dr. Chapman, would you please begin.

                               Panel II:

   STATEMENT OF DR. WALTER G. CHAPMAN, W.W. AKERS PROFESSOR; 
   DIRECTOR, ENERGY AND ENVIRONMENT SYSTEMS INSTITUTE, RICE 
                           UNIVERSITY

    Dr. Chapman. Mr. Chairman and Members of the Energy and 
Environment Subcommittee, welcome to Rice University, a 
beautiful setting and one of the Nation's premier research 
universities. It's a great honor to address this committee on 
an issue of such crucial importance to the United States and 
the world.
    Before I start, I would like to acknowledge numerous 
colleagues, including Amy Jaffe, Kenneth Cox, and Emil Pena, 
for providing input to this testimony; but the opinions I 
express here today are my own.
    Mr. Chairman, it is fitting that you have come to Rice 
today because Rice takes on big challenges. Almost 50 years 
ago, President Kennedy came to this campus, not far from where 
we are seated, to challenge our Country to land a man on the 
Moon. The resulting investment led to one of the United States' 
greatest technological achievements and to unprecedented 
economic growth and unparalleled standing in the international 
community. We have an even larger, equally important challenge 
today. Energy is, as the late Richard Smalley, Nobel Prize 
winner and Rice University professor, told the U.S. Senate in 
2004, ``the single most important challenge facing humanity 
today.'' Confronting and surmounting the energy challenge is 
not optional; it is necessary for survival.
    Compared with the space race, this challenge will involve 
even more advanced scientific and engineering feats, social 
change, and government investment. Rice University's Energy and 
Environmental Systems Institute envisions the challenge as 
being one of building the bridge to a sustainable, affordable, 
and secure energy future. The image of the bridge symbolizes 
the imperative to span the technological, economic, and 
political divide between the present and a sustainable future; 
but there is more to the symbolism. To me, this bridge is not 
constructed solely from technology. In fact, perhaps the most 
important component of the bridge is the investment in human 
capital.
    The United States must recommit itself to science and 
engineering education and to funding scientists and engineers 
engaged in fundamental research, research that can produce 
innovations that will drive the economy and provide solutions 
to producing sustainable energy. As the U.S. Government 
recommits itself to the energy challenge, it's important to 
recognize, as I believe this committee does recognize, that you 
cannot legislate an energy solution. Solutions many times come 
from fundamental research in seemingly unrelated areas. I 
recommend adopting the initiatives on education and research 
funding in the National Academy's report, ``Rising Above the 
Gathering Storm, Energizing and Employing America for a 
Brighter Economic Future,'' that was presented to this 
committee in October of 2005. Among other guidelines, the 
report recommended significant increases in funding of basic 
research to secure our future.
    Beyond supporting fundamental research, what else should we 
do? Let me approach that question by exploring a series of 
other questions. What do we know? What we are learning? How can 
we learn faster? How long will it take?
    First, what do we know? We know that a transition to 
greater use of renewable energy sources is essential to 
sustainability. At the same time, as the Department of Energy 
points out, even with aggressive adoption of alternative 
energy, the U.S. demand for hydrocarbon energy sources will 
increase over the next two decades. Thus, the U.S. should 
invest more to increase the supply of fossil fuels, while 
simultaneously investing to replace them.
    Mr. Chairman, I am very pleased that this energy portfolio 
approach is embodied in your bill, H.R. 5146. At Rice we have 
learned many things. With respect to oil and gas, familiar 
energy sources that have propelled the global economy for 100 
years, we have learned that there is still much to learn. We 
still do not know all we need to know about extracting these 
energy sources. Roughly 70 percent of the oil discovered in the 
world cannot be produced by conventional technologies. Faculty 
members at Rice University have developed self-assembling smart 
fluids to better extract oil from the pores inside rocks and to 
expand the areas swept in an oilfield. Based on experiments and 
modeling studies, these technologies could double the amount of 
oil produced from reservoirs. Further applications of 
nanotechnology to existing exploration and production will 
enhance supplies. The newly-established Advanced Energy 
Consortium a privately-funded consortium of companies led by 
the Bureau of Economic Geology at the University of Texas, in 
collaboration with Rice University, is working on that 
possibility.
    Now, beyond traditional oil and gas, we're discovering new 
energy opportunities and new ways to improve existing 
technologies. For example, we are learning how nanotechnology 
can inhibit corrosion, increasing safety and lower maintenance 
costs in energy, transportation, and other industries. 
According to the National Association of Corrosion Engineers, 
corrosion presently costs the United States, every year, $276 
billion. We are learning how to create metabolically engineered 
bacteria and plants to convert biomass, as well as wastes from 
biodiesel production, into fine chemicals and fuels. We are 
learning how to manipulate gold coated nanoparticles to 
efficiently harvest energy. This could lead to more efficient 
solar cells.
    Interestingly, the same technology has shown effectiveness 
in treating cancer, using light energy. We are learning how to 
employ, in wind turbines, new nanomaterials as blades that 
morph into the optimum shape in response to wind conditions and 
possibly also heal themselves if damaged.
    In other activities, our institute is helping the Wind 
Energy Systems Technology Group to bring offshore wind to 
Texas, the first offshore wind project in the United States. We 
are learning within the Rick Smalley Institute at Rice how to 
produce, on a large scale, a quantum wire to allow transmission 
of electricity around the globe with near zero loss, enabling 
distributed energy generation on a worldwide electricity grid. 
This is promising and exciting research, but I have only 
highlighted some of the research under way, and that at Rice.
    This brings me to the next question: How can we learn 
faster? I think the answer is twofold. First, as I noted above, 
we need additional research funding to advance fundamental 
research and to assimilate the next generation of students into 
the quest for solutions. Second, I recommend that the 
Government, presumably the Department of Energy, make 
available, on its website, energy-related research findings 
from as many sources as possible. Information technology has 
vastly reduced the cost of placing information in the public 
domain. That cost, however, has been offset by the cost of 
tracking the sheer volume of material available. One way to 
learn faster is to provide the research community and public at 
large a compendium of energy information. I acknowledge this is 
no small task, but it need not be done perfectly to make a 
difference.
    Finally, how long will we need? We acknowledge that the 
odds of finding a single quick solution to the energy challenge 
are infinitesimally small. It will take time to develop a 
portfolio of solutions. At the same time, however, we have 
every reason to be optimistic because progress towards a 
secure, affordable, and sustainable energy future is certain. 
It is happening now. It is not a matter of whether but when. We 
are fortunate, as I hope I have made clear, that there is much 
that this subcommittee can do to accelerate the pace toward the 
goal upon which our very survival depends.
    Thank you very much.
    Chairman Lampson. Thank you very much.
    [The prepared statement of Dr. Chapman follows:]
                Prepared Statement of Walter G. Chapman
    Mr. Chairman and Members of the Energy and Environment 
Subcommittee, welcome to Rice University, a beautiful setting and one 
of the Nation's premier research universities. It is a great honor to 
address this committee on an issue of such crucial importance to the 
United States and the world. Before I start, I would like to 
acknowledge numerous colleagues (including Amy Jaffe, Kenneth Cox, and 
Emil Pena) for providing input to this testimony, but the opinions I 
express here today are my own.
    Mr. Chairman, it is fitting that you have come to Rice today 
because Rice takes on big challenges. Almost 50 years ago, President 
Kennedy came to this campus (not far from where we are seated) to 
challenge our Country to land a man on the Moon. The resulting 
investment led to one of the United States' greatest technological 
achievements and to unprecedented economic growth and unparalleled 
standing in the national community.
    We have an even larger, equally important, challenge today. 
``Energy is,'' as the late Richard Smalley, Nobel Prize winner and Rice 
University Professor told the U.S. Senate in 2004, ``the single most 
important challenge facing humanity today.'' Confronting and ultimately 
surmounting the energy challenge is not optional, it is necessary for 
survival. Compared with the space race, this challenge will involve 
even more advanced scientific and engineering feats, social change, and 
government investment.
    Rice University's Energy and Environmental Systems Institute 
envisions the challenge as being one of Building the Bridge to a 
Sustainable, Affordable, and Secure Energy Future. The image of the 
bridge symbolizes the imperative to span the technological, economic, 
and political divide between the present and a sustainable future. But 
there is more to the symbolism. To me this bridge is not constructed 
solely from technology. In fact, perhaps the most important component 
of the bridge is the investment in human capital. The United States 
must re-commit itself to science and engineering education and to 
funding scientists and engineers engaged in fundamental research, 
research that can produce innovations that will drive the economy and 
provide solutions to producing sustainable energy.
    As the U.S. Government re-commits itself to the energy challenge, 
it is important to recognize, as I believe this committee does 
recognize, that you cannot ``legislate'' an energy solution. Solutions 
many times come from fundamental research in seemingly unrelated areas. 
I recommend adopting the initiatives on education and research funding 
in the National Academies report ``Rising Above the Gathering Storm: 
Energizing and Employing America for a Brighter Economic Future,'' 
presented to this committee in October, 2005. Among other guidelines, 
the report recommended significant increases in funding of basic 
research to secure our future.
    Beyond supporting fundamental research, what else should we do?
    Let me approach that question by exploring a series of other 
questions. What do we know? What are we learning? How can we learn 
faster? How long will it take?
    What do we know? We know that a transition to greater use of 
renewable energy sources is essential to sustainability. At the same 
time, as the Department of Energy points out, even with the aggressive 
adoption of alternative energy, the U.S. demand for hydrocarbon energy 
sources will increase over the next two decades. Thus, the U.S. should 
invest more to increase the supply of fossil fuels while it 
simultaneously invests in replacing them. Mr. Chairman, I am very 
pleased that this ``energy portfolio'' approach is embodied in your 
bill H.R. 5146.
    At Rice we have learned many things. With respect to oil and gas, 
familiar energy sources that have propelled the global economy for a 
hundred years, we have learned that there is still much to learn. We 
still do not know all we need to know about extracting these energy 
sources. Roughly 70 percent of the oil discovered in the world cannot 
be produced by conventional technologies. Faculty members at Rice 
University have developed self-assembling fluids to better extract oil 
from the pores inside rocks and to expand the area swept in an oil 
field. Based on experiments and modeling studies, these technologies 
could double the amount of oil produced from reservoirs.
    In addition, I expect that applying nano-technology to existing 
exploration and production will enhance supplies. The newly established 
Advanced Energy Consortium--a privately funded consortium of companies 
led by the Bureau of Economic Geology at the University of Texas 
working in conjunction with Rice University--is working on that 
possibility.
    Beyond traditional oil and gas, we are discovering new energy 
opportunities, and new ways to improve existing technologies. For 
example,

    We are learning how to create metabolically engineered bacteria and 
plants to convert biomass as well as waste from biodiesel production 
into fine chemicals and fuels.
    We are learning how to manipulate gold coated nanoparticles to 
efficiently harvest solar energy. This could lead to more efficient 
solar cells. Interestingly, this same technology has shown 
effectiveness in treating cancer using light energy.
    We are learning how to employ in wind turbines new nanomaterials as 
blades that morph into the optimum shape in response to wind conditions 
and possibly also heal themselves if damaged. In other activities, our 
institute is helping the W.E.S.T. group to bring offshore wind to 
Texas--the first offshore wind project in the United States.
    We are learning within the Rick Smalley Institute at Rice how to 
produce on a large scale a quantum wire to allow transmission of 
electricity around the globe with near zero loss enabling distributed 
energy generation on a world wide electricity grid.
    This is promising and exciting and research, but I have only 
highlighted some of the research underway at Rice. Which brings me to 
the question: How can we learn faster?
    The answer to that is two-fold.
    First, as noted above, we need additional research funding to 
advance fundamental research and to assimilate the next generation of 
students into the quest for solutions.
    Second, I would recommend that the government, presumably the DOE, 
make available on its web site a moderated wiki of energy related 
research findings from as many sources as possible. Information 
technology has vastly reduced the cost of placing information in the 
public domain. That cost, however, has been offset by the cost of 
tracking the sheer volume of material available. One way to learn 
faster is to provide to the research community, and the public at 
large, a compendium of energy research. I acknowledge this is no small 
task. But it need not be done perfectly to make a difference.
    How long will we need? We need to acknowledge that the odds of 
finding a single, quick solution to the energy challenge are 
infinitesimally small.
    At the same time, however, we have every reason to be optimistic 
because progress toward a secure, affordable and sustainable energy 
future is a certainty. It is happening now. It is not a matter of 
whether, but of when. We are very fortunate, as I hope to have made 
clear, that there is much that this subcommittee can do to accelerate 
the pace toward a goal upon which are very survival depends.

                    Biography for Walter G. Chapman
    Professor Walter G. Chapman is the William W. Akers Professor of 
Chemical and Biomolecular Engineering and the Director of the Energy 
and Environmental Systems Institute at Rice University. Among his 
recognitions are multiple teaching awards and an Outstanding Young 
Alumni Award from Clemson University. Professor Chapman's research into 
properties and interfacial structure of complex fluids has applications 
in the energy and high performance materials industries.

    Chairman Lampson. Mr. Ming, you're recognized for five 
minutes.

     STATEMENT OF MR. C. MICHAEL MING, PRESIDENT, RESEARCH 
        PARTNERSHIP TO SECURE ENERGY FOR AMERICA (RPSEA)

    Mr. Ming. Thank you. Good morning, Mr. Chairman. My name is 
Mike Ming, and I serve as the President of the Research 
Partnership to Secure Energy for America, known as RPSEA. While 
you have a copy of my written statement, I have some oral 
remarks to elaborate on that, somewhat shorter than my written 
remarks, which in some detail describe the program Mr. Hall 
described from the Energy Policy Act of 2005, Section 999.
    I appreciate the opportunity to share with you my views on 
what I feel is the most important issue of our time, that being 
energy. Its impact on productivity, our standard of living, the 
economy, the environment, and national and global security are 
indisputable. Energy plays a primary role in virtually every 
major challenge we face today, and if we fix the energy 
problem, all other problems become much more manageable.
    RPSEA, a public-private research consortium headquartered 
in Sugar Land, Texas, focuses on abundant but technically 
challenging domestic unconventional natural gas in ultra-deep 
water resources. I especially want to thank you, Mr. Lampson, 
and your colleague, Mr. Hall, for your support of this program.
    The U.S. is endowed with substantial natural gas and oil 
resources which, if developed in an environmentally responsible 
manner and consumed as efficiently as possible, will provide 
reliable and affordable energy to the American public for 
decades to come. Our job at RPSEA is to address those technical 
challenges and develop the intellectual capabilities to exploit 
those resources. RPSEA is a consortium comprised of 130 member 
entities, 25 research universities. If you include Dr. Hirsch's 
association with SAIC, it includes everyone on this panel, Rice 
University, other universities.
    We are facing a fundamental shift in resource types from 
conventional to unconventional resources, which requires 
technology but leverages a much larger resource space. Contrary 
to popular opinion, we are not running out of energy. In fact, 
if we are short on anything, it is creativity and innovation on 
both the supply and demand ends of the pipeline.
    With eight straight years of natural gas reserve growth and 
actually increasing production, all based on aggressive 
development and implementation of technology enabled by market 
forces and effective public policy, domestic natural gas is a 
bird in the hand and not two in the bush. To illustrate, 30 
years ago, U.S. reserves were just over 200 trillion cubic 
feet, or the equivalent of ten years of remaining supply at 
then-current consumption rate. Today reserves are 211 trillion 
cubic feet and growing, despite the production of over 500 
trillion cubic feet in the 30-year period in between, or two 
and a half times what was supposedly left in 1979. We must not 
let up now in our efforts to develop the energy technologies 
and technologists to continue this impressive progress for this 
clean-burning and low-carbon fuel.
    Effective energy policy must address many issues and 
consider many options, and there is no single solution. What 
must occur is the development of a diverse yet integrated 
portfolio of technologies and policies. What I address today is 
primarily one component of that portfolio, technology 
development for natural gas and oil supply; but I would also 
like to comment on end-use energy efficiency because it is a 
critical component to the supply side of the equation.
    Driven by effective public policy and appropriate market 
incentives, end-use energy efficiency leverages all force of 
supply; and this holds true for natural gas and oil more than 
any other fuels, if for no other reason than the sheer scale of 
their 66 percent contribution of our nation's energy supply, an 
enormous enterprise by any measure. These points were 
eloquently stated by all the witnesses on the previous panel, 
Mr. Hofmeister and Mayor White, regarding energy efficiency and 
energy issues, and by Mr. Standish with regard to distributed 
generation.
    With regard to the development of natural gas and oil 
supply technology, I will highlight three critical 
requirements. The first is the creation of a vehicle populated 
with capable participants which enables the effective creation 
of technology solutions. This is the RPSEA public-private 
partnership concept, utilizing the open innovation model which 
engages the full spectrum of contributors. This contrasts with 
the historical approach of proprietary single-breakthrough type 
research efforts, by integrating processes and utilizing 
interdisciplinary skill sets.
    The second is the development and utilization of the 
intellectual capability necessary to solve the problems at 
hand. Fully engaging the academic and research community, 
providing real problems for them to solve, and providing 
incentives for the best minds to enter the research field is 
the best method to build this intellectual capability.
    The third and final requirement is integrating supply and 
demand in an optimized system. The unique attributes of natural 
gas, for example, lend themselves to extraordinary increases in 
the efficiency of power generation, distribution, and end-use 
consumption. Legislative supplier-demand proposals, which in 
isolation ignore the opposite end of the pipe, don't capture 
this intrinsic value. In the U.S. we waste more energy than we 
use. So my message is that we have plenty of energy, just not 
plenty to waste.
    All of these requirements necessitate investment with 
adequate funding in resources. The funding for the program 
described by Mr. Hall is $37.5 million per year. To put that in 
perspective, that's the value of less than 45 minutes worth of 
imported oil coming into the United States.
    I urge you to take this pragmatic approach back to 
Washington, and I hope this message and my written testimony 
will assist you in developing an integrated and sustainable 
energy policy and portfolio that will meet the criteria of our 
ancestors, where effective decisions are measured seven 
generations out. Quoting the great Wayne Gretzky, ``You miss 
100 percent of the shots you don't take.'' Our research 
consortium is taking this shot and stands ready to continue our 
contribution to this important effort that we cannot afford to 
fail.
    After spending a career as an independent producer from a 
rig floor perspective and now as a technology facilitator, I 
have always subscribed to the notion that I am more comfortable 
at proactively creating my future than reactively just trying 
to predict it. I hope you agree with this philosophy and 
continue to provide the support to enable those efforts that 
truly can create the sustainable energy future we all desire. I 
thank you for your time and the opportunity to voice these 
opinions.
    Chairman Lampson. Thank you, Mr. Ming.
    [The prepared statement of Mr. Ming follows:]
                 Prepared Statement of C. Michael Ming
    Thank you Mr. Chairman for this opportunity to testify before your 
subcommittee. The Energy Policy Act of 2005 established a new research 
program to maximize the value of our domestic energy supplies through 
the development of new technologies titled the ``Ultra-Deepwater and 
Unconventional Natural Gas and Other Petroleum Resources Program.'' 
This 10-year, $500 million dollar program is a public private 
partnership designed to benefit consumers by developing technology to 
increase America's domestic energy resources and is paid for from lease 
bonuses and production royalties from federal lands. I want to thank 
you and your colleague Congressman Ralph Hall for the leadership you 
have demonstrated with your work to see that this law was enacted and 
the program implemented.
    The Research Partnership to Secure Energy for America (``RPSEA,''), 
a 501 (c) 3 not for profit corporation was selected to help manage 
research and development projects funded through this new program. 
RPSEA is an innovative public-private partnership comprised as a 
consortium of over 130 organizations, including 25 of the Nation's 
premier research universities, five national laboratories, several 
private research institutions, and a range of industry players. 
Participants in the consortium and many other people have contributed 
thousands of man hours and expertise to help develop a robust research 
plan to produce the Nation's abundant--but technically challenging--
domestic natural gas and oil resources. RPSEA is headquartered in Sugar 
Land, Texas.
    RPSEA was selected to administer 75 percent of the funds for this 
program in a competitive solicitation issued by the Department of 
Energy in November, 2005. The Federal Government maintains oversight of 
the program and Congress reviews our Annual Research plan. RPSEA, as 
the research manager, is limited to 10 percent of the total funds to 
administer the program. The research dollars managed by RPSEA will be 
awarded to research performers across the Nation. DOE's National Energy 
Technology Laboratory will conduct complementary research with the 
remaining 25 percent of the funds. Founded in 2002, RPSEA uses a 
collaborative approach with industry, government, non-government 
organizations, academia, national laboratories, Federally Funded 
Research Development Centers and independent research groups. Members 
of this consortium have invested a substantial amount of intellectual 
and financial resources in the start up of this new program, and 
initial project selections have been made in several program areas with 
research projects set to begin this spring.
    We also appreciate the pressure that Congress faces as it seeks to 
allocate scarce federal resources and we appreciate how hard you have 
worked to resist recommendations to reduce or eliminate funding for 
this program--an effort that would diminish its overall effectiveness 
and de-value the considerable investment already made to ensure that it 
meets its potential for serving the American public. This new program 
of research and development contains a revolutionary mechanism to 
produce innovation and creativity unburdened by traditional 
constraints. Its effectiveness is based on open and transparent 
processes with the full engagement and support of all stakeholders in 
the research arena. Attempts to hamper its implementation not only 
diminish the value of the existing public investment but also 
discourage the participation of industry which is where the true 
leverage is created to multiply the value of the taxpayer investment.
    All reasonable forecasts indicate that natural gas and petroleum 
will remain essential sources of energy in this country for decades as 
we transition to a sustainable energy future. The United States has 75 
years of natural gas supply, with most of it on lands that are not 
subject to access restrictions; they are, however, ``technically'' 
restricted. New technologies will enable less expensive, more 
efficient, and more environmentally-friendly domestic natural gas and 
other petroleum production. Natural gas and oil provide two-third's of 
our nation's primary energy, and will do so for the next several 
decades as we transition to a new energy future. This collaborative 
research program will ensure the continued development of America's 
intellectual capital and skilled workforce to effect this transition, 
enhance our energy security and provide new technologies to produce 
affordable domestic energy supplies in environmentally-sound ways.
    Our nation is not short on resources, in fact identified 
technically recoverable unconventional resources are growing, and it is 
this fundamental shift from historical conventional resources to a 
virtually unlimited unconventional resource base that makes this 
investment so beneficial. Developing cutting edge technologies to bring 
reliable sources of clean-burning, environmentally friendly, domestic 
natural gas to American consumers is exactly the kind of investment 
that the United States should be making today, especially in light of 
sharply rising energy costs. RPSEA funds research projects conducted 
across the country that are designed to enhance domestic energy 
production, mitigate its environmental impacts and help develop the 
next generation of energy technologies and technologists. We need to 
re-establish the United States global leadership role in energy 
technology and intellectual capital.
    This national effort will engage the best minds in the country--
from inside and outside of the industry--to develop the new 
technologies that will take us to new levels of energy self-
sufficiency. The work of RPSEA benefits the public directly because the 
technology that is developed through RPSEA funded research is non-
proprietary. The purpose of this Department of Energy program is to 
fund research--using federal oil and gas royalties and industry 
matching funds--that will reduce America's dependence on foreign energy 
sources.
    Quoting Congressman Ralph Hall to Energy Secretary Samuel Bodman, 
``the energy supply and demand situation in this country will not 
improve without the concerted and expeditious effort of every person 
that has the capacity to make a contribution. Production in difficult 
regions such as the ultra-deepwater requires new technologies, a point 
that has been recently highlighted by the recent large Chevron and 
Devon find in the Gulf of Mexico. Exploration wells have indicated 
there is significant resource available in that region; however, actual 
production and delivery to market could take five to seven years.'' 
This program and the technologies and partnerships envisioned could 
help accelerate that production and lower its cost. The technologies 
that are developed will likely have crosscutting applications for deep 
drilling and production for unconventional onshore production as well. 
Chevron and Devon are two of the over 130 members of RPSEA.
    Further, two natural gas resources--coal bed methane and the 
Barnett Shale--have been unlocked in recent years as the result of 
collaborative research jointly funded by the Federal Government, the 
energy industry and private not-for-profit research organizations. 
Today, the Barnett Shale and many basins containing coal bed methane 
are significant contributors to our nation's natural gas supply. The 
Energy Information Administration recently announced that natural gas 
reserves rose for the eighth straight year. Texas led the Nation in gas 
reserve additions in 2005 thanks largely to sharp increases in the 
Barnett Shale. Coal bed methane reserves now account for approximately 
10 percent of overall domestic gas reserves. Much new technology 
remains to be developed to tap the 1,525 trillion cubic feet of 
technically recoverable natural gas resource estimated by the Potential 
Gas Committee. This program will help to ensure that our citizen's 
collective knowledge and ingenuity will continue to be used 
aggressively to unlock many more natural gas and oil resources through 
technology advancement.
    The members of our consortium are confident that this program will 
enable the broad sharing of R&D results, done at sites all across the 
country, to address the public's interest in developing abundant, 
clean, affordable and secure supplies. RPSEA will administer a program 
across four elements of research, development, demonstration and 
commercial application of technologies. The actual R&D activity is 
conducted by recipients of awards that are selected through a 
competitive proposal process.
    The time for action is now. Investing in the development of 
domestic energy resources will make us less dependent on supplies from 
unreliable overseas supplies. And investments in R&D today will 
increase the energy supplies of tomorrow. This means lower prices, 
increased competitiveness, and greater security. This program will give 
the American consumer a seat at the head of the table: directing the 
Nation's energy research agenda with public, not corporate, interests 
serving as its primary guideposts.

                     Biography for C. Michael Ming
    C. Michael Ming currently serves as the President of the Research 
Partnership to Secure Energy for America, RPSEA. Mr. Ming formerly 
served as an independent oil & gas producer as a Managing Member of K. 
Stewart Energy Group, LLC and as a principal, Director, and VP of 
Engineering at K. Stewart Petroleum Corp. He holds a BS degree with 
distinction in Petroleum Engineering and an MS degree in Engineering 
Management, both from Stanford University, and is a Registered 
Professional Engineer in Oklahoma. Mr. Ming is an emeritus member of 
the Petroleum Investments Committee at Stanford University and is a 
past Chairman. He is actively involved in the University's energy 
programs, co-sponsored the MAP/Ming Visiting Professorship on Energy 
and the Environment, and currently serves on the School of Earth 
Sciences Dean's Advisory Board. He has served as an adjunct professor 
in Energy Management at the University of Oklahoma and as an oil & gas 
strategic planning advisor to the Department of Energy.

    Chairman Lampson. Dr. Hirsch, you're recognized for five 
minutes.

   STATEMENT OF DR. ROBERT L. HIRSCH, SENIOR ENERGY ADVISOR, 
             MANAGEMENT INFORMATION SERVICES, INC.

    Dr. Hirsch. Mr. Chairman, Dr. Bartlett, and staff, if it 
hasn't already, world oil production is about to reach a 
maximum, after which it will go into decline. When decline 
begins, world oil prices will leap upwards and oil shortages 
will worsen year after year.
    The oil interruptions of 1973 and 1979 sparked recession, 
inflation, growing unemployment, and high interest rates. The 
peaking of world oil production will be much more damaging and 
could well last much longer than a decade, in spite of the very 
best of human efforts. Oil prices have risen by more than a 
factor of five since the 1990s, as you know. For the last three 
and a half years, world liquid fuel production has stagnated, 
which means that production has fluctuated within a relatively 
narrow volatility band. Such a long plateau in world oil 
production hasn't happened in the last 50 years.
    A growing chorus of influential individuals and 
organizations has warned of impending world oil shortages. 
Included are the International Energy Agency, Chevron, Shell, 
Total Oil, Statoil, Hess Oil, the Chinese Petroleum Institute, 
the Corps of Engineers, Volvo Trucks, and a number of retired 
senior oil company geologists, and such American notables as 
James Schlesinger, Boone Pickens, Matt Simmons, and Charlie 
Maxwell. Some sugar-coat their warnings with phrases like 
``supply will no longer be able to meet demand,'' while others 
warn specifically of growing world oil shortages.
    Consider statements by executives of the International 
Energy Agency when they released their 2006 world energy 
outlook: ``This energy future is not only unsustainable, it is 
doomed to failure. We are on a course for an energy system that 
will evolve from crisis to crisis.'' The IEA chief economist 
opined that he expects the oil industry's production capacity 
to slightly outstrip demand through the end of this decade--not 
far from now--if all oil projects worldwide see the light of 
day, which he said is not likely.
    Charlie Maxwell is often called ``the dean of world oil 
analysts.'' He tells us to expect gasoline at twelve to fifteen 
dollars per gallon within a few years. Twelve to fifteen 
dollars within a few years. Others specifically speak of oil 
shortages that will increase year after year. Think of what oil 
shortages will mean to our economy with our everyday mobility 
requirements, extensive world trade, oil-based agriculture, 
just-in-time manufacturing, and long commutes to work.
    In 2005, the Department of Energy released a study that 
colleagues and I prepared, on mitigating the impacts of peak 
oil. We analyzed a worldwide crash program because that 
represents the best that would be humanly possible. We found 
that a crash program started 20 years before world oil peaking 
could avoid economic disaster. On the other hand, waiting for 
peaking to become obvious--the course we are presently 
following--means much more than a decade of dire economic 
consequences. During the time of our study, we took no position 
on when peaking might occur because it was much less clear then 
than it is now. Our primary conclusion was that growing world 
oil shortages will almost certainly outrun the best human 
efforts, assuming that we wait until the problem is obvious.
    The fact is that there will be no quick fixes, absolutely 
no quick fixes, because of the enormity of the lost oil 
production. That enormity means that rapid activity, the best 
that we can possibly do, will not be sufficient. Today credible 
forecasts indicate that oil declines will occur either right 
after the current production stagnation or after a few more 
years of production fluctuations, but a few more years either 
way is not significant when viewed from the point of view of 
what will have to be a worldwide, multi-decade crash program.
    Peak oil could, indeed, be another perfect storm. This is 
because the world, as you well know, is increasingly focused--
some might say fixated--on manmade contributions to global 
climate change. While some energy efficiency options may be 
similar for the two problems, other peak oil mitigation methods 
are not. So some wrenching value readjustments are going to be 
necessary. Which problem is more urgent is a matter for debate. 
To me, the worst kind of disaster is hordes of people out of 
work, out of their homes, and desperate, which is what world 
oil shortages will deliver.
    Peak oil could burst into active public consciousness at 
any time. There's a lot in the literature now, in television 
and newspapers and so forth; but in reality hasn't crashed past 
the threshold into open public consciousness. When it does, 
reactions are likely to resemble those of 1973 and 1979 oil 
shocks--namely, public panic, early hoarding, induced 
shortages, and major negative reactions on Wall Street.
    Those problems arose in the past, and they are almost 
certain to happen again.
    Difficult compromises and decisive action will be needed. 
There will be no single solution. Multiple mitigation options 
will be required. Large-scale deployment--and let me repeat the 
word ``deployment"--of appropriate technologies will be 
essential, and government-facilitated industrial crash programs 
will be a must. Research and development will be required--and 
I'm a research and development person and feel very strongly 
about such things--but make no mistake: R&D alone will have 
little impact in the near-term. R&D in big problems like this 
takes times to implement under the best of conditions. Large-
scale deployment is the only thing that can make a difference.
    Thank you for the opportunity to be heard. I have 
compressed my comments here, quite obviously. This is a 
horrendous problem. The task ahead will be unprecedented.
    Chairman Lampson. That's a lot to think of, but I think 
you're right and that's why we're here. Thank you, Dr. Hirsch.
    [The prepared statement of Dr. Hirsch follows:]
                 Prepared Statement of Robert L. Hirsch
    If it hasn't already, world oil production is about to reach a 
maximum, after which it will go into decline. When decline begins, 
world oil prices will leap much higher, and oil shortages will worsen 
year-after-year. The brief oil interruptions of 1973 and 1979 sparked 
recession, inflation, growing unemployment, and high interest rates. 
The peaking of world oil production will be much more damaging and 
could well last much longer than a decade in spite of our best efforts.
    Oil prices have risen by more than a factor of five since the late 
1990s. For the last three and a half years, world liquid fuel 
production has stagnated, which means that production has fluctuated 
within a relatively narrow volatility band. Such a long plateau in 
world oil production hasn't happened in the last 50 years.
    A growing chorus of influential individuals and organizations has 
warned of impending oil shortages. Included are the International 
Energy Agency (IEA), Chevron, Shell, Total Oil, Statoil, Hess Oil, The 
Chinese Petroleum Institute, The Corps of Engineers, Volvo Trucks, a 
number of retired senior oil company geologists, and such American 
notables as James Schlesinger, Boone Pickens, Matt Simmons, and Charlie 
Maxwell. Some sugarcoat their warnings with phrases like ``supply will 
no longer be able to meet demand,'' while others warn specifically of 
growing oil shortages.
    Consider statements by the Executive Director and Chief Economist 
of the International Energy Agency (IEA) associated with the release of 
their 2006 World Energy Outlook: ``This energy future is not only 
unsustainable, it is doomed to failure. . .'' ``. . .we are on course 
for an energy system that will evolve from crisis to crisis.'' The IEA 
chief economist opined that he expects the oil industry's production 
capacity to ``slightly outstrip demand'' through the end of this 
decade, if all oil projects worldwide see the light of day, which he 
said was not likely.
    Charlie Maxwell is often called the dean of world oil analysts. He 
tells us to expect gasoline at $12-$15 per gallon within a few years. 
Others warn of world oil shortages that increase each year. Think about 
what oil shortages will mean to our economy with our everyday mobility 
requirements, extensive world trade, oil-based agriculture, just-in-
time manufacturing, and long commutes to work.
    Some deny that the problem is imminent and tell us not to worry. 
Included are OPEC, DOE EIA, CERA, ExxonMobil, and fewer and fewer 
others. OPEC asks us to trust that it can and will act in our best 
interests. The OPEC countries tell us to believe their secret, 
unaudited oil reserves claims, in spite of disturbing evidence they 
have been less-than-truthful in the past.
    CERA has been consistently optimistic, but they have been wrong on 
many resource and price forecasts in the past. They too ask us to trust 
them.
    In early 2005 the Department of Energy released a study that 
colleagues and I prepared on mitigating the impacts of peak oil. We 
analyzed a worldwide crash program, because it represents the best that 
would be humanly possible. We found that a crash program started 20 
years before world oil peaking could avoid economic disaster. On the 
other hand, waiting for peaking to become obvious--the course we are 
presently following--means much more than a decade of dire economic 
circumstances. At the time of our study, we took no position on when 
peaking might occur, because it was much less clear than it is now. Our 
primary conclusion was that growing world oil shortages will almost 
certainly outrun our very best human efforts, assuming that we wait 
until the problem is obvious. The fact is that there will be no quick 
fixes, because the enormity of lost oil production means that rapid 
mitigation is impossible.
    Today, credible forecasts indicate that oil declines will occur 
either immediately after the current production stagnation or after a 
few more years of production fluctuations. But a matter of a few years 
is not significant when viewed in the context of a multi-decade crash 
program.
    Peak oil could indeed be another ``Perfect Storm.'' This is because 
the world is increasingly focused, some say fixated, on man-made 
contributions to global climate change. While some energy efficiency 
options may be similar for the two problems, other peak oil mitigation 
methods are not, so some wrenching value adjustments will be called 
for. Which problem is more urgent is a matter for debate. To me, the 
worst kind of disaster is hoards of people out of work, out of their 
homes, and desperate, which is what world oil shortages will deliver.
    Energy experts know that it will take something like half a century 
for the world to meaningfully transition toward a more sustainable 
energy future. In the meantime, world oil supply shortages will require 
other sources of liquid fuels to power the huge worldwide fleets of 
automobiles, trucks, airplanes, ships, and farm equipment.
    Most renewables won't help because they produce electricity, which 
will be of no value in existing liquid fuel-consuming machinery. Corn-
based ethanol produces a fuel that can replace oil, but its energy 
efficiency is near zero; its climate impact is now believed to be 
negative; and it has already lead to higher food prices. Oil peaking 
will force us to be much more pragmatic about our energy choices and to 
stop betting on seemingly wonderful technologies that cannot 
significantly contribute to the toughest energy challenge we've ever 
faced.
    Thinking about peak oil is extremely uncomfortable because it 
quickly conjures a cascade of events that lead to a major recession 
that deepens with time.
    How could peak oil happen? It's because oil is a finite resource, 
which the world is consuming at an ever-increasing rate. Oil production 
peaking has occurred in countries all over the world. The Royal Swedish 
Academy tells us that 54 of the 65 most important oil-producing 
countries are already past their peak oil production. In the U.S. lower 
48 states, our production peaked in 1970 and has been declining ever 
since. This happened in spite of dramatically improved technology and 
increased oil prices.
    The Royal Swedish Academy also tells us that the rate of 
discoveries of new oil reserves is less than a third of the present 
rate of oil consumption. Some believe the number to be higher. It's not 
hard to comprehend that we've got a problem.
    Keep in mind that seemingly small numbers have very large impacts 
when it comes to oil. For example, the five percent decrease in U.S. 
oil supplies associated with the 1973 Arab oil embargo was accompanied 
by a damaging economic recession. A one percent change in current world 
oil production equates to over 800,000 barrels per day (bpd), which 
represents a huge volume. To save that level of consumption through 
improvements in the efficiency of the world's light duty vehicle fleet 
would require more than a decade, assuming crash program 
implementation. The production of 800,000 bpd of substitute liquid 
fuels would require coal-to-liquids (CTL) plants costing $50-100 
billion and more than a decade under the best of conditions, which 
don't now exist. The bottom line is that small decreases in world oil 
supply can have large economic impacts and necessitate unprecedented 
levels of mitigation hardware and investment.
    An exercise called Oil Shockwave a couple of years ago concluded 
``It only requires a relatively small amount of oil to be taken out of 
the system to have huge economic and security implications.'' Robert 
Gates made that statement prior to his current job as Secretary of 
Defense. Among other Oil Shockwave conclusions was that a four percent 
global shortfall in daily oil supply would result in an oil price 
increase of nearly a factor of three and a severe recession in the U.S.
    And our whipping boys must change. We can no longer blame the major 
oil companies, including the public's favorite villain, ExxonMobil. 
That's because the majors now control only a small fraction of world 
oil. Expropriations over recent years mean that National Oil Companies 
dominate world oil, and many of them are much more interested in near-
term revenues than servicing the world's thirst for oil. Indeed, it can 
be argued that it is in their best interests to hold back production.
    The peak oil issue is percolating up the public awareness ladder. 
There are growing numbers of related articles in the media. The 
Administration gives indications that it recognizes the problem but 
isn't speaking out directly. More and more people on Wall Street are 
talking about the problem. Last time I Googled ``peak oil,'' there were 
over four million items, including serious studies, newspaper stories, 
documentaries and blogs.
    Peak oil could burst into active public consciousness at any time. 
When it does, reactions are likely to resemble those of the 1973 and 
1979 oil shocks: Public panic, early hoarding-induced shortages, and 
major negative reactions on Wall Street. These problems occurred 
before, and they are almost certain to happen again.
    Difficult compromises and decisive action will be needed. There 
will be no single solution; multiple mitigation options will be 
required. Large-scale deployment of appropriate technologies will be 
essential, and government-facilitated industrial crash programs will be 
a must. Research and development will be required at much higher 
levels, but make no mistake, R&D alone will have little impact in the 
near-term. Large-scale technology deployment is the only thing that can 
make a difference.
    Thank you for the opportunity to be heard. I hope that these 
compressed thoughts will help to motivate greater attention to this 
horrendous problem. The task ahead will be unprecedented.

                     Biography for Robert L. Hirsch
    Dr. Hirsch is a Senior Energy Advisor at MISI and has been involved 
in virtually all aspects of energy technology in industry and 
government for over 40 years. He is a past Chairman of the Board on 
Energy and Environmental Systems at the National Academies.

    Chairman Lampson. Dr. Harriss, you're recognized for five 
minutes.

STATEMENT OF DR. ROBERT C. HARRISS, PRESIDENT AND CEO, HOUSTON 
                    ADVANCED RESEARCH CENTER

    Dr. Harriss. Thank you, Mr. Chairman, and thank you for 
inviting me to testify. This is an honor to be here with such a 
distinguished panel, and I want to first say that I'm used to 
be at the end of the line because I grew up down in South 
Texas, in Cameron County, and one of the most transforming 
things in my life was to get off the ranch and come to Houston, 
Texas, to go to Rice University. I was lucky to be here at a 
time when there was an amazing and inspiring speech in this 
football stadium by John F. Kennedy, and it was one of the 
things that changed my life and has inspired me for the last 43 
years, and I hope for many more, to work for a more sustainable 
future for our nation. NASA and the space program have resulted 
in radical innovation in so many ways, from robots on Mars to 
better products on our markets today, that it's a model that I 
would like to talk about today for other things that we do in 
the energy area.
    I'm also pleased to represent the Houston Advanced Research 
Center, a nonprofit organization founded by the visionaries 
George and Cynthia Mitchell. We are dedicated to city and 
regional sustainability. George Mitchell was a pioneer in 
natural gas, continues to worry every day about issues of 
sustainability and the need for more visionary thinking. He 
often calls me up and says, ``Bob, well, if we're not doing 
well at sustaining Houston with six million people, what are we 
going to do when three more million people get here? You've got 
to get to work.'' So he's relentless in trying to say, ``How do 
we come up with solutions? There's plenty of people talking 
about problems. I'd like to see some solutions.''
    I agree with him. I get weary when I turn on my computer in 
the morning to look at the news and see ongoing discussion 
about climate change and oil wars and the spread of nuclear 
weapons, because they're all looking at the problems and I say 
it's time for us to choose none of those topics but to look for 
solutions and look forward with a vision that will inspire 
young people to go out and engage in the science, the 
engineering, and the policy that's necessary to move us 
forward.
    Now, I do totally agree with the previous statements that 
in the near-term, the next 20 to 50 years, we're going to 
require a very efficient and effective use of fossil fuel. 
However, I think we need to look beyond that. We need to do 
everything we can to make that bridge, to look beyond that and, 
in doing so, to focus on thinking about how we live in a 
different world today. It's an urban age. We're really 
transitioning out of the industrial age into the urban age. 
Cities are essential sources of opportunities for social 
advancement and the creation of wealth, globalization, and 
creativity; but they are also large consumers of resources, 
they're reservoirs of poverty, and concentrated sources of 
solution. We've talked about severe air pollution. We've talked 
about the vulnerability of our urban areas to hurricanes. Those 
are just two examples of the metrics which suggest that we have 
a big challenge ahead.
    Now, I do think the Houston metro area reflects the 
complexity, opportunities, and challenges that we face in the 
urban age on a worldwide scale. It is the face of the future.
    I'd like to comment on what I think is a very exciting 
opportunity in urban sustainability, which is actually a new 
and emerging field that considers primarily use-inspired 
research. We do a lot of good, basic, fundamental research in 
our university community and in our federal laboratories, but 
we need to also focus on what I will talk about as use-inspired 
work. That's meeting the needs of the consumers in this nation 
with the products that will be fitting to the solutions they 
expect for their culture, for their local setting, for their 
environment. One size simply doesn't fit all. It's urgent that 
we think seriously through a vision, a design, and a deployment 
of a whole array of regional and local solutions to our problem 
with supplying energy for the future.
    I'm going to comment very briefly on something that builds 
on Mr. Standish's testimony, and that is the opportunity that 
Texas has to lead the world in terms of displaying the first 
smart super-grid based entirely on renewable energy. Before I 
do that, I would like to emphasize that all of these systems 
that we are talking about in terms of energy supply and demand, 
are what we call sociotechnical systems--that is, the social 
dimension is every bit as important as the technological 
dimension. We can produce a lot of gadgets, but if there's not 
a consumer demand for those and a desire for the consumer to 
buy those, we're not going to make a bit of difference, and yet 
often we ignore the social sciences as an incredibly important 
part of the future.
    Now, one of the things I think we could do to start to make 
important headway is to think about setting up a network of 
urban sustainability centers. In one sense, I think of the fact 
that Congress has taken action before that did a very similar 
thing when they set up the land grant college system. We were 
an agricultural nation. We needed to get out and work with the 
farmers on a regional basis and to figure out how to innovate 
in a way that was suitable for the local culture and the local 
conditions, including the environmental conditions. Now, 
regional sustainability centers would catalyze, facilitate, and 
support the integration process necessary to creating use-
inspired solutions to the grand challenges facing American 
cities.
    They are: Shaping the transition to a renewable energy 
future, adapting to climate change, sustaining biodiversity in 
ecosystems, and reducing vulnerabilities, especially 
vulnerabilities that many of our citizens in Houston face to 
pollution and natural disasters. These centers would be, I 
think, a major contribution to going from a one-size-fits-all 
model to the customized model that will meet the needs of 
citizens across the Nation, in our metros, where they live and 
under the conditions and cultural settings in which they live. 
As America's energy capital, Houston would be the ideal setting 
to assemble the necessary expertise to do a demonstration or at 
least to think through a design of what these regional 
sustainability centers might look like.
    Finally, I want to come back to this notion that Mr. 
Standish talked about, of a super-grid or of a Smart Grid; and 
I want to say that because Texas is fortunate to have a 
relatively independent electrical grid--there are small 
interconnections, but for the most part, being a big state with 
six climate zones, we have our own grid--and it offers a model 
for the Nation and the world because of the variety of local 
and regional environments we have. Now, we can, I am convinced, 
produce the most affordable electricity our nation has ever 
experienced, with renewable energy that will only require a 
backup of natural gas as a reserve for surprises that may come 
as a result of global warming or some other factor; but I think 
it will be easy for us over the next 20 years to demonstrate 
that we can jump-start the world in moving towards a Smart Grid 
and a super-grid here in Texas and using available 
technologies. I want to emphasize that not only do we not have 
the funding, we don't have the institutions to make that happen 
now. There are too many variables.
    Finally, I would point out that in terms of energy R&D in 
our nation, the energy area and related environmental science 
have been flat for several decades now and it's time for us to, 
I think, invest in a way that's far beyond $100 million in 
terms of this grid technology, probably more like $100 billion, 
and really inspire our young people to see that as the most 
exciting challenge they can take on in their future careers.
    Thank you very much, sir.
    Chairman Lampson. Thank you very much.
    [The prepared statement of Dr. Harriss follows:]
                Prepared Statement of Robert C. Harriss
    Mr. Chairman, Thank you for inviting me to testify. My name is 
Robert Harriss and I am President of the Houston Advanced Research 
Center (HARC), a nonprofit organization dedicated to moving knowledge 
to action to improve human well-being and the environment at the 
regional scale. As an institution, HARC does not take positions nor 
engage in advocacy, so the opinions expressed here are my own.
    For the record, I have been involved with energy, environment, and 
related sustainability issues as researcher, educator, and science 
administrator serving universities, NSF, NASA, the National Center for 
Atmospheric Research, and the Houston Advanced Research Center for the 
past 43 years of my professional career.
    My testimony today draws heavily on the work of the Board on 
Sustainability and Sustainability Roundtable at the National Academy of 
Sciences/National Research Council. The National Academy Press 
publication titled ``Our Common Journey: A Transition Toward 
Sustainability,'' published in 1999, provided a new foundation for 
thinking about pathways to more sustainable futures. The continuing 
leadership of Robert W. Kates, recipient of the National Medal of 
Science, William C. Clarke of Harvard University, William Merrell at 
Texas A&M-Galveston, and many others, continues to reveal and refine 
new insights and pathways for advancing the well-being of both our 
nation and the global environment.

THE URBAN AGE

    The Greater Houston and Upper Texas Coast region, our nation, and 
Planet Earth are nearing critical tipping points that will result in 
declining economic prosperity, dramatic environmental degradation, and 
other serious threats to human well-being. Prospects for today's 
children, and especially our region's vulnerable populations, hinge 
upon more aggressive and effective leadership in advancing the science, 
engineering, and policies necessary to achieving more sustainable 
futures.
    The United States has demonstrated an extraordinarily successful 
capacity for discovery and innovation in developing new technologies, 
innovation processes, and public policies that serve commercial and 
national security purposes. In little more than a century our nation 
has moved from an agricultural, to an industrial, to an urban age. 
Remarkably, today our top 100 metropolitan areas take up only 12 
percent of the land in the United States, but account for 68 percent of 
our population and 75 percent of the U.S. Gross Domestic Product. The 
urbanization of America and other advanced nations, combined with the 
increasing role of cyberspace as the primary infrastructure stimulating 
economic globalization, positions cities as the primary platforms for 
addressing the major challenges facing the world today.
    Cities are essential sources of opportunities for social 
advancement and the creation of wealth, globalization, and creativity. 
But many cities are also dysfunctional both environmentally and 
socially. They are large consumers of resources, reservoirs of poverty, 
and concentrated sources of pollution. The Houston metro area reflects 
the complexity, opportunities, and challenges that we face in the urban 
age.

URBAN SUSTAINABILITY: AN EMERGING FIELD OF ``USE-INSPIRED'' RESEARCH, 
                    EDUCATION, AND INNOVATION

    Sustainability science is a new paradigm that aspires to integrate 
research and knowledge from the natural, social, medical, engineering, 
and policy sciences and to inform decision-making and stimulate 
innovation. It is defined by the practical problems it addresses, 
specifically the problems of sustainable development. It is focused on 
scientific understanding of strongly interacting human and 
environmental systems. Sustainability science is generally place-based; 
at metropolitan and regional scales where complexity is comprehensible 
and integration is possible, innovation and management happen, and 
local culture is understood.
    Present systems for governing and implementing R&D encourage good 
research that is anchored in single (or closely related) disciplines 
and is either fundamental (e.g., university R&D) or specific to 
commercial products (e.g., industrial R&D). The essence of 
sustainability science, engineering, and policy is synthesis and 
integration of knowledge and treating policies and projects as 
opportunities to learn. Relative to conventional science less emphasis 
is needed on elite researchers making discoveries and more on 
connecting diverse stakeholders in a sustained collaborative dialogue 
on an important shared problem. The outcome of a sustainability process 
and project is to increase stakeholder options and make choices among 
them. HARC is committed to the goal of being an effective, trusted 
bridging organization dedicated to solving sustainability issues in the 
Greater Houston and Upper Texas Coast region.

THE NEED FOR A NATIONAL NETWORK OF URBAN SUSTAINABILITY CENTERS

    America has several times solved complex issues through the 
implementation of a distributed network of centers that could 
facilitate a knowledge dialogue aimed at use-inspired research and 
education. The development of industrial age agriculture benefited from 
the Land Grant College program. NASA's network of regional research and 
engineering centers has been successful at integrating university and 
private sector researchers into national space technology R&D programs. 
There is an urgent need to provide an institutional framework 
appropriate to solving the many sustainability issues facing the major 
metropolitan regions of this nation. Regional urban sustainability 
centers would catalyze, facilitate, and support the integration process 
necessary to creating use-inspired solutions to the grand challenges 
facing American cities--shaping the transition to a renewable energy 
future, adaptation to climate change, sustaining biodiversity and 
ecosystems services, reducing vulnerabilities to pollution and natural 
disasters, etc.

A TRANSITION TOWARDS SUSTAINABLE ENERGY SERVICES

    Long-term sustainable development must be based on clean, 
affordable, and renewable energy services. Today's most critical 
sustainability issues like global climate change, energy security, and 
urban air quality can be directly connected to energy systems. Current 
efforts to design a transition towards future sustainable energy 
services will fail because many of the objectives related to public 
goods (e.g., national security) and externalities (e.g., air pollution) 
that are not currently priced in markets. A fundamental transition in 
energy systems would also be subject to ``market failures'' derived 
from abuse of monopoly power, lack of information, perverse incentives, 
short-term planning horizons, and other factors.
    A transition beyond business-as-usual toward energy systems that 
support socially, environmentally, and economically sustainable energy 
is possible. Many technologies and scenarios are available that could 
meet the requirements of lower costs of delivering energy services, 
lower energy intensity of economic activity, lower emissions intensity 
of economic activity, and enhanced resilience to climate surprise. 
Conventional R&D is necessary but not sufficient to achieve the goal of 
sustainable energy services. Creating usable knowledge that informs the 
design of sustainable energy services requires solution-driven research 
and innovation and must consider the place and scale of operation. 
Regional urban sustainability centers would catalyze, facilitate, and 
integrate the dialogue between stakeholders in civil society, business, 
and government through which scientists and engineers learn what users 
need and users learn what scientists and engineers can offer. As 
America's energy capital, Houston would be the ideal setting to 
assemble the expertise necessary to develop the goals and institutional 
framework for a national network of regional urban sustainability 
centers focused initially on the transition towards sustainable energy 
services.

THE NEED TO MOVE QUICKLY TO SCALE

    Energy will be our most important technological and social 
challenge in the 21st century. America's metropolitan regions are 
likely to grow by a further 100 million people in this century. By 
2030, fully half of the American built infrastructure in place will 
have been constructed since 2000. Our current federal technology and 
environment R&D programs will not drive a transformational change in 
the design process or implementation of a transition to sustainable 
energy services. There is an urgent need to move quickly to scale and 
to maintain a long-term commitment to funding sustainable energy 
programs by both public and private sectors. This commitment is 
essential, given the long lead times required for transformational 
changes in both technology and human capital.
    In summary, I suggest that urban centers are the focus of our 
sustainability problem and they should be the source of innovative 
solutions. We should employ models of innovation based on collaboration 
and facilitated by organizations capable of bridging from basic 
research to application. The first challenge to be addressed by this 
network of urban sustainability centers should be development of 
systems for sustainable energy services.

                    Biography for Robert C. Harriss
    Robert Harriss is President and CEO of the Houston Advanced 
Research Center. He was formerly Senior Scientist and Director of the 
Institute for the Study of Society and the Environment of the National 
Center for Atmospheric Research, Boulder, CO. Current adjunct 
appointments include Professor, Department of Marine Sciences, Texas 
A&M University at Galveston; and Principal Scientist, The Institute for 
Oceans and Coasts.
    Previous appointments include a Harvard University postdoctoral 
fellowship and faculty appointments at McMaster University (Canada), 
Florida State University, the University of New Hampshire, and Texas 
A&M University. He also served as a Senior Scientist at the NASA 
Langley Research Center and as Science Director of the Mission to 
Planet Earth Program at NASA Headquarters. Dr. Harriss obtained a B.S. 
in Geology from Florida State University and a Ph.D. in Geochemistry 
from Rice University and has primary professional interests in 
sustainability science, engineering, and policy.

                               Discussion

    Chairman Lampson. I think that all of our panelists are to 
be commended for the words that you've given us, and you've 
given us a lot of food for thought. I will now move into our 
question-and-answer period, and I will yield myself the first 
five minutes of our discussion.
    I want to tell everyone that when we finish this particular 
section of our hearing this morning, we'll adjourn the formal 
hearing. We will step into a room on the other side of this 
wall, and we'll ask you to come in and we'll have a period of 
questions and answers, statements that might be made by the 
public. So I just encourage you to stick around when we are 
finished here.

                Technology Commercialization Challenges

    Let me begin, Dr. Chapman, with you. The real prize, I 
guess, in research and development is the commercialization and 
the adoption of technologies. Obviously, it's a long road from 
the laboratory shelf of the marketplace.
    How is Rice University providing an environment to connect 
innovative technologies with entrepreneurs?
    Dr. Chapman. Rice has an organization called the Rice 
Alliance that's built up in the Jones School of Management here 
at Rice. The Rice Alliance is a, I have here ``the mission is 
to support the creation of technology-based companies and 
commercialization of new technologies in the Houston community 
and the Southwest.'' And what's really fascinating about this 
is since its inception, it's assisted in launching 205 new 
technology companies. What they do is they bring together the 
entrepreneurs with the companies, the startup companies that 
develop new technology, along with the researchers, in addition 
bring in the companies that will apply the technology. By 
bringing these organizations together, it's provided the 
infrastructure, at least in the Houston area, to develop new 
innovations, new companies, and get the technologies to the 
marketplace. It's really become, I believe, a model for 
technology commercialization that can be used in other parts of 
the country.
    Chairman Lampson. I think the comments of both you and Dr. 
Harriss made about how challenges of this country--I guess 
maybe all of you alluded to it--the challenges of this country 
pull along education and change the activities that we do here. 
It's that inspiration and follow-up with the inspiration that 
has to be done--not just offer a challenge, put something in 
place, and then don't talk about it anymore or not fund it. 
It's going to take the active effort; and when we do, I think 
that we have the ability in this nation to rise to the 
challenge and to make our dreams become realties. It's just 
providing the wherewithal to make it happen; and it can't help 
but grow our economy, grow our position of technology 
leadership in the world.

                H.R. 5146, Invest in Energy Security Act

    Mr. Ming, I think that you know that Congressman Chet 
Edwards and I have introduced a resolution, a bill in the 
House, HR 5146. We call it the Invest in Energy Security Act. 
Our legislation is intended to increase funding this year for 
important energy research-and-development programs that have 
already been authorized by Congress but are not fully funded.
    One of the things that the bill would do is to increase, by 
$50 million, funding for the program that RPSEA manages.
    If we're successful in getting that bill enacted, how would 
you expect to apply those funds to research projects?
    Mr. Ming. Well, first of all, I'd like to applaud you for 
that proposed legislation, not only for that component but the 
rest of the integrated component as I described in my remarks 
because I think it's the integrated approach that really 
extracts the true value.
    What we have done at RPSEA now over the last years is 
embark on the solicitation of research proposals from the 
entire research community, and just the initial rounds of those 
proposals have produced over 90 quality research proposals. 
Right now, with the available funding of the basic $50 million, 
we estimate we'll be able to fund about one in three of those 
proposals. The legislation that you proposed would allow us to 
fund more of the proposals. It would allow us to get back to a 
more historical norm in terms of research-and-development 
funding levels from the Federal Government that produce the 
results that, for example, are technologies now being deployed 
that have enabled the Barnett Shale play in the Dallas-Fort 
Worth area and coal bed methane production which now comprises 
almost 10 percent of the Nation's production.
    So the increase in funding would really just bring us back 
to the level that we need to be in order to continue the 
impressive progress to exploit this transition from the 
conventional to the unconventional fuels. If you take the 1525 
trillion cubic feet of technically recoverable reserve 
resources estimated by the Potential Gas Committee, that 
resource base has a value well in excess of $10 trillion. If 
you take royalties and severance taxes that are derived from 
the production of that resource base, it amounts to billions of 
dollars per year that go to states, individuals, and the 
Federal Government. That money can be used to develop the next 
generation of energy technologies and energy technologists.
    Chairman Lampson. Thank you very much.

                  Benefit of R&D in Peak Oil Scenario

    Dr. Hirsch, I don't understand why a crash program of 
mitigation won't keep us out of serious economic trouble. So 
why is that, and why won't more research and development be 
beneficial?
    Dr. Hirsch. More research and development, of course, will 
be beneficial; it just won't pay off quickly. That's all. 
Because you have to deploy technologies in order to make up for 
the loss of oil, the loss that will increase year after year.
    The numbers are relatively small, seemingly small. Two to 
five percent per year is what people believe the decline in 
world oil production will be; but when you translate that to 
times 85 million barrels a day, you come up with enormous 
numbers. One percent is 800,000 barrels a day. It would take 
much more than a decade of crash program change in fuel-
efficient vehicles in order to begin to make a dent, come close 
to that 800,000 barrels a day of savings. The reason is that 
there are something like 240 million vehicles in this country 
and they have a long lifetime, which we're happy with because 
they last a long time and we don't have to buy new ones every 
few years. That same lifetime means that it takes a long time 
for things to change.
    Eight hundred thousand barrels a day--if, for instance, you 
wanted to produce it by making liquid fuels out of coal, would 
require over $100 billion of investment and require over a 
decade of effort in order to bring enough plants on to save 
that much liquids. It's the scale of things. The scale is 
absolutely unbelievable, and that's why the word ``deployment'' 
is key in this whole thing.

                      Peak Oil and Climate Change

    Chairman Lampson. Let me ask about reconciling our concerns 
for manmade global climate change with peak oil mitigation. How 
do we go about that reconciliation?
    Dr. Hirsch. Well, I think it's going to be very difficult 
because the focus in the public for quite some time has been on 
manmade contributions to global climate change.
    So people are fixated on that and I think the mule is going 
to have to get hit by the two-by-four of significant growing 
recession and people really being hurt. I know they're being 
hurt now with what's going on, but it's nothing compared to 
what's almost certain to happen when peak oil hits and 
shortages begin. That's when people will recognize that they 
have to change their thinking, they've got to alter their 
priorities and have to make some compromises. When in life 
didn't we have to make some compromises? Compromises are going 
to be necessary here; and the thing, the squeaky wheel that 
gets the most attention are people in pain.
    Chairman Lampson. Thank you.

                The Changing Role of Government Research

    Dr. Harriss, energy research and development is extremely 
expensive, and getting more so every day. I also know that we 
have cut, for example, the research money in the Department of 
Energy over the last 25 or so years by more than 85 percent; 
but federal research and development program budgets are just 
continuing to get squeezed down, as that one certainly has. We 
can't expect just the Department of Energy to tackle all the 
world's energy problems, particularly with the smaller and 
smaller amount of money that we're giving them. So how do we 
see the role of government research and development changing in 
the future and what can we in Congress do to enhance that role, 
with increasingly limited funds?
    Dr. Harriss. I think there are several lines of hope that 
we could explore in addressing that. One is certainly to try to 
create opportunities to stimulate more radical innovation. When 
funding is tight in the science sector, our wonderful peer-
review system, which I have great respect for and have worked 
on at NASA and NSF, gets more and more conservative. It's just 
human nature. You've got less money; you give it to things 
you're most confident will work. So we do need new 
institutional ways of thinking about, in times where we're 
limited in funding, how we can continue to really push the 
frontiers of creativity and innovation. I think the notion of 
this ARPA-E, modeled after DARPA, which was focused on defense, 
radical innovation for defense, is a very interesting notion 
and one that needs to be considered further. I applaud the 
Congress for taking this forward and putting it on the table. I 
think it is crucial that it not be buried under DOE bureaucracy 
and have as much autonomy as possible and have adequate funding 
to really go out and do some exciting things.
    The second line that I'm particularly interested in is that 
we do a much better job of forming partnerships. We need a 
continuing sustained dialogue between business, government, 
independent scientists, and civil society. This dialogue really 
has to be one in which scientists and engineers learn what 
users need, and users learn what scientists and engineers have 
to offer. That has to be a continuing dialogue; and out of 
that, hopefully, we will be able to narrow down the domain in 
terms of our focus and be more efficient in the use of our R&D 
dollars.
    Chairman Lampson. Where and how does that take place?
    Dr. Harriss. I think that dialogue takes place at 
particularly the metropolitan regional scale because our metro 
areas have very different needs in terms of the types of 
technologies that will best supply them. That's why I was 
calling for these regional urban sustainability centers.
    Those would be basically neutral, non-advocacy 
organizations that could facilitate, in hopefully a trusted and 
absolutely superb way, this partnership.
    Again, if I can relate back to my youth in Houston, Texas, 
one of the reasons I came to school here was not only because 
Rice was a wonderful institution but because at that time the 
Shell Development Center was a world-famous center for basic 
research and applications in geology and geophysics. I could go 
walk into that organization anytime I wanted to, talk to the 
scientists about the research. It was sort of an open 
environment, that simply doesn't exist anymore. I'm not expert 
at talking about all the institutional and other reasons for 
that, but we need to stimulate more of that again, to get that 
dialogue between all that wonderful brainpower that is in our 
energy industry, all of the exciting new developments at places 
like Rice and other universities, and people out there who are 
the consumers, because we should not produce things that we 
don't first sort of understand whether they're going to meet 
consumer needs. So I think that's a really important discussion 
for us to have, but it does have to be an ongoing process.
    Chairman Lampson. Thank you very much.
    Dr. Bartlett, I recognize you for the time that you may 
consume.

                  Strategies: Will Conservation Work?

    Mr. Bartlett. Thank you very much.
    Dr. Chapman, I would like to thank you for your observation 
that solutions many times come from fundamental research into 
seemingly unrelated areas. When I came to Congress 15 years 
ago, Congress was going to really do the right thing with our 
taxpayers' money. We were going to fund only basic research 
that was going to have a societal payoff. I said, ``Pray tell 
me how you're going to know which basic research is going to 
have a societal payoff.'' I can't imagine that Madame Curie had 
any notion of the implication of her early discoveries of 
radiation.
    So thank you for recognizing what we really need to do is 
to put enough money in basic research and in the education of 
the people to do that basic research, and we will get benefits 
from that. I can't tell you ahead of time where those benefits 
will come; but I can assure you that the more money we put into 
basic research, the more the benefits will be.
    I have a lot of farmers in my district and not one of them 
is dumb enough to eat their seed corn, but that's exactly what 
we do in the Government. Every year we cut basic research. 
That's the equivalent of eating your seed corn. (Applause) 
Nobody said Congress was very bright, did they?
    Near the end of your presentation, sir, you made some 
really great comments: ``We need to acknowledge that the odds 
of finding a single quick solution to the energy challenge are 
infinitesimally small.'' If you believe, sir, that there is a 
silver bullet out there, you probably also believe you're going 
to solve your personal economic problems by winning the 
lottery. I think the odds are about the same.
    You also say that we need to accelerate the pace toward a 
goal upon which our very survival depends. I think that Dr. 
Hirsch would agree with you. Then earlier in your text, you 
quote from the Department of Energy, the Energy Information 
Administration. I would caution that if you're quoting from 
their assessment of the amount of oil that we have used, you 
can be pretty sanguine that you can have some confidence in 
that. If you're quoting from their assessment of how much oil 
will be there in the future, I think you ought to be very 
cautious. They're economists and they come to my office and 
they say that's USGS. The USGS has the strangest way of 
providing their prognostications of future oil. They do a lot 
of computer simulations and they take the mean of those 
computer simulations and they say that's how much oil is going 
to be there. That's a 50 percent of probability, is what the 
Energy Information Administration said. So be very careful.
    You quoted their comments that just don't square with 
reality: ``The hydrocarbon energy sources will increase over 
the next two decades.'' Sir, there isn't even a prayer that 
that's going to happen. That just isn't going to happen.
    Then they say the thing we ought to be doing is increasing 
the supply of fossil fuels. That's exactly the thing we ought 
not be doing. We need to be husbanding the small, readily 
available reserves of fossil fuels we have for really, really 
critical needs; but going out there now and harvesting those 
things as quickly as we can is exactly the wrong thing to do.
    So thank you for your words of wisdom at the end of the 
article, and be very careful in noting our Energy Information 
Administration and what they say. They're very nice people. 
They've been in my office and they say we just use USGS data. 
And maybe Dr. Hirsch will tell us more about the USGS data.
    Mr. Ming, we need to be very careful in what we say, that 
we aren't lolling our people. People just love to hear nice, 
soothing words. My wife tells me I ought not to be talking 
about these things. She said, ``Don't you remember in ancient 
Greece they killed the messenger that brought bad news,'' and I 
have to stand for election every two years. On the average, 
every year I have a primary and then a general. You know, I 
tell her, ``Gee, this is a good news story because the good 
news is, if we start today, the ride will be less bumpy than if 
we start tomorrow.''
    It's good news in another respect. You know, we spend far 
too much effort, many of us in our country, you know, seeing 
dirty movies and smoking marijuana; and we need other things to 
challenge us. We're the most creative, innovative society in 
the world; and, properly challenged, we're up to this task of 
seeing us through this really, really critical time. There's no 
exhilaration like the exhilaration of meeting and overcoming a 
big challenge; and, boy, this is a big, big challenge.
    We ought to be careful, sir, in saying things like we're 
going to have all the gas and all we need for the foreseeable 
future and we're not running out of energy. That's right. We're 
not running out of oil. There's as much more oil to be pumped 
as all the oil we have ever pumped. What we are running out of 
is our ability to produce that oil as fast as we would like to 
use it. Our world comes unglued if we cannot grow. In the 
United States, two percent growth is considered too small and 
the stock market goes into panic.
    By the way, a session for another day, we're going to have 
to change the way we look at these things. Ultimately, sir, for 
the finite world, there's no such thing as sustainable growth 
unless that growth is coming from increased efficiency, which 
we really need to be focusing on. Thank you very much.
    Dr. Hirsch, you mentioned scale; and when you mentioned 
that, I was thinking of our corn ethanol debacle. The National 
Academy of Sciences says that if we converted all of our corn 
to ethanol, every bit of it to ethanol, and just discounted it 
for fossil fueling, but which is big--some people think it's 
bigger than what you get out of it, but it's big--it would 
displace 2.4 percent of our gasoline. They wisely mention--now, 
this isn't Roscoe Bartlett saying this or Bob Hirsch; this is 
the National Academy of Sciences saying this--if you tuned up 
your car and put air in the tires, you would save as much gas 
as using all of our corn for ethanol. They further say if we 
turned all of our soybeans into soy diesel, it would displace 
2.9 percent of our diesel requirement.
    What we have done with corn ethanol--and I voted against 
the last energy bill because it doubled this silly mandate--
this ethanol corn mandate doubled the price of corn. So our 
farmers diverted land from soybeans and wheat to corn. So then 
the price of soybeans and wheat went up--so did the world 
demand go up. So now there are people all over the world--three 
of the basic four food necessities, we drastically increased 
the price of them and did essentially nothing to displace our 
need for foreign oil.
    One of the officials in the U.N. said what we have done is 
a crime against humanity, and now we're doubling that thing in 
this new bill? I wanted to vote for that bill because there's 
some very good things in there about renewables; but with that, 
I couldn't vote for it.
    Dr. Hirsch, the one thing that we might do is a really 
aggressive program on conservation, which, by the way, was the 
No. 1 point in the Chinese five-point program. Matt Simmons 
says that we might buy a couple of decades and free up some 
energy to invest in alternatives. Now we have run out of time 
because we totally ignored the warnings of M. King Hubbert and 
the reality that we peaked in 1970, and there's no surplus oil. 
If there's any surplus oil to invest in alternatives, it will 
take a huge investment in these alternatives, of time--we won't 
worry about money. We just borrow that from our kids and our 
grandkids--not with my vote--but borrow from our kids and our 
grandkids, without their permission. You can't borrow time from 
them, and you can't borrow energy from them. Do you agree with 
him that with a really aggressive conservation program that we 
might buy a couple of decades and free up some energy to invest 
in alternatives?
    Dr. Hirsch. As you know, one of the things that we've 
talked about--and it's part of my testimony and part of our 
reports in the past--is that there is no single answer to any 
of these things. We've got to do a number of things 
simultaneously. If we make the mistake of picking one thing and 
relying on that, we have made a fundamental error. Conservation 
clearly is something that is important and will be important, 
no matter how you see the world. Indeed, there are significant 
opportunities out there to be more efficient and to conserve.
    I see the term ``energy efficiency'' different than 
conservation. I see conservation as something that is 
voluntary. As a number of us have talked about, if people 
understand that, by God, they need to do some things 
differently, they will voluntarily do those things differently, 
at least for a while; but then the history also is that after a 
while of doing things and things being all right, people tend 
to lapse back into where they were and do what they've been 
doing previously.
    So conservation is a wonderful idea. I think people will 
respond, but I think there also needs to be teeth in that. How 
you do that, how you do that in such a way as to, on the one 
hand, inspire but, on the other hand, be sure that there are 
negative consequences for people that don't fall in line and 
don't do what they could be doing? That's very important and 
that's going to be up to you folks to figure out. That is not 
going to be easy.
    The scale is enormous. There are opportunities here in 
light-duty vehicles, particularly in the United States.
    We're all well aware of the SUVs, and I don't want to be 
negative about soccer moms because we had soccer kids when I 
was a kid also and I was a younger person. People want what 
they can have; and if they can have it easily, they take it, 
particularly when they can afford it. Driving around huge 
pieces of metal in order for a 150- or 200-pound person to get 
from Point A to Point B just simply does not make sense. To get 
people to change is going to be very, very difficult. That's 
where the two-by-four is going to have to come in, because my 
standing up and saying that this is a waste is not going to 
influence a lot of people. How we do these things, very 
important.
    We also have got these huge fleets of airplanes that I flew 
in on and you flew in on. The cars that are out on the street 
here, an enormous amount of them, they're not going to go away 
overnight. We can't replace them overnight. We can't afford to 
replace them overnight. We will make them more efficient over 
time. We do that, hopefully, on a crash-program basis. It will 
not happen quickly. That has to happen, though. Airplanes 
already have incentive to be more fuel-efficient. I don't know 
how much more capability there is to make them much more fuel-
efficient. I think probably what will happen is much less 
airplane travel. Railroads are a very efficient way of doing 
things, and doing much more with railroads rather than trucks 
and airplanes makes sense.
    The point here, I'm going on and on because, in fact, you 
can go on and on and there are many different dimensions to 
this whole thing. They've got to be looked at in a hard way, 
they've got to be looked at in a creative way, and they've got 
to be looked at in a practical way. Part of what we're doing 
today is looking to the sustainable future and we want to go 
from where we are now to this beautiful future. I can conceive 
of a beautiful future, everybody up here can consider a more 
beautiful future, but we've got to get from here to there and 
that is an enormous task.
    Mr. Bartlett. It is, indeed. The fifth point of the Chinese 
five-point program is international cooperation; and what I 
would hope that we might have is an international cooperation 
and competition. Rather than competing to see how much of the 
oil we can use, I'd like to have a challenge to sustainability. 
Ultimately, we will have sustainability; it is inescapable. We 
will go from fossil fuels to renewables. In 150 years, the age 
of oil will be over and we will be making it on renewables. 
What will that world look like?
    Sir, the soccer moms are right and if they know that more 
of their kids die in SUVs because they turn over and kill--and 
that is the statistic--then they'll drive something smaller. 
Conservation is two people getting into a car; efficiency is 
getting into a Prius.
    Dr. Hirsch. I drive a Prius, sir.
    Mr. Bartlett. Okay. Well, we're on our second. I bought the 
first one, as I mentioned, in Congress and the first one in 
Maryland.
    I want to thank you, sir, very much for the contribution 
that you have made. You and I first started talking about this 
how many years ago? When I first started talking about this, by 
the way, we spent, in my office, quite some time trying to 
decide whether we were going to talk about the great roll over 
Hubbert's peak or were we going to call it peak oil. Finally 
decided to call it peak oil. That's how little discussion there 
was about this at that time. So thank you very much.
    Dr. Harriss, you make a statement which I couldn't agree 
more with. Planet Earth, you started with Houston, and upper 
Texas coast region, our nation and planet Earth, we're all in 
the same boat, aren't we? On our way to the Moon, we looked 
back and we saw, boy, that's just a little spaceship, isn't it? 
And we're going to have to make do with what's on that 
spaceship.
    When I thought about that, I thought Apollo 13, your 
statement here that nearing critical tipping points that will 
result in declining economic prosperity, dramatic environmental 
degradation, and other serious threats to human well-being. I 
thought of Apollo 13. They were on a little spaceship, and they 
only had so much. Don't you think that's a pretty reasonable 
model for where we are today, to take another look at what 
we've got and what we have to do if we're going to make it? I 
think there's a fairly narrow window of opportunity which is 
closing, if we're going to make it through.
    By the way, one of the greatest authorities in this area, 
Kenneth Deffeyes, says that the least bad outcome of this is a 
deep worldwide recession that may make the Thirties look like 
good times. Then he says if you don't like that, try the four 
horsemen of the Apocalypse--war, famine, pestilence, and death. 
If you have a chance to invite him to a hearing, he's really a 
very bright and very entertaining guy. Someone asked him what 
the odds were that we were going to have a happy outcome in 
this challenge, and so what he showed them was a little picture 
his granddaughter had colored. It was a snowball in hell.
    I want to thank you, Mr. Chairman, very much. I want to 
thank the witnesses. I take every opportunity I can. I'll go 
halfway around the Earth to talk about energy because I agree--
which one of you said it--it is the transcending, overarching 
issue of the 21st century. That it will be.
    Thank you. Thank you very much.
    You know, we talk about a lot of things now that it won't 
even matter if we don't have this energy. One of the first 
casualties of an energy-deficient world are going to be all 
these social programs that we spend most of our time talking 
about. This really is a huge, huge problem we face.
    Let me just close by saying that your government, sir, has 
paid for four studies, all of them saying essentially the same 
thing in different words. Peaking is near or present, with 
potentially devastating consequences. Why are we totally 
ignoring that?
    We're not. You're here. So thank you very much for not 
ignoring. Thank you for having this hearing, and I want to 
thank our witnesses. I yield back.
    Chairman Lampson. Thank you very, very much. (Applause).
    Dr. Bartlett, in my opinion, is one of the most thoughtful 
and, in my opinion, one of the brightest guys in the House of 
Representatives. He's a real scientist that's come to serve in 
this body, and it's an honor to be able to serve with you.
    We do have work to do. It seems like that all of these 
things, it's easier for us to come up with more of the problems 
than we do the solutions. It's easier to talk about the 
problems and we've got to find ways to change the commitment 
and get down to the level of where we can make the changes. 
That's going to be in our schools and inspiring our kids to 
grow up knowing different things than what we know and react 
differently than what we react to.
    None of this is going to be very easy to achieve, and we 
don't seem to be making the right kind of commitment. We don't 
seem to have had the right kind of leadership for an awfully 
long time to bring these issues to a head, where we can 
actually get them adequately addressed. That is why we are 
here, and I thank all of you for taking the time to come and to 
share your concern. Hopefully, more than the folks that are 
here in this room today who are here at this meeting. Hopefully 
there will be many, many more meetings.
    Recently I had something that we called an economic 
development summit. We got folks from across the community to 
come and talk to us about what kind of smart growth and what 
kind of planning we're going to be doing. We seem to 
concentrate too much on looking at what's going to be happening 
to us in the next 10 to 20 years rather than looking at what's 
going to be happening to us generationally. Every decision that 
we make today is having a greater and greater impact and making 
it harder for those future generations to be able to make the 
kinds of decisions that we are making. I think that through our 
shortsightedness, we are just taking so much away from our 
children and our grandchildren that we should be ashamed of 
ourselves. Hopefully, that will begin to change; and obviously, 
as you heard from our panels today, we don't have much time 
within which to change it.
    I hope that all of you will do everything that you probably 
can to continue to talk about these issues, continue to push 
Members of Congress. There's not a lot of pushing you can do on 
us or the others that you have here this morning, but there are 
plenty of Members of Congress that need to understand that we 
have to change what we have been doing.
    I want to also mention to you that all of the materials 
that have been generated today will be on the website, which is 
www.science.house.gov, for those of you who want access to it. 
I would encourage you to go there and use that as well to keep 
in touch with our Science Committee and other Members of 
Congress through that website.
    At this time, I want to thank all of you for appearing 
before the Subcommittee today. I think it's been a very 
interesting discussion. There's been suggestions that hopefully 
will indeed turn into legislation that will help change some of 
these things. I must say that under the rules of this 
committee, the record will be held open for two weeks for 
Members to submit additional statements and any additional 
questions that they might have for the witnesses. At this time 
I will adjourn this hearing, and I thank all of you for 
participating.
    [Whereupon, at 1:17 p.m., the Subcommittee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by John Hofmeister, President, Shell Oil Company

Questions submitted by Representative Adrian Smith

Q1.  What technological advances are needed to develop the domestic oil 
and gas resources of the United States?

A1. An assortment of technologies will be needed to responsibly and 
sustainably recover the vast resources of the United States. Which 
technologies will prove to be best is yet to become clear. The 
following highlights some of what will be required:

        1.  Access to all potential hydrocarbon basins in the U.S. 
        onshore and offshore so energy companies can apply and finish 
        development of our new technologies and learn about new 
        settings, reservoirs and hydrocarbon opportunities.

        2.  All reservoirs are getting small, low pressure, viscous, 
        corrosive or all combinations of the aforementioned. Even giant 
        income cannot pay the technology and development cost to do 
        these economically.

        3.  The cost of doing business has outstripped the oil price. 
        Only technology breakthroughs can make many projects feasible.

        4.  Much of the U.S. infrastructure has aged. The cost to 
        sustain this infrastructure is often prohibitive without 
        technology breakthroughs.

        5.  Despite overall top performance, we do not have a social 
        and government environment encouraging domestic energy and fuel 
        development from oil and gas. New technologies must be 
        developed to allow economically possible environmental 
        performance in these more challenging projects. This must be 
        coupled with support by and confidence in the technology and 
        our ability to sustainably do our job.

        6.  Tight rock, deep formations, deepwater, low hydrocarbon 
        saturations, small compartmentalized accumulations, new 
        hydrocarbon and rock types are all conspiring to dramatically 
        increase risk and uncertainty in exploration. Only big 
        technology breakthroughs will deliver most of the reservoirs of 
        the future.

        7.  Complexity in the business is growing rapidly at the same 
        time we are having difficulty getting information from our 
        existing tools. This is made worse because, in many places, we 
        are limited by cost or legislation on the number of wells 
        (information points) we can drill. Ability to gather, analyze 
        and take action on the analysis results must greatly increase 
        in information volume and speed while accommodating the 
        increasingly limited pool of skilled and experienced workers.

        8.  We must both improve recovery and have new recovery 
        mechanisms and techniques since the remaining U.S. capacity is 
        oil left in old fields or new, more difficult crude in new 
        areas. These have to be sustainable and economical under much 
        more difficult conditions than in the past.

        9.  Related to the above is the need for technologies that will 
        speed up development, allow phased and reusable/movable 
        production systems, faster and lower cost drilling, and also 
        reduce our carbon footprint.

Q2.  What impact will the loss of tax credits have on the U.S. oil and 
gas industry?

A2. At a time when we need energy companies to continue the record 
level of investment in developing our energy resources, it is 
unfortunate that some in Congress are pursuing tax policies that will 
discourage this needed investment. These policies include proposals 
such as the repeal of the domestic manufacturing deduction for select 
U.S. oil and gas companies, which would reduce domestic oil and gas 
production and negatively affect our nation's energy security. Energy 
companies invest significant amounts in new technologies, new 
production, refining and product distribution infrastructure and 
environmental improvements, and make such investments considering long-
term commitments. Continued and sustained capital expenditures are 
required each year to find and develop energy resources, despite the 
cyclical nature of the business and risks involved. Given the 
industry's long-term capital allocation models in a global and free 
marketplace, it is important to have stable and consistent tax policy 
in order to meet all of the challenges ahead.

Q3.  In what way could federal policies level the playing field for all 
energy solutions, thereby promoting research and development in a broad 
range of energy solutions which will survive in the marketplace?

A3. Federal policies should not pick winners and losers among possible 
technology solutions. Fair and equal opportunities promoting research 
and development for a broad array of innovative solutions to our energy 
needs should include a wide range of applications, since we cannot 
currently predict which ones will survive in the marketplace. 
Government policies can and do play a role. Policies currently limit 
access to domestic resources, which is not reasonable. Research and 
development can be incentivized through federal funding, tax policy and 
other innovative programs.
                   Answers to Post-Hearing Questions
Responses by Thomas R. Standish, Group President of Regulated 
        Operations, CenterPoint Energy

Questions submitted by Representative Adrian Smith

Q1.  What technological advances are needed to develop the domestic oil 
and gas resources of the United States?

A1. In the power sector it's becoming obvious that gas-fueled 
generation will be the short-term bridge in transitioning from fossil-
fired generation to renewable technology such as wind and solar as well 
as nuclear and cleaner coal technology. Hence, with respect to gas 
resources, existing exploration efforts need to continue to evolve 
through the development of more efficient tools while alternative or 
unconventional discovery efforts need to also be encouraged. These 
alternative efforts would include the enhanced exploration of ``tight 
sand'' gas, shale, coal bed methane, and methane hydrates.

Q2.  What impact will the loss of tax credits have on the U.S. oil and 
gas industry?

A2. Tax credits were granted to help encourage research and development 
of new technologies and offset the cost of exploration in areas that 
otherwise would not be economical to explore when energy prices were 
low (e.g., shale, tight sands, and coal seam formations). In today's 
market of high oil and gas costs, one might expect that energy 
companies would be able to cover the cost of exploration and production 
in those formerly uneconomic areas. For example, once natural gas 
prices rose above $5 per MMBtu the U.S. experienced a proliferation of 
drilling in the various shale formations throughout the mid-continent 
area. Without tax credits, one could expect the energy companies might 
reduce exploration in areas where their cost are highest.

Q3.  In what way could federal policies level the playing field for all 
energy solutions, thereby promoting research and development in a broad 
range of energy solutions which will survive the marketplace?

A3. With respect to the power industry federal policies should promote 
research and development of historically uneconomical and underutilized 
energy sources such as renewable energy sources (e.g., solar, wind, 
biofuels made or recovered from waste, etc.) and also encourage the 
development of demand response to time of use and real-time prices. 
This might call for research grants or new tax credits to companies 
that would develop renewable energy technologies and demand-side 
sources so that they can quickly be brought to market while also 
maintaining current tax credits for existing gas and oil exploration.
    Policies and incentives for cleaner coal, nuclear generation as 
well as the development of technologies that would create more 
efficient use of oil and gas should also be sought.
                   Answers to Post-Hearing Questions
Responses by Walter G. Chapman, W.W. Akers Professor; Director, Energy 
        and Environment Systems Institute, Rice University

Questions submitted by Representative Adrian Smith

Q1.  What technological advances are needed to develop the domestic oil 
and gas resources of the United States?

A1. Many technological advances are needed to maximize recovery of 
domestic oil and gas. One example where advances are needed is in more 
efficient oil recovery. Conventional oil recovery technologies produce 
only about one third of the oil originally in place--leaving behind 
approximately two thirds of the oil in a reservoir. Advances in 
enhanced oil recovery can potentially recover two thirds or more of the 
oil originally in place. Although enhanced oil recovery shows great 
promise, DOE funding of university research for enhanced oil recovery 
essentially ended in the 1990's. The lack of funding results in a lack 
of new knowledge, but it also results in a lack of new scientists and 
engineers available to more the technology forward.
    In the area of natural gas, the organization, Research Partnership 
to Secure Energy for America (www.RPSEA.org  ) 
has received funding through the Department of Energy based on the 
Energy Act of 2005 to determine the technology gaps and to fund 
research and development in this area. Still, RPSEA is limited by law 
and funding in its scope.
    But technological advances alone are only part of the answer. The 
oil and gas industry, as well as other high technology industries, need 
a steady supply of educated workers. To maintain economic leadership in 
all high technology industries, the United States must commit itself to 
encouraging students to study science and engineering and invest in 
improved science and engineering education programs. One of the most 
beneficial ways to invest is to increase funding for basic and applied 
research. The United States needs the equivalent of Apollo level 
funding in research to regain our technological leadership in the 
world.

Q2.  What impact will the loss of tax credits have on the U.S. oil and 
gas industry?

A2. Since this question is outside of my area of expertise, I cannot 
answer.

Q3.  In what way could federal policies level the playing field for all 
energy solutions, thereby promoting research and development in a broad 
range of energy solutions which will survive in the marketplace?

A3. In my testimony, I stated that a portfolio of energy solutions will 
be needed. The next breakthrough in energy cannot be ``legislated.'' 
Research funding must be increased across the range of energy 
technologies as well as by significantly increasing funding for basic 
research. I suggest at least doubling the U.S. investment in 
fundamental research and increasing investment in science and 
engineering education. I support the guidelines listed in the National 
Academies report ``Rising Above the Gathering Storm: Energizing and 
Employing America for a Brighter Economic Future.''
                   Answers to Post-Hearing Questions
Responses by Robert L. Hirsch, Senior Energy Advisor, Management 
        Information Services, Inc.

Questions submitted by Representative Adrian Smith

Q1.  What technological advances are needed to develop the domestic oil 
and gas resources of the United States?

A1. None would make a large difference. The issues are almost all 
human--primarily restricted access to potentially attractive areas for 
exploration and production.

Q2.  What impact will the loss of tax credits have on the U.S. oil and 
gas industry?

A2. I'm not qualified to provide a meaningful answer.

Q3.  In what way could federal policies level the playing field for all 
energy solutions, thereby promoting research and development in a broad 
range of energy solutions which will survive in the marketplace?

A3. The Federal Government needs to stop picking winners and losers and 
let the marketplace do it. The corn-ethanol mandates are a disaster 
because of marginal energy benefits and serious negative environmental 
impacts. Mandates for renewables such as wind and photovoltaics are 
unfortunate because those technologies cannot provide large-scale 
electric power because of their inherent intermittence. The public 
demands electric power-on-demand, not when the wind blows or the sun 
shines. Helping new technologies with temporary tax subsidies or 
benefits can be both legitimate and beneficial, but ``temporary'' too 
often becomes permanent, which distorts the marketplace and hinders 
attempts to build more practical, more reliable power systems.
    All energy sources have strengths and weaknesses, and too often 
people are mesmerized by ``the new thing'' that promises to be better 
than what is currently satisfying our power needs. Too often ``the new 
thing'' turns out to have ``warts'' that can be worse than what 
currently serves us. Since it is not politically correct to criticize 
renewables, politicians are not being told the inherent practical 
limits of these ``wonder technologies'' and are thus not getting the 
kind of straight talk that is needed to implement optimal energy 
policies.


                                   

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