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

                         RETAIL GAS PRICES (PART II):
                        COMPETITION IN THE OIL INDUSTRY

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

                                    HEARING

                                   BEFORE THE

                        TASK FORCE ON COMPETITION POLICY
                               AND ANTITRUST LAWS

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 22, 2008

                                   __________

                               Serial No. 110-180

                                   __________

             Printed for the use of the Committee on the Judiciary

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

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                           COMMITTEE ON THE JUDICIARY

                     JOHN CONYERS, Jr., Michigan, Chairman
    HOWARD L. BERMAN, California         LAMAR SMITH, Texas
    RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr.,
    JERROLD NADLER, New York                 Wisconsin
    ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
    MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
    ZOE LOFGREN, California              BOB GOODLATTE, Virginia
    SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
    MAXINE WATERS, California            DANIEL E. LUNGREN, California
    WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
    ROBERT WEXLER, Florida               RIC KELLER, Florida
    LINDA T. SANCHEZ, California         DARRELL ISSA, California
    STEVE COHEN, Tennessee               MIKE PENCE, Indiana
    HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
    BETTY SUTTON, Ohio                   STEVE KING, Iowa
    LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
    BRAD SHERMAN, California             TRENT FRANKS, Arizona
    TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
    ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
    ADAM B. SCHIFF, California
    ARTUR DAVIS, Alabama
    DEBBIE WASSERMAN SCHULTZ, Florida
    KEITH ELLISON, Minnesota

                Perry Apelbaum, Staff Director and Chief Counsel
          Sean McLaughlin, Minority Chief of Staff and General Counsel
                                     ------

              Task Force on Competition Policy and Antitrust Laws

                     JOHN CONYERS, Jr., Michigan, Chairman

    RICK BOUCHER, Virginia               STEVE CHABOT, Ohio
    ZOE LOFGREN, California              RIC KELLER, Florida
    SHEILA JACKSON LEE, Texas            F. JAMES SENSENBRENNER, JR.,
    MAXINE WATERS, California            Wisconsin
    STEVE COHEN, Tennessee               BOB GOODLATTE, Virginia
    BETTY SUTTON, Ohio                   CHRIS CANNON, Utah
    ANTHONY D. WEINER, New York          DARRELL ISSA, California
    DEBBIE WASSERMAN SCHULTZ, Florida    TOM FEENEY, Florida
                                         LAMAR SMITH, Texas, Ex Officio

                Perry Apelbaum, Staff Director and Chief Counsel

          Sean McLaughlin, Minority Chief of Staff and General Counsel

                                C O N T E N T S

                                  ----------

                                  MAY 22, 2008

                                                                       Page

                               OPENING STATEMENTS

    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, and Chairman, Task Force on
      Competition Policy and Antitrust Laws..........................     1
    The Honorable Lamar Smith, a Representative in Congress from the
      State of Texas, and Member (Ex Officio), Task Force on
      Competition Policy and Antitrust Laws..........................     2
    The Honorable Sheila Jackson Lee, a Representative in Congress
      from the State of Texas, and Member, Task Force on Competition
      Policy and Antitrust Laws......................................     6
    The Honorable Steve Chabot, a Representative in Congress from the
      State of Ohio, and Ranking Member, Task Force on Competition
      Policy and Antitrust Laws......................................     7
    The Honorable Steve Cohen, a Representative in Congress from the
      State of Tennessee, and Member, Task Force on Competition
      Policy and Antitrust Laws......................................     9
    The Honorable Ric Keller, a Representative in Congress from the
      State of Florida, and Member, Task Force on Competition Policy
      and Antitrust Laws.............................................    10
    The Honorable Betty Sutton, a Representative in Congress from the
      State of Ohio, and Member, Task Force on Competition Policy and
      Antitrust Laws.................................................    10
    The Honorable Chris Cannon, a Representative in Congress from the
      State of Utah, and Member, Task Force on Competition Policy and
      Antitrust Laws.................................................    12
    The Honorable Debbie Wasserman Shultz, a Representative in
      Congress from the State of Florida, and Member, Task Force on
      Competition Policy and Antitrust Laws..........................    14
    The Honorable Darrell Issa, a Representative in Congress from the
      State of California, and Member, Task Force on Competition
      Policy and Antitrust Laws......................................    15
    The Honorable Tom Feeney, a Representative in Congress from the
      State of Florida, and Member, Task Force on Competition Policy
      and Antitrust Laws.............................................    16

                                   WITNESSES

    Mr. John Hofmeister, U.S. President, Shell Oil Company
      Oral Testimony.................................................    18
      Prepared Statement.............................................    21
    Mr. Peter J. Robertson, Vice Chairman of the Board, Chevron
      Corporation
      Oral Testimony.................................................    34
      Prepared Statement.............................................    36
    Mr. John E. Lowe, Executive Vice President, ConocoPhillips
      Oral Testimony.................................................    53
      Prepared Statement.............................................    55
    Mr. Robert A. Malone, Chairman and President, BP America
      Oral Testimony.................................................   107
      Prepared Statement.............................................   109
    Mr. J. Stephen Simon, Senior Vice President, Exxon Mobil
      Corporation
      Oral Testimony.................................................   132
      Prepared Statement.............................................   134

                                    APPENDIX

    Material Submitted for the Hearing Record........................   215

                         RETAIL GAS PRICES (PART II):
                        COMPETITION IN THE OIL INDUSTRY

                                  ----------

                             THURSDAY, MAY 22, 2008

                  House of Representatives,
               Task Force on Competition Policy
                                     and Antitrust Laws
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Task Force met, pursuant to notice, at 11:12 a.m., in
    room 2141, Rayburn House Office Building, the Honorable John
    Conyers, Jr. (Chairman of the Task Force) presiding.
        Present: Representatives Conyers, Jackson Lee, Waters,
    Cohen, Sutton, Wasserman Schultz, Smith, Chabot, Keller,
    Cannon, Issa, and Feeney.
        Also present: Representative Peterson.
        Staff present: Anant Raut, Majority Counsel; and Stewart
    Jeffries, Minority Counsel.
        Mr. Conyers. Good morning, ladies and gentlemen. We are
    ready to begin.
        We welcome you all here again. Many of you have almost
    become professional witnesses, you have been here so many
    times.
        This is the second hearing that the Antitrust Task Force
    has held, but I am putting in the record all the hearings that
    have been held on the Hill with the Senate and the House, with
    our various Committees. It comes to a very large number.
        The reason these hearings are called, gentlemen, is that
    every one of my colleagues on this Committee join with me in
    wanting to figure ways to bring the price of gas down at the
    pump. We all want to do it.
        The question is how do we do it. And it is not that you are
    the ultimate resolvers of this issue, but certainly you are
    among the major players. And it is in that sense that we begin
    these hearings.
        On May 7, when we had our first hearing on this subject,
    the national average price of gas was $3.66. Today, it is
    $3.81. In Washington, DC, it is $4. In other places, it is just
    as much.
        So we come here to explore this. We thank you so much for
    your cooperation.
        I wanted to just recognize my colleagues for a couple
    minutes for them to bring their welcome and identify the key
    point that is on their mind when they come today.
        I will start with the Ranking Member of the full Committee,
    Mr. Smith of Texas, for his comments, and then I will go to
    Steve Chabot.
        Mr. Smith. Thank you, Mr. Chairman.
        Mr. Chairman, fuel prices at the pump have caused a
    significant strain on individuals' and businesses' finances
    across the nation. This week, the average price for gallon of
    gas hit $3.84, a new high.
        Unfortunately, some people are playing a blame game when it
    comes to prices at the pump, often pointing fingers at big oil.
    According to the Federal Trade Commission, though, there is no
    collusion to fix prices in the retail sale of gasoline.
        So what can Congress do to reduce fuel prices?
        Congress should be working to expand the domestic supply of
    energy. House Democratic leaders have rejected opportunities to
    increase that supply, which would result in a drop in prices at
    the pump.
        For example, last August, 95 percent of House Democrats
    voted against a proposal that would have opened up the outer
    continental shelf and the Arctic National Wildlife Refuge to
    drilling for oil and natural gas.
        Only one-tenth of 1 percent of ANWR would be impacted. The
    area is frozen tundra, not exactly where the caribou roam.
    There may be as many as 86 billion barrels of oil in the outer
    continental shelf and Arctic National Wildlife refuge, enough
    oil to keep America going for 5 years, with no foreign imports
    at all.
        Drilling in ANWR alone would increase U.S. crude oil
    production by 20 percent of today's levels, which would mean
    lower gas prices in the future.
        While no one contends that opening up the OCS and ANWR to
    drilling will make United States energy independent overnight,
    it is a step in the right direction.
        Many believe that alternative fuels are the solution to gas
    prices and while alternative sources of energy are important,
    including solar and wind, they account for only 6 percent of
    U.S. energy consumption.
        Even if we doubled our reliance on these types of energy,
    increasing 100 percent, it would hardly be noticed at the gas
    pump.
        With fossil fuels constituting so much of our energy
    consumption, both now and in the future, expanding our access
    to oil and natural gas must be a part of the solution in
    reducing gasoline prices.
        An excess profits tax on the oil companies has been
    proposed. While it is true that these companies have strong
    profits, profits are necessary for companies to expand, produce
    and create more jobs.
        To put these profits in perspective, last year, oil and gas
    companies had a profit margin of 8.3 percent, lower than the
    8.9 percent profit margin enjoyed by all manufacturing sectors
    and significantly lower than the 13 percent profit enjoyed by
    computer companies and the 18 percent profit in
    pharmaceuticals.
        Do we really want to start punishing any business that
    makes more than an 8 percent profit?
        Regarding energy companies, an excess profits tax would
    only serve to discourage them from investing more in their
    exploration, production and refining capabilities. This is not
    the way to reduce the price of gas.
        Not only would an excess profits tax not produce an extra
    drop of oil, it would drive down the value of oil company
    stocks, which are owned by millions of Americans and their
    pension funds, retirement funds and mutual funds. In fact, all
    Federal employees who participate in the thrift savings plan
    have a stake in the energy companies.
        There is an old cartoon in which the character, Pogo, says,
    ``We have met the enemy and he is us.''
        It is Congress who needs to be held accountable for not
    supporting policies that would increase the supply of oil and
    reduce the price of gas.
        There are no short-term fixes to this problem. But over the
    long term, Congress can help reduce the cost of gas at the
    pump.
        Mr. Chairman, one final request, a unanimous consent
    request to have an editorial that was in ``Investor's Business
    Daily'' today made a part of the record.
        And I will yield back the balance of my time.
        Mr. Conyers. Without objection.
        [The information referred to follows:]

        Mr. Conyers. I am pleased now to recognize the gentlelady
    from Houston, TX, Sheila Jackson Lee.
        Ms. Jackson Lee. Mr. Chairman, let me, first of all,
    express my appreciation to you and this Committee for the
    insight of convening such a very important hearing and previous
    hearing that we have had.
        I think it is well known that Houston claims and still
    remains the energy capital of the world. Many of these
    companies are my constituents and I proudly represent their
    employees, and I know that they are hardworking and patriotic
    Americans.
        But as we proceed in this hearing, I hope that the approach
    will be a collective and collaborative effort of solutions. We
    already know the core principals and proposals of the industry,
    which is that this Congress has not worked effectively--when I
    say that, this bipartisan Congress--over the long term and that
    the answers to our problems are at our feet.
        I would turn the cards back toward the industry and hope,
    in this process, this hearing, that you will offer creative
    solutions. Frankly, I believe that the issue of speculators,
    which many Americans are unaware of, add to the price.
        I think the structure of OPEC, which many of you believe
    cannot be touched, adds to the price.
        I do think that we have to be broad-based in our thoughts
    about how we secure more resources. I am a champion of drilling
    offshore of Texas and Louisiana. Why? Because there is a
    consensus. You have done it well. You have done it an
    environmentally safe manner.
        I think the other interest that I have, and I do want to
    make mention of your colleague, Mr. Hofmeister, avocation in
    the road, and I am going to extend an invitation for a
    roundtable discussion in our city by all of you, at my
    invitation, on the question of solutions.
        But this is an antitrust Committee. So we will be asking
    the hard questions. What is impacting these prices? Are there
    collusions and price fixing, in the ultimate results of the
    truck drivers who we heard from who are losing their business
    or to the moms and pops who are trying to go on a limited
    vacation over the summer or carpools.
        All of this has a major impact on the mindset and the
    attitude that Americans have about how their country is
    treating them.
        I think all of us, regardless of whether you are in the
    private sector, you are, in fact, public servants. You have a
    utility, a need that we cannot survive without.
        Yes, we can look alternatively and we have done a good job.
    This Committee, the Energy and Commerce, the leadership of this
    Congress, Democratic leadership, looking at R&D and looking at
    alternatives, but, Mr. Chairman, I do believe that we have to
    have a balanced energy policy that includes a variety of
    resources, which these gentlemen represent.
        Let us find a way that the callers that spoke to me this
    morning ask, and that is to relieve the pain. There may not be
    a short term if we think narrowly, but there may be a short
    term if we think broadly.
        And I do think we have ideas that would warrant that and I
    hope to pose questions, Mr. Chairman, along those lines.
        I yield back.
        Mr. Conyers. I thank you, Sheila Jackson Lee.
        We would now turn to the Ranking Member of the Antitrust
    Task Force, Steve Chabot of Ohio.
        Mr. Chabot. Thank you, Mr. Chairman. I would like to thank
    you for holding this hearing, with our nation facing record
    high gas prices and energy prices.
        And as we were preparing this speech, this was the part in
    the speech where we had a number and, over the past week to 10
    days, since we knew we were going to have this hearing, we had
    to keep revising this figure and we have been scratching it out
    and putting it in.
        And now, this morning, my staff gave me this morning's
    ``Cincinnati Enquirer'' article saying that ``gas zips past $4
    mark.'' So it is now $4 or higher than $4 in Cincinnati, Ohio.
        And there is not an issue that we hear more about from our
    constituents than when is Congress going to do something about
    the high gas prices and how they are affecting their lives.
        The public is demanding answers to questions such as, ``Are
    we going to make energy more affordable in the short term? How
    are we going to make our nation more energy independent in the
    long term? What will be our primary source of energy in the
    future and how are we going to get there?''
        In response, this Congress gives them legislation that
    purports to fix our energy problems simply by raising taxes by
    billions of dollars on domestic energy companies and hoping for
    the best.
        That is not an energy policy. That is what amounts to a tax
    increase on every American family. And let's face it. For the
    most part, the oil companies are going to pass that cost on to
    the consumers at the gas pump. So they are basically just
    taxing the public.
        We should be debating legislation to streamline the Federal
    permitting process that has stifled construction of new
    refineries. We haven't built one in about 32 years, the last
    one back in 1976.
        We had 324 oil refineries back then. We have got fewer than
    150 now, 30 years later.
        We should be talking about benefitting consumers by
    simplifying our nation's fragmented gasoline supply. The number
    of regional boutique fuels restrict the movement of our fuel
    supply and raises costs on Americans at the pump.
        And as Lamar Smith indicated before, we should be opening
    up Alaska's Arctic National Wildlife Refuge, ANWR, and the
    outer continental shelf for energy exploration. And all
    indications are that, combined, there is approximately 16
    billion barrels in ANWR and 86 billion barrels in the outer
    continental shelf; so the two together, about 100 billion
    barrels of oil and, also, millions of cubic--excuse me--
    trillions of cubic feet of natural gas.
        Previous Congresses made the decision to keep these vast
    reserves off limits. I know I personally voted 11 times since I
    have been here to open up ANWR. We had the votes to pass it in
    the House, but, unfortunately, it would go over in the Senate
    and be killed over there.
        Of course, the price of a barrel of oil was much less then,
    too. It is now about $100--well, here we go again--$130 a
    barrel, $135 a barrel, and that is since yesterday, and reports
    indicate that it may reach $150 a barrel at some point this
    summer, this says. God only knows where it is going to be this
    summer at this point.
        It is time we revisit this very important issue. What about
    encouraging the construction of nuclear power plants? We began
    that process in 2005 with the passage of the Energy Policy Act,
    but as we sit here today, we haven't built a new plant in
    decades.
        European and Asian nations are building them by the dozens.
    India has nine new plants under construction. Japan has built
    five more and China is--they plan to build dozens of new
    reactors.
        Let's talk about how we intend to compete with China, who
    is canvassing the globe in its quest to ensure a reliable
    supply of oil. Reports indicate that the Chinese are forming
    energy partnerships with rogue nations like Iran and Cuba, and
    Cuba is planning to work with China to drill of the Florida
    Keys.
        So we are not going to go after that oil, but Cuba and
    China are. It is an absolute outrage.
        Shouldn't we be talking about boosting domestic production
    simply so we wouldn't have to rely on the mood of third world
    dictators like Hugo Chavez? Wouldn't it be nice if prices
    didn't spike at our neighborhood gas stations when unrest in
    nations such as Nigeria occur and they impact us here directly?
        Now, some may argue, and they might well be right, that oil
    isn't the long-term answer. It is a finite resource that may be
    exhausted or very scarce some years down the road, and China
    and India continue to develop and to soak up more of the oil
    that is available out there.
        So maybe oil isn't the energy of the future, but shouldn't
    we consider boosting our oil and natural gas supplies,
    increasing our energy independence, that might just buy is the
    time necessary to develop the next fuel source?
        Perhaps hydrogen fuel cell technology will take us into the
    next century or maybe other renewable resources that could be a
    combination of both or maybe something that we haven't even
    discovered yet? We don't know.
        But we do know that America has substantial reserves of oil
    and natural gas that we have locked up, that this Congress has
    locked up. We have placed it off limits.
        These resources could be the bridge that allows America to
    cross over the choppy waters of OPEC and third world dictators
    to the secure footing of affordable and secure energy sources
    of tomorrow.
        Just as no nation has ever taxed itself into prosperity, it
    is simply not plausible to believe that we can tax and regulate
    our way to energy independence. Yet, that has been the
    majority's prescription and it is clearly failing.
        As we all know, we remember this, we have heard it before,
    that Speaker Pelosi said 18 months ago that she had a plan,
    that they were going to--that prices at the pump were
    outrageous. They were $2.30 a gallon, $2.30. That was 18 months
    ago. Now, in my district, they are $4 a gallon, getting close
    to double what they were 18 months ago.
        That was one heck of a plan.
        I yield back the balance of my time.
        Mr. Conyers. Thank you.
        Steven Cohen, Memphis, Tennessee.
        Mr. Cohen. Thank you, Mr. Chairman.
        And thank the panel here for coming before us.
        Years ago, I think it was said, in Jefferson's time that
    the economy basically was grounded in land and farming and that
    agriculture was important, that the land was the foundation of
    society, and indeed it was, but that the land really belonged
    to everybody, because society was based upon it.
        Today, oil is really what the economy is based on and,
    accordingly, everybody has an interest in oil, because society
    itself is so wedded to it.
        You, as the leaders of the companies that produce and sell
    the oil, in my opinion, and I hope you agree and, in your
    remarks, will comment on this, have a duty to all of society to
    do the utmost to make this society a part of the riches that
    you have, to see that the price doesn't go up and people are
    not being economically stretched, as they are, and to find
    alternatives to fossil fuels so that we don't endanger greater
    than we already have the planet which we live and the very
    existence of man and all other species and the flora and the
    fauna that we presently have, some of which are threatened
    because of global warming.
        You have a responsibility, a great responsibility, almost
    like a government unto yourself, to see that society is
    furthered and is perpetuated in a way that does not jeopardize
    the planet or does not jeopardize everybody's opportunity to
    have a share.
        The price of gas is a regressive economic factor and poor
    people suffer more than a wealthy person does. I can afford $4
    gas. But most people in my district cannot.
        I heard something on ``NPR'' today that airlines can't
    continue with this $125 a barrel, and that is why they are
    charging people to put luggage on the airplane.
        A lot of society and a lot of things we are used to are
    changing and I would just submit to you, while you have a duty
    to your stockholders, and I am one of them, that you have a
    greater duty to the planet and to the people, American people,
    people on this earth, because society has such an investment in
    what you have as your business interest.
        And I would urge you to think about some social policies
    and to try to understand the responsibility you have to
    everybody to be cautious in the way that you operate your
    companies.
        What happened in Alaska with the Valdez is unforgiveable
    and environmental disasters can't really be compensated. Their
    damage is never undone. But the damage you are doing to the
    economy can be corrected and I would just ask you to look
    within your own mortal souls and try to do something to help
    everybody out there and to help us get off of our reliance on
    oil and find alternative energy sources, which I know you can.
        And I hope that we hear some responses to this in your
    testimony.
        Thank you, Mr. Chairman.
        Mr. Conyers. Thanks, Steve Cohen.
        From Florida, Ric Keller?
        Mr. Keller. Thank you, Mr. Chairman.
        I am going to make my remarks very brief. I have got a ton
    of questions for our oil company executives and I want to get
    to them as soon as possible by waiting to let them testify.
        So let me just briefly say that in terms of solutions,
    which is where we are all going right now, I firmly believe
    that we do need more exploration in ANWR, more exploration of
    our deepwater oil reserves, more refineries, more alternative
    energy solutions, like nuclear energy.
        On the conservation side, I think we do need better
    conservation efforts, like higher fuel efficiency standards and
    tax incentives for hybrids.
        I believe the oil company executives, from their testimony
    yesterday, have done a good and credible job of explaining that
    crude oil increases are the main reason driving the higher gas
    prices. I think they have done a good and credible job of
    explaining that the crude oil prices are governed by the law of
    supply and demand, and the one law we can't change here in
    Congress is the law of supply and demand.
        I believe, however, on the flipside, that the Achilles heel
    of what I have heard from their testimony is the somewhat
    exorbitant pay that some of these executives have received in
    retirement packages and otherwise, as well as the failure of
    these companies to build any new refineries in the United
    States over the past 32 years.
        And I want to give them the opportunity fairly to address
    both of those questions, because those are some of the
    perceptions that are on people's minds that they need to
    address, even though they may not directly impact the price of
    crude oil that we are going to pay.
        So I will give them the chance to address those perceptions
    when I get to my questions. But as Woody Allen said, ``Eighty
    percent of life is showing up,'' and I thank you for showing
    up.
        And I yield back the balance of my time.
        Mr. Conyers. Thanks, Ric Keller.
        Betty Sutton, Ohio?
        Ms. Sutton. Thank you, Mr. Chairman, for holding this
    important hearing today.
        We began the discussions of what we can do in this
    Committee to address outrageous gas prices 2 weeks ago. And I
    know the American people have several questions they would like
    to ask our nation's oil executives, so I thank our witnesses
    for appearing here today.
        When we met 2 weeks ago, and this has been alluded to by my
    colleague from Ohio, gas prices stood at a record national
    average of $3.61 a gallon. Today, the national average is $3.81
    per gallon--rising a penny a day for the past month,
    surpassing, as he indicated, $4 in many part of our country.
        There is no issue that I am hearing more about from my
    constituents than gas prices. They are outraged by what they
    are paying and, frankly, so am I.
        Throughout the President's term of office, he has
    consistently claimed that all is well with the economy. My
    constituents know this is not the case. People are losing their
    jobs and those who manage to hold on while the manufacturing
    base has collapsed around them have seen the value of their
    wages diminish greatly.
        Now, people are spending up to $70--my colleague from
    Florida just told me she spent $68 to fill up her tank--to
    drive to work, to take their children to school and to go about
    their daily lives.
        The trucking industry is suffering. A single fill-up costs
    truckers over $1,000. That is astonishing.
        We heard in our last hearing about the trickle-down effect
    that diesel prices have on American consumers, leading to
    increases in food prices and other necessities that truck
    drivers and retailers live on.
        The President says the cost-benefit analysis of taking
    immediate action to assist American consumers does not persuade
    him. Luckily for the American people, a veto-proof majority of
    Congress has disagreed.
        Last week, Congress passed legislation, which the President
    has now signed into law, that requires the President to suspend
    purchases of oil for the strategic petroleum reserve through
    the end of 2008, so long as prices remain above $75 a barrel.
        I would also like to thank Chairman Conyers for introducing
    the NOPEC Act, which passed the House earlier this week and
    will eliminate protection for OPEC-controlled entities to allow
    the Department of Justice to bring lawsuits in U.S. courts
    against cartel members.
        We have heard a little bit about one measure supported by
    some of my colleagues across the aisle and our witnesses today
    to drill for oil in ANWR. Yet, the Department of Energy has
    concluded that opening up the Arctic for drilling would reduce
    the price of gasoline by approximately one penny per gallon 20
    years from now.
        The debate over drilling in ANWR has spanned decades,
    always resulting in the same answer--drilling in ANWR is simply
    not the answer to either what we hope is a short-term crisis or
    to our nation's long-term energy needs.
        I often say that my top priorities as a Member of Congress
    are jobs, jobs and jobs. This morning, I heard one of my
    colleagues on this Committee say that our energy future needs
    to be green, green and green, and I could not agree more.
        This Congress has enacted landmark legislation to take
    necessary steps toward a greener and cleaner future for
    America's energy policy, first, by passing the Energy
    Independence and Security Act that was signed into law in
    December and to set new fuel standards for cars and trucks.
        Yesterday, we passed the Energy and Tax Extenders Act,
    which will retain and create hundreds of thousands of green
    energy jobs and provide tax credits for the production of
    renewable energy sources, like solar, wind energy and
    incentives for the production of renewable fuels and energy-
    efficient products.
        In 2007, the oil industry recorded record profits of $150
    billion, 75 percent which was earned by the companies we have
    represented before us today.
        Exxon Mobil alone made $40 billion last year. It is the
    prerogative of the American people to know how these companies
    are possibly in need of the subsidies that the Administration
    has lavished upon them, while they themselves are suffering to
    make ends meet.
        At our last hearing, I expressed concern about the
    Administration's energy policy, written in secret, in my view,
    by Vice President Cheney.
        I look forward to hearing from you the details and the
    nature and extent of the involvement of the companies you
    represent, about your participation in those meetings which led
    this Administration's energy policy.
        I thank the Chairman and yield back the balance of my time.
        Mr. Conyers. Thank you very much, Ms. Sutton.
        Chris Cannon of Utah?
        Mr. Cannon. Thank you, Mr. Chairman.
        I appreciate your holding this hearing. I want you all to
    know that I agree entirely with Ms. Sutton that my constituents
    are outraged. I couldn't disagree more about the reasons for
    the outrage.
        This is complicated subject. I am not sure that America and
    American citizens understand it, but they are learning. They
    are figuring it out. And what I hope they understand, very
    quickly, is that the price of oil is going to be a function--
    and I hope we hear from our witnesses today about this--that
    oil is going to be--the cost of gas is going to be derived by
    the availability of oil and the cost of making that oil
    available.
        And the Democrats have, in fact, interfered continuously
    with our ability to make resources available so that the price
    will come down. They voted continuously as a body against
    drilling in ANWR, continuously as a body against drilling on
    the outer continental shelf.
        We have had a regulatory proliferation under their period
    of control that has led to a diminishing of our ability to
    drill in the intermountain west. That has expanded, I think,
    somewhat significantly under the current President, but not
    nearly enough to keep up with the demands and the growing
    demand.
        On the other hand, if we are going to get out of the
    problem of the cost, the $4 a gallon cost of gasoline today, we
    have to have another resource. We have to have something new.
        We have a great deal--and I think we will hear some
    information about some of the unconventional sources, but there
    is a vast source of oil that is available to Americans and most
    people just don't understand that technology has caught up to
    the point where we can produce oil out of shale in the
    intermountain west.
        Colorado has the largest amount, Utah the next, and Wyoming
    the third largest amount, and these amounts are in the
    neighborhood of 20 times as much as all the other conventional
    resources combined.
        And, in fact, the amazing thing is that the conventional
    resources are very expensive to get. Technology has brought
    down--and I think several of the companies that are here
    represented today will testify about--or at least I will ask
    some questions about their technology for getting oil out of
    shale.
        It is a matter of cost and a matter of availability. How do
    we reduce the cost? Well, you reduce the cost by having a
    programmatic approach to leasing shale from BLM public land.
        But the Democrats have eliminated that program that we
    instituted as Republicans, when Republicans controlled the
    House and the bill that the President signed.
        That is gone. In addition, we have to have the money
    available to BLM to promote the development of oil shale and to
    deal with the issues and the problems, and the Democrats, in
    their appropriations bill last year, included a rider that
    prohibited spending any money by BLM on development of shale
    oil or developing the opportunity to do shale oil.
        One of the employees of one of the witnesses came in my
    office the other day. He is a guy who worked in Utah, I know
    him well, and he is now running one of these programs, and he
    handed me a list, two sheets of paper that had 42 to 46
    agencies listed on it, many with multiple permits per agency.
        And he said, ``You know, Chris, we have got an 8-year lease
    on shale oil. The permitting is going to take us 7 years. How
    do I tell my board of directors they should invest in this 7-
    year process when the lease is 8 years?''
        If we want to reduce the cost of oil, as a Federal
    Government, we have to get out of the way of industry, which
    now has, by the way, the capital available to, I think, pursue
    these alternatives, get out of the way of industry and let them
    get on with producing oil so that we can reduce the costs.
        And the availability of oil is vast. It is vast. It is
    available in shale in America today. I think most of the people
    here that are going to be witnesses know, and I want the world
    to know, that we have the first commercial test in about 30
    years going on to develop or yield oil out of shale today in
    Utah.
        It is not done on Federal lands, because we can't do it on
    Federal lands. It is being done on school trust lands and I
    believe that by about mid-September, you are going to see that
    they are able to get oil out of shale. Based upon their tests,
    they believe that that could be done for about $30 a barrel.
        Thirty dollars a barrel in a world where we are paying $4--
    for oil, we are paying about $138 yesterday. It is obscene that
    we have an environment where we are grilling these gentlemen
    because their companies, competing with each other, are trying
    to get the better share of the market in a world where they are
    constrained by resource.
        And America has vast resources on its public lands, which
    it has locked up and kept from getting to the gas pump, kept
    from getting to poor people.
        You know, Mr. Chairman, you and I have worked on many
    issues together where the commonality has been the regressive
    cost of Internet or taxes on telephones and other things like
    that.
        We have a great deal of commonality. It is a crime, it is
    immoral to have the kind of policies that rob food from people
    in the third world, rob food from the poor people in America,
    because we are doing ethanol, and, on the other hand, locking
    up our resources and not letting people develop those resources
    so that we can bring that down cost from $4 a gallon to where
    it ought to be, a $1 a gallon or, frankly, less, but we would
    have to get rid of Federal taxes to bring it down, I think,
    below that level.
        So, Mr. Chairman, this is an issue that I am excited about,
    I am concerned about. We need to change. We can do this as
    Democrats and Republicans and make the world a better place,
    but we have to change policies, and that is within our power to
    do.
        And I thank the Chairman and yield back.
        Mr. Conyers. Well, I am glad this subject has attracted the
    gentleman's attention. Thank you very much.
        Mr. Cannon. I would tell the Chairman that I have lived in
    shale oil Utah for my whole life, but $4 gas has finally got
    the attention of the American people, and I hope that we can be
    common in our views about it here.
        Thank you, Mr. Chairman. I actually yield back this time.
        Mr. Conyers. Thank you.
        I am pleased to recognize, from Florida, Debbie Wasserman
    Schultz.
        Ms. Wasserman Schultz. Thank you, Mr. Chairman.
        You know, saying that Americans don't understand how oil
    impacts the price of gas, it is that kind of patronizing
    attitude that has shaken the confidence of the American people
    in their government.
        With all due respect, the whole point of this hearing is so
    that we can identify ways that we can dramatically reduce the
    cost of gas or even maybe reduce the cost of it a little bit,
    because I am a mom with three young kids who just filled up my
    minivan the other day for $68.
        That is real money. I mean, it might not be real money to
    the five people right in front of us, because $68 is like a
    nickel, based on the income that you all earn. But we cannot
    continue to expect to drill our way out of the cost of gas
    problem.
        And I am a Floridian, and I oppose drilling off the coast
    of the outer continental shelf. But we need to understand
    several things. Since 2000, the amount of drilling that we have
    done has actually increased dramatically, exploded over the
    last 4 years.
        Has the price of gas done down because of that? No. In
    fact, as drilling has increased, the price has just kept going
    up.
        The Federal Government has given oil companies more
    drilling permits than they know what to do with. Since 2003,
    the Federal Government has consistently issued far more permits
    than the oil companies have acted on.
        Are we tying their hands from continuing to drill? No. We
    are certainly not. Of the 42 million acres of Federal land that
    is currently being leased by oil and gas companies, only about
    12 million acres are actually being produced.
        Oil companies don't need new areas to drill. They need to
    use the ones we have already given them. And for all the talk
    from Republicans about how the Democratic Congress has stopped
    the drilling and that we have said no throughout the process,
    there hasn't been one acre closed to more drilling for oil or
    gas.
        So if you could drill it under the Republican Congress, you
    can still drill it under the Democratic Congress.
        And at the end of the day, what I would love to hear during
    the course of this hearing is a solution that does not involve
    more drilling.
        I also find it baffling that we continue to give you
    subsidies and forgive royalty payments for an industry that
    makes record profits, that is the most profitable industry in
    America.
        And on top of that, I have to tell you, it is very
    difficult to stand in front of our constituents, where you are
    an industry that is reaping record profits, while charging
    record prices, and it becomes difficult to answer the question
    that inevitably comes up that you are not manipulating the
    prices, which there is a strong suspicion that you are.
        So those are the kinds of things that I would like to hear
    from you today.
        And thank you, Mr. Chairman. I yield back the balance of my
    time.
        Mr. Conyers. Thank you, Debbie.
        Darrell Issa, California?
        Mr. Issa. Thank you, Mr. Chairman. And thank you for
    putting me after the gentlelady from Florida.
        Her comment is true. America, over decades, has been
    habitually being a NIMBY nation. Well, we ask you to go to
    Kazakhstan for joint ventures, Venezuela, and many countries,
    some of them, quite frankly, less reputable when it comes to
    keeping their promises, some of which have nationalized
    resources, some of which, like Russia, fail to reinvest in
    their natural resources so that although today they have record
    profits, there is no likelihood of record profits in the
    future.
        I am not ashamed to be a Republican. I am proud to be a
    Republican. I am proud to be for all energy solutions and for
    all reasonable energy savings, and I am happy that we are
    having this discussion today, because, in fact, whether or not
    there has been any manipulation in process, I think, those of
    us at the dais have to be part of the solution to make sure
    that there is surplus of opportunities and options to compete
    with real energy alternatives.
        You in front of us represent one energy source or one group
    of energy sources. The truth is that this Congress has, in
    fact, taken many areas of potential new development off limits,
    when we had $9 or $10 or $20 a barrel oil.
        Perhaps some of those didn't make sense. I, for one, have
    watched T. Boone Pickens reinvent himself and become the
    smartest guy going, because he went to Canada, where it takes
    $30 or $40 a barrel to lift or to extract, if you will, from
    the sands, and he now, of course, is making a killing.
        He is making a killing because prices have gone well above
    where they were in the past and where they would be today if,
    in fact, we had a glut rather than a shortage around the world.
        So I, for one, want to hear what we can do to enable you to
    have better access here, which I believe, unlike the gentlelady
    from Florida, a State like mine that has simply said we don't
    want it in our backyard, more available.
        I also would like to and, with my questions, will ask about
    each of your company's worldwide efforts to find and extract
    oil from around the world. I don't expect you to give us all
    the answers on wind energy, although many of your companies
    have invested in that.
        I do expect you to have a plan to reinvest the profits that
    you are earning today into future energy. I am confident you
    will, in fact, have a plan to do that, that unlike the
    gentlelady and the gentlemen, in some cases, on this dais, that
    you will show us where these funds are not simply being sent
    out to stockholders, although well deserved, because many of
    them waited for a long time for these windfall profits, but, in
    fact, reinvest it in future energy.
        For that, I hope the Chairman will be as receptive as I
    will be.
        Mr. Chabot. Would the gentleman yield?
        Mr. Issa. And I would yield to the gentleman from Ohio.
        Mr. Chabot. I thank the gentleman. I will be very quick.
        The gentleman made the comment about America being a NIMBY
    nation, and NIMBY, of course, is ``not in my back yard.'' I
    would just note, when it comes to ANWR, which is in Alaska, the
    overwhelming number of Alaskans are in favor of drilling in
    ANWR.
        I yield back.
        Mr. Issa. Thank you, and reclaiming my time.
        It is very clear that some people in America are not in
    anyone's back yard. That is not true of Hugo Chavez, who will
    drill where he needs to drill. It is certainly not true of the
    Chinese, who were today in preparation for drilling off of
    Cuba's coastline, far closer to the gentlelady from Florida's
    district than, in fact, any of you are allowed to drill.
        So, Mr. Chairman, I do look forward to it. I do believe
    that we have to be vigilant against price manipulation. I also
    think we have to recognize that in absence of sufficient supply
    and too much demand is, in fact, what we also have an
    obligation from this dais to deal with.
        With that, I would happily yield back.
        Mr. Conyers. Thanks, Darrell.
        Tom Feeney, Florida?
        Mr. Feeney. Thank you, Mr. Chairman.
        Congress has had some 45 hearings recently on gas prices
    and energy applications.
        I would say that the essence of these hearings has proved
    two of my favorite maxims. Number one, no situation is so bad
    that Congress can't make it worse, and, two, that Congress is
    constantly trying to repeal the laws of supply and demand and
    economics as though we could reverse gravity by passing a law.
        And I would predict that the more hearings we have and the
    more policies based on the attitude of the liberal leadership,
    the higher prices of gas will go.
        I think it ought to be liberal leaders in Congress that are
    answering questions about how our policies have led to $138 a
    barrel oil.
        Any of you that have had a third grade economics class or
    the first week of economics in high school or college can talk
    about the fundamental laws of supply and demand.
        We can't really impact or stop India or China or much of
    the developing world that 40 years ago was walking around, they
    were rich if they had a bicycle. The demand for energy is
    increasing worldwide and there is simply nothing that the
    American Congress can do about that.
        What we can have an impact on is supply. What have we done
    for 35 years? Energy includes a basket of viable ways to
    produce energy that we need in our personal lives, our
    families, for businesses and for prosperity.
        Yet, for 35 years, we have said that not one nuclear power
    plant can be built to provide energy to Americans. All of our
    nuclear experts went to France. I hate to point out that France
    has a better common sense policy toward energy than the United
    States, but all of our technology and experts went to France.
        They now get 80 percent of their energy needs from clean,
    renewable and affordable nuclear power. We have got 26 percent
    of the world's coal supply right here in the United States, and
    yet we have largely said we are not going to build any new coal
    plants, even though liquefied or gasified coal is cleaner than
    ever.
        We have done this to ourselves. We have stopped any new
    drilling in the Gulf. The oil in shale, as Congressman Cannon
    pointed out, in ANWR, we have deliberately done everything we
    can to reduce the supply of domestic energy.
        And, yes, it is great to talk about long-term needs that I
    support, wind and solar and biofuels are all great potential
    one day opportunities, but in the short run, we have done this
    to ourselves with policies.
        And, finally, I would like to say a word about the
    speculators that supposedly are driving up the cost of gas at
    the pump. Speculators are nothing but sophisticated bettors and
    they are betting on what is going to happen in the future to
    supply and demand.
        They are watching the United States Congress crush
    ourselves in every way that we produce a new policy of taxes or
    regulation or killing supply, and they are betting that this
    Congress will take $4 a gallon gas to $8 or $10 or $12 a gallon
    gas, and I would say if we don't change directions
    dramatically, the speculators are right.
        They are not responsible. They are betting on the
    misperformance and the negligence of the United States
    Congress.
        With that, I will yield back the balance of my time.
        Mr. Conyers. Thank you very much.
        We welcome John Peterson of Pennsylvania sitting with us.
        You have given us an idea, Tom, that I have been talking
    about with Mr. Chabot and Mr. Smith. Maybe we should hold a
    hearing someday and we will be the witnesses and let those we
    have invited ask us the questions, which has what has started
    out this morning.
        We have finished now. We have got three quick votes. We
    will stand in recess and we will resume.
        Thank you for your patience.
        [Recess.]
        Mr. Conyers. Our witnesses are Steve Simon, Senior Vice
    President of Exxon Mobil Oil; Bob Malone, Chairman and
    President of BP America; John Lowe, Executive Vice President,
    ConocoPhillips; Peter Robertson, Vice Chairman of the Board of
    Chevron; and, our lead-off witness, Mr. John Hofmeister, U.S.
    President, Shell Oil Company, who we note has been active with
    the National Urban League, who is stepping down soon and who we
    wish well in his future endeavors.
        Please start us off.

             TESTIMONY OF JOHN HOFMEISTER, U.S. PRESIDENT,
                           SHELL OIL COMPANY

        Mr. Hofmeister. Thank you, Chairman Conyers, Congressman
    Chabot and Members of the Task Force. I appreciate the
    opportunity to testify today.
        In addition to my formal written statement, I welcome the
    chance to share some additional thoughts.
        This is an era of remarkable capital expenditures for major
    new projects and infrastructure, strong investments in
    technology and the aggressive pursuit of energy alternatives.
        We are setting records in one of the most expansionary
    periods the industry has known. Yet, in the face of this
    sustained record spending, the relentless increase in the price
    of a barrel continues.
        As repetitive and uninteresting as it may sound, the
    fundamental laws of supply and demand, I believe, are at work.
    Oil exporting nations are managing their natural resource
    development and production to supply their local and global
    markets in their own self-interest.
        While all oil importing nations buy oil at global prices,
    some, notably, India and China, subsidize the cost of oil
    products to their nation's consumers, feeding the demand for
    more oil, despite record prices.
        They do this to speed economic growth and to ensure a
    competitive advantage relative to other nations.
        Meanwhile, in the United States, access to our own oil and
    gas resources has been limited for the past 30 years,
    prohibiting companies such as Shell from exploring and
    developing resources for the benefit of the American people.
        According to the Department of the Interior, 62 percent of
    all onshore Federal lands are off limits to oil and gas
    development, with restrictions applying to 92 percent of all
    Federal lands.
        In addition, the outer continental shelf moratorium on the
    Atlantic Ocean, the outer continental shelf moratorium on the
    Pacific Ocean, the outer continental shelf moratorium on the
    eastern Gulf of Mexico, congressional bans on onshore oil and
    gas activities in specific areas of the Rockies and Alaska, and
    even a congressional ban on doing an analysis of then resource
    potential for oil and gas in the Atlantic, Pacific, and eastern
    Gulf of Mexico prevent us from bringing new supplies to the
    American people at a time when they desperately need new
    supplies.
        The Argonne National Laboratory, in addition, produced a
    report in 2004 that identified 40 specific Federal policy areas
    that halt, limit, delay or restrict natural gas projects.
        I urge you to review it. It is a very long list. If I may,
    I offer it today, if you would like to include it in the
    record.*
    ---------------------------------------------------------------------------
        *Note: The December 2004 report, ``Environmental Policy and
    Regulatory Constraints to Natural Gas Production,'' has been made a
    permanent part of this record and is archived at the Task Force. The
    report may also be viewed on the Internet at:

        http://www.ipd.anl.gov/anlpubs/2004/12/51652.pdf
        Mr. Conyers. I do and so ordered.
        Mr. Hofmeister. When many of these policies were
    implemented, oil was selling in the single digits, not the
    triple digits we now see. The cumulative effect of these
    policies has been to discourage U.S. investment and send U.S.
    companies abroad to produce new supplies.
        As a result, U.S. production has declined so much that
    nearly 60 percent of daily consumption now comes from foreign
    sources.
        Alternative and renewable energy sources play a role and
    will grow substantially, and Shell is playing a key part in the
    expansion of such technologies.
        But nonetheless, leading experts forecast that by 2030, we
    are still expected to import more than half of our oil.
        The problem of access can be solved in this country by the
    same government that has prohibited it. Congress could, if it
    chose, to lift some or all of the current restrictions on
    exploration and production of oil and gas.
        If the nation set a goal, Mr. Chairman, of increasing
    domestic production by 2 to 3 million barrels a day, by opening
    up new sources for exploration and production, in addition to
    recent laws you have passed to increase the production of
    renewable fuels and to increase miles per gallon in the
    vehicles that we drive, we could demonstrate to the world that
    we are in control of our own destiny.
        If we did this, it would be unnecessary for our national
    leaders to ask the rulers of other sovereign nations to produce
    more oil for U.S. consumers and risk the discomfort of an
    unresponsive reply.
        Instead of continuing the 30-year pattern of limiting
    access, let's implement a national policy that expands access
    where appropriate, and Shell is prepared to participate in such
    a plan.
        In addition to more access, we do need more refining
    capacity. As you know from my written testimony, Shell is a 50
    percent participant in the $7 billion expansion of the Motiva
    Refinery in Port Arthur, Texas.
        This project will expand production of finished products by
    more than 300,000 barrels per day and, when completed, will be
    one of the largest refineries in the United States and in the
    world.
        Refining capacity is particularly critical when it comes to
    the demand for diesel, aviation fuel and heating oil, all
    products that we in the industry refer to as the middle of the
    barrel.
        At home and around the world, demand for these middle
    distillates is growing faster than the demand for gasoline. Due
    to the sustained demand for diesel mobility and air travel,
    prices for these products are also rising faster than other
    products.
        There is simply no way for us to keep up with demand or get
    ahead of it without producing more oil and more refining
    capacity. Higher taxes would only serve to diminish the
    expansion capacity of this critical capital investment, and I
    urge you to resist such punitive policies.
        We are making significant capital investment to produce
    more energy and more kinds of energy to meet global demand.
    Enormous amounts of capital are required and will continue to
    be required to fund our huge scale projects and cutting-edge
    research.
        This year, Shell will spend more than $28 billion, the
    largest capital expenditure in our history and perhaps in the
    oil and gas industry, and this investment includes significant
    investments in wind, solar, hydrogen and biofuels.
        In conclusion, Mr. Chairman, the United States has the
    natural resources, it has the technology, the financial
    capital, the human capital, and the desire to be more energy
    self-sufficient.
        It consecrates the future of new alternatives and more
    traditional hydrocarbons. It can also address the CO2
    reductions that we need for the future. It can continue to
    assure a quality of life for its citizens. It can deliver more
    affordable energy and affordable ways to U.S. consumers.
        By addressing our challenges by considering them as short-
    term, medium-term and long-term opportunities, the U.S. can
    move beyond its current dilemma and build a new era of
    sustainable, affordable energy security.
        I look forward to your questions.
        [The prepared statement of Mr. Hofmeister follows:]
                     Prepared Statement of John Hofmeister

    --------
    Note: The attachments submitted with the prepared statement of John
    Hofmeister, are not reprinted here but are on file with the Task Force
    and can be viewed on the Internet at:

            http://www.ipd.anl.gov/anlpubs/2004/12/51652.pdf

            http://www.shell.com/static//usa/downloads/energy_security/pdf/
            shell_final_
            report.pdf
        Mr. Conyers. Thank you so very much.
        We have all of our resumes, accomplishments and present
    activities that will be in the record.
        Mr. Robertson, welcome.

     TESTIMONY OF PETER J. ROBERTSON, VICE CHAIRMAN OF THE BOARD,
                          CHEVRON CORPORATION

        Mr. Robertson. Good morning, Mr. Chairman, Ranking Member
    Chabot and Members of the Committee.
        My name is Peter Robertson. I am Vice Chairman of Chevron
    Corporation, and I am here today proudly representing our
    59,000 employees.
        I appreciate the opportunity to discuss the energy issues
    facing consumers. We know Americans are frustrated and
    concerned about prices at the gas pump. They are looking for
    answers, and rightly so. They deserve answers from us and
    answers from Congress.
        Last week, the average price of gasoline was $3.72 a
    gallon, up $0.62 from a year ago. Increased crude oil costs
    made up all of the increase and now account for 71 percent of
    the price, or $2.65 a gallon.
        Global issues affecting the supply and demand of crude oil
    are driving prices up to new records. The world is consuming
    oil at an ever increasing rate and it is projected to continue.
        There is dramatically reduced spare supply and no room for
    error. Any disruption or perceived threat of disruption sends
    oil prices up. Oil prices have doubled over the last year due
    to this highly volatile environment.
        So what are we doing about rising oil prices? We are
    reinvesting our record income at record rates in future energy
    supplies, including renewables, and we market energy efficiency
    services.
        This year, we are spending $7.1 billion to develop U.S.
    energy projects, triple what we spent in 2004. In the precious
    5 years, we spent nearly $20 billion in the U.S.
        When it comes to refining and gasoline marketing, we are
    spending $2.3 billion this year on our American facilities.
        Recent upgrades to our U.S. system have added 1 million
    gallons per day and we are working to add more.
        We now produce more than 6 billion gallons of gasoline each
    year, a large number, but that is less than 6 percent of the
    U.S. refining capacity, and, in fact, we own just five of the
    150 U.S. refineries.
        And when it comes to selling gasoline at the street corner,
    we are the fourth largest U.S. retailer, but our market share
    is less than 7 percent.
        There are 168,000 retail sites across the country. We have
    fewer than 10,000 sites, most of which are owned and operated
    by independent businessmen and women.
        Given the number of players involved, there can be no doubt
    competition for sales is fierce. Consumer demand has fallen in
    the first 2 months of this year.
        U.S. gasoline production has been at record levels for over
    the first 4 months. Gasoline inventories have recently been
    pushed to their highest levels in a decade. The market is well
    supplied. That is why the current high price situation is so
    confusing.
        Americans are right to ask. With ample supplies of gasoline
    and weak demand at home, why are prices at the pump continuing
    to climb?
        The tension is with crude oil supplies. America is the
    world's largest consumer. We important 10 million barrels a
    day, which is double our domestic production.
        We are in competition for these imports with developing
    economies around the world, many of which subsidize their
    domestic fuel prices. This puts more pressure on limited spare
    capacity.
        To ease this tension, massive investment is needed around
    the world. This is where companies such as Chevron play a
    critical role.
        American energy companies are large compared to most U.S.
    businesses, but relatively small compared with national oil
    companies competing with us for supplies.
        These companies have control over most of the world's known
    reserves and many enjoy the unqualified support of their
    national governments.
        Punitive measures, such as windfall profits taxes, will
    hamper our ability to invest in badly needed supplies. They
    will weaken our competitiveness in this volatile atmosphere and
    increase our dependence on foreign supplies.
        Our solutions need to focus on the basics of crude oil
    supply and demand. When it comes to demand, we need less. We
    need to value energy as a previous resource and use our
    ingenuity and advanced technology to use energy more wisely
    across the economy.
        When it comes to supply, we need more of all forms, oil,
    natural gas, biofuels and other renewables. Last year, the
    National Petroleum Council study reinforced this need to deal
    with supply and demand. It emphasized strategies for achieving
    American energy security through smart policies and
    investments.
        We strongly urge you to implement its recommendations. We
    know that high prices are forcing consumers to make hard
    choices on how they use energy.
        We are making hard choices to mobilize more people and more
    money to increasingly remote locations in the world for more
    supplies. Chevron employees understand the enormous
    responsibility that they have to deliver energy reliably. I can
    personally attest to their strong commitment.
        Congress has recently made some hard policy choices on
    renewables and energy efficiency that will make a difference.
    But we can't expect other countries to expand their resource
    development to meet our increasing needs as we limit our
    development without good reason.
        We welcome the opportunity to work with you to ensure the
    responsible development of this country's substantial untapped
    potential resources in a way that respects the environment and
    delivers badly needed energy supplies to Americans.
        Thank you.
        [The prepared statement of Mr. Robertson follows:]
                    Prepared Statement of Peter J. Robertson
        Chairman Conyers, Ranking Member Chabot, Members of the Committee.
    My name is Peter Robertson, and I am vice chairman of Chevron
    Corporation. I am here to represent the more than 59,000 Chevron
    employees (of whom 27,000 work here in the U.S.) and more than 1.5
    million stockholders who put their trust in our company each day. I am
    proud to be a part of an industry so vital to every American's way of
    life and to the development and growth of economies around the world.
        Given the many challenges our country faces on the energy front, I
    appreciate the opportunity to appear before you today. I will address
    the factors behind rising oil and gasoline prices, discuss some
    realities of the highly competitive global energy market, and outline
    what Chevron is doing to ensure reliable supplies of energy to U.S.
    consumers.
        Although Chevron has been firmly rooted in California for almost
    130 years, our operations and customers span the globe and extend
    across the entire energy spectrum. Globally, we produce approximately
    1.7 million barrels of crude oil per day--less than 2 percent of global
    demand. Chevron's U.S. production of approximately 410,000 barrels of
    crude oil per day represents about 8 percent of U.S. total.
        We refine, transport and sell petroleum products. Chevron is the
    sixth-largest refiner in the U.S., producing about 5.8 percent of the
    country's refined products. And we blend ethanol into almost 40 percent
    of the gasoline we sell in the U.S.
        Chevron is a leading producer of renewable energy. We're the
    world's largest producer of geothermal energy (operating 1,250
    megawatts), and we're pursuing next-generation biofuels and other
    alternatives with a number of important strategic partnerships.
        Chevron is unique among major oil companies as a leading provider
    of energy efficiency services and clean energy solutions in the nation.
    Our subsidiary, Chevron Energy Solutions, has a strong track record of
    providing solar power to large commercial clients across the country.
    To date, it has handled more than 800 projects, helping clients lower
    their energy consumption and costs by nearly 30 percent on average.
        Chevron strives to be a strong partner in the communities where we
    operate. Our company supports more than 11,000 large and small
    businesses throughout the country. Last year alone, we spent $10.8
    billion with our business partners in the U.S. and supported 2,000
    charitable organizations across 43 states and the District of Columbia.
        It is precisely Chevron's size and scope that allow us to
    successfully compete for the energy resources the world and America
    needs.

        Strong global demand, weak U.S. dollar have driven up oil prices

        As we meet today, the question on the minds of most Americans is,
    ``Why are gasoline prices so high?'' The short answer? Because global
    crude oil prices are so high.
        The price of oil has risen recently to above $125 a barrel--a
    record level and double its price at this time last year. Given that
    the largest portion of the cost of gasoline is crude oil, gasoline
    prices have risen to record heights. According to the Department of
    Energy, a gallon of regular gasoline retailed on average for $3.72 in
    the first week of May, with the price of crude oil accounting for about
    $2.65 of this amount. Federal, state and local taxes averaged 47 cents
    per gallon, making the combined effect of crude costs and taxes $3.12
    per gallon or 84 percent. (See Appendix chart #1). While the price of
    crude oil has soared, it is important to understand that the market
    forces of demand, supply and competition have prevented gasoline prices
    from keeping pace. That average gasoline price for the first week of
    May rose 20 percent over the price for the same week last year--a
    relatively small amount compared to the jump crude has experienced.
        Consumers and businesses feel the effects of high crude oil and
    gasoline prices from the supermarket to the airport. Chevron is both a
    producer and a user of energy, and we are concerned about escalating
    oil prices just as any other energy consumer is. To address these
    concerns going forward, it is important to understand the many factors
    affecting the price of oil--and, therefore, the price of transportation
    fuels.
        There are fundamental factors affecting the current price of oil,
    including rising demand, the reduction in the supply system's spare
    capacity to deal with unforeseen disruptions, the value of the U.S.
    dollar and the associated flight to commodities, and rising risk--both
    above ground and below ground.
        We have reached a point where worldwide demand is straining the
    global energy system. Demand in non-OECD countries--what we typically
    think of as developing nations--is experiencing robust growth, pushing
    up overall global demand despite essentially flat or slightly lower
    demand in OECD countries. In fact, growth in non-OECD regions has
    accounted for over 80 percent of the rise in oil demand since 2000,
    including rapidly increasing demand throughout Asia, particularly in
    China and India. The expansion has been driven by exports and
    infrastructure investment, and has consumed commodities at an
    unprecedented rate. It is important to highlight that in many important
    energy-consuming non-OECD countries government treasuries have
    subsidized price (Appendix chart #2)--a factor that has contributed to
    additional stress on supplies and price.
        The Middle East is also in the middle of a substantial investment
    cycle, a process that has kick-started oil product demand growth in the
    face of rising oil prices. Thus far, non-OECD oil demand growth has
    shown few signs of softening despite the U.S. economic slowdown.
        It is this economic growth overseas, especially in India and China
    that has helped hundreds of millions of people to rise above the
    poverty level to a better quality of life. These basic human
    aspirations and the resulting energy demand growth are forecasted to
    continue. Global energy demand is projected to increase roughly 50
    percent by 2030, with demand in the Asia-Pacific expected to grow 90
    percent over the same period (See Appendix chart #3). And, according to
    the Department of Energy, demand in the U.S. is also forecasted to grow
    by 16 percent over the next 20 years.
        The accelerated increase in demand since 2004 has reduced the
    global spare capacity of crude oil, creating a tighter relationship
    between supply and demand and heightened concerns in markets around the
    world (See Appendix chart #4). Falling or flat U.S. production is a
    contributing factor and adds to these pressures. According to the
    Department of Energy, U.S. crude oil production has fallen
    approximately 40 percent since 1985, while U.S. consumption has grown
    more than 30 percent to more than 20 million barrels per day today. In
    real barrels, U.S. oil production is now approximately 5 million
    barrels per day--down from approximately 9 million in 1985. The
    narrowing of spare production capacity in the world means that even
    when a relatively small amount of resource is at risk of disruption due
    to a variety of factors, it can affect the price of oil.
        This heightened market sensitivity is exacerbated by other risks.
    ``Below ground risk'' is increasing as energy is harder to find and
    more expensive to produce. ``Above ground risk'' is also occurring
    around the world. At home and abroad, access to new supplies has been
    restricted, making it increasingly difficult for the energy industry to
    invest and expand operations. And calls for increased taxation only
    serve to shrink the capital base available for energy development. As
    the recent National Petroleum Council study pointed out, our country's
    greatest concern relative to future supplies stems not from a lack of
    hydrocarbon resource but, rather, from the risks to our ability to
    expand production in a manner timely enough to meet growing demand.
    Policies restricting access to new areas with resources in the United
    States combined with naturally declining mature crude oil and natural
    gas fields have increased U.S. reliance on imports from international
    sources. (See Appendix chart #5).
        Demand and supply pressures on oil prices are compounded by the
    weakening of the U.S. dollar. The higher oil price is in part a market
    adjustment that reflects the weakening purchasing power of oil
    exporting countries that sell their oil in U.S. dollars but buy goods
    with stronger currencies such as the euro. Additionally, the weak
    dollar--and concern by stock investors over the subprime issue and its
    impact on the stock market--has contributed to a flight to commodities
    by investors seeking better returns (See Appendix chart #6). Oil has
    gone up along with many other commodities such as gold, corn, copper
    and even coal.
        In the U.S., consumers have begun to respond to the high fuel
    prices by using less. Recent figures from EIA suggest that petroleum
    product demand in the U.S. has fallen 1.4 percent over the first two
    months of the year, compared with the same period last year. Gasoline
    production at U.S. refineries was at record levels over the first
    quarter of 2008, leaving inventories at their highest levels in a
    decade. Capacity increases at existing refineries have added the
    equivalent of 10 new refineries over the past decade. Overall refining
    capacity has increased by 20 percent since 1985 even though there are
    57 fewer refineries (See Appendix chart #7). That retail fuel prices
    still remain high underscores the fact that many factors are in play,
    and, unfortunately, there are no short-term fixes to today's price
    levels.
        Finally, it is important to note that the U.S. transportation fuel
    markets are not only well supplied but also highly competitive. We are
    the sixth largest U.S. refiner and operate five of the nation's roughly
    150 refineries. Our market share is less than six percent. Marketing
    operations are similarly competitive. Chevron is the fourth largest
    U.S. branded marketer operating under the Chevron and Texaco brands. We
    have roughly 9,700 of the country's 168,000 branded stations. And it's
    important to note that 95 percent of our stations are operated by
    independent business people, who must compete aggressively against at
    least 40 other companies.
        Energy companies are making very little money on retail gasoline
    sales despite the high price environment. Energy company earnings from
    the first quarter of 2008 tell the tale. Chevron's U.S. downstream
    operations--that part of our business responsible for refining,
    marketing and transportation of gasoline and other refined products--
    effectively broke even. That portion of our business lost money over
    the last six months of 2007.
        Over the years the Federal Trade Commission has scrutinized our
    industry carefully. Summarizing its oversight of the industry in 2004,
    FTC concluded: ``In sum, mergers have contributed to the restructuring
    of the petroleum industry in the past two decades but have had only a
    limited impact on industry concentration. The FTC has investigated all
    major petroleum mergers and required relief when it had reason to
    believe that a merger was likely to lead to competitive harm. The FTC
    has required divestitures in moderately concentrated markets, as well
    as highly concentrated markets.'' \1\ (See Appendix chart #8)
    ---------------------------------------------------------------------------
        \1\ Federal Trade Commission, ``The Petroleum Industry: Mergers,
    Structural Change and Antitrust Enforcement,'' August 2004
    ---------------------------------------------------------------------------

            Energy challenges are immense--so is the infrastructure
                              needed for supplies

        To understand today's energy reality, I would emphasize that the
    energy system is global, vast and complex. For each minute we spend
    here today, the world will consume the equivalent of 7 million gallons
    of oil-equivalent. For decades it also has delivered energy to over a
    billion people around the globe efficiently and reliably. The
    infrastructure that produces energy in one part of the world and
    delivers it to another is highly interconnected--physically and to the
    global markets that set oil prices. Each depends upon the other.
    Although the United States is a key producer and the leading global
    consumer, we are only one part of this global system and cannot be
    isolated or immune from issues that either shape or upset global market
    dynamics.
        There has never been a more urgent need to be realistic about the
    energy system's interdependence and its size and scale. We also need to
    recognize the magnitude of resources--both financial and
    organizational--needed to keep it running. Today's energy
    infrastructure requires substantial ongoing investment to sustain
    production, tap new sources and meet growing demand. In fact, in its
    2007 Energy Outlook, the International Energy Agency has projected that
    the world will require $22 trillion in new energy investments by 2030,
    with $7 trillion needed to produce the resources--the crude oil,
    natural gas, coal and biofuels--needed to meet demand. Nearly half of
    these investments will be in developing countries.
        As we strive to meet demand, we are overcoming increasingly extreme
    and remote environments while responding head-on to the challenges
    posed by climate change. Our industry has evolved over the last 100
    years from drilling with relatively simple wooden derricks that barely
    scraped the earth's surface to complex offshore platforms that produce
    oil from reservoirs located miles below, where pressures can exceed
    20,000 pounds per square inch and temperatures can surpass the boiling
    point. One new crude oil project on the frontiers of the Gulf of Mexico
    can cost more than $5 billion and take more than 10 years to bring
    onstream. A recent expansion of production at the Tengiz field in
    Kazakhstan which added less than one percent to global oil supplies
    took more man hours of labor than the construction of the Panama Canal.
    We will need as many of these projects as we can get.
        And costs are escalating. The competition for resources to meet
    that demand has resulted in rising costs for our industry. Costs in the
    upstream sector have doubled since the year 2000, reflecting higher
    prices for everything from steel, drilling rigs and offshore vessels to
    bulk materials, engineering, construction and labor. Similarly, the
    capital costs for our downstream refining, processing and chemical
    businesses are sharply higher.
        Today's environment illustrates an industry truism: The era of easy
    access to cheap oil is over.
        There are significant challenges and paradigms about energy that
    need to be resolved so that we can generate the kind of production at a
    scale needed to meet U.S. demand. These challenges will take time,
    money, new infrastructure and advanced technology to solve. For the
    foreseeable future it also will take contributions from all energy
    sources--traditional energy, renewables and energy efficiency.

        Competing in the global marketplace requires scale and strength

        Today's global resources are increasingly nationalized, and single
    crude oil and natural gas development projects run in the billions of
    dollars. The search for the next source of energy and delivering it to
    markets on six continents--whether oil or next-generation fuels from
    renewable sources--takes enormous capital, specialized expertise,
    advanced technology and human energy that characterizes Chevron.
        From a global perspective, sovereign states and their national oil
    companies own the majority of the resources consumers need. Chevron
    ranks 18th in terms of its access to oil reserves. (See Appendix chart
    #9). U.S. energy companies need the scale that is necessary to partner
    and compete with these large national oil companies to gain access to
    critically needed energy resources that fuel America's cars, heat
    America's homes and power America's businesses.
        The U.S. is advantaged by having large, well-capitalized oil and
    gas companies that can partner and compete with this group of national
    oil companies. And, policies that disadvantage U.S. companies' ability
    to compete in the global marketplace--such as proposals to levy
    addition taxes on the industry--diminish our ability to provide new
    sources of energy.

        Chevron is aggressively investing to develop new energy supplies

        We are actively responding to the energy demand of the United
    States and countries around the world--investing aggressively to
    develop energy supplies to meet today's and tomorrow's needs. Our
    activities span a diverse portfolio of energy interests, including
    traditional oil and gas, renewables, alternatives, energy efficiency
    services, and research and development in future energies. Between 2002
    and 2007, Chevron invested approximately $73 billion back into the
    business to bring new energy supplies to market--investing what we
    earned. Some $22 billion of that sum was invested in our U.S.
    operations.
        Our capital program for 2008 is close to $23 billion, an increase
    of nearly $3 billion over our 2007 investment, and nearly triple what
    it was in 2004. Globally, Chevron currently has 40 major capital oil
    and natural gas projects in the planning, engineering or development
    stage, each with a net Chevron share of the investment over $1 billion.
    These projects are critical to supplying the energy that the world
    needs and will be important to closing the gap between supply and
    demand, which is key to addressing the challenge of high prices. Out of
    this queue of 40 major supply projects, eight are located in the United
    States. And there are many other upstream projects under $1 billion
    that will have significant production once they come onstream.
        A number of these projects are situated at the forefront of
    development and employ leading-edge technology. As alluded to earlier,
    factors such as size, organizational capability and the ability to
    assume the inherent risks in developing technology and undertaking
    large investments are essential assets when competing in today's global
    energy environment. Even though Chevron is relatively small compared
    with its nationalized competitors, it is a strong competitor. This is
    an industry in which size, technological capabilities and financial
    strength are the new ``price of entry,'' and large-scale and frontier
    energy developments are the norm versus the exception today and in the
    future.
        Let me highlight an example to illustrate what we do. We are
    working on several deepwater crude oil and natural gas projects in the
    U.S. Gulf of Mexico. One of these, known as Tahiti, offers a typical
    case study in the risks facing this business today in terms of timing,
    scale and cost. We acquired the Tahiti leases in the 1990s. In 2002, we
    used leading-edge technology to drill in 4,000 feet of water and found
    an estimated 400 million to 500 million barrels of recoverable
    resources. It will take seven years to build the infrastructure
    required to produce the oil and gas more than a 100 miles offshore.
    When Tahiti finally comes online next year, we will have invested $4.7
    billion--and dedicated personnel and resources for over a decade to
    manage exploration, permitting, engineering and development--before
    realizing $1 of return on our investment. Once in production, Tahiti is
    expected to produce for up to 30 years. Tahiti is expected to add
    125,000 barrels of oil and 70 million cubic feet of gas per day to the
    U.S. domestic supply.
        Today in the United States, the major oil and natural gas projects
    we have under construction have a total peak production capacity of
    420,000 barrels per day of oil-equivalent. All these projects are
    expected to be in production by 2010.
        We are also aggressively developing and applying new technologies
    to extend the life of existing fields. This year we expect to spend
    nearly $1 billion on the sophisticated technology and ongoing
    development activities required to produce as many barrels as possible
    out of our 100-year-old Kern River field in California. This investment
    in our base business is a very important. Aside from sustaining our
    capability to provide oil today, these efforts help us understand how
    complex oil reservoirs work--knowledge and technology that we can apply
    around the world so that our partners also can enhance their oil
    recovery from known resources. In fact, one of the reactions to high
    oil price has been a renewed focus on existing fields industrywide, a
    trend that is helpful in the near term and should be encouraged.

           Chevron is investing in critical downstream refining and
                            marketing infrastructure

        We are also investing in our refineries and marketing business to
    continue to improve our ability to supply the products U.S. consumers
    need. We are investing $2.3 billion in 2008 in our U.S. downstream
    assets. Since 2002, we have invested $5.2 billion and we have developed
    additional production capacity of more than 1 million gallons of
    transportation fuel production per day. Our investment in U.S.
    downstream refining and marketing assets in 2007 accounted for almost
    half of our 2007 global downstream capital expenditures, even though
    our U.S. operations only accounted for about a quarter of our
    downstream business earnings. We also are investing in refineries
    outside the United States, such as Pembroke, Wales, which can produce
    gasoline to meet U.S. and California specifications.
        Chevron's refinery investments have focused on achieving several
    goals, including upgrading our capability to provide more
    transportation fuels from more diverse crude oil feedstocks, improving
    reliability and energy efficiency, enhancing environmental performance
    of our facilities, and producing cleaner burning fuels.
        At present, we are working on major projects at each of our big
    three U.S. refineries. We are advancing through the permitting process
    for projects at our El Segundo and Richmond refineries in California.
    At Chevron's Pascagoula, Mississippi, refinery, construction began this
    year on a new gasoline production unit. The project will improve
    equipment reliability and utilization and allow the refinery to
    optimize product yields. Gasoline production at the refinery is
    expected to increase by approximately 10 percent, or about 600,000
    gallons per day, upon completion of the project in mid-2010.
        Focusing on the longer term, we have recently announced a research
    and development project to further advance refining technology. Known
    as VRSH, which stands for Vacuum Resid Slurry Hydrocracking, this
    technology will help us produce transportation fuels from heavy crude
    oil otherwise used for other lower-grade petroleum products. We spent
    almost five years working on the project in a lab setting testing the
    technology. We announced in March that we are beginning work on a pre-
    commercial plant at our Pascagoula refinery that will take two years to
    construct. We will learn more about the technology for a few years
    before we will be able to confirm whether we can build one of these
    plants at full scale. Once that decision is made, it will take another
    several years after that to complete. This kind of step-by-step process
    is needed to ensure we are making the right decisions. They take time.
        We are committed to remaining a reliable supplier to our customers,
    but it is important to remember that investments are sensitive to local
    permitting decisions and market forces. For example, we hope to soon
    finalize the plans for the Richmond refinery project The process of
    obtaining these permits has already taken more time than constructing a
    new state-of-the-art refinery we are investing in with partners in
    India or completing a major refinery expansion in at our joint-venture
    refinery in Yeosu, Korea.
        At a more fundamental level, government policies--such as the
    recently passed energy bill with its very ambitious program for
    renewable fuels--have created new uncertainties over how much
    additional U.S. refining capacity may be needed to meet future U.S.
    demand. Nonetheless, we are aggressively investing in the critical
    energy infrastructure this nation needs to continue to reliably supply
    fuels to customers.

                      Diversifying energy and fuel sources

        At the same time that we are investing at the forefront of
    traditional energy such as oil and gas, we also are pursing advances in
    renewable technologies that are needed to help diversify supply and
    meet the challenges of tomorrow. To add to domestic energy resources,
    Chevron and many other companies are making investments in renewable
    energy. Since 2002, Chevron has spent more than $2 billion to develop
    renewables and energy efficiency services. Between 2007 and 2009, our
    spending on renewable technologies and energy efficiency solutions will
    be an additional $2.5 billion.
        Chevron is investing in new technology to unlock the enormous
    potential of cellulosic ethanol. In 2006, we formed a biofuels business
    to advance technology and pursue commercial opportunities related to
    the production and distribution of ethanol and biodiesel in the United
    States. We recently announced a joint venture with Weyerhaeuser
    Corporation to pursue the research necessary to commercialize
    production of biofuels from nonfood sources. Catchlight Energy will
    work to develop technology that will lead to commercial biofuels
    production.
        And more research is needed. We have strategic biofuels alliances
    with Georgia Tech, UC Davis, Texas A&M, the U.S. Department of Energy's
    National Renewable Energy Lab and the Colorado Center for Biorefining
    and Biofuels. We also are participating with AC Transit in the San
    Francisco Bay Area (California) on a zero-emission hydrogen bus
    project.

        Chevron is taking aggressive steps to increase energy efficiency

        The energy challenges we face, globally or in the United States,
    cannot be met by addressing only the supply side. It is also important
    for all of us to realize that the most readily accessible source of new
    energy is conservation and efficiency. At Chevron, we embrace
    conservation as an important business strategy, and we are in our 17th
    year of a focused effort to increase our own energy efficiency. Since
    1992, we have increased energy efficiency by 27 percent.
        And through Chevron Energy Solutions (CES), we are delivering
    energy efficiency projects that benefit federal, state and local
    governments; the public; and the environment. CES has completed over
    800 projects involving energy efficiency and renewable power in the
    United States. These projects have accounted for over $1 billion in
    energy and operational savings, helping clients lower their energy
    consumption and costs by nearly 30 percent on average.
        Chevron Energy Solutions has implemented energy efficiency, energy
    management and related energy improvements at government facilities
    across the United States. These projects include U.S. military bases
    such as: Beale Air Force Base, California; Department of the Navy,
    Marine Corps Logistics Base, Georgia; Department of the Army, Picatinny
    Arsenal, New Jersey; and the Department of the Army, Corpus Christi
    Army Depot, Texas. CES also has developed energy efficiency, solar
    power and clean energy projects for the U.S. Postal Service, including
    its Processing and Distribution Center in Oakland, California, and Mail
    Processing Facility in San Francisco, California. Another California
    solar project at Contra Costa Community College near San Francisco is
    the largest of its kind at an institution for higher learning in North
    America. The project, when completed, will generate 3.2 megawatts of
    solar power and will save the college $70 million in energy costs over
    25 years.

         The National Petroleum Council Study: Urgent action is needed

        There is no single or short-term solution to satisfy the world's
    growing appetite for energy--or to prevent the United States from being
    affected by the global energy dynamic. We are in a new energy era, one
    defined by increased demand and constrained supply.
        We need a range of realistic solutions, and we need them at scale.
        We literally need all the energy we can develop and to use energy
    more wisely. This includes oil, natural gas, coal and nuclear power. It
    also includes renewables. And, just as important, it includes a focus
    on energy efficiency. The U.S. Energy Information Agency forecasts that
    over the next 25 years oil, coal and natural gas will provide roughly
    the same 86 percent of the world's total energy mix as they do today.
    The energy industry and other parties are making investments in all
    these areas, and it is important that they continue. All are needed to
    provide important additions to our energy supply portfolio. And all
    will play an important role in meeting increased energy demand.
        At a time when more supply is needed, the United States has been
    reluctant to access some of its own resources. Chevron and others have
    been talking about the constrained supply-demand dynamic for the last
    several years, urging greater access to U.S. resources, onshore and
    offshore--especially given the time it takes for projects to come
    onstream. Instead, we have been increasing our demand on exporting
    countries because of policy decisions made here at home. Any serious
    measures toward energy security must seek to reverse this equation. As
    the world's largest consumer of energy, actions we ask of other
    producers must be matched at home.
        Energy underpins every aspect of our society and our growing
    economy. The scale and breadth of the U.S. energy system is unsurpassed
    in the world, as is our energy demand, which is forecast to soon to
    need 1 million barrels of oil an hour of supplies. A sustained,
    reliable supply is essential, and that is achieved by bolstering
    supplies and moderating demand. The Energy Independence and Security
    Act of 2007 had important measures to moderate demand. However, it
    missed taking the additional step we believe is also urgently needed--
    improved access to ``off-limits'' oil and natural gas resources that we
    will need 10, 20 and 30 years from now.
        Last summer, the National Petroleum Council (NPC) issued a sobering
    study called ``Facing the Hard Truths About Energy,'' which outlines a
    comprehensive, integrated approach to U.S. energy security. The NPC
    study is a broad-based consensus effort representing the views of an
    impressive range of experts and stakeholders. Input was sought from
    more than 1,000 other stakeholders, in the U.S. and abroad; there were
    350 participants with backgrounds in all aspects of energy including
    efficiency, economics, geopolitics and environment; 65 percent of
    participants were from outside the oil and gas industry, including
    nongovernmental organizations, academia, government, environmental and
    financial.
        The NPC study highlights the need for an integrated national
    strategy given accumulating risks to the supply of reliable, affordable
    energy. The study highlights a number of ``hard truths'':

              Coal, oil and natural gas will remain indispensable
            to meeting total projected energy demand growth.

              The world is not running out of energy resources, but
            there are accumulating risks to continuing expansion of oil and
            natural gas production from the conventional sources relied
            upon historically. These risks create significant challenges to
            meeting projected energy demand.

              To mitigate these risks, expansion of all economic
            energy sources will be required, including coal, nuclear,
            renewables, and unconventional oil and natural gas. Each of
            these sources faces significant challenges--including safety,
            environmental, political, or economic hurdles--and imposes
            infrastructure requirements for development and delivery.

              ``Energy independence'' should not be confused with
            strengthening energy security. The concept of energy
            independence is not realistic in the foreseeable future,
            whereas, U.S. energy security can be enhanced by moderating
            demand, expanding and diversifying domestic energy supplies,
            and strengthening global energy trade and investment. There can
            be no U.S. energy security without global energy security.

              A majority of the U.S. energy sector workforce,
            including skilled scientists and engineers, is eligible to
            retire within the next decade. The workforce must be
            replenished and trained.

              Policies aimed at curbing CO2 emissions will alter
            the energy mix, increase energy-related costs and require
            reductions in demand growth.

        The NPC study sets forth five core strategies to assist markets in
    meeting the energy challenges to 2030 and beyond. The United States
    must:

            1.  Moderate the growing demand for energy by increasing
            efficiency of transportation, residential, commercial and
            industrial uses.

            2.  Expand and diversify production from clean coal, nuclear,
            biomass, other renewables, and unconventional oil and natural
            gas; moderate the decline of conventional oil and natural gas
            production; and increase access for development of new
            resources.

            3.  Integrate energy policy into trade, economic,
            environmental, security and foreign policies; strengthen global
            energy trade and investment; and broaden dialogue with both
            producing and consuming nations to improve global energy
            security.

            4.  Enhance science and engineering capabilities and create
            long-term opportunities for research and development in all
            phases of the energy supply and demand system.

            5.  Develop the legal framework to enable carbon capture and
            sequestration (CCS). In addition, as policymakers consider
            options to reduce CO2 emissions, provide an effective global
            framework for carbon management, including establishment of a
            transparent, predictable, economy-wide cost for CO2 emissions.

        The study further recommended that markets should be relied upon
    wherever possible to produce efficient solutions. Where markets need to
    be bolstered, policies should be implemented with care and
    consideration of possible unintended consequences.
        The study is a catalyst for action. And action is needed now on all
    of the recommendations.

                   Changing the conventional wisdom on energy

        We welcome serious dialog about measures that can be taken to help
    the consumer deal with these rising energy and fuel prices and develop
    a comprehensive energy policy.
        Let me reiterate that the NPC study has given us sound, sensible
    and achievable solutions. To successfully implement these
    recommendations, we need to change our conventional wisdom about energy
    development and its use.
        First, we need to value energy as a precious resource. Energy
    efficiency is the most immediate and important action that each of us
    can take to contribute to rising energy prices. The United States must
    become a nation of energy savers. In short we need a ``Made in
    America'' solution enabled by everything from human ingenuity, to
    ``smart'' buildings, to advanced vehicles and transportation systems.
    Increased energy efficiency and conservation will help reduce demand
    for energy and will reduce pressures on the system. Markets are
    indicating U.S. consumers are already taking action. Congress has a
    critical role to play to engage the U.S. public and put the United
    States at the forefront of responsible energy use.
        Second, we need all the energy we can get from every available
    source. We must continue to bring traditional energy supplies to
    market, and invest in the critical energy infrastructure this nation
    needs, even as we are developing alternatives sources of energy.
        Third, on the supply side, we need your help to open up the 85
    percent of the Outer Continental Shelf that is now ``off limits'' to
    environmentally responsible oil and gas exploration and development. We
    cannot expect other countries to expand their resource development to
    meet America's needs when our government limits development at home.
    Along with access, it is also important to streamline permitting
    processes to enable new resource development, additional recovery in
    existing fields and continued investment in critical downstream
    infrastructure to progress in a reasonable timeframe.
        Fourth, I would encourage careful evaluation of policies that can
    lead to unintended consequences and create inefficiencies in the
    gasoline supply system. Today we have 17 ``boutique'' fuel requirements
    across the country, requiring us to blend unique gasoline products for
    different states and different localities. More requirements on fuels
    are being added through renewable fuel mandates and proposed climate
    policies. For example, we are under a mandate to include rising levels
    of corn-based ethanol in our gasoline products and, over time, add
    significant quantities of cellulosic ethanol. At the same time that we
    are accommodating these new mandates, policymakers have proposed
    legislation to reduce greenhouse gas emissions that again is
    disproportionately burdensome on the transportation fuels sector. We
    urge you and your colleagues to reflect on how to advance these
    important national policies without inadvertently disrupting our
    ability to provide the gasoline and transportation fuels that the
    United States needs. Rationalization of these multiple requirements
    will create greater efficiencies in the fuel supply system.
        Finally, we urge you to reject punitive measures on our industry.
    Regardless of intent, these will diminish our ability to invest in the
    long term solutions critical to maintaining this country's energy
    infrastructure and supplies, as well as our ability to develop diverse
    energy resources for the future. As reported recently by the
    Congressional Research Service, a similar measure in the 1980s resulted
    in lower domestic production and increased dependence on foreign
    sources.\2\ Put simply, actions drawn more from emotion than sound
    policy will hurt everyone.
    ---------------------------------------------------------------------------
        \2\ (Salvatore Lazzari, ``The Crude Oil Windfall Profit Tax Of The
    1980s: Implications for Current Energy Policy,'' Congressional Research
    Service, 3/9/06)
    ---------------------------------------------------------------------------
        American energy companies operate at the frontier of geography,
    geology and technology. As the world's largest energy consumer, and as
    a country blessed with rich natural resources, Americans need our
    ingenuity and your leadership. With your help we can continue to
    develop the critical energy supplies and infrastructure needed to
    supply this nation and support this economy. Our collective actions
    today will demonstrate leadership on issues that are within our
    control. They will bolster us today, prepare us for tomorrow and set in
    motion a wave of innovation and responsible development for many years
    to come--to help us weather the powerful forces we cannot control.
        How we as a country deal with our energy future is nothing less
    than an urgent matter of our energy and national security
        Ultimately, polices should recognize the interdependence of the
    United States within the global energy system, while at the same time
    capitalizing on our country's own extensive energy endowment. These are
    not insignificant challenges, and they will require leadership and
    collaboration. We look forward to working with you to address these
    challenges.
        Chevron will continue to do its part.
        Thank you.
                                   __________

                                  ATTACHMENTS

        Mr. Conyers. Thank you so much.
        John Lowe?

         TESTIMONY OF JOHN E. LOWE, EXECUTIVE VICE PRESIDENT,
                             CONOCOPHILLIPS

        Mr. Lowe. Good morning, Chairman Conyers and the Committee.
        We share the public's concern about rising energy prices
    and appreciate the opportunity to present our views on what is
    driving the increase, what our company is doing to respond, and
    what we believe Congress can do.
        Crude oil represents over 70 percent of the current cost of
    gasoline. So higher crude prices are driving higher gasoline
    prices.
        So why have crude oil prices increased so dramatically?
    There are numerous factors, the biggest contributor being a
    long period of strong global economic growth, particularly in
    developing Asia.
        Limited access to resources, both here and abroad, also
    constrains the growth in supply. In addition, higher taxes,
    service cost inflation, little excess production capacity, and
    high geopolitical risk also contribute.
        Adding to this are the investor funds flowing into oil
    futures as a hedge against credit risk, inflation and dollar
    devaluation.
        I cannot overemphasize the access issue. Access to
    resources is severely restricted in the United States and
    abroad and the American oil industry must compete with national
    oil companies who are often much larger and have the support of
    their governments.
        We can only compete directly for 7 percent of the world's
    available reserves, while about 75 percent is completely
    controlled by national oil companies and are not accessible.
        ConocoPhillips is working to bring more energy to the
    market. Over the past 6 years, we have reinvested, on average,
    106 percent of our income. In 2007, we earned $12 billion, but
    reinvested $13 billion, and we have over $15 billion in
    investments planned this year.
        This investment includes finding added supplies of oil and
    gas, expanding refining capacity and continuing to research and
    bring renewable and alternative fuels to the market.
        Here in North America, we are drilling exploratory wells,
    developing the Canadian oil sands, and building infrastructure.
    But we want to do more, such as explore the vast areas of the
    U.S. that are off limits due to drilling moratoriums.
        These areas could more than double the nation's oil and gas
    reserves.
        Downstream, we are increasing our refining capacity and
    ability to process lower quality crudes. Unfortunately, our
    efforts here in the U.S. have been met with continuing
    opposition.
        At our Wood River, Illinois refinery, the 10th largest in
    the United States, we are experiencing long permitting delays
    via the appeals process that are blocking our expansion plans.
        In California, a project to make ultra low sulfur diesel
    fuel has been threatened by permit challenge for 4 years.
        We are working hard to bring renewable fuels into the
    market by looking at ways to process them at traditional
    refineries and researching new technologies.
        Fifty-five percent of our U.S. gasoline volumes contain
    ethanol. E-85 and biodiesel are being marketed at our branded
    facilities. We are producing renewable diesel fuel and
    researching next generation biofuels, like cellulosic ethanol,
    and we are developing better materials for the lithium ion
    batteries and electric vehicles.
        So what can Congress do to help address energy concerns?
        Congress can enact a balanced national energy policy that
    encourages development of the conventional fuels that power our
    economy, clears the permitting logjam, encourages alternative
    sources, including all forms of biofuels, and removes the
    current tariff on imported ethanol, encourages high energy
    efficiency, and accelerates technological innovation.
        Meanwhile, we urge you not to pass measures that have
    public appeal, but would be counterproductive, such as tax
    increases that diminish our investment capabilities, reduce the
    attractiveness of high cost domestic production, or
    disadvantage the U.S. oil and gas companies.
        This has been tried before with extremely negative results,
    reducing supplies, eliminating jobs, and resulting in higher
    prices.
        The nation cannot afford to make that mistake again.
        The U.S. is in a global race for energy. We are competing
    against national oil companies that are far larger and that
    enjoy preferred access and governmental cooperation.
        We must move beyond today's adversarial relationship and
    start working together to find real solutions. U.S. oil
    companies should be viewed as the key to the energy solution,
    not as scapegoats, but as assets in this global energy race.
        We must be allowed to compete on level ground for the
    benefit of our country.
        Mr. Chairman, that concludes my statement. Thank you.
        [The prepared statement of Mr. Lowe follows:]
                       Prepared Statement of John E. Lowe

        Mr. Conyers. Thank you very much.
        We are pleased now to recognize Rob Malone, Chairman and
    President of BP America.

                    TESTIMONY OF ROBERT A. MALONE,
                   CHAIRMAN AND PRESIDENT, BP AMERICA

        Mr. Malone. Thank you, Mr. Chairman, Ranking Member Chabot,
    Members of the Committee. Good afternoon.
        We know that high energy prices are having an adverse
    effect on our economy and on our workers and families across
    this nation. Not a week goes by that I don't receive letters
    from consumers about the impact that they are feeling from high
    energy prices.
        Unfortunately, I cannot and we cannot change the world
    market on which this nation now relies for 60 percent of the
    oil it consumes every day. But what we can do is to work
    together with this Congress, with the Administration and with
    governments and consumers to move toward greater energy
    security and a lower carbon energy future.
        Today's high prices are linked to the failure both here and
    abroad to increase the supply of oil and gas and renewables and
    to reduce demand through conservation and energy efficiency.
        The oil market is tight. Geopolitical risk and concern
    about future supply have had a big impact on price. We are
    working hard to expand and diversify U.S. energy supply. We are
    the nation's largest producer of domestic oil and gas and one
    of the nation's largest energy investors.
        In the last 5 years, we have invested $31.5 billion in
    development of U.S. energy supply, almost dollar for dollar of
    our net income.
        We expect to spend $30 billion over the next 5 years to
    maintain production of natural gas from the Rocky Mountain
    area, to renew critical infrastructure in Alaska, to continue
    development of the deepwater Gulf of Mexico, and to increase
    gasoline production at two of our Midwest refineries.
        We are nearly doubling the capacity of our Frederick,
    Maryland solar plant and, by the end of this year, we expect to
    have 1,000 megawatts of U.S. wind power capacity online,
    increasing to 2,400 megawatts by the end of 2010.
        We are already one of the largest blenders of ethanol in
    the nation. However, over the next decade, we will invest more
    than $500 million in the search for a new generation of
    biofuels that contains more energy, has less impact on the
    environment, and which is not made from a food crop.
        Together with my colleague here from ConocoPhillips, we
    have recently announced the largest private sector investment
    ever in the United States, the Denali, Alaska gas line project.
        Our investments across the entire energy spectrum are huge,
    but the hard truth is that even with major improvements in
    energy efficiency and the rapid growth of solar, wind and
    biofuels, the United States is going to need more oil, more
    natural gas, more coal and more nuclear power in 2030 than it
    does today.
        The United States, with 5 percent of the world's
    population, is consuming 25 percent of daily world oil
    production. The U.S. has to produce more of the energy it
    consumes and it has a responsibility to use the energy wisely.
        On the supply side, we support incentives for alternative
    energy. But taxing one form of energy to encourage production
    of another will reduce our ability to keep up with the growing
    U.S. energy demand.
        The results will be less investment, less production,
    tighter energy markets, and potentially even higher prices at
    the pump.
        This nation should be encouraging production of all forms
    of energy, especially oil and gas. But adopting measures that
    limit access to U.S. resources, that dampen investment in
    infrastructure, discourage trade with our Canadian neighbors is
    going to make it increasingly difficult and make our economy
    more vulnerable to market influences.
        My company is serious about bringing new sources of oil and
    gas to the U.S. market. We are also serious about building a
    sustainable, profitable alternative energy business that is
    capable of delivering the clean and affordable power that
    consumers want.
        My company is ready to work with you and others to address
    the energy and environmental needs of this nation through a
    bipartisan and comprehensive energy policy.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Malone follows:]
                     Prepared Statement of Robert A. Malone

        Mr. Conyers. Thanks so much.
        Senior Vice President, Exxon Mobil, Steve Simon?

      TESTIMONY OF J. STEPHEN SIMON, SENIOR VICE PRESIDENT, EXXON
                           MOBIL CORPORATION

        Mr. Simon. Thank you, Chairman Conyers, Ranking Member
    Chabot, and Members of the Task Force.
        Energy is essential to the U.S. economy and is a topic on
    many Americans' minds. They are raising important questions
    about how our industry is helping meet their vital energy
    needs.
        I welcome the opportunity to respond to these questions and
    to clear up some misconceptions regarding our industry and to
    this end, I would like to make two points during my allotted
    time, similar to those I made before the Senate Judiciary
    Committee yesterday.
        First, the prices Americans pay at the pump reflect the
    dynamics of an enormous international market for energy, which
    means that in order for American energy companies, like Exxon
    Mobil, to successfully compete, it is vital that we have
    sufficient financial strength and scale.
        The crude oil used to manufacture the fuel Americans
    consume may have been produced in the United States or in any
    one of more than 35 countries. Within this vast global
    marketplace, competition is fierce. Exxon Mobil is the largest
    U.S. oil and gas company, but we account for only 2 percent of
    global energy production, only 3 percent of global oil
    production, only 6 percent of global refining capacity, and
    only 1 percent of global petroleum reserves.
        With respect to petroleum reserves, we rank 14th.
    Government-owned national oil companies dominate the top spots.
        For an American company to succeed in this competitive
    landscape and go head-to-head with huge government-backed
    national oil companies, it needs financial strength and scale
    to execute massive, complex energy projects requiring enormous
    long-term investments.
        To simply maintain our current operations and make needed
    capital investments, Exxon Mobil spends nearly $1 billion a
    day. Over the past 25 years, we have invested $355 billion in
    new energy projects, which is more than we earned during the
    same period.
        Over the next 5 years, we plan to invest at least $125
    billion more. Our profitability, in absolute terms, is large.
    But it must be viewed in the context of the massive scale of
    our industry and our dependence on high earnings in the current
    up-cycle to sustain the huge investments required over the
    longer term.
        The second point I would like to make addresses the
    concerns your constituents and our customers have about where
    their gas dollars are going.
        Last year, the average price in the United States of a
    gallon of regular unleaded gasoline was around $2.80. On
    average, in 2007, approximately 58 percent of the price
    reflected the amount paid for crude oil.
        Consumers pay for that crude oil and so do we. Of the 2
    million barrels per day Exxon Mobil refined in 2007 here in the
    United States, 90 percent were purchased from others. Last
    year, we spent over $40 billion ourselves buying crude oil and
    feedstock on the open market to fill our U.S. refineries.
        Fifteen percent of the average price Americans paid at the
    pump last year reflected the amount collected in Federal, State
    and local taxes. The remaining 27 percent reflected refining,
    marketing and transportation.
        For our refining and marketing business, that 27 percent
    would be more than 23 percent cost and less than 4 percent
    earnings, which translates to earnings of only about $0.10 per
    gallon of product sold. That is about one-quarter of the amount
    claimed by taxes.
        Now, since last year, the increase in gasoline price and
    more can be attributed to the rise in the cost of crude oil.
    Product prices have not risen as much as crude oil. So industry
    margins have been reduced.
        In fact, our U.S. refining and marketing earnings have
    actually been cut by more than half compared to last year to
    approximately $0.04 a gallon sold.
        Our margins are tight because our industry is very
    competitive. The Federal Trade Commission and other government
    agencies have repeatedly confirmed this fact.
        When energy prices are high, the urge to point fingers at
    oil companies is strong. But undercutting the ability of
    American companies, like Exxon Mobil, to compete in a huge
    global marketplace only makes it harder for Americans to secure
    the energy they need at competitive prices.
        We should instead work together to strengthen U.S.
    competitiveness and meet the needs of the American people we
    all serve.
        Thank you.
        [The prepared statement of Mr. Simon follows:]
                     Prepared Statement of J. Stephen Simon

        Mr. Conyers. Thanks so much, Mr. Simon.
        Sheila Jackson Lee?
        Ms. Jackson Lee. I believe this process is constructive and
    I hope, as we proceed with our questions, that each of you will
    find our inquiry going down a pathway that would lead us to
    solutions.
        My first question is very simple. I indicate my interest in
    this when we first started and I had my opening remarks, and I
    will just simply ask each of the gentlemen here to say yes or
    no, and that is the invitation for a roundtable discussion that
    is outside the realm of these very important congressional
    hearings in Houston on the question of solutions, which I
    believe is key to really explaining to the American people how
    we can work together.
        Mr. Hofmeister?
        Mr. Hofmeister. Congressman, provided we could do it in the
    next 35 days. Otherwise, I can't. I am sure my successor would
    be interested, as well.
        Ms. Jackson Lee. Mr. Robertson?
        Mr. Robertson. We would be pleased to participate and if I
    can do it, I would like to be there.
        Ms. Jackson Lee. Mr. Lowe?
        Mr. Lowe. ConocoPhillips actually did a 35-city
    conversation on energy last year. We would be delighted to
    participate.
        Ms. Jackson Lee. Thank you.
        Mr. Malone?
        Mr. Malone. We would be happy to participate.
        Ms. Jackson Lee. Mr. Simon?
        Mr. Simon. We would welcome the opportunity.
        Ms. Jackson Lee. Thank you.
        Mr. Simon, I am going to start with you, because there is a
    question of buying product on the market, the international
    market, and I don't take to calling names to our international
    partners, but Exxon had a very strong presence in Venezuela, a
    market that is much closer than the North and South America.
        What happened with that and what is the status of the
    product coming from Venezuela?
        Mr. Simon. Well, as I think you know, Congresswoman, our
    assets in Venezuela were expropriated and we are currently in
    arbitration regarding the value of those assets.
        We are hoping for an amicable solution to that and
    constructive discussion, and we will see how that plays out.
        Ms. Jackson Lee. Does that mean now that the working
    entities that you had in Venezuela are no longer operable? You
    are no longer receiving the product?
        Mr. Simon. The Venezuelan government--PDVSA, the government
    company there, is operating those facilities today.
        Ms. Jackson Lee. And there was no--putting aside the
    arbitration--no way that you thought you could effectively
    negotiate a compromise in the new attitude of the new
    government or the existing government.
        Mr. Simon. We worked very hard to do so, but, thus far,
    have been unsuccessful. But as I said, we are still hoping for
    an amicable solution.
        Ms. Jackson Lee. And how many barrels were you getting out
    of that production area?
        Mr. Simon. We were bringing into the United States
    somewhere around 100,000 barrels a day.
        Ms. Jackson Lee. Thank you very much, Mr. Simon.
        Mr. Hofmeister, would you explain how you put the
    partnership together for Motiva and how you overcame the
    regulatory maze that I hear members of the panel speaking to?
        Mr. Hofmeister. Congresswoman, there is a long history of
    relationships between Saudi Aramco and, at that time, Texaco,
    and towards, I would say, about the 1996-1997 timeframe, Shell
    Oil Company entertained discussions with both Texaco and Saudi
    Aramco to form a series of joint venture companies in order to
    reduce costs and in order to bring, frankly, more product to
    America.
        The relationship between Saudi Aramco and Shell has
    continued in the aftermath of the sale of the Texaco assets to
    Shell in the early 2000 period.
        Ms. Jackson Lee. Motiva came online when?
        Mr. Hofmeister. Motiva was formed, I believe, about 2001. I
    would have to check the date to be precise. But today it is a
    50-50 joint venture between Saudi Aramco and Shell Oil Company.
        Ms. Jackson Lee. The focus of my question is how you
    managed--did you get through the regulatory construct quickly
    or not quickly? Would you be prepared to do another refinery,
    since that is one of the issues that we are discussing?
        Mr. Hofmeister. If you are referring to the refinery
    expansion of----
        Ms. Jackson Lee. Yes.
        Mr. Hofmeister [continuing]. The Motiva Refinery in Port
    Arthur, the State of Texas was very helpful and very useful in
    helping to speed up the process and the Federal regulations,
    also, that we had to deal with----
        Ms. Jackson Lee. So it can be done.
        Mr. Hofmeister. It can be done and it was done. We now have
    all permits and we are beginning construction.
        Ms. Jackson Lee. If you had to estimate, how many more
    refineries do you think--if we looked at a balanced energy
    policy that didn't rule out fossil fuels, what would be an
    optimum in terms of moving the technology forward and creating
    increased proficiency in our refineries? How many more would we
    need?
        Mr. Hofmeister. Well, I can really on speak for Shell in
    that regard and I think with the $7 billion, $3.5 billion Shell
    share, that will take care of our expected demand for some time
    to come.
        Ms. Jackson Lee. So you wouldn't build another one at these
    point.
        Mr. Hofmeister. Not at this point. But we never stop
    looking at options and depending upon our market share, in
    which we would decide to--instead of buying, on a third party
    market, finished products, we always keep options open for
    further expansions.
        Ms. Jackson Lee. Mr. Chairman, I had a question for Mr.
    Malone. I didn't know where we were.
        Mr. Conyers. Okay.
        Ms. Jackson Lee. Thank you.
        Mr. Malone, BP has been known--has a long history in
    promoting conservation and biofuels, and, frankly, I believe
    that recognizing the need for heavy crude, if the energy
    industry would embrace its name, which is energy, which is
    diverse and doesn't have a definition to it, and begin to
    promote these alternative fuels, and, I must say, that I know
    some of the testimony did not reflect.
        But we have passed legislation in this Congress, the 110th
    Congress, that is focused on R&D, that has tried to turn money
    back in to research development to improve the status of our
    energy policy, if you will.
        What has BP done currently to promote not only
    conservation, but this alternative fuel, and how much more can
    we expect from the energy industry, including BP, on giving us
    the roadmap to alternative fuel?
        Mr. Malone. I am not going to try to speak for the entire
    industry, but I think you have heard that all of us have some
    degree of work that we are doing in alternatives.
        As I said in my statement, the incentives that were
    included in the energy bill have allowed us to actually bring
    on additional wind generation capacity.
        It would not be economical if it had not been for those
    encouragements, because we are building a market. We are going
    to have to get a lot of wind generation to make that profitable
    and competitive.
        But an example is Texas went one step further and also put
    an encouragement in by requiring renewable energy into their
    system, and, right now, is now the largest wind producer in the
    United States.
        So it is usually a combination of Congress and the States.
    So in wind energy, we are seeing it working.
        Solar is a lot more difficult. We have been in the business
    a long time. Actually, our biggest solar market out of our
    Maryland plant is California, where, again, a combination of
    Federal and State has allowed that market to grow.
        On the biofuels side, again, we are a big blender, but what
    we have got to look for and what we are spending money on is on
    research into the next generation of that biofuel and, as I
    stated, it doesn't compete.
        And one other thing I would mention is we are working in
    California at the capability to generate hydrogen from the
    bottom of the barrel and it would be clean hydrogen, where we
    could sequester the CO2 in existing oil fields, increase the
    production from the field, sequester the greenhouse gases and
    produce clean energy from hydrogen.
        Ms. Jackson Lee. I thank the Chairman and I thank you for
    allowing me these questions, and I will even hang around for an
    abbreviated second round.
        But I yield back, Mr. Chairman.
        Mr. Conyers. Steve Chabot?
        Mr. Chabot. Thank you, Mr. Chairman.
        It is my belief that the greatest question in the economy
    right now, whether we go into a recession and if so, how deep
    it is, is the energy crisis that we have in this country now.
        And they say you will reap what you sow and it is my belief
    that what Congress has sown is the inability of the necessary
    exploration and drilling in areas like ANWR and the outer
    continental shelf that has been mentioned by myself and others
    previously, and that was terrible policy in not allowing this
    country to go into those areas.
        And one of the key problems that we face right now, and I
    would invite any of the members of the panel to address that
    issue relatively briefly, how significant is walling off those
    areas, specifically ANWR and the outer continental shelf?
        And I will start with you, Mr. Hofmeister.
        Mr. Hofmeister. I think, Congressman, the first thing that
    has to be understood is that for 30 years, we have been
    building business plans that have not included major potential
    resource development projects in the Atlantic, Pacific, eastern
    Gulf of Mexico, as well as, as you say, ANWR.
        So we have had 30 years of training to look elsewhere. And
    so we don't have a good handle on what is possible in the outer
    continental shelf, which is why I think it is long past time to
    at least map and understand what are the resources that are
    there so the nation could then make very informed decisions.
        I think that the drilling that we are currently doing on
    existing leases, many of which are marginal leases, is not
    yielding sufficient new energy, new oil into the economy to
    make up for persistent decline in existing fields.
        That then drives us to very expensive projects in the
    deepwater or ultra deepwater Gulf of Mexico, where we are
    allowed, which costs us an awful lot more money, which then, of
    course, gets built into the whole cost equation, which goes to
    American consumers.
        So my point of view is this persistent denial of access is
    costing American consumers right out of their pocketbook.
        Mr. Simon. Congressman, can I add to that? I think there
    are estimates and in the estimates I have seen is about 30
    billion barrels of oil and about 125 trillion cubic feet of gas
    that are declared off limits.
        When you look at that and put it into perspective, that is
    enough oil to back out our current level of imports for more
    than 8 years and enough natural gas to heat 15 million U.S.
    homes for a period of over 100 years. This is the only
    government in the world who denies its citizens access to known
    recoverable significant quantities of oil and gas.
        Mr. Chabot. Thank you.
        Mr. Robertson?
        Mr. Robertson. Congressman, we have the most dynamic,
    technologically advanced energy companies in this country and
    our production used to be 9 million barrels a day. It is now 5
    million barrels a day of oil in the United States. We now
    import 10 million barrels a day.
        We are, as has already been said, exploring the most
    difficult places in the world. We have heard from some of the
    Committee Members this morning about some of the forms of
    energy that exist in the United States, whether it be coal,
    whether it be oil, whether it be gas, whether it be other forms
    of energy.
        And with the determination to address some of these
    permitting and some of these access issues, that production
    decline could be turned around significantly.
        It takes long periods of time, but our domestic resources
    are very important and we have the capability to produce more
    in this country.
        Mr. Chabot. Excuse me. We have got votes on the floor. I
    only have a couple more questions. So let me get to the others
    very quickly, and I will ask Mr. Lowe and Mr. Malone on these.
        One of the solutions that this current Congress believes to
    be helpful in this effort is to raise taxes. What effect does
    that have on exploration for additional oil and how much of the
    tax increases, were they come, ultimately just get passed along
    to the consumer?
        Mr. Malone. Well, as I said in my oral statement,
    Congressman, I think the important thing right now is my
    company is investing ever dollar it makes back into energy
    development in the United States, and the simple result of that
    is if you take a dollar away from me here, I am not going to
    have it to reinvest in energy here in the United States.
        Mr. Chabot. Mr. Lowe?
        Mr. Lowe. I would just echo the same comment, that it is
    going to reduce supply, which is going to end up ultimately in
    higher prices for the consumers.
        Mr. Chabot. Mr. Chairman, I think in the interest of time,
    since we have votes on the floor, I am going to yield back,
    because I know the red light is ready to come on here.
        Can we finish?
        Mr. Conyers. If you need any more time, we will go ahead.
        Mr. Chabot. Since we do have just a moment here, Mr. Cannon
    is very excited about shale and, obviously, they have got a lot
    out there.
        How about when we come back? Because we are going to run
    out of time here. We have only got 4 minutes, I think, to get
    to the floor.
        Mr. Conyers. We will recess and any of the witnesses who
    want to join us at the deli in the B level, Attorney Raut will
    show you how to get there.
        We will be right back.
        [Recess.]
        Mr. Conyers. The Chair recognizes the gentleman from Ohio,
    Mr. Chabot.
        Mr. Chabot. Thank you, Mr. Chairman. And I will try to be
    relatively brief, since I started my questions prior to the
    votes.
        And we want to apologize to folks here for having a break,
    but obviously this happens during the course of one of these
    hearings, the votes that we have.
        Mr. Lowe, you had mentioned in your testimony that you were
    attempting to--going back a little bit--clearly having
    sufficient refinery capacity, if we have enough crude to be
    able to refine it in a product we can actually put into our
    cars in a timely manner, is important.
        And it is my understanding that you are trying or, in fact,
    are still trying to expand the capacity of one of our
    refineries and I think you mentioned, in the permitting
    process, you have had lawsuits filed against you and that has
    been a holdup to being able to expand this refinery, to be able
    to put out more product.
        Is that correct, you did say that?
        Mr. Lowe. Yes, sir. Actually, at a number of different
    refineries, we have had significant issues with permitting. The
    one that I specifically mentioned was Wood River, Illinois,
    where it is a very important project to expand the capacity to
    produce significantly more clean fuels, and it really ties in
    with the Canadian oil sands development.
        So this refinery will be capable of running those heavier
    Canadian oil sands. It has been about 2 years now and we still
    haven't gotten the permits.
        Mr. Chabot. And who or what organizations are filing such
    lawsuits to prevent you from expanding to be able to put out
    more gasoline that we can put in our cars?
        Mr. Lowe. These are primarily environmental groups, who I
    think their primary interest is to block the development of the
    Canadian oil sands.
        Mr. Chabot. Now, as I was mentioning here when we broke for
    the vote, Mr. Cannon, for the second time that I have seen him
    quite animated about the future of shale oil and the potential
    to be able to go after that, and it sounds very interesting to
    me.
        I am just wondering--he also mentioned that one of the
    problems has been the government and the example he used, I
    believe, was that it takes 7 years to develop the plant and
    move ahead, and yet they give them an 8-year lease.
        So it makes no sense to make that investment if you are
    going to be shut down potentially after a year.
        How real is that and is that something that we ought to be
    looking at in the future, that we are looking at in the future?
    Anybody that has any experience with this.
        Mr. Robertson?
        Mr. Robertson. Well, shale is a real resource. I mean,
    there is supposed to be about a trillion barrels or something
    like that, which is bigger than a lot of the Middle Eastern oil
    put together in the three States that he mentioned.
        Chevron and Shell both are working on projects with the DOE
    on different forms of producing that shale in an
    environmentally acceptable manner, focusing on an in situ
    process where we put chemicals or heat or whatever into the
    ground to produce this material without tearing up the surface,
    like we used to do in mining projects and those kinds of
    things.
        So this is real. It is too big of a resource for the United
    States to ignore. It is going to take a determined effort over
    a period of time, but our companies are working on that today.
        So we just need to make sure that there are no barriers to
    us continuing to go forward with this project. It is a
    multiyear project, but we need to start now. It is a huge
    opportunity for the United States.
        Mr. Chabot. And we have talked a lot about gasoline here
    today, which is critical, because a lot of people being hurt
    right now at the high prices at the pump.
        But we haven't talked too much about diesel and, obviously,
    trucks are what take our products around the country and as
    diesel has been going up, all consumers are going to see this
    reflected in the price of goods that we purchase, whether it is
    at the grocery store or the furniture store or anywhere else,
    and diesel is even higher than gasoline at this point.
        What are the prospects for diesel in the near term and
    perhaps long term?
        Mr. Hofmeister?
        Mr. Hofmeister. Thank you. I think the point that many
    people do not realize is that if you have a 42-gallon barrel of
    crude oil, you cannot produce 42 gallons of diesel from that.
        In other words, the way the cracking process works on the
    molecules, you can get, at best, with the right kind of crude
    and the right kind of production process, maybe 50 percent can
    be turned, at the most, turned into diesel or aviation fuel.
    More likely, you will get about a third.
        We like to talk about a barrel in terms of three thirds, a
    bottom third, a middle third and a top third. And what is
    pushing up the price of diesel today is not just U.S. demand,
    but global demand, where Europe, for example, has a
    concentrated strategy to convert their fleet of private
    automobiles, not just their trucks, to diesel-run products.
        Asia, all the construction, all of the major activities
    that are expanding economies in Asia are consuming diesel, as
    well as aviation fuel.
        So there are only two ways to get more diesel into the
    marketplace. The first thing is to get more barrels. If you
    don't get more barrels, you don't have the opportunity to
    create that third or whatever it is into diesel, and then you
    need manufacturing or refineries in order to produce it.
        In the U.S., we tend to concentrate the design of our
    refineries around gasoline more than diesel, because that is
    what the market has demanded.
        So for this country, we would have to do some considerable
    retrofitting of refineries in order to produce more diesel. In
    the new expansion I have mentioned in Port Arthur, Texas, we
    are actually designing it in such a way that we can reconfigure
    quickly for more diesel as the market wants it.
        Mr. Chabot. Thank you. And, finally, one last question.
        Mr. Hofmeister, I will address this to you, as well.
        This Congress has put a lot of confidence on ethanol to get
    us out of this mess that we are in for a lot of reasons that
    have been self-imposed, as far as I am concerned and as I have
    already mentioned.
        But ethanol is the thing that people are relying upon and,
    obviously, it has been driving up the cost of food stuffs and
    animal feed and everything else and we are paying for that in
    other ways.
        But is it a fact that the energy that is expended to
    produce a gallon of ethanol is virtually the same as the
    ethanol that you ultimately get out at the end of the process?
        Mr. Hofmeister. Well, I think it depends on the type of
    ethanol you are producing. Corn ethanol is one of the least
    efficient forms of ethanol, as we do our own research in this
    area, in that the co-efficiency of energy in for energy out is
    fairly close to a one-to-one relationship.
        Mr. Chabot. Let me stop you there, if I can. So are you
    saying, in essence--is it generally gasoline that you are using
    or is it another type of fuel?
        Mr. Hofmeister. If you compare the BTU content of what you
    get out of a gallon of ethanol with the BTU energy content to
    make that gallon of ethanol, it is fairly close to a one-to-one
    relationship.
        Mr. Chabot. So the energy expended to produce the energy
    that you get out the other side, what you are going to put in
    your car, is almost the same. Is that correct?
        Mr. Hofmeister. That is correct. What many people don't
    recognize is that the ultimate BTU content of a gallon of
    ethanol is considerably less than a gallon of gasoline.
        So it could be as much as 25 percent less than a gallon of
    gasoline.
        Mr. Chabot. So it could even be less.
        Mr. Hofmeister. So you actually have to use more ethanol to
    get the same energy usage that you would--25 percent more
    ethanol to get the same energy usage as you would from the same
    gallon of gasoline.
        Mr. Chabot. Does that make any sense?
        Mr. Hofmeister. Well, the reason Shell is pursuing all of
    its research in what we call second generation or cellulosic
    ethanol, we prefer not to put investment dollars into corn
    ethanol. We will let others do that.
        But we believe that there is a much richer energy content
    to be had from ethanol that might come, for example, from algae
    or from wood chips or sawdust or other kinds of grasses that
    are not in the food chain.
        So we have major projects ongoing with third parties to
    test the validity of that science.
        Mr. Chabot. Thank you.
        Mr. Chairman, I yield back the balance of my time.
        Mr. Conyers. The Chair recognizes the distinguished
    gentlelady from California, Maxine Waters.
        Ms. Waters. Thank you very much, Mr. Chairman.
        I thank you for using the Task Force to attempt to get some
    of the questions answered that we have all been asking and try
    and deal with the concerns of our constituents that we face on
    a daily basis.
        I have listened to the testimony of our presenters here
    today, and I have been trying to read about what was done over
    on the Senate side, and we ask the same questions.
        We ask a lot about profitability and in all of this
    testimony, we see where there are explanations of profitability
    and, basically, what the presenters are saying to us is, in
    essence, ``we make a lot of money and we spend a lot of
    money,'' that we have to spend money on exploration and
    investments in everything from refineries, trying to expand
    them, to development of new sources of energy.
        So we never really learn anything different when our
    presenters are here.
        Let me try and frame some of these questions a little bit
    differently.
        Exxon Mobil is represented by whom?
        Mr. Simon. By Steve Simon.
        Ms. Waters. Thank you very much, Mr. Simon.
        It shows that $40.6 billion were your profits in 2007, the
    largest corporate profit in American history.
        Now, with $40.6 billion in profit, are you saying that
    every time the price of oil per barrel increases, that you have
    to keep increasing the price at the pump in some way?
        Mr. Simon. Well, I think it helps to break that
    profitability down to where people understand the components of
    it.
        Ms. Waters. Okay, do that.
        Mr. Simon. If I could, please.
        Ms. Waters. Sure.
        Mr. Simon. When you look at that $40.6 billion, if you put
    that on a cents per gallon basis, on a global basis, it would
    be about $0.10 per gallon.
        Ms. Waters. So what did you spend that money on?
        Mr. Simon. Well, if I could just finish my point here and
    then I will come back to that.
        Ms. Waters. Sure.
        Mr. Simon. When you come back to the United States and then
    you look at the cents per gallon on the piece of the business
    where we produce products, last year, it was $0.04 per gallon
    and this year it is $0.014.
        Now, in terms of where we are spending that in the United
    States, one thing we are doing is we are expanding our
    refineries to meet the demands of our customers and your
    constituents.
        Ms. Waters. Of the $40.6 billion, how much did you spend on
    refinery expansion?
        Mr. Simon. In the last 5 years, we have spent about $3.5
    billion on refining here in the United States.
        Ms. Waters. In 2007, your profits were $40.6 billion. How
    much did you spend on refinery expansion in 2007?
        Mr. Simon. In 2007, it was probably about $1 billion, $1.5
    billion.
        Ms. Waters. Okay, all right.
        Mr. Simon. Now, again, that is here in the United States
    and you have got to be sure that you are talking about
    profitability here in the United States.
        Ms. Waters. I am talking about $40.6 billion, wherever it
    was earned. Was that earned internationally or here in the
    United States?
        Mr. Simon. About 75 percent of that profitability was
    earned outside of the United States, so about 25 percent here
    in the United States. And, again, then when you look at what
    amount of that was earned the refining and marketing business,
    it was about 10 percent last year.
        Ms. Waters. Of the $40.6 billion, where you spent about
    $1.5 billion on refineries, how else did you spend $40.6
    billion?
        Mr. Simon. Well, part of that goes back to the shareholder
    in terms of dividends, paid back the----
        Ms. Waters. What did you pay in 2007 in dividends?
        Mr. Simon. In dividends in 2007, we paid about $7.6 billion
    on a global basis.
        Ms. Waters. And how much did you pay on product promotion
    and advertisement, however that is framed in your company? I am
    just trying to get an idea of how it works.
        Mr. Simon. About $100 million.
        Ms. Waters. Is that all, $100 million?
        Mr. Simon. And that is everything in terms of advertising,
    product promotion, yes.
        Ms. Waters. I won't ask the amount of your compensation,
    but do you receive bonuses?
        Mr. Simon. If you looked at my total compensated granted
    last year, it was $12.5 billion. If you include a 1-year
    accrual of my pension fund, that would take it up to $15
    billion.
        Ms. Waters. In 2007, how much----
        Mr. Chabot. Would the gentlelady yield?
        Ms. Waters. Yes.
        Mr. Chabot. He just said $12 billion.
        Mr. Simon. No, million. Million. I am sorry.
        Mr. Chabot. $12 million?
        Mr. Simon. $12.5 million.
        Mr. Chabot. Million.
        Mr. Simon. And then $15 million.
        Mr. Chabot. I thank the gentlelady for yielding.
        Mr. Simon. Thank you very much, Congressman.
        Mr. Chabot. It is all right.
        Ms. Waters. I am sorry. Let me go back. I just want to deal
    with 2007, because that is the $40.6 billion. Is that number
    correct? Maybe it is not the right number, $40.6 billion.
        Mr. Simon. $40.6 billion (sic) was the correct number.
        Ms. Waters. And how much in compensation?
        Mr. Simon. Out of that, I don't have that answer,
    Congresswoman.
        Ms. Waters. Okay.
        Mr. Simon. But when you look at how much we invested, I
    think is one of the things you are driving at----
        Ms. Waters. What does investment mean? We don't know what
    that means. We understand that you have to invest in ways that
    will improve the profitability of the company, that you have
    got to invest in, as you say, refinery expansion, you have got
    to do a lot of things.
        But we don't know, when you say investment, whether or not
    the investments are realistic as it relates to how much you end
    up with and how much you have to charge at the pump.
        I mean, I could take $40.6 billion and invest it all, I
    suppose, or somebody could. Not me, I couldn't.
        But I want to know whether or not there is a percentage of
    that earnings that is reasonable for investments or whether or
    not when you come here and you talk to us and you tell us
    investment, we don't get the picture.
        What did you invest in?
        Mr. Simon. Well, if you look at it over a longer period of
    time----
        Ms. Waters. Yes.
        Mr. Simon [continuing]. We have invested more than we have
    earned.
        Ms. Waters. Oh, so you are operating at a deficit.
        Mr. Simon. When you look at earnings, we have invested more
    than what we have earned over a longer period of time.
        Ms. Waters. But we can't deal with that. You know why we
    can't deal with that? Because I don't know what period of time
    you are talking about. I don't know how much investment. That
    is a nice general statement.
        But the fact of the matter is we know you are not broke. We
    know that the compensation of the executives is very high. We
    know that you get your bonuses. We know that you spend a lot on
    promotion.
        So we don't like to hear that you are broke and that you
    have spent more money than you are earning. It just doesn't sit
    well with us.
        Mr. Simon. And I wasn't trying to----
        Ms. Waters. It certainly doesn't sit well with me.
        Mr. Simon. I certainly wasn't trying to imply that we are
    broke, Congresswoman.
        But if you looked at last year and looked at--I said we
    invested about $21 billion. Now, let me explain what that is.
        That is investing in projects to bring on oil and gas
    supplies around the world, to expand our refineries, to expand
    our chemical plants and meet our chemical customers'
    requirements. It all goes into that.
        Ms. Waters. But it says profits. After all of that was done
    in 2007, you earned $40.6 billion, after all of that was done,
    $40.6 billion.
        Mr. Simon. $40.6 billion was the profitability. That is
    correct.
        Ms. Waters. That is right. So let's deal with that. You
    earned $40.6 billion, but you continued to raise prices at the
    pump.
        Why is it necessary, when you have that kind of profit,
    that you increase the price at the pump to our constituents and
    to your customers?
        Mr. Simon. Okay. Well, let's come back and talk about that,
    which is what I was trying to do initially.
        When you look at----
        Ms. Waters. No, I know what you did. I don't want you to
    tell me about the penny.
        Mr. Simon. I am going to, Congresswoman, if you would give
    me----
        Ms. Waters. No, you are not. I want to----
        Mr. Simon. If you will give me an opportunity----
        Ms. Waters. I want to know----
        Mr. Conyers. Would you like another round of questioning?
        Ms. Waters. Yes.
        Mr. Conyers. We have already given you more time.
        Ms. Waters. I appreciate that, Mr. Chairman, but let me
    just say this.
        I appreciate your generosity, and I am going to yield back
    my time, because this is an exercise in futility.
        And our constituents are angry, and they are knowing now
    that we are not going to get any new information out of these
    presenters.
        I thank them for coming.
        Mr. Conyers. He is doing pretty well. I don't think it is
    futile at all.
        Ms. Waters. Let me yield my time before I step outside of
    this box.
        Mr. Conyers. You don't have any time to yield.
        Ms. Waters. Thank you, Mr. Chairman. Thank you, thank you,
    thank you very much. Thank you.
        Mr. Conyers. But I would like to invite you to another
    round of questions. You are just getting warmed up----
        Ms. Waters. I appreciate that.
        Mr. Conyers [continuing]. It sounds like to me.
        Ms. Waters. I appreciate that. Thank you.
        Mr. Conyers. All right.
        Ric Keller?
        Mr. Keller. Thank you very much, Mr. Chairman.
        I want to thank all our witnesses for being here today.
        Mr. Simon, I will begin with you for a few questions for
    Exxon. Let me state that, preliminarily, I agree with much of
    your testimony before the Senate.
        Specifically, I agree that the principal component of the
    price of gasoline is the price of crude oil. I agree that crude
    oil is determined by the law of supply and demand and that
    nothing we can do in Congress can alter that fundamental law of
    supply and demand.
        I agree with you that there are things we can do to help
    influence it by drilling in ANWR and by providing more drilling
    for the deepwater oil reserves.
        I think those are good steps.
        One of the things you just testified about, however, is
    that you wanted to clear up some misconceptions and I want to
    give you some straight talk about the two issues that, from an
    appearance perspective, you may feel helpful you would like to
    address, and I will give you both issues and then give you a
    chance to fairly go through and give your side of both of them.
        Let's first address the issue that you might want to
    address from an appearance perspective.
        Moms in Orlando, Florida are paying $3.75 a gallon today at
    the local Exxon Mobil gas station. Exxon paid its former CEO,
    Lee Raymond, $400 million in retirement compensation.
        This situation is unacceptable. People in central Florida
    are hurting and they want a hand, not a finger.
        Now, you all are nice guys, you are respectful. I would not
    dare suggest any of you, just like me, wouldn't give them a
    finger. But I want to convey the anger and frustration that I
    hear from them on a regular basis at town hall meetings and
    give you a fair chance to respond to it.
        The second issue that I would like you to address from a
    perception perspective. You just testified today that Exxon's
    profit margins are tight and that your long-term investments
    are huge.
        It appears to some people that it is your profits that are
    huge and your long-term investments in building new refineries
    in this country are tight.
        Specifically, Exxon just recorded a profit of $40.6 billion
    in 2007, the single largest annual profit in U.S. history for
    any U.S. company.
        To put that in perspective, Wal-Mart is number one on the
    Fortune 500 list. Exxon's profits are literally more than
    triple those of Wal-Mart's in 2007.
        At the same time, Exxon has not made any long-term
    investments in new refineries in the United States in the past
    32 years, beyond the expansion of existing ones.
        So I want to give you a chance to respond to those. I have
    some very detailed questions for you on the refineries.
        But first, in fairness to you, do you have any response to
    clear up any misconceptions that you feel are out there with
    respect to what some believe to be exorbitant pay that you are
    using this money for?
        Mr. Simon. Well, it was our former Chairman. I think that
    number, we have tried to clarify that. That number itself, when
    you look at the $400 million, about 10 percent of that was
    associated with the 1 year and the rest of it was what was
    earned over many years, and a lot of that did not pay out until
    much later.
        I would, however, say we recognize that is a large amount
    of money. It is determined by independent directors. It is not
    management that makes those determinations. And we pay our
    executives based upon that and that is where you look at
    competition and what others with comparable responsibilities
    and authorities are paid.
        It is a lot of money, I know that.
        Now, let's come back and talk about----
        Mr. Keller. Do you stand by that? Do you think that is a
    fair level of compensation, $400 million for one individual?
        Mr. Simon. Well, again, let's put it into perspective. That
    wasn't $400 million in 1 year. About 10 percent of that was in
    that year.
        About 70-75 percent was not paid out until 5, 10 years into
    the future for that period and a lot of it was what was earned
    over a long career in terms of a pension payout, which was
    about 98 million.
        Mr. Keller. But you understand, if you were at my gas
    station in Orlando and you saw a single mom there with her kids
    and she just paid 80 bucks to fill up the minivan, it would
    probably be a hard conversation for you to have to say, ``Look,
    we paid our CEO 400 million bucks. We just posted the largest
    profit in American history, and I need a hug here, because our
    margins are tight.''
        Mr. Simon. I understand. I understand that fully. Again,
    that was a few years back. It, of course, has not an impact on
    this year--on last year's profitability.
        But I recognize the point.
        The point I would talk about is when you look at the
    profitability on the gasoline that we sell at the pump, and
    let's talk about that, again, when you look at the United
    States and the refining and marketing business last year, it
    was $0.04 on the dollar.
        Now, you compare that $0.04 on the dollar of revenue, as
    compares to about $0.078 cents on the Dow Industrial, so it was
    about half of that.
        I recognize it is a big impact on consumers, but, again,
    when you look at what is driving that, it is not the
    profitability on that that is driving the higher price.
        It is the cost of the raw material that we have to buy in
    order to produce those products. We buy 90 percent of the raw
    materials that we use to produce those products on the open
    market.
        Mr. Keller. Well, Mr. Simon, my time has expired. So in
    fairness to others who haven't asked their questions, let me
    say this and wrap up, and I will defer to the Chairman.
        I raise those two issues, the executive pay and the failure
    to build a new refinery in 32 years, because you wanted to
    clear up some misconceptions, and I have got about 12 or 13
    more questions about the refineries, to give you a fair chance
    to address the refinery issue, too, as well as to talk about
    solutions.
        So I just want you to know we want to be fair to you in
    raising these issues and when we come back to a second round of
    questions, we will be happy to ask you those questions and let
    you feel you got a fair shake and got your side out on those,
    as well.
        Mr. Simon. I really would appreciate the opportunity to
    address refining.
        Mr. Keller. Absolutely, and I promise you we will get to
    that in my first question when we get back.
        Thank you, Mr. Chairman, yield back.
        Mr. Conyers. Betty Sutton?
        Ms. Sutton. Thank you, Mr. Chairman.
        Were any of you or colleagues that you work with and
    communicate with participants in the energy task force meetings
    conducted by Vice President Cheney at the beginning of the Bush
    administration and if so, could you just share with the
    American people what role you played or they played?
        Mr. Simon. In Exxon Mobil's case, no, ma'am.
        Ms. Sutton. No one was there.
        Mr. Malone. In BP's case, yes, there was a meeting with the
    Vice President. Whether you would call it the task force
    meeting, our chief executive met with Vice President Cheney.
        It was a general discussion, I am told, I was not there,
    around world oil production.
        Ms. Sutton. And when was that?
        Mr. Malone. Early 2001.
        Ms. Sutton. Thank you.
        Mr. Lowe. No one from Phillips or ConocoPhillips was there.
        Mr. Robertson. No one from Chevron participated in that.
    But at the time when the new Administration came aboard, we
    wrote a letter to the President of the United States and sent a
    copy to some Members of the House and every Senator on both
    sides of the aisle with our recommendations for energy policy,
    and, frankly, a lot of it is playing out exactly the way we had
    described.
        Mr. Hofmeister. I was working overseas during the early
    years of the Bush administration, so was not a party to any.
        We looked into the history of Shell's involvement with the
    White House and we do know that, on a periodic interval, my
    predecessors would brief various members of the White House on
    energy matters, but were not part of a task force.
        Ms. Sutton. I have a question. Mr. Simon, you had the
    opportunity to talk to Representative Waters about the profit
    and the breakdown.
        Today, I think it was, there was a story in the Washington
    Post, and I just want to see if this is accurate.
        It says that Exxon Mobil made a $40 billion--I understand
    it is $40.6 billion--profit last year, repurchased $31.8
    billion of stock. Is that correct?
        Mr. Simon. I am sorry. Thirty?
        Ms. Sutton. $31.8 billion of stock.
        Mr. Simon. Right.
        Ms. Sutton. Gave out $7.6 billion in dividends. Is that
    correct?
        Mr. Simon. That is correct.
        Ms. Sutton. Paid its top five executives $76 million. Is
    that correct?
        Mr. Simon. I have not checked that number. I don't know if
    that is correct or not.
        Ms. Sutton. What do you think? Is it in the neighborhood?
    Would you know if it is in the neighborhood, $76 million?
        Mr. Simon. I would have to check, Congresswoman. I just
    don't have the answer to that.
        Ms. Sutton. Were you asked this question by the Senate?
        Mr. Simon. The question I was asked by the Senate was what
    was my compensation and I answered that earlier in this
    hearing, as well.
        Ms. Sutton. Right. That was $12.5 million.
        Mr. Simon. $12.5 million granted in compensation, including
    stock and everything else, last year. And then there was an
    additional increment if you allocated back 1 year accrual of my
    pension and that would take it to $15 million, but that doesn't
    pay out until after I retire.
        So I did not mention that. I mentioned the $12.5 million in
    terms of my compensation granted last year.
        Ms. Sutton. Do you have any idea how many people with Exxon
    Mobil make more than you?
        Mr. Simon. I would have to check on that.
        Ms. Sutton. No idea. How many people are in positions above
    yours?
        Mr. Simon. Well, I am the number two in the company in
    terms of I am a director, and we have got one other director,
    and, of course, that is our chairman.
        Ms. Sutton. And it says that the top five executives, $76
    million. If you could get back to me----
        Mr. Simon. I would.
        Ms. Sutton [continuing]. With the answer to that question,
    I would appreciate it.
        And that you invested roughly $10 million in renewable
    energy.
        Mr. Simon. No, that number is not correct. And if you would
    give me the opportunity, I would like to talk about our
    renewables approach.
        Ms. Sutton. What I would like to know, and not just from
    you, but from all, because I heard a lot of discussion about
    the investments that you are making in new energy projects,
    what is the percentage that you are investing in renewable
    energy?
        Mr. Simon. Could I?
        Ms. Sutton. You can start.
        Mr. Simon. When you look at what we are doing in order to
    do what I think to be our mutual objective of reducing the
    amount of fossil fuels that we consume and mitigating
    greenhouse gas emissions, when you look at what we are doing to
    accomplish that objective, it is somewhere around $2 billion
    over the last 4 years.
        Now, that is a three-pronged strategy. One is to improve
    efficiency in our own operations, refining and chemicals
    operations, where we are improving efficiency at two to three
    times the rate of the average of industry, and there we are
    putting about $1.5 to $2 billion over the last 4 years into
    that.
        The other prong is how do we help our customers to utilize
    our products more efficiently. And when you look at what we
    have developed right now, if applied in the U.S. vehicle fleet,
    would save about 5 billion gallons of gasoline and that would
    be equivalent to removing 8 million cars off the road.
        When you look at our own operations, it was equivalent to
    removing about 2 million cars off the road when you look at
    what we have done since 1999.
        Ms. Sutton. But, Mr. Simon, all I am asking for is the
    percentage that you are investing in renewable energy in the
    projects that you are talking about putting investment in.
        And if you could just get back to me with that number, too,
    that would be great.
        Mr. Simon. All right, I will.
        Ms. Sutton. Mr. Malone?
        Mr. Malone. Last year, it was about 10 percent of our
    capital, $750 million. This year, it will exceed that. It will
    be something in excess of 10 percent.
        Mr. Lowe. ConocoPhillips' investments are primarily in the
    research phase. Spent about $150 million last year. But if
    those research things, such as carbon capture and storage, if
    those come to fruition, those would be multibillion dollar
    projects. But they are in the research phase at this point.
        Mr. Robertson. In the renewables area, Chevron is the
    largest geothermal energy company in the world. We just
    announced a joint venture with Weyerhaeuser to develop
    cellulosic non-food ethanol. So that is a serious project.
        We have a company that sells energy efficiency and shows
    customers how to become more energy efficient by putting in
    either good practices or putting in solar panels or fuel cells
    or whatever fits that particular customer, and their experience
    has been reducing energy costs by 30 percent.
        On those three areas, ethanol, second generation ethanol,
    geothermal energy and energy efficiency, we will spend $2.5
    billion over the next 3 years. We spent about $2 billion over
    the last 5 years.
        Ms. Sutton. And you guys can't tell me what percentage it
    is that you are putting into these projects based upon all the
    money that you are saying that you are investing?
        Mr. Robertson. I can tell you that we are going to spend
    this year $23 billion. I can't tell you what we are going to
    spend in capital beyond that. But I can tell you that we are
    going to spend $2.5 billion on alternative energy and when and
    if some of these things prove out, like cellulosic ethanol, we
    are quite prepared to spend a lot more on it.
        So we are at a phase in that work, that it is not an issue
    of how much money you spend on it. It is an issue of what you
    spend it on to try and develop some technology that will work.
        So we are not constrained by money in terms of these
    projects.
        Ms. Sutton. So encouraging you to spend it there----
        Mr. Robertson. We are going to spend it. We are going to
    spend it and we are serious about the non-food ethanol. We are
    serious about the geothermal. We are serious about energy
    efficiency. That is the biggest opportunity we have.
        On average, in over 800 projects, Chevron's energy
    efficiency customers, universities in California, military
    bases, post offices, they average, over 800 projects, 30
    percent energy savings.
        That is a lot bigger source of fuel for the economy by
    saving energy than most of these other things that I have
    talked about.
        Ms. Sutton. Sir?
        Mr. Hofmeister. Shell has spent approximately $1 billion
    over the last 5 years on renewable energies. We believe that
    that is a prudent amount given the maturity of the technology.
        For that $1 billion, there is a negative return on
    investment, which actually prompts us to think very seriously
    about how quickly we could spend more.
        We do believe we can commercialize in time and this year we
    are continuing to spend. On a percentage basis, it is very
    small, it is less than 1 percent.
        And at the same time, we are learning about what we need to
    do if we were to spend more in the future.
        Ms. Sutton. I really appreciate that you used the
    percentage, less than 1 percent. Thank you.
        And, Mr. Chairman, I will yield back and wait for the next
    round.
        Mr. Conyers. Thank you so much.
        I am pleased now to recognize Chris Cannon, the gentleman
    from Utah, who apparently has cooled down quite a bit now.
        Mr. Cannon. I try to always have a cool exterior, but the
    inner furnace is always pumping, and especially when we are
    talking about these kinds of points.
        To follow up on the gentlelady's questions about where we
    are spending money, can we start, Mr. Hofmeister, with you and
    go down the panel and could you tell me how much money, if you
    know, that you have spent on shale oil development as a subset
    of the unconventional?
        Mr. Hofmeister. Congressman, I would have to confirm that
    number. I don't have it at my fingertips.
        I think it is public record that between oil sands in
    Canada, Alberta, Canada, and oil shale, we are spending in the
    billions in order to develop projects.
        But the Colorado effort is currently a research effort, so
    it is in the hundreds of millions. But I would have to check to
    confirm the number.
        Mr. Cannon. Thank you. Hundreds of millions is actually
    quite a good number for this purpose.
        I know that the chairman has also been investing in
    technology and recognizing the difference between production,
    which could be very large numbers, the question is just how
    much have you put into shale oil technology development, if you
    have a sense.
        Mr. Robertson. I can't tell you the answer to that. I can
    tell you that it is a significant research project that is
    going on using chemistry to try to figure out how to breach
    this stuff cleanly, and we have a joint project with the DOE
    and we are a large shale oil owner and have been for many
    years.
        So we have put a lot money into the technology development.
    I will get back to you happily with the number.
        Mr. Cannon. My sense is it has been hundreds of millions of
    dollars, just having looked at some of the material that you
    have out there.
        Mr. Robertson. It is probably in that range, but it is
    certainly not a lot more than that.
        Mr. Cannon. We don't really want to nail anything down
    here, just to get a sense that this is an important project.
        Mr. Robertson. It is a very important project to Chevron
    and it has been for many years.
        Mr. Cannon. I love the idea that you are not using brute
    force, but rather some----
        Mr. Robertson. I think in many places, that is something
    that is happening. We are partners with Shell in a project up
    in the oil sands in Canada, but the next generation of projects
    up there, too, will be in situ projects.
        We use steam flooding around the world to produce oil
    through wells. In the future, we will be finding ways to put
    heat into the ground to produce oil sands through wells and,
    similarly, in the shale, it will be different technology,
    different chemistry, but essentially we will be putting
    something into the ground to be able to push that through
    wells.
        So the technology is moving forward and we are deeply
    involved in this important project.
        Mr. Cannon. Mr. Lowe, before you go ahead, let me just
    point out that we keep hearing this statement and it is quoted
    in the Desert News, I think, today. There is a statement Nick
    Rahall, the Chairman of the Resources Committee, ``We simply
    cannot drill our way to lower prices at the pump.''
        But, of course, that is true if you think of drilling as a
    traditional function, but if you think of it in the
    unconventional sense, I think that that actually changes that
    analysis.
        So I appreciate your reference to the kind of drilling that
    you would be doing, Mr. Robertson.
        Mr. Lowe, is ConocoPhillips doing any oil shale
    development?
        Mr. Lowe. The oil sands, in particular, but also the oil
    shale are a very important part of our growth story in the
    future.
        We acquired most of our shale position when we acquired
    Tosco, which was mainly a refiner, but Tosco actually stood for
    ``The Oil Shale Company.''
        Mr. Cannon. Do you have any sense of what the commitment
    has been historically----
        Mr. Lowe. Sorry. I know that we invested a lot of money
    back in the 1970's. It is mostly in the research side up to
    this point, and it continues today.
        Mr. Cannon. And let me just point out that that investment
    is vastly important, because we take that base of understanding
    and add the new technology that has developed over the last 30
    years and it changes the nature of the calculation of what is
    available at what cost.
        Mr. Malone, do you have a sense of what BP has done?
        Mr. Malone. I am not aware of any development opportunities
    that we have in the shale oil. But in the oil sands in Canada,
    we just announced a joint venture with Husky Oil, $5.5 billion.
        We will bring oil to our Toledo refinery, Toledo, Ohio
    refinery and we will invest in the refinery, as well. It should
    be 600,000 gallons a day additional gas.
        Mr. Cannon. Well, we appreciate that. That is a big chunk
    of new resource coming in, which makes a big difference.
        Mr. Simon, could you tell us a little bit about what Exxon
    Mobil is doing?
        Mr. Simon. Yes. What we have done at this point is, again,
    mainly in the research area, although we have a technology that
    I know my colleagues wouldn't agree with that we think is
    superior in terms of developing shale oil resources.
        That is an important resource. It should be made available
    and let us all of us apply our technologies and see how it
    works out.
        Mr. Cannon. Let me just ask one final question. My
    governor, John Huntsman, has recently submitted a letter to the
    Senate asking that it lift the moratorium on the development of
    Utah oil shale, which, of course, is on BLM land, and I am
    thinking about introducing a bill that would allow the
    President to cut through the permitting process by drawing
    together groups of people that understand what needs to be done
    or what the environmental problems could be.
        Is that something that your companies or those of you who
    are interested in oil shale would invite and if so, would you
    actually pursue development of oil shale properties?
        Let me start with Mr. Hofmeister again.
        Mr. Hofmeister. I think, Congressman, it would be a
    tremendous improvement which would enable us to get to a
    commercial decision on such projects in a much faster
    timeframe.
        Mr. Robertson. I am not familiar with the details, but the
    way you described it, it sounds like something we ought to
    support.
        Mr. Cannon. May I ask, would your company pursue
    development if the permitting period was shortened?
        Mr. Robertson. Our company is pursuing, obviously, the
    technology, the development of the technology and as soon as we
    can make that commercial, we would certainly pursue it, yes.
        Mr. Lowe. Certainly, we are in favor of access and we are
    very much in favor of having a clear permitting process.
        Mr. Malone. As I said, we don't have an active, but we
    never say never. And at one time, our predecessor company was
    in White River oil shale there in Utah.
        At the current oil price, we couldn't make it economical.
    But we are always watching.
        Mr. Simon. Certainly, anything I believe that would open up
    that and allow access to it and allow commercial applications
    of whatever technologies we have would be very welcome,
    Congressman.
        Mr. Cannon. Thank you.
        Mr. Chairman, I recognize my time has expired, but if I
    could make one more comment.
        That is, Mr. Malone referred to the White River mine. That
    cost $330 million, as I understand, to develop in 1977, over $1
    billion today to duplicate that.
        When I came to Congress, the first thing I did was to try
    and stop BLM from shutting that mine down. It is now up and
    available, but it is taken over 2 years to get the permits that
    we thought were going to happen in 6 weeks.
        The permitting process has become a terrific problem and an
    impediment. The way we solve the problem of $4 a gallon oil is
    by making more resource available, which can deliver oil at a
    lower cost.
        That is the only way we are going to do it and, in fact, we
    have those resources. And I wish we could also talk about coal
    to liquid, but that probably goes beyond the course of this.
        So I thank you, Mr. Chairman, for your indulgence and yield
    back.
        Mr. Conyers. Thank you.
        The distinguished gentlelady from Florida, Debbie Wasserman
    Schultz?
        Ms. Wasserman Schultz. Thank you, Mr. Chairman.
        Mr. Simon, I want to direct my questioning mostly to you.
        As I mentioned in my opening remarks, I paid $68 at the
    beginning of this week to fill up my minivan that I drive my
    family around it, and $68 isn't real money to someone who makes
    $12.5 million, but it is certainly real money to working
    families in America who are struggling to make their mortgage
    payments and pay for their groceries and make sure that they
    can afford to pay the copayments on their health insurance, if
    they even have health insurance.
        And so when faced with the insensitivity that it appears
    the oil industry has for the plight of Americans who are
    struggling to fill the gas tanks of their minivans, it is
    really hard for me to understand and it is difficult when I
    stand in front of my constituents at a town hall meeting and
    they throw at me that the oil industry is making record profits
    and that you are charging record prices.
        It is difficult for me to explain to them how you are not
    manipulating the price of gas and manipulating the price that
    is paid at the pump.
        So, in fact, I probably want all of you to answer this
    question. But I can't say that there is evidence that you are
    manipulating the price, but I believe that you probably are.
        So prove to me that you are not.
        Mr. Simon. Well, Congresswoman, I can assure you that we
    are not doing anything to manipulate prices. Now, how I can
    convince you of that, I am not sure, other than to say----
        Ms. Wasserman Schultz. Well, you have got to go beyond your
    word and show me.
        Mr. Simon. I give you my word and I would also comment that
    the FTC has investigated our industry more than any other that
    I know of, on the average of about three times per year over
    the last 35 years, and have never found in one of those any
    evidence of anticompetitive behavior.
        I fully understand, and I know it is hard for you think
    that I empathize with the consumer, but we do and I do and we
    are doing all we can to try to put downward pressure on the
    prices.
        We can do that in two ways.
        Ms. Wasserman Schultz. What are you doing to put the
    downward pressure? Because you are not expanding capacity.
        Mr. Simon. Yes, we are, Congresswoman. I did want to make
    that point. When you look at what industry has done, let me
    talk about industry first and then let me talk about what we
    have done as a corporation.
        The industry, over the last 10 years, has brought on the
    equivalent of one new refinery every year by incrementally
    expanding existing capacity.
        Ms. Wasserman Schultz. How many has your company brought
    on?
        Mr. Simon. We have expanded capacity at a rate 40 percent
    above the industry average.
        Ms. Wasserman Schultz. How many refineries have you opened
    in the last 10 years?
        Mr. Simon. We have not opened any new refineries, but we
    have brought on the equivalency of new----
        Ms. Wasserman Schultz. Why not?
        Mr. Simon. We don't need new refineries, Congresswoman.
    What we can do is we can take what we have and incrementally
    expand that and do that at a lower cost and do it much more
    rapidly than we could by bringing on a new refinery.
        Ms. Wasserman Schultz. Well, the third grade economics that
    was referred to earlier, I have two third graders and there is
    not a whole lot of economics that they are learning, but the
    law of supply and demand is pretty basic.
        And it is hard for me to understand how the prices keep
    going up and up and up if you are expanding capacity in a great
    enough proportion to bring down the price. I assume you are
    not.
        Mr. Simon. When you look at what has happened between last
    year and this year, price of the product has gone up. When you
    look at what is behind that, our profitability in the refining
    and marketing business has gone down.
        Why is that? Because crude price has gone up about 80
    percent.
        Ms. Wasserman Schultz. Your profitability has gone down,
    but you made $40.6 billion last year.
        Mr. Simon. The profitability in the refining and marketing
    business here in the United States, which is making those
    products you are talking about, has gone down. It is about 40
    percent this year of what it was last year.
        Why is that? It is because the price of the raw materials,
    crude oil, has gone up about 80 percent. The products you and I
    are talking about, when you look at diesel fuel, it is gone up
    about 52 percent and motor gasoline up only 60 percent.
        Ms. Wasserman Schultz. Mr. Simon, how many gas stations
    have you opened in the last 5 years in America?
        Mr. Simon. I wouldn't have that number. But when you look--
    --
        Ms. Wasserman Schultz. I am talking----
        Mr. Simon. But when you look at the number of gas stations
    in this country, about 165,000, the number that we own and
    operate and, therefore, set the price in is only about a half a
    percent of that.
        Most of those outlets are owned by independent businessmen
    and businesswomen.
        Ms. Wasserman Schultz. So while we open up more--but they
    are affiliated with your company. I mean, they might be owned
    and operated by the independent businessmen and women, but they
    have your company's name on them.
        Mr. Simon. They are branded. They are branded Exxon Mobil
    and, frankly, our market share has actually dropped since the
    merger. It is dropped from 14 percent down to 10 percent.
        Ms. Wasserman Schultz. Before I yield back, so the bottom
    line here, which is indisputable, is that you have opened no
    refineries. You say you have expanded capacity in the existing
    refineries.
        Yet, the price has continued to go up. Your profits
    continue to go up and you have absolutely--and if you could get
    back to me with the number of gas stations that you have opened
    in the last 5 years in America, I would appreciate it.
        You have expanded the asset point exponentially. So we are
    making the gas--the place you can get gas more available, but
    we are not making more gas available, and the price is going up
    and your profits, as well as your salaries of your top tier
    executives are going up.
        That is inherently unfair and it causes the Members of
    Congress in front of you to stand in front of our constituents
    and have to defend how it is we are going to address the rising
    cost of energy, and you have no solutions.
        I yield the balance of my time.
        Mr. Simon. But I did mention that our refinery capacity has
    expanded, Congresswoman, whether we brought on new refineries
    or not.
        Ms. Wasserman Schultz. But it isn't doing us any good,
    because the prices are not coming down.
        Mr. Simon. Oh, I think it has done some good. As mentioned
    before, the price----
        Ms. Wasserman Schultz. Really? What?
        Mr. Simon [continuing]. Of products relative to crude oil
    has come down. But the raw material behind it----
        Ms. Wasserman Schultz. The only thing that matters is that
    it costs almost $70 to fill up a minivan.
        Mr. Simon. I understand that.
        Ms. Wasserman Schultz. That is the price that matters.
        Mr. Simon. And that is because of the raw materials that we
    have to buy in order to produce those products.
        Ms. Wasserman Schultz. Well, you need to be more a part of
    the solution than you have been, and you can say that you have
    been, but it isn't working. So it is time to go back to the
    drawing board.
        Yield back the balance of my time.
        Mr. Conyers. The distinguished gentleman from California,
    Darrell Issa.
        Mr. Issa. Thank you, Mr. Chairman.
        And thank you, Ms. Wasserman Schultz.
        I couldn't have asked for it to be better set up for the
    debate that was really going on here. I am listening and
    saying, ``Okay, we have established through years of hearings
    that it is incredibly expensive and just about impossible to
    open a new refinery.''
        We established during the Jimmy Carter era there was this
    incentive to open a bunch of small, inefficient refineries and,
    over the years, they have gone away in favor of larger, more
    efficient refineries.
        And we have established that there is a risk of these large
    refineries because they are better targets for terrorists. They
    have other fundamental problems. But that is the world that we
    live in.
        Let me understand. That was the world we lived in with $29
    oil. That was the world we lived in $2 ago in gas and oil
    prices. Isn't that true?
        Okay. So all of those truisms of 30-40 years of bad or no
    energy policy haven't changed. I just want to make sure that I
    understand that 7 minutes-plus was used to berate you, Mr.
    Simon, on what I think was a very unfair tact, because you
    don't control retail prices.
        We have had hearings to make it very clear. As a matter of
    fact, we have had hearings about the question of whether the
    interchange fees from credit card companies are more profitable
    than your gas revenues at the retail.
        So having gone through that, let me move on to a couple of
    other areas and I will give you a break, Mr. Simon. Quite
    honestly, I think you need the glass of water and a little
    moment.
        Mr. Malone, British Petroleum, I was in Baku when the
    pipeline was opened.
        Would you tell us a little bit about your global
    activities? In other words, how much new capacity as a world
    company have you brought on outside the U.S. which goes into
    the same pool of available oil and then how much have you been
    able to bring on net inside the U.S. during that same period of
    time?
        Mr. Malone. Thank you, Congressman. We have been bringing
    on projects all over the world. You mentioned the one in Baku.
        Mr. Issa. I am going to Kazakhstan tomorrow night. Trust
    me, I am very interested in the place that brought on more than
    one ANWR in the time we have been arguing about voting on it.
        Mr. Malone. We have also been extremely active off the west
    coast of Africa. Angola, in particular, has been a real
    opportunity for us. Of course, development continues in the
    North Sea, just about geographically all around the world.
        We have been investing at the rate of about $19 billion a
    year.
        Mr. Issa. Right. And shorten it down. You brought on, if I
    understand correctly, more outside the U.S., where you had
    opportunity, than you have been able to in the U.S. on a net
    basis.
        Mr. Malone. Yes. Our production has been declining in the
    U.S. We are now just roughly a half a million, 500,000.
        Mr. Issa. Mr. Lowe, same sort of a question. I know that
    you spent some time and energy in a number of markets that
    became off limits or unavailable to you.
        If I remember right, you were involved in Syria, hoping to
    develop those oil wells that have never been properly
    developed. But how do you view U.S. versus the rest of the
    world and how much would you say you have brought on net in
    each place?
        Mr. Lowe. Well, I think one of the items that does seem to
    get lost in all this is we deal with a depleting resource and
    so it is very challenging, particularly here in the U.S., where
    the depletion rates oftentimes are double digit.
        So your production is going down, all other things being
    equal, by 10 percent or more a year. And so it is very
    difficult to keep production anywhere near flat here in the
    United States.
        We are the largest producer in Alaska. Production continues
    to go down there.
        Mr. Malone mentioned earlier the Denali, Alaska pipeline.
    That would be a $30 to $40, possibly even higher than that,
    billion investment to bring that natural gas down to the lower
    48.
        So the scale of our businesses is very large, very
    challenging to keep our production flat, let alone grow it.
        Mr. Issa. And, Mr. Robertson, you are California-based.
    California, if I understand it, is about a million barrels a
    day of production, about 2 million barrels a day of
    consumption.
        How much opportunity have you had in California to have
    access to any new fields at all in order to try to take that
    reducing amount that is being produced in California and get it
    reversed?
        Mr. Robertson. Congressman, not much in California. Our
    biggest investments in California are in the same old place, in
    the San Joaquin Valley, where we have put an enormous amount of
    money. In fact, just in the last few weeks, we produced the two
    billionth barrel from an old field that was started up in 1899
    called Kern River.
        We have put billions of dollars into that field over the
    years. But the new access has been almost nothing.
        Globally, we are going to be increasing production. We
    have, over this 5-year period, we are in the middle of
    increasing about 3 percent a year in terms of our production.
        Decline rates are about 4 percent. That means you have got
    to have about 7 percent. We produce about 2.6 million barrels a
    day.
        The opportunities we have in the U.S. are primarily the
    deepwater Gulf of Mexico. We have had some major projects, one
    coming on this year, one coming on next year.
        Just one of those is a $4.7 billion project in 5,000 feet
    of water. So the places where we can invest in the United
    States, we are. We would love to invest more in the U.S.. Two
    thirds of our capital is outside the United States. We would
    love it to be a lot more in the United States, but the
    opportunities just haven't been there.
        Mr. Issa. That is a decision that we can make from the
    dais.
        Mr. Robertson. That is a decision that can be incredibly
    changed by policy in the United States.
        Mr. Issa. Mr. Hofmeister, Shell is certainly known as a
    global leader in many ways, known less as a U.S. company than
    as a global leader.
        How do you find opportunities in the U.S. versus elsewhere
    when it comes to us being part of the solution of new
    production?
        Mr. Hofmeister. Well, fortunately, Shell was a leader in
    the deepwater Gulf of Mexico and continues to produce in the
    Gulf of Mexico and invest in those areas where we have leases.
        So we see the Gulf of Mexico as a continued growth
    opportunity. More recently, we have taken a very, very big bet
    on offshore Alaska, with multiple leases in the Beaufort Sea
    and the Chukchi Sea.
        Regrettably, we are seeing tremendous legal action trying
    to stop every move we make in trying to get to a drilling
    season, which, of course, is limited in the amount of time we
    have to drill, and this is not an area that is off limits.
        So Chukchi Sea and Beaufort Sea are not off limits, but
    there are others who are trying to prevent it from occurring by
    testing in the courts whether the EIS that has been done by the
    Department of Interior is adequate for the purposes of our
    prospective drilling.
        But our growth primarily is coming from outside the U.S. at
    the moment.
        Mr. Issa. Well, I would like to thank you for continuing to
    try to produce in the U.S. I think that is important.
    Hopefully, we will recognize that we are part of the problem
    unless we allow you the opportunity to be part of the solution
    inside the U.S.
        And I yield back, Mr. Chairman.
        Mr. Conyers. Thank you very much, Darrell.
        Sheila Jackson Lee?
        Steve Cohen of Tennessee?
        Mr. Cohen. Thank you, Mr. Chairman.
        Gentlemen, I missed some of this and I might have missed
    it. I would like to see--I read the Congressional Quarterly
    today. Mr. Coral Davenport said that, I guess it is Mr.
    Robertson there, that you might have earned as much as $50.6
    million last year.
        Is that anywhere near accurate? Are you Tiger Woods?
        Mr. Robertson. That is nowhere near accurate. What I earned
    last year I got in my pay and bonus. I got $2.5 million.
        Mr. Cohen. Where would they have gotten----
        Mr. Robertson. In addition to that, I got some stock
    options and some performance shares, the value of which depends
    entirely on the performance of the company 100 percent.
        They were valued last year in the proxy statement at $5
    million. So if you add those two together, I got $7.5 million
    last year.
        Mr. Cohen. Where do you think he got 50 or she got $50.6
    million?
        Mr. Robertson. I have no idea.
        Mr. Cohen. It is a lot of money without playing golf well.
    But thank you, sir.
        Mr. Simon, you did pretty good, too, last year, if I
    understand it.
        How much did you say you made last year, was it $12
    million?
        Mr. Simon. $12.5 million in terms of compensation granted
    last year, although some of that pays out over time. And then
    if you were to take a 1-year accrual of the pension fund, it
    would actually take it up to $15 million.
        Mr. Cohen. And how much did you make the previous year?
        Mr. Simon. The previous year, I don't remember.
        Mr. Cohen. Would it have been that much?
        Mr. Simon. It could have been that much, and it could have
    been less.
        Mr. Cohen. It would have been less. How much less would it
    have been?
        Mr. Simon. I don't know. I would have to get back to you on
    that.
        Mr. Cohen. Could it have been $6 million?
        Mr. Simon. I don't believe it was that low, but I just
    don't recall.
        Mr. Cohen. So it may be double.
        Mr. Simon. It wasn't that low, no.
        Mr. Cohen. Could it have been double? Six is not double.
        Mr. Simon. No, it would not be double.
        Mr. Cohen. Not double.
        Mr. Simon. No.
        Mr. Cohen. Would it be 40 percent more?
        Mr. Simon. No, I don't believe so. But, again, I will get
    back to you on that.
        Mr. Cohen. But it was more.
        Mr. Simon. It was more.
        Mr. Cohen. How much more did you work this year than the
    previous year?
        Mr. Simon. I worked probably about the same this year as I
    have other years.
        Mr. Cohen. So why did you make more money?
        Mr. Simon. The money that I get is, again, not determined
    by management inside our corporation. It is determined by a
    committee of independent directors.
        They look at my responsibilities and my accountability----
        Mr. Cohen. I understand all that.
        Mr. Simon [continuing]. And then compare that with others
    on the outside and then----
        Mr. Cohen. I got that.
        Mr. Simon [continuing]. We pay competitively.
        Mr. Cohen. I got that. But this is what confuses me. You
    are saying that the price of oil is determined by supply and
    demand and you said that you are 80 percent less profitable. Is
    that correct?
        Mr. Simon. Not on a total worldwide basis, no, I didn't say
    that.
        Mr. Cohen. Is that just on American?
        Mr. Simon. That is talking about within the U.S. on
    refining and supply, which is part of the business that makes
    the products that we are talking about.
        Mr. Cohen. So where are you making all this record profit?
        Mr. Simon. Most of the profitability that we make is
    outside of this country. This year, in the first quarter of
    this year, about 81 percent of our profitability was outside
    the United States.
        Last year, of that $40.6 billion, 75 percent of it was
    outside the United States.
        Mr. Cohen. And then that is just on the sale of gas?
        Mr. Simon. No. That is in terms of producing oil and gas,
    also, running our refineries, producing product, selling those
    and, also, our chemical operations.
        Mr. Cohen. If the profit percentages--the profit percentage
    must have gone up, obviously. So profit at Exxon Mobil is not
    based on supply and demand.
        Mr. Simon. I think the profit of Exxon Mobil is based on
    supply and demand, because the market is what determines the
    price that we get for the commodities that we sell.
        Mr. Cohen. Well, it does, but it doesn't--the profit
    margin, isn't that something different? I know that you sell
    different to the public, but your profit is figured
    differently, isn't it?
        Mr. Simon. No. The profit, the way you determine profit is,
    first of all, look at the price that you get for the products
    that you sell.
        Mr. Cohen. Right.
        Mr. Simon. That is determined by supply and demand and then
    you look at the cost of producing those products. You subtract
    the cost from the revenues and that gives you the profit.
        Mr. Cohen. But couldn't you sell your gas at a lesser price
    and still be higher than your cost? And by setting your price
    where it is, producing record profits, you are setting the
    price at the pump and not supply and demand setting it.
        Mr. Simon. No, I don't agree with that, Congressman,
    because, again, the price that is established for the products
    that we sell is established by the marketplace.
        Let's take this year and let's look at the profitability on
    a gallon of gasoline. This year, first quarter, it was $0.014
    for every dollar that we collected in revenue.
        Now, that is down from last year and it is down because the
    cost of raw materials has gone up that we had to buy to produce
    those products and the price of the products that we sell have
    not gone up as much as crude oil. So the margin has actually
    been squeezed year to year.
        Mr. Cohen. But your profit is up.
        Mr. Simon. The overall global profit this year is not up.
    It is about, I would say, roughly where it was last year. Last
    year, $40.6, first quarter of this year, $10.9.
        Mr. Cohen. But if you charge less for gasoline, you
    wouldn't be making a $40.6 billion profit. You could maybe make
    a $20 billion profit, if you charged less.
        Mr. Simon. Gasoline is only a small component. When you
    look at what we make on refining and marketing, this year, it
    is about 4 percent of what our first quarter profitability was.
    Last year, about 10 percent when you look at what the
    downstream piece was here in the U.S.
        Mr. Cohen. So what are you making the money on, lottery
    tickets?
        Mr. Simon. No. It is producing and selling oil and gas.
    When you look here in the United States, we produced about
    300,000 barrels a day of crude oil. We actually run 2 million
    barrels a day.
        And of that we produce, we only take 1 million of that and
    run it in our own refinery. So what we are doing is producing
    oil and gas and we are selling most of that on the open market.
        For example, we run about 5.5 million barrels per day in
    our refineries around the world. We produce 2.4 million barrels
    a day of oil and only half of that goes into our own
    refineries.
        So most of the refineries that we operate around the world,
    we are buying raw materials on the open market.
        Now, the biggest piece of our profits is producing oil and
    gas and selling that oil and gas on the market.
        Mr. Conyers. Does the gentleman need additional time?
        Mr. Cohen. I would like just another minute or 2, if you
    don't mind.
        The gentleman from Shell, is it Mr. Hofmeister?
        Mr. Hofmeister. Yes, sir.
        Mr. Cohen. How much money did you say you all put into
    renewable energy sources in solar and wind last year?
        Mr. Hofmeister. I said $1 billion over 5 years.
        Mr. Cohen. One billions dollars over 5 years.
        Mr. Hofmeister. It varies from year to year.
        Mr. Cohen. How many of the other gentlemen on the panel are
    putting anywhere near that much into those areas?
        Mr. Robertson?
        Mr. Robertson. I think I just described it. I think I said
    $2.5 billion over 3 years.
        Mr. Cohen. Over 3 years.
        Mr. Robertson. In geothermal energy, non-food cellulosic
    ethanol and energy efficiency services for our customers.
        Mr. Cohen. Mr. Simon, the report in Mr. Dana Milbank's
    story this morning said that your company put $10 million into
    renewable energy last year. Is that accurate?
        Mr. Simon. No, that is not correct. That was one piece of
    one project. But what we are doing is trying to accomplish what
    I think you are driving at and that is how do we reduce the
    amount of fossil fuels that we consume, lessening our
    dependence, and how do we reduce greenhouse gas emissions.
        And what we are doing primarily is focusing on 60 percent
    of the equation and that is oil and gas. Oil and gas is going
    to continue to be the dominant source.
        How do we use that more efficiently in our own operations
    and----
        Mr. Cohen. How much did your company invest in renewables
    last year?
        Mr. Simon. In what you would call renewables, it would
    probably be about $100 million.
        Mr. Cohen. And that is compared to $2.5 billion over 3
    years.
        Mr. Simon. Because, again, we have looked at all current
    technologies of renewable fuels. These are current
    technologies. We have not identified any that have any
    appreciable impact in terms of adding supplies or reducing
    greenhouse gas emissions.
        The $100 million I am talking about is looking at that next
    generation and we are funding all of the opportunities and
    leads that we have there and we think we have some very
    promising leads.
        Mr. Cohen. Mr. Lowe and Mr. Malone, are your companies more
    in line with the two gentlemen to your right or with Exxon
    Mobil?
        Mr. Malone. Well, last year, we invested, in 2007, $750
    million, 10 percent of our capital. This year, we will invest
    $1 billion, something in excess of 10 percent.
        Mr. Cohen. And, Mr. Lowe?
        Mr. Lowe. Ours is primarily on the research side, about
    $150 million last year.
        Mr. Cohen. Thank you.
        Do any of you have any solace or any hope you can offer the
    American public for what they are going to be paying for your
    record profits this year?
        Mr. Simon. I would say there are two things that we can do.
    One is work on supplies, and we have already talked about that.
        Mr. Cohen. What do you mean work on supplies?
        Mr. Simon. Get access to supplies. And the other aspect is
    how do we produce more product and we are looking at expanding
    our capacity. We have already expanded it considerably already
    in terms of refining. And when you look at the industry, it is
    projected that about the equivalent of five new refineries will
    be coming on stream between now and the year 2012.
        And to put that five into perspective, that is about three
    refineries more than is required to meet projected demand
    growth.
        The point is the market is working. I know it is painful,
    but the market is working and it will work to the ultimate
    benefit of the consumer if we don't put additional tax burdens
    on the industry, let the market work, and don't put in place
    additional mandates for subsidies.
        Mr. Cohen. Anybody have any better hope for the consumer
    than just the market is working and $4 is good?
        Mr. Hofmeister. Congressman, in my opening statement, I
    said if this nation, led by the Congress, the Administration,
    set a goal of producing 2 to 3 million more barrels of oil a
    day in the near future, over, let's say, the next 10 to 15
    years, plus the renewable fuels mandate that we have from last
    year's energy bill, plus the efficiency standards of the miles
    per gallon improvement, we could knock this issue of ever
    higher futures on its head.
        Futures are based upon the prediction of more supply and by
    the United States of America coming to grips with the fact that
    it was now beginning to address the issue it has not addressed
    in years gone past, we could say to the world we are not going
    to come ask you for more production, we are going to do our own
    production.
        That, in my opinion, would give immediately relief to the
    American consumers, knowing that this government was focused on
    solving the problem together with the industry.
        Mr. Cohen. The solution is getting away from gasoline and
    getting into hybrids, getting into something that we don't have
    to depend on the folks in the Middle East or anybody else and
    be concerned about both the consumers and their pocketbooks and
    the planet, and that is not going to work by simply more
    drilling and more drilling and more drilling.
        You can't drill yourself out of this problem, because the
    problem is bigger than that. And it goes back to my opening
    statement about the land belonging to the--is a title to the
    farmer, but the reality is society rests upon the land, so all
    people own it. That was Jefferson.
        And an analogous situation could be made to oil and there
    are some ways that people think about--you might have title to
    the oil right now, but really, since society rests on it, you
    have a duty to the rest of the folks on this planet.
        And the profits you all are making are unconscionable and
    to continue--and I have listened to all this and maybe I didn't
    do that third grade economic course, but I think there is
    something wrong when you all are increasing your profits so
    much and your salaries so much and all you tell us drill,
    drill, drill, drill, drill.
        You all are gouging the American public and it needs to
    stop and you are going to look for windfall profits tax and
    anti-gouging and competition and antitrust and there is a whole
    lot of other ways that this can happen, because it is obvious
    you all don't have the American public at heart whatsoever.
        Mr. Simon. I disagree with that, Congressman. I do think we
    have the American public's interest and we are doing all we can
    to produce as much supplies as we can, to put downward pressure
    on prices for the American consumer and other consumers around
    the world.
        Mr. Conyers. Well, I have had a discussion up here. There
    are five of you and five of us.
        Steve Simon, I would like to invite you to my next town
    hall meeting. Who would you like to bring, since I have got the
    top guy here?
        Mr. Cohen. I would like to bring you back again.
        Mr. Conyers. Not for a gas price town hall meeting. Who
    among these witnesses would you like to bring with you?
        Mr. Cohen. I am going to pass.
        Mr. Conyers. Well, you have never been reluctant about
    anything before since I have known you in the Congress. I don't
    know.
        I think there would be a great advantage to have one of
    these executives with you at the next town hall meeting. I will
    bet you get more people out than you have gotten out lately.
        Mr. Cohen. Mr. Chairman, you are probably right and I guess
    the best person would be Mr. Hofmeister, because he is doing
    more with solar and renewable energy and I think that is what
    the people in my district want to hear about, and they wish
    that each of these individuals, particularly Exxon Mobil, which
    I have to admit I have got stock in and I have had it forever,
    but you should be doing more in alternative energy and trying
    to see if the public is served.
        And I just really can't believe that the profit is just
    supply and demand. The profit is taking advantage of a
    situation.
        Mr. Conyers. Do your stockholders meetings go like this,
    Steve Simon?
        Mr. Simon. They go a little bit smoother, Mr. Chairman.
        Mr. Conyers. Ms. Sutton, who would you nominate to join you
    in Ohio?
        Ms. Sutton. Well, I would just like to comment that my
    colleague from Tennessee, when he mentioned that he would like
    Mr. Hofmeister because they were doing more with renewables,
    and you were out of the room when he said that they were using
    less than 1 percent of their investment money in renewables.
        So if they are doing more and it was less than 1 percent,
    that is a bit of an issue.
        But I think I would invite any of them, all of them. All of
    you come. Come to the 13th district, talk to my constituents.
    And I would also like to invite my colleague from across the
    aisle who said that the American don't understand.
        Thank you.
        Mr. Conyers. Could I ask Sheila Jackson Lee whom among
    these distinguished witnesses she would like to bring to her
    next town hall meeting on the price of gas?
        Ms. Jackson Lee. Every one of them, Mr. Chairman. I believe
    they each have a perspective that should be heard and when I
    pose my questions, I hope I will get some of that perspective
    out as relates to this hearing.
        Thank you, Mr. Chairman.
        Mr. Conyers. And now we recognize Ric Keller for his choice
    and his questions.
        Mr. Keller. Thank you, Mr. Chairman. They are all welcome
    at my event. With this affluent gentlemen, I don't have to pay
    for valet parking. So I can save some money here.
        But I would love to have them here, because I think even
    though they are on the hot seat today, they have been very cool
    under pressure and respectful and I admire that.
        Whatever we may think about the board of directors'
    decision at Exxon to pay $400 million to one individual at a
    time when people are hurting, Mr. Simon, your salary today,
    based on $12.5 million, is $34,246, and most folks out there
    watching this probably think you earned it and we appreciate
    you being here under these trying circumstances.
        I raised a couple of issues that I gave you a chance to
    clarify. Executive compensation, I think you had a chance to
    deal with that issue. And I promised that I would come back and
    talk about refining. You remember that line of questioning.
        Would you agree with me that refining capacity has not kept
    pace with demand for gasoline?
        Mr. Simon. When you actually look at it, Congressman, and
    you look at it over the last 10 or 5 years, the refining
    industry has expanded capacity commensurate with demand growth.
        Mr. Keller. Do you think refining capacity has kept pace
    with the demand for gasoline?
        Mr. Simon. Yes, I do. Yes, I do.
        Mr. Keller. You are familiar with the National
    Petrochemical and Refiners Association, which includes Exxon
    Mobil as a member.
        Mr. Simon. Yes, I am.
        Mr. Keller. The executive vice president, Charlie Drevna,
    of the National Petroleum and Refiners Association said,
    ``Consumer demand just continues to grow, and we can't grow as
    fast at the refining level.''
        Do you disagree with that statement, as a member
    organization?
        Mr. Simon. Let me make a comment and then you decide
    whether I am disagreeing or not.
        When you look at what we have done in the refining
    industry, we have grown capacity at about 1.1 percent per year.
    Demand has grown 1.1 percent per year.
        So what we have got now, and I will say this, is we have
    got a much tighter supply-demand situation in refining than we
    have had for many, many years, and it started about 2003.
        If you go back before 2003, we had a big surplus in the
    refining industry and now it is tight.
        Mr. Keller. You just proudly told us that you are going to
    put online the equivalent of five new refineries through
    expansion of the next 5 years. If refining capacity has kept
    pace with the demand for gasoline, why in the world you would
    be expanding these refining----
        Mr. Simon. I didn't say Exxon Mobil. I said the outlook and
    this is the EIA's outlook, is looking at what all everybody is
    planning and looking at what is going to be coming on stream,
    the equivalent of five new refineries for the industry are
    projected to come on stream between now and the year 2012.
        If you look at projected demand growth, that is three
    refineries more than what we need. We will return to the same
    kind of environment in refining over the next several years
    that we had prior to the year 2003.
        Mr. Keller. Well, thank you. And since you cited the EIA--
    and for those watching this, that is the government's Energy
    Information Administration, and I happen to have an article
    from cnnmoney.com and I will quote it for you, April 17, 2007,
    from that very organization, ``There have been calls every year
    this decade for new refining capacity, yet no new projects
    initiated,'' said Jeff Sundstrom, a spokesman for AAA, the
    motorist organization.
        ``Refining capacity has not kept pace with demand for
    gasoline. Numbers from the government Energy Information
    Administration proved Sundstrom correct. In 1995, American
    drivers burned about 17 million more gallons of gasoline a day
    than the country produced, according to the government's Energy
    Information Administration. The difference was made up for by
    imports. By 2005, the latest figures available, the gap had
    widened considerably to about 36 million.''
        So we have the government's Energy Information
    Administration saying refinery capacity has not kept pace with
    demand for gasoline. We have the National Petroleum and
    Refiners Association, for which you are a member, saying
    refining capacity has not kept pace with demand for gasoline.
        We have the government's Energy Information Administration
    saying refining capacity has not kept pace with demand for
    gasoline. We have you saying that you are going to expand
    capacity, and yet everything is fine because refining capacity
    has kept pace with the price of gasoline.
        And it is just dumbfounding me, and you are more of an
    expert than I am, to hear the conflict.
        Mr. Simon. Well, again, when I was talking, it was total
    product. It is true that imports of motor gasoline have gone
    up. That is true. They are low cost imports out of Europe, much
    cheaper than what we could produce here in the United States by
    expanding capacity.
        That is part of our supply chain. But when you look at
    total products, refining capacity has grown commensurate with
    demand.
        Mr. Keller. When was the last year that Exxon built a new
    refinery as opposed to expanding an existing one?
        Mr. Simon. Well, over 35 years ago. But we don't need to
    build a new refinery.
        Mr. Keller. So 1973.
        Mr. Simon. Prior to that even.
        Mr. Keller. Okay. You haven't built a new U.S. refinery in
    35 years. Have you asked for a permit to build a new U.S.
    refinery in the last 35 years?
        Mr. Simon. Not to my knowledge, because we haven't needed
    to. We can take what we have and expand it more than what is
    needed to keep pace with demand.
        Mr. Keller. President Bush has said that new refineries
    need to be built and he proposed to allow the oil companies to
    build these new refineries on old military bases.
        As of today, isn't it fair to say that you have declined to
    take him up on his offer?
        Mr. Simon. I do not agree that we need a new grassroots
    refinery in this country.
        Mr. Keller. As of today, you have not taken the President
    up on his offer to build a new----
        Mr. Simon. No, we haven't.
        Mr. Keller [continuing]. U.S. refinery.
        Mr. Simon. No, we haven't.
        Mr. Keller. Okay. You are proud of the fact that you have
    expanded existing refineries. And I want to be fair to you, if
    you want to tell us what you are proud about in terms of the
    last few years and what you have done and where you see us
    going in the future.
        I think that is only fair, and I will be happy to defer and
    listen fully to your answer.
        And then I will yield back the balance of my time.
        Mr. Simon. As I mentioned before, when you look at what the
    industry has done, it has expanded capacity commensurate with
    demand for total product. When you look at what our corporation
    has done, we have expanded capacity at a rate 40 percent higher
    than the industry in terms of distillation capacity.
        I am proud of that. I think our employees are doing
    everything they can to produce as many products as we can for
    the American consumer and I think they are doing a very good
    job of that. I am proud of it.
        Mr. Keller. Thank you, sir.
        Mr. Chairman, my time has expired. I have more questions on
    refineries, but I will yield back in respect to the other
    witnesses here.
        Mr. Conyers. Thank you very much, Ric Keller.
        Sheila Jackson Lee?
        Ms. Jackson Lee. Thank you very much, Mr. Chairman. This
    has been a very interesting discussion.
        But I hope the witnesses who have been here before, been
    before a variety of Committees over the last couple of months,
    can understand the enormity of the frustration and, frankly, I
    think, the challenge.
        And maybe the disappointment is that as we continue to
    listen, we are still sort of striking in the darkness to look
    for a real answer that, as you walk out of this room, this
    Committee can come together and say there is one focal point
    that we need to do for immediate relief, and I think that is
    the distinction, gentlemen, between the questioning of our
    colleagues who have shown some degree of frustration, because
    you have not answered the immediate question.
        And I pose the immediate question in the context of a
    hypothetical that I saw rendered on one of our cable stations
    that indicated that suppose there was a Hurricane C which
    wreaked havoc in the Gulf. We lost many of our drilling rigs
    and we wound up with a $12 per gallon cost of gasoline.
        It would jeopardize our national security, certainly our
    economic security, and it would be a crisis. And, frankly, all
    of you would be called upon to respond in a crisis mode.
        Well, with not with Hurricane C, but we are in a crisis
    mode, by definition of many Americans, and it is not all your
    fault, because certainly the dollar is weak and it adds to the
    cost, I imagine, in the national cost, as well as the cost to
    consumers.
        But what I am trying to press you for is immediate answers,
    and I would suggest responding to this. Why couldn't there be a
    moratorium in gasoline prices, for example, from June to
    October, moratorium on gasoline taxes, and the expense of that
    tax be paid by the profits that you have earned?
        What would harm your overall bottom line profits? I assume,
    as a private entity, that would be something that your board
    would need to approve. Shareholders range from my good friend
    to the right to retirees and others who probably look to you
    for the fiduciary responsibility of ensuring they can stay
    above the water during their retirement.
        But you are not giving the American people, if you will,
    direct and immediate relief.
        So I pose that question to you as I show you that the
    Minerals Management Service of 2006 says that we have about 79
    percent of land open to leasing, and, therefore, a smaller
    percentage not. So it seems that we have a sufficient amount of
    our leasing properties available for drilling.
        And then this is another one that is prepared that says
    that as we look at the prices of gasoline, they actually lead
    to higher profits, and that is, of course, what provoked the
    American people when it comes to asking Congress to find a
    solution.
        Now, let me pursue just another point before I yield to you
    for questions.
        This is an Antitrust Task Force and you have already seemed
    to refute the idea that there is collusion. But let me give you
    a definition. Collusion is a will for subversion of a normal
    operation of free market and could result in serious harm to
    consumers, suppliers and the economy.
        It virtually always results directly in inflated prices to
    consumers and denial of choices in the marketplace. Indeed,
    that is its purpose.
        Now, for non-lawyers, they saw and heard this being read,
    the word collusion. They make a simple assessment that I am
    being hurt, there is inflation, I am paying a higher price for
    gasoline, there must be collusion.
        So I think what we are trying to generate here today is
    some small measure that refutes the collusion theory requiring
    investigation by the Department of Justice, a collaborative
    effort with us.
        And, Mr. Lowe, I am really going to start with you, because
    I look at your list here, and I agree with everything that you
    have said. I wear somewhat of a different hat from the region
    that I come from, and I am somewhat at a loss as to what
    Congress has not done.
        And I will read it quickly, and I have asked several
    questions and so I beg your indulgence.
        But Mr. Lowe has, in his statement, encouraging
    conventional supplies, optimizing biofuels production,
    encouraging alternative and unconventional sources, lowering
    the carbon intensity of energy supplies, improving energy
    efficiency, and encouraging technology innovation.
        What has Congress not done? That is what I understand. We
    have tried to do everything that we could.
        And I would say to you, and I will yield to you for your
    answers on this, but one thing we have to get away from is the
    Republicans have the answers and the Democrats don't. And I,
    frankly, believe that that is what you have been operating on
    for a number of years and there is a new day in Congress.
        Your representatives who are here in this room barely see
    us. We don't even know their names, hardly, and I will qualify
    those that I do, BP and Shell.
        But any others, we don't know. There is no interaction.
    There is no sense that we are in this together, that there are
    those of us who look different from you who know energy, care
    about it and want something good to happen.
        You don't respect us. So I don't think there is a coming
    together and a meeting of the minds, because you are not
    broadening those who you are discussing this issue with.
        Shell got a wide view from your roving tour. ConocoPhillips
    did the same thing. I assume you saw the man and woman of
    America and got an earful, but also probably found some common
    ground.
        So I am going to yield to Mr. Simon first on the question
    that I posed originally as refuting this question of collusion
    and the idea that you don't have enough places to drill.
        According to our Federal resources here or documentation,
    you are drilling in a large part of this country. And then why
    we seem to have a policy that is single in answer.
        And then don't forget my gasoline taxes, if you would.
        Mr. Simon. Well, thank you very much, Congresswoman.
        When you, first of all, talk about collusion, let's examine
    a little bit about the industry. Let's take refining, first of
    all. There is 55 different refinery companies. There are about
    145 individual refineries in the United States.
        We are one of the largest refiners. We have seven
    refineries. We have 11 percent market position and that is
    actually down from where it was at the time of the merger.
        So usually, in a concentrated market, that would not be the
    case.
        Also, when you look at independent marketers, their market
    share has actually grown from 8 percent up to 25 percent.
        Ms. Jackson Lee. Mr. Simon, the American people don't
    really define it that way. They look at the fact that you have
    got Exxon Mobil, BP, ConocoPhillips, you have got Chevron, you
    have got Shell, and after that, then you get second tier, maybe
    there is somebody else that I missed, and there are domestics.
        They look at you as an entity that is now merged, two huge
    companies, and they ask the question whether the small numbers
    that have now gone down in size from 20 years ago are not
    actually engaged in making sure that the prices are being set
    at a certain amount.
        Mr. Simon. And that is what I am trying to get across here.
    I understand the perception, but the facts are not that. In
    other words, we have actually lost market share, not gained it,
    since the merger.
        When you look at the retail side of the business, there are
    165,000 retail outlets. Exxon Mobil owns and operates and,
    therefore, sets the price in only a half a percent of those.
        Our market share, again, has gone from 14 percent down to
    10 percent. We have lost market share and so have all of the
    majors.
        Ms. Jackson Lee. But does losing market share impact on
    still the opportunity to set prices, even though you have lost
    market share? That is the perception that the American people
    have.
        New energy companies, merged energy companies, prices go
    up.
        Mr. Simon. But the concentration of the industry, when you
    compare the concentration of our industry versus others, it is
    one of the lesser concentrated industries in the United States.
    It has been repeatedly investigated by the FTC and not a single
    one of those investigations, which have been 100 over the last
    35 years, an average of about three per year, not a single one
    of those have found any evidence whatsoever of price collusion
    or anticompetitive behavior.
        Ms. Jackson Lee. Here, today, you have offered us a
    presentation that doesn't seem to pinpoint, in an effective
    way, I appreciate your response, as to why this price keeps
    accelerating, short of the idea that the industry agrees with
    the price set.
        Now, I am not suggesting that it would be proven. I am
    saying that it would be suggested and it seems to be that there
    are a smaller number of companies and the price has gone up.
        But let me let you move on quickly to your other questions
    so the others could answer about the gasoline tax and calling a
    moratorium and having the energy companies pay for that tax
    moratorium from, say, June to September out of your profits.
        Mr. Simon. Did you want me to address the drilling aspect?
        Ms. Jackson Lee. If you can do it quickly.
        Mr. Simon. When you look at that chart you had, that is--
    unfortunately, I wish we were developing more, but oil isn't
    everywhere we have leases.
        Where there is oil, we are developing that. These are
    mature, well established areas, where the prospects are a lot
    lower and, therefore, you don't find the oil everywhere.
        We need access to those areas that are promising, lesser
    developed, where we know there is good prospect for oil and
    gas.
        Ms. Jackson Lee. You didn't answer the gasoline tax.
        Mr. Simon. When you look at the gasoline tax, again, you
    asked the question why the prices are going up.
        Ms. Jackson Lee. No. What I would like to ask is the
    question of whether or not you would absorb that in a
    moratorium on gasoline taxes, would you absorb that through you
    profits.
        Would you be willing to do that if you were asked on behalf
    of the American people?
        Mr. Simon. What you would see, Congresswoman, if you
    eliminated that tax, you would see a drop in the price. But
    what would happen then is you would have an increase in demand.
    That price would go back up and I think it is impossible for
    any of us to say that the price wouldn't recover to where
    supply and demand would get back in balance.
        Ms. Jackson Lee. I would say this. I would venture and be
    willing to try it in the instance, let the market play as it
    would in that instance, and then come back again in September,
    since it would be a moratorium only briefly, and reorder it.
        But I think some relief is owed and the question is whether
    you would be willing to pay those taxes so that the highway
    trust fund is maintained.
        Mr. Simon. No, we couldn't pay those taxes. When you look
    at our profitability, it is $0.014 this year on a dollar,
    whereas taxes are somewhere up around $0.15.
        Ms. Jackson Lee. Well, your profits show that they are a
    little larger than that. But let me yield to Mr. Malone.
        Mr. Malone. Let me not try to repeat, because I agree with
    a lot that Mr. Simon said.
        On the issue of collusion, most of our retail outlets are
    not owned by us. They are owned by independent individuals.
        Ms. Jackson Lee. I am aware.
        Mr. Malone. I would also reinforce that we have
    investigations even going on now and have had continuously and
    they have yet to ever find that there was an issue on the
    market.
        There is a point I would like to bring up, because I think
    it keeps getting lost in this. If you would just say today
    gasoline is $4 a barrel----
        Ms. Jackson Lee. A gallon.
        Mr. Malone. A gallon, excuse me.
        Ms. Jackson Lee. We would like the $4 a barrel.
        Mr. Malone. Is $4 a gallon, my apology. If you take that a
    barrel of oil is 42 gallons, right? At today's price, just to
    buy that barrel is about $3.20 a day to buy that barrel of oil.
        Roughly, the retail outlets, we talked about this
    yesterday, $0.08 to $0.10. So now you are at about $3.30.
    Taxes, State, Federal, local, are about--let's use $0.50. You
    are now at $3.80.
        That is built into this system. At $3.80, we are going to
    have to get that barrel of oil on a ship, a train, a boat, a
    plane, get it to our refineries, refine it, and then distribute
    it and market it.
        And this is getting lost that the big piece is the $3.30 a
    gallon due to the rise in the price of crude oil. It is an
    enormous piece.
        On your question about a tax holiday, we believe, first of
    all, street price is not set by us and even if there was a
    moratorium, I can't say that the retail outlets wouldn't keep
    the price up, because it is a commodity.
        Let's say they did bring the price down. I think it would
    be very short-lived and that we could actually see a run on
    those kind of stations. Soon, the supply is gone and it is
    going to come in from overseas. It is just the supply-demand
    economics are at play here.
        On the access, I will only make one point and, that is,
    when Congress opened up the deepwater Gulf of Mexico, and you
    and I have talked on many different times, I just want to use
    the example that the price of oil was so low that it was not
    economical for many of us to go into the deepwater Gulf of
    Mexico.
        Congress provided royalty relief. It encouraged us to go in
    at very low prices. We are just bringing on one of our
    platforms, a multibillion dollar platform and it is coming up
    with--we have partners in this--7,000 feet of water and 5 miles
    we go down below the surface.
        It is a multibillion dollar one. We are now flowing about
    150,000 barrels a day and it should flow as much as 250,000.
        Access to where the source of oil is does work and there
    have been times government has helped. We don't need the
    subsidies, royalty relief in the Gulf of Mexico. In fact, they
    have gone----
        Ms. Jackson Lee. Are you at capacity in the Gulf of Mexico?
        Mr. Malone. No. I am building more platforms.
        Ms. Jackson Lee. Is the energy industry at capacity in the
    Gulf of Mexico?
        Mr. Malone. No. We are all out there trying to develop.
    Remember, we are pushing the frontiers of technology.
        Ms. Jackson Lee. And we agree with this and I don't know
    why we are complaining about supplies and access, because there
    you are in the Gulf and there is more that can come on line.
        Mr. Malone. That same Gulf, that same geology appears to go
    right around Florida and up the east coast and right around----
        Ms. Jackson Lee. And as you well we know, we will not be
    able to drill there without consensus in those areas. Where we
    have consensus is off the Gulf, and I say come one, come all.
        But the point that is being represented is that we don't
    have enough, but we are not at capacity in the Gulf off of
    Texas and Louisiana.
        Mr. Malone. I would be happy to--I know what we are doing
    on our leases. I can't speak for anyone else. We are utilizing
    our leases and developing across our lease base and we would
    love to see more available to us.
        Ms. Jackson Lee. Mr. Lowe, you had a whole list and you say
    we are not doing--and we are doing all of that. And why
    wouldn't ConocoPhillips want to give relief to the American
    people by taking some of their profits and paying down on the
    gasoline taxes from June to September?
        Mr. Lowe. I will try and address each of your points.
    ConocoPhillips has essentially exited--we are in the process of
    exiting the retail gasoline business. So that has been our
    strategy and we are really in the finalization of that.
        On the access issue, I would say that there is plenty of
    evidence that the companies represented here are starved for
    access. ConocoPhillips, just in the past 6 months or so, the
    last 3 bid rounds, Chukchi Sea and the 2 Gulf of Mexico bid
    rounds, has been high bidder on more than a $1 billion worth of
    leases and we have been outbid by our peers on well over $1
    billion of other money that we were willing to put at stake.
        So we are starved for access. We are not making that up. It
    is a fact. We do need more access to more prospective acreage.
        On the gas tax, I would just echo the comments earlier that
    the concern--I do believe that supply and demand works and that
    we have seen a reduction in gasoline demand with the higher
    prices and my concern would be that if we lower the prices,
    that that would reverse itself, and we would actually
    exacerbate the problem.
        So that would be my concern on the gas tax.
        If I could just mention one other thing. I participated----
        Ms. Jackson Lee. I am smiling because I would want you to
    give that gift to the American people and let them decide that
    for a period of time. But let me yield back to you.
        Mr. Lowe. ConocoPhillips did 35 of these what we call
    conversations on energy. I did a number of them, Reno, Nevada,
    Scranton, Pennsylvania, Richmond, Virginia, and it is a very
    healthy debate.
        Ms. Jackson Lee. It didn't hurt you, did it? It did not
    hurt you, did it? You came away okay.
        Mr. Lowe. Absolutely, it was very educational, I think, on
    both sides and I would actually appreciate the opportunity to
    do one of your town halls. You are extremely thoughtful. I
    think it would be very good for both of us.
        And when you ask kind of, well, what aren't we doing, I
    think my feeling is that there seems to be a lack of a
    recognition of how big this business is and how much it is a
    global business.
        The U.S., people in America, we enjoy a great quality of
    life and that quality of life has come a lot, foundational,
    really from energy. Other people around the world want that
    same quality of life and so we are engaged in a real
    competition for energy.
        So we are competing every day, whether it is crude prices,
    whether it is natural gas prices. You see we have an empty LNG
    port in the Gulf Coast because the price of natural gas in the
    United States is well below what the natural gas price is in
    Asia and Europe. And so we cannot compete for that natural gas,
    the LNG, away from elsewhere in the world.
        So we need to recognize that we are--it is a global
    economy. This is a global business and we can do things here at
    home to provide more access, to provide more supply, to also
    work on the efficiency side.
        We need to do everything and we need to work on that
    together.
        Thank you.
        Ms. Jackson Lee. Thank you.
        Mr. Robertson? And while you are answering, Mr. Robertson,
    what did you do in Venezuela?
        Mr. Robertson. Well, let me start with Venezuela. We stayed
    there. We negotiated an agreement that was acceptable to us and
    so we remain a producer in the Boscan field and we remain a
    producer in the heavy oil sands.
        Ms. Jackson Lee. And how much product do you get out of
    there?
        Mr. Robertson. We produce over 100,000 barrels a day in the
    Boscan field and, to be honest, I don't remember how much we
    produce in the Hamaca field.
        Ms. Jackson Lee. But that gets to the United States or it
    stays in South America?
        Mr. Robertson. A lot of it comes to the United States. But
    we have been in Venezuela since 1946, with a hiatus in between,
    and we expect to be there for a long time to come.
        I think in these hearings the last couple of days, I hope
    one thing that has maybe become evident, is that the current
    situation is not really about refineries in the United States.
    It is not really about whether we have enough service stations.
    It is not really about whether the market is well supplied with
    gasoline.
        It is well supplied with gasoline, inventory is up. There
    is plenty of gasoline.
        The problem is, again, what others have been saying, it is
    in the crude oil feedstock. So that all of a sudden becomes as
    bigger issue in the United States.
        One out of every 4 barrels of oil in the world is consumed
    in the United States. So we are competing with the world. One
    of the things that I know is we have got 27,000 employees here
    in the United States that are doing everything they know how to
    continue to look for, develop and produce energy for people in
    the United States, and we have got lots of other American
    employees around the world in all kinds of difficult
    circumstances, and you can start to list off the countries.
        I mean, Venezuela, Nigeria, Kazakhstan, Australia, Burma, a
    whole host of countries producing oil and gas, one-fourth of
    which, on average, comes to the United States.
        So we are in this competition with the rest of the world
    and we can't get away from it. We are using one out of every 4
    barrels that is produced in the world.
        So we are part of that system and as a result of the fact
    that many other--and it has been mentioned before--many other
    economies are growing rapidly and in many of the large
    population centers of the world, our products are subsidized. I
    mean, not just subsidized, people are paying very, very low
    prices for gasoline and diesel and those other products.
        So they are not even seeing the market price signals today.
    Those economies are moving forward and they are continuing to
    use these products and we are competing with those people for
    products in the United States.
        So the issue is what can we do, and there are only two
    things we can do. We can either reduce the demand, the use of
    these products, and the American people, frankly, are reducing
    the use of these products. We have been looking at data. The
    first couple of months this year, U.S. gasoline demand was down
    2 percent.
        It is down, right now, looking at our service station
    sales, probably down 6 or 7 percent. So the demand is going
    down.
        The other thing we have to do or the other part of it is
    increasing supply. I don't know whether you saw on ABC News
    last night, there was a clip from the deepwater Gulf of Mexico,
    showing what some of our folks are doing to bring on new
    supplies in deepwater Gulf of Mexico, just like was described,
    miles deep, incredible technology, incredible effort.
        So we have got an enormous number of people working,
    Americans working very hard every day to supply energy to the
    American people and they are competing with the rest of the
    world and they are doing a heck of a good job.
        And what we need to do is allow them to do more of what
    they are doing in the United States.
        Ms. Jackson Lee. Would you pay for the gasoline taxes for a
    period of time to give Americans immediate relief?
        Mr. Robertson. I can't----
        Ms. Jackson Lee. Representations of the witnesses is very
    complex for anyone to understand. You try to decipher between
    the retail upstream and downstream, and you are trying to
    suggest you don't have any gasoline stations, so it is not your
    fault.
        You are not giving any relief. What would be the wrongness
    of this moratorium and the energy companies paying for these
    taxes out of their profits?
        Mr. Robertson. With respect, I would say we are giving
    relief in the sense that we are working every day to bring
    supply and we are working every day with our energy efficiency
    customers to make them more energy efficient and more
    profitable.
        Ms. Jackson Lee. So if we reduce need or reduce usage, you
    say that the gasoline per gallon would go down.
        Mr. Robertson. I am saying that if demand in the world and
    demand in the United States goes down, that will have an effect
    on price.
        Ms. Jackson Lee. And that is the crux of the issue, whether
    the demand in the world will go down.
        Mr. Robertson. Well, ours is a big part of the demand in
    the world. So it will have an effect on price.
        Ms. Jackson Lee. That would be the key, whether or not our
    going down reflects on the overall world price.
        Mr. Robertson. We are only part, but, again, we are 25
    percent of the world's total demand. So if our demand goes down
    dramatically, prices will----
        Ms. Jackson Lee. But we have to wait that long, which will
    be a long time.
        Mr. Robertson. Well, I think the consumers have made a big
    change in the last few weeks. Our service station sales are
    down, as I said, 6 or 7 percent year over year. There is a
    dramatic change in the United States.
        Ms. Jackson Lee. Will we see a decrease then? Will it come
    back to the consumer? Will we see a decrease over these summer
    months?
        Mr. Robertson. It will certainly influence the price of
    gasoline.
        Ms. Jackson Lee. Do you think we will be down to $3?
        Mr. Robertson. I have no idea. I can't tell you that. I can
    tell you, on the gas tax, it was said already, I think reducing
    tax for a short period of time, reducing the price for a short
    period of time will increase the usage of the product and,
    frankly, compound the situation, because that will increase
    demand and increase the need in the United States for crude oil
    and increase the price of crude oil, and that is not what
    really, frankly, needs to happen here.
        Ms. Jackson Lee. I don't know if the minivan drivers are
    understanding that.
        Mr. Hofmeister?
        Mr. Hofmeister. Congresswoman, I don't think my company is
    qualified to get into national tax policy. I think that is for
    government to manage.
        I do think, however, that a temporary suspension with a
    spring-back that would affect families at the end of the summer
    season would have as much negative impact on perception of what
    has been occurring.
        But really, if you want to reduce the price of gasoline at
    the pump, the most dramatic step that this government could
    take is to commit to the United States people that we will
    solve this problem of restricting supply for once and for all.
        This nation has for 30 years told us, ``Go away, oil
    companies, go elsewhere, go to Kazakhstan, go to Brazil, go to
    Africa, go to Nigeria, go anywhere but the United States,''
    except in that 15 percent of the outer continental shelf where
    we are doing everything we can to maximize production in that
    15 percent.
        If this nation said to the world and to its own citizens,
    ``We want a dramatic increase in the quantity of production
    that is possible from America's own natural resources,'' it
    would knock the futures market on its head.
        It would be unprecedented and traders would immediately get
    discouraged about bidding up the price, knowing that additional
    supplies would be coming into the market in the coming years,
    which would cause them to begin taking other positions rather
    than simply bidding up the price.
        It would tell the world the U.S. is serious about its own
    supply. I think the tax idea is not a good idea.
        Mr. Keller. Would the gentlelady yield?
        Ms. Jackson Lee. I would be happy to yield.
        Mr. Keller. One of the things my friend from Texas said is
    that there needs to be a consensus about drilling in the outer
    continental shelf, and I happen to be from Florida.
        And I would just like to ask you a question so you can
    speak to the Florida people on this issue.
        I personally happen to be in favor of drilling for the
    deepwater oil reserves, but you hear two objections from
    Florida, and I would like each one of you to just briefly give
    us your response.
        Number one, they don't want to see the oil rigs. So I would
    like to ask you how many miles off the coast to you have to be
    in order to not see the oil rigs. Is it 20 miles, 30 miles, 50
    miles? You tell me.
        And then the number two issue is they don't want to risk
    their tourism-based economy because of an oil spill that might
    happen, albeit even though it is unlikely.
        So I would like you to address whether there has ever been
    such an oil spill by any of your companies that ended up with
    oil on the beach and then what solutions or what comfort you
    can give to the folks that there wouldn't be in the future.
        So the three questions: how far does the rig have to be so
    you don't see it? Has your company ever had a spill that
    resulted in it coming on the Florida beaches? And, three, what
    assurances can you give that that wouldn't happen in the
    future?
        Mr. Hofmeister?
        Mr. Hofmeister. I would just respond very quickly. I think
    the curvature of the earth would be at 14 miles and most of the
    drilling would be well beyond 14 miles, as far as I could tell.
        The question of--I am not aware of any oil spills on the
    beaches of the Gulf of Mexico that have come from any Shell Oil
    wells. We went through the summer of 2005 with seven named
    hurricanes. We shut down platforms seven times in one summer.
        We had Katrina and Rita in the same year coming through
    nearly the same region of the Gulf of Mexico and although we
    took sustained damage and although the industry lost some 90
    platforms, there were no spills on the beaches of Louisiana or
    Texas or Alabama.
        The technology that did not exist when the Santa Barbara
    blowout occurred many years ago has improved dramatically to
    the point that shut-in valves and the manner by which we design
    rigs, design the sub-surface and the sea surface equipment,
    including the pipelines, is such that it--while nobody could
    ever say there would never be a spill, because we can't control
    nature, it is hard to imagine such equipment failure that we
    would have a spill.
        Mr. Keller. Are you saying you couldn't see the rigs at 14
    miles visually?
        Mr. Hofmeister. That is my understanding.
        Mr. Keller. Is that because they are mostly underwater?
        Mr. Hofmeister. No. It is because the curvature of the
    earth means that the height of the rig above the surface of the
    water would be invisible.
        Mr. Keller. Thank you.
        Mr. Robertson?
        Mr. Robertson. We haven't had a spill in Florida, to your
    question. Just to build on a comment that was made, I think
    during these hurricanes, 1,000 wells in the Gulf of Mexico were
    destroyed, ripped up, torn up, bent over, and not one, to my
    knowledge, leaked significantly.
        So the technology is here to withstand serious natural
    disasters.
        With regard to Florida, offshore, several years ago, we
    actually did drill offshore of Florida, in an area called
    Destin Dome, and did discover a fair amount of natural gas. In
    today's values, it would have been a tremendous value.
        We could not get permission to develop it, after spending
    lots of money to get the leases and lots of money to drill
    exploratory wells. We could not get the money to develop. We
    eventually ended up having to turn the leases back.
        So what is happening? We have rigs offshore in Angola and
    the people there support rigs offshore. We are developing LNG
    and we are going to bring it to a terminal in the Gulf Coast
    other than Florida and we are going to put it in a pipeline and
    send it to Florida.
        Mr. Keller. Understood. So do you agree with the 14 miles,
    you can't see it after 14 miles?
        Mr. Robertson. I don't have a better answer than that. It
    sounds about right.
        Mr. Keller. Mr. Lowe?
        Mr. Lowe. Our work that we have done is in synch with the
    14 miles. I don't have any knowledge, I don't believe we have
    ever had any spills that would affect the Florida coast, and I
    agree with the updated technology on the impact to the
    environment.
        Mr. Keller. Mr. Malone?
        Mr. Malone. Nothing to add, Congressman, to the others on
    what they have said.
        Mr. Keller. Has BP ever had a spill that ended up on the
    Florida beaches?
        Mr. Malone. No.
        Mr. Keller. Mr. Simon?
        Mr. Simon. Nor has Exxon Mobil. I would echo what my
    colleagues have said. I would make one more point.
        Mr. Keller. Yes, sir.
        Mr. Simon. And that is that we are developing oil and gas
    all around the world elsewhere in environments much more
    difficult, much more challenging than we would find here in the
    United States in a very environmentally responsible fashion and
    we are absolutely convinced we could do it here, as well.
        Mr. Keller. So to sum up, before I yield back to my good
    friend and colleague from Texas, you make up five of the
    largest oil companies in the United States. It is your
    collective opinion that with respect to drilling off Florida's
    coast, you wouldn't be able to see the rigs past 14 miles.
        There has never been an oil spill from any of your major
    companies landing on the Florida beaches, to your knowledge,
    and you believe it can be done safely and secure and in an
    environmentally friendly manner, because you went through
    Hurricane Katrina, and even though that was so devastating, you
    had no oil spills show up on beaches there, and you have also
    had drilling in the past in places like Destin Dome without oil
    spills and you are comfortable it can be done in the future.
        Is that a fair summary?
        Mr. Simon. Absolutely.
        Mr. Keller. I yield back to my colleague from Texas and
    thank her.
        Ms. Jackson Lee. I thank you. And I will include, because
    the Chairman has been enormously generous.
        But this hearing was to provoke, if you will, and to probe
    the idea of collusion and the, if you will, fixing of prices
    and it doesn't mean that we--some of us here were predisposed
    to answers that would suggest that was happening.
        But it is a hearing, as well, to find solutions and I would
    argue that you have given some, but they are not sufficient to
    give an immediate relief.
        And I do believe that this will require more heads than one
    and a bipartisan approach. The gentleman from Florida is a
    Republican and I am on the other side, and I happen to agree
    with him that there can be safe and secure drilling in places
    that there is not.
        But I can assure you that none of that will occur unless
    there is continued explanation and interaction with this
    bipartisan body politic here in the United States Congress
    going forward.
        And though this is an aside, it has not occurred and I
    believe we are going to change minds and really understand
    whether prices are fixed, really understand whether there is
    connection to your compensation to fix prices or high prices,
    and this will have to be an ongoing dialogue even beyond a
    Committee hearing, because the DOJ can investigate, we can call
    for an investigation, but parallel to that, prices will
    continue to rise.
        So I hope that we will have these gatherings that the
    Chairman has so generously offered to various Members, because
    I happen to believe that a moratorium on gasoline prices is not
    fixing prices, but it has a real perspective to it, and I have
    gotten answers that say quite the contrary.
        But I hope that out of this will come the opportunity to
    really get down to how we can lower these prices, and I thank
    the gentlemen for their answers.
        I yield back.
        Mr. Conyers. I thank the gentlelady.
        Did Steve Cohen want a follow up or is he going to wait for
    Maxine Waters?
        Mr. Cohen. I will always wait for Maxine Waters, Mr.
    Chairman.
        Mr. Conyers. That is a wise move. I commend the gentleman
    for his soundness and experience in less than 2 years.
        Ms. Waters. Thank you, Steve.
        Thank you, Mr. Chairman.
        First of all, let me just say this. To Mr. Simon, I
    appreciate what is in your bio that indicates that you work
    with the National Action Council for Minorities in engineering.
        Mr. Simon. That is correct.
        Ms. Waters. That is very important.
        To Mr. Hofmeister, that you serve on the board of the Urban
    League.
        And to Mr. Robertson, I guess I want to ask you, at some
    point, what do you do with the U.S.-Saudi Arabian Business
    Council?
        But I want to say thank you for your volunteerism and your
    contributions dealing with social issues and helping our
    neighborhoods and with our nonprofits.
        And I just want you to know this is not personal. Thank you
    very much for being here.
        Now, having said that, I want to get back to all this money
    you are making and I want to talk with you about whether or not
    there are acres of Federal land currently leased by oil and gas
    companies, 42 million acres and only 12 million acres are
    actually being drilled to proceed with oil and natural gas.
        Someone may have asked this already, but is that a true
    statement?
        Mr. Simon. Ms. Waters, may I take that on?
        But before I do, I would like to apologize for a number
    that I gave you earlier that was incorrect on what we are
    spending in terms of promotion and sponsorships and
    advertising.
        I think I gave you----
        Ms. Waters. That $100 million?
        Mr. Simon.--$100 million. It is actually $270 million. So I
    did want to correct that number.
        Ms. Waters. Yes. I knew it was more than that. But I
    thought maybe you just didn't have it at your fingertips at the
    time.
        Mr. Simon. Well, thank you for giving me the opportunity to
    correct that.
        Ms. Waters. Sure.
        Mr. Simon. When you look at we currently have about 7
    million acres under lease and on every one of those leases, we
    either have evaluated or are evaluating or have specific plans
    to evaluate, and every one of those that have prospects,
    commercial prospects, we are developing or are in the process
    of developing.
        The problem is a lot of the acreage that we have is mature
    acreage. A lot of that will not have oil and gas prospects.
        Ms. Waters. How long have you had this 7 million acres?
        Mr. Simon. It varies. It varies depending upon the lease
    terms. We wish we were successful----
        Ms. Waters. Tell me, what is the amount of your oldest
    lease?
        Mr. Simon. I am sorry?
        Ms. Waters. I want to know how long you have had the leases
    and I want to understand, to the best of my ability, how long
    have you had--you say they vary. Some of them you may have had
    10 years, some you may have had 15 years.
        What is the longest period of time you have had these 7
    million acres?
        Mr. Simon. I am informed that they are 1998-1999 and they
    are 10-year terms and most of them are toward the end of that.
        Ms. Waters. So if you have had them around 10 years, you
    have been exploring and researching to see what they could
    produce.
        Mr. Simon. And those that we have found that have prospects
    for commercial volumes, we are developing. So those that aren't
    are those that we have not found commercial prospects for and,
    again, these are established mature areas where you would
    expect to have a lower rate of prospects.
        The access that we would like to get are those that are not
    developed, undeveloped, where we know the prospects are much
    greater than those that we have now in the mature developed
    areas.
        Ms. Waters. Such as?
        Mr. Simon. Like the parts that are currently off limits.
        Ms. Waters. So if your 7 million acres, only about 2 or 3
    million are worth drilling.
        Mr. Simon. If that, if that.
        Ms. Waters. All together, they said there are 42 million
    acres of Federal land currently leased for oil and gas
    companies. Can each of you tell me how much of that 42 million
    you have? You have got seven.
        If we could just start with Mr. Hofmeister, is it? How many
    acres do you have?
        Mr. Hofmeister. I am sorry, Congresswoman. I would have to
    get back to you with the number. I don't know at my fingertips.
        Ms. Waters. Right down the line. How many do you have?
        Mr. Robertson. I do not know how many acres we have. Many
    leases that are producing have been around, we have had for 20
    or 30 years, because we are producing on them. So there are
    rules.
        The Federal Government has rules. So you can't just hang on
    to a lease forever. You have to have a plan. You have to be
    doing something. And if it is a 10-year lease, when the 10
    years expires, if you haven't done the work that you committed
    to do, you lose it.
        So on all the leases that we have, we are paying rentals.
    So we pay to keep them and we don't keep ones that we don't
    need and the government won't let us keep ones that we are not
    doing some work on.
        So it is an active program on all of them.
        Ms. Waters. How many do you have, sir?
        Mr. Lowe. A similar question came up yesterday and we are
    actually working to try and find that information, but I don't
    have that at my fingertips. I am sorry.
        Ms. Waters. Yes, sir?
        Mr. Malone. Onshore, I think I have been told about a half-
    million acres, 95 percent of that acreage is in production. The
    remaining 5 percent are in development, exploration and
    development now.
        I don't know the acreage in the deepwater Gulf of Mexico,
    but of the 658 leases there, 114 are producing and the rest are
    under exploration and development.
        Mr. Simon. Congresswoman, I could add that we have 100
    Federal lease blocks. Again, we gave you the acreage. And by
    the end of this year, only one of those will likely be
    producing and most of these will expire next year.
        Again, we have not found prospects on. There is a small
    handful that we still believe deserve study, but very little.
        Ms. Waters. Again, you may have heard this information
    before. It is stated that the areas with the vast majority of
    oil and gas are already open to drilling. According to Federal
    Government surveys, 82 percent of the gas in the outer
    continental shelf and 79 percent of the oil in the outer
    continental shelf is suitable for leasing.
        And this was before Congress opened more space in the Gulf
    of Mexico for drilling in 2006.
        Mr. Simon. I am not sure what information you are talking
    about there. My information is that about 85 percent of the
    offshore is off limits and even onshore, about 75 percent is
    either off limits or severely restricted.
        So there is a significant amount of acreage that is
    unavailable, off limits, and there has been estimated it is
    about 30 billion barrels of oil and about 125 trillion cubic
    feet of gas.
        That is enough oil to back out imports for a period of over
    8 years and enough gas to heat----
        Ms. Waters. So you disagree with these information that I
    have that 82 percent of the gas in the outer continental shelf
    and 79 percent of the oil in the outer continental shelf is
    available for leasing. That is not something you are familiar
    with. You don't know that.
        Mr. Simon. Unless we have got different definitions. I
    can't identify with those numbers, I am sorry.
        Ms. Waters. Okay. When I first started the questioning, I
    asked about your need to--well, we are trying to find out the
    real relationship between the cost of a barrel of oil and the
    cost at the pump.
        Whenever the oil increases, a barrel of oil increases, we
    automatically get these increases and would have us believe
    that it is absolutely necessary to do, because--and we don't
    know whether or not there is a direct connection.
        Ordinarily, in managing your budgets and managing your
    income, you would say that when the price of commodities
    increase and you have got to spend your money, you have got to
    earn more money or you lose, you spend more money in order to
    do it.
        But I don't see that connection yet with the barrel of oil
    and this increase at the pump.
        Tell me one more time why it is, when the cartel--and let
    me just ask whether or not--is Angola in the oil cartel?
        Mr. Robertson. Angola is a member of OPEC, yes.
        Ms. Waters. And Nigeria and Venezuela, they all are. Okay.
        Tell me, when they have increased the price of a barrel of
    oil, how does that increase get all the way down to the pump
    past all of your profits?
        You have $123 billion in profits collectively and you have
    had, in 2007, that $40.6 billion that I keep getting back to.
    And so what if they increase the price of a barrel of oil? You
    still have big profits. Why do you have to--why does that
    translate automatically into an increase at the pump?
        Mr. Simon. Well, again, we have got different components of
    our business. When you look at the piece of the business here
    in the United States that produces those products, we have to
    buy that raw material on the open market.
        Ninety percent of what we refine here we buy on that open
    market. And so we refine it and market and then we sell it. So
    if the price of that raw material goes up, if we don't pass
    that through, the profitability on that piece of the business
    goes down, and, indeed, it has this year.
        Ms. Waters. So instead of making $40.6 billion, what if you
    made $25 billion? Would that be enough for you?
        Mr. Simon. Well, we are going to----
        Ms. Waters. Because I understand what you are saying. You
    have got to go out on the open market and buy that raw
    material.
        Mr. Simon. Right.
        Ms. Waters. I understand that. You have got to refine it.
    You have got to do all of these things. But in the final
    analysis, after you do all of that, you had $40.6 billion.
        Mr. Simon. That is correct.
        Ms. Waters. And what I am asking you is this: in the name
    of patriotism, why can't you just have $30 billion or $25
    billion for that year that you make $40.6 billion?
        You have bought all your materials. You have done all your
    investing. You have explored. You have drilled. You have done
    everything and you have got $40.6 billion left.
        Why does that price at the gas pump have to increase?
        Mr. Simon. Over the next 5 years, we are going to be
    investing over $125 billion. If we are not strengthening our
    balance sheet now, we are not going to be able to sustain long-
    term investments of that level----
        Ms. Waters. Give me the projection of your profits, just
    like you give me the projection of your investments.
        Mr. Simon. I don't have a projection.
        Ms. Waters. But you can give me, you can tell me how much--
    --
        Mr. Simon. No, honestly----
        Ms. Waters [continuing]. It is going to cost you to invest.
    Tell me what your projections are for profits, given everything
    that you know.
        Mr. Simon. We are investing over $125 billion over the next
    5 years, regardless of what our profitability is, because we
    don't know what our profitability is going to be. We invest as
    much in low profitability----
        Ms. Waters. Let me just say this.
        Mr. Simon [continuing]. As we do in high profitability.
        Ms. Waters. Let me just say this. I cannot believe that you
    don't have the ability to do projections on your profits, given
    everything that you know and everything that you build in,
    everything you speculate that you build in.
        You guys are very, very good. You have some of the best
    technologies for research and you do know and you do have
    projections about what your profits will be in the next 5
    years.
        So I don't want to hear about the investments over the next
    5 years without hearing about your projections for profits over
    the next 5 years.
        Mr. Simon. Congresswoman, I can assure you we do not have
    projections of our profitability over the next 5 years, because
    we don't know what the price of crude oil is going to be. We do
    not know that.
        Ms. Waters. Yes. But what I am saying is you certainly
    don't now, but you see how it has been increasing and if you
    take the history of the increase and if it keeps going in that
    direction, you should be able to say if this continues to
    happen, this is what is going to happen to our profits and we
    are going to either reduce our investments so that we can
    maintain this huge profit that we have or we recognize that we
    are not going to make as much money and we will continue to
    invest.
        I know that you do that.
        Mr. Simon. But what we do is we have a long-term outlook
    and we are not assuming that prices are going to stay where
    they are today. I cannot tell you when they might come down,
    whether they are going to go up higher.
        But we have got a long-term projection. We are investing,
    and we don't change that investment whether we are in good
    times or bad times. If you go back to 1998 when crude was $10 a
    barrel, we were investing as much in that year as we were in
    the years before and after when crude was much higher.
        We have a long-term outlook. That $125 billion that I
    talked about, we will be doing that regardless of what the
    profitability is over those next 5 years, because we are in a
    10 to 15-year business here.
        Ms. Waters. You can't, in my estimation, run a business
    without projecting and without anticipating that you have to do
    cutbacks, perhaps, depending on how much money you want to make
    and how much you want to pay your dividends, you want to pay
    your investors. You have got to do that.
        And so to say to me our investments are constant and we
    don't care if we lose all the money, all the profits, we are
    going to continue to invest, now you know that does not make
    good sense.
        Mr. Simon. No, and I agree with that.
        Ms. Waters. And you can't do that.
        Mr. Simon. I agree with that nor do we expect that we are
    going to be losing money. But I am telling you that we don't
    expect to be where we are now either and we map out that and we
    look at it over a 10-year period.
        We don't look at it next year or the following year. That
    has nothing to do with what we are investing over those 5
    years.
        Ms. Waters. How much money have you lost over the past 10
    years?
        Mr. Simon. We have only lost money in the U.S. one time
    and----
        Ms. Waters. No, no, no, no. I don't want to know. I am
    talking totally. When I talk about----
        Mr. Simon. We have not lost money. We have not lost money.
        Ms. Waters. Of course, you have not.
        Mr. Simon. No. I admit that.
        Ms. Waters. So you have not lost money over the last 10
    years.
        Mr. Simon. And or do we----
        Ms. Waters. As a matter of fact, the profits continue to
    climb. They didn't even dip in the past 10 years. They just
    kept going up and up and up until you get to 2007 with $40.6
    billion, and you cannot tell me how to reduce the price of that
    gas at the pump.
        Mr. Simon. Well, the way we can reduce the price of the
    product is to work on raw materials and, also, to reduce the
    demand for product. We either supply more or we reduce demand.
        And the way we supply more product, again, is to have
    access to bring on more so we can impact the price of those raw
    materials and reduce demand. And it has been pointed out----
        Ms. Waters. But even with the price that you pay for raw
    materials, you made $40.6 billion in 2007.
        Mr. Simon. We did not make $40.6 billion on the part of the
    business where we bought the crude and processed----
        Ms. Waters. But it doesn't matter, because in the final
    analysis, whether you do your accounting so that you separate
    out how much you are spending on one aspect of it, like your
    raw materials, or in other ways, the bottom line is $40.6
    billion. That is what you made. That is what your overall
    profit was.
        Mr. Simon. No. And I understand where you are coming from,
    but each one of our pieces of the business has to stand on its
    own or we go out of that business.
        We could be out of the refining business. We could be out
    of the marketing business and just sell the crude and gas, and
    natural gas----
        Ms. Waters. Well, the business decision would be if you can
    contract with somebody who can refine it for you cheaper, you
    ought to do that and you would do that.
        Mr. Simon. And if we could do that, we would. In fact----
        Ms. Waters. You would.
        Mr. Simon [continuing]. In some areas, in the retail
    business now, we are actually moving distributors----
        Ms. Waters. Why didn't you take that part of that $40.6
    billion and expand refinery capacity?
        Mr. Simon. We have expanded refining capacity at a faster
    rate than demand has grown. There is no shortage of products
    today in the United States.
        Ms. Waters. Well, why don't you just keep on expanding your
    refining capacity? That brings down the cost, is that right?
        Mr. Simon. We are expanding our refining capacity at a rate
    faster than demand is growing and if you look at the refining
    and marketing business over the next several years, the outlook
    is we are going to be back into a surplus situation here.
        And so the refining and marketing business will be surplus.
    What I cannot tell you is what is going to happen to the raw
    material. But the outlook in refining and marketing is we are
    going to be in a surplus situation. It is going to be a sloppy
    market. That is the outlook.
        Now, whether that materializes, I don't--that is our
    outlook and that is other people's outlook. It is the price of
    the raw materials that we have to buy to produce those
    products.
        Ms. Waters. I understand that very, very much.
        Let me say this. I am considered a liberal. I am one of the
    persons who want to protect the environment, I want to do good
    for a lot of poor people, I want to make opportunities
    available, because I am one of those liberals who think the
    government has a responsibility to come to the aid of the
    people.
        Now, as I watch gas go up past $4 per gallon at the pump
    and I watch people who are pawning their possessions in order
    to purchase gas and people on fixed incomes who can't get to
    work, who can't get their children to school, I am prepared to
    talk about doing whatever it is necessary to keep that from
    continuing to climb.
        I am not going to be happy or sympathetic to the oil
    companies at all while people cannot afford to pay $5 a gallon
    for gas and you are making $40 billion, collectively, $123
    billion in profits. You have got to know that.
        And so Mr. Hofmeister says we can bring down the cost of
    this if you just let us drill where we want to drill. What
    guarantees are you going to give this liberal about how that
    will reduce the cost of gasoline at the pump if we let you
    drill where you say you want to drill?
        What guarantees do you give me?
        Mr. Hofmeister. Congresswoman, it has worked for 100 years
    in our industry that wherever there was adequate supply, there
    were reasonable prices. This price escalation is being driven
    not just by U.S. lack of supply, but global lack of supply.
        Ms. Waters. Point to the areas where you would like to
    drill, how much you would get from that drilling, over what
    period of time, and tell me how much that is going to reduce
    the cost of gas at the pump.
        Mr. Hofmeister. Well, we are actually pursuing areas where
    we are allowed to drill and we are being stopped by lawsuits
    from doing that.
        Ms. Waters. I don't want to hear that. I am saying let's go
    to your idea.
        Mr. Hofmeister. Let's go first to the eastern Gulf of
    Mexico.
        Ms. Waters. How much can you get?
        Mr. Hofmeister. Don't know yet. We have to have a seismic
    analysis, a seismic survey, but we are not even permitted to do
    that----
        Ms. Waters. Tell me where you know that there are gas
    deposits or oil deposits that would reduce the cost of the gas
    at the pump. Tell me where you know it.
        Mr. Hofmeister. We have a general knowledge that off the
    middle Atlantic states, there are prospective opportunities.
        Ms. Waters. How much do you think you can get out of there?
        Mr. Hofmeister. Don't know yet. We would have to do an
    awful lot of analysis to be able to identify----
        Ms. Waters. So after all is said and done, there is nothing
    that you can tell us here----
        Mr. Hofmeister. But in the meanwhile----
        Ms. Waters [continuing]. About how you could guarantee a
    reduction of the price at the pump if you were given the
    ability to go and drill where you say there is oil deposits.
        Mr. Hofmeister. On the contrary, I can guarantee to the
    American people, because of the inaction of the United States
    Congress, ever increasing prices, unless the demand comes down,
    and the $5 will look like a very low price in the years to come
    if we are prohibited from finding new reserves, new
    opportunities to increase supplies.
        Ms. Waters. Well, everything that I see shows me that there
    are still areas under lease that have not been explored by you.
    I see that you have the money to, as you say, increase refinery
    capacity. You have the money for exploration and investment.
        And I think that you could do a better job than you are
    doing. Because the American people over the years keep
    absorbing this price, they cry and they scream and somehow they
    continue to absorb it, while wages are going down or at least
    are stagnant.
        There is going to come a point in time when it is not going
    to work and the American people are not going to be able to
    absorb $5, $6, $7, $8, $9, $10 gasoline.
        And guess what? This liberal, who would be willing to
    entertain drilling in places that are protected now in the
    interest of protecting my constituents and the American people,
    don't feel so good if you don't take some steps now to
    guarantee us that you could, in fact, reduce the price at the
    pump.
        And guess what this liberal would be all about? This
    liberal would be all about socializing--would be about
    basically taking over and the government running all of your
    companies, and that, I tell you, is an extreme position.
        Mr. Hofmeister. Venezuela is a nationalized--what was a
    free market has been nationalized and we see what is happening
    under the government's leadership in Venezuela.
        Ms. Waters. Yes, but you are still working with them. You
    are over there with them.
        Mr. Hofmeister. We are.
        Ms. Waters. And you are buying from them----
        Mr. Hofmeister. We would like to work----
        Ms. Waters. And you are supporting them.
        Mr. Hofmeister [continuing]. With this Democratic
    government in the United States.
        Ms. Waters. So I don't want to hear--I don't want to hear
    about Venezuela. They are your friend. You don't care what they
    do as long as you are able to get that oil from them.
        So don't talk about what they are doing. What I am telling
    you is you don't want to see that happen in the United States.
    You guys have got to get off of this. You cannot keep coming in
    here with all of these profits and tell us you can't give us
    any guarantees, even if the liberals are convinced that you
    should go into some of the protected areas.
        What do you expect us to do?
        Mr. Simon. Congresswoman, I don't think any of us can
    guarantee what is going to happen in the future. But what I
    think we can guarantee you is that if we have access to those
    supplies, it will put a downward pressure on prices, whatever
    they are at that point in time.
        I wish there were some silver bullets here. I wish there
    were something that we could tell you today that if you did or
    we did tomorrow would make a difference.
        The issue we have got and the challenge we have got is that
    ours is a long-term business. The things we are doing today
    don't really show up until 5 or 6 years.
        But what we can do is we can work to help our consumers to
    use less of our product, to take some of the burden off of
    them. And, for example, we are working on technology and we
    already have technologies available right now that we can that
    we can show to our consumers to help them use less of our
    product, to take the cost burden off of them, and also put
    downward pressure on prices.
        If you applied those in the vehicle fleet today, it would
    save 5 billion gallons of motor gasoline, and that is a
    significant amount.
        And these are things like this: when you look at we have a
    new tire inner liner which, if applied, keeps tires inflated.
    Over a billion gallons of gasoline every year are consumed
    because consumers' tires are under inflated.
        Ms. Waters. So how do you advertise that? How do you----
        Mr. Simon. We are advertising. We are putting it in our op-
    eds. We are working with tire manufacturers. We are sending
    this out to our consumers. We also have advanced economy engine
    oils now.
        Ms. Waters. Anybody on this Committee heard of any of this
    stuff?
        Mr. Simon. Well, I haven't had an opportunity to say it
    yet.
        Ms. Waters. But if you advertised it, we should have seen
    it somewhere.
        Mr. Simon. Oh, no, it----
        Ms. Waters. We should have learned about it somewhere.
        Mr. Simon. Well, it is advertised and we have Mobil One
    advanced economy engine oil, which improves the efficiency and
    that is now available and we started that in April. And if you
    put these into effect, it can have a big effect.
        That can have an immediate effect. These other things we
    are talking about are extremely important----
        Ms. Waters. How much money do you spend on advertising
    that?
        Mr. Simon. Pardon me?
        Ms. Waters. How much money do you spend on advertising
    that?
        Mr. Simon. I have that now. That is that $274 million I was
    talking about earlier.
        Ms. Waters. Well, no, most of that goes to the----
        Mr. Simon. I agree with you. I agree with you.
        Ms. Waters [continuing]. The football games and stuff. You
    know what I am saying. That $275 million doesn't include that.
        Let me just say----
        Mr. Simon. It is about $100 million that we are--but, I
    mean, we----
        Ms. Waters. Gentlemen, the proof of the pudding is in the
    eating. All we know is this. You have a very complicated
    business. You make a lot of money. The profits are there. You
    are compensated well and you may well deserve it, I don't know.
        But I know our constituents are hurting. They are hurting
    and, again, you have been able to ride this wave of increases
    for a number of years and people have absorbed those costs and
    I know that in the background, people are thinking, well, you
    know, if it goes up to $5, they will get used to it. If it goes
    up to $6, they will find a way to deal with it.
        But I don't think so. I don't think so. And I want to tell
    you I don't see any effort to try and talk about how you either
    reduce your profits or how you utilize the space that you
    already have leased to do the investment to get the products
    out of the ground.
        I don't know how you use your influence sitting with the
    Saudi Arabian Business Council to try to influence the oil
    cartel. I don't know any of that.
        But I know one thing. Whatever you are doing, you are not
    helping the American people to be able to have access to a
    product that we have all learned to depend on and a product
    that people are willing not to have to depend on if there were
    legitimate, sustainable alternatives to gas as we know it.
        And so when you come here today and you put up with all of
    this, it is because, as legislators, we cannot abide this any
    longer. We cannot continue to do this.
        And so I am hopeful that you will come up with something
    that will help us to reduce the price of that gas at the pump.
        I am really hopeful that--Ms. Lee talks about, I don't
    know, interacting with you, talking with you. I don't need to
    do all of that. I just need for you to get it done.
        We are not going to learn--we don't know how to do that.
    You know how to do that. And so I am hopeful that you will do
    that.
        I thank you for being here today. If you feel a little bit
    beaten up on, we all feel beaten up on. So just share the pain.
    We get our behinds kicked every day in our districts about what
    is going on.
        So, again, I thank you for the work that you do, the
    volunteerism and the help that you give with some of our
    nonprofits and the work that you do, but for that father that
    we are trying to train at the Urban League, it doesn't do any
    good if he can't get to work because he doesn't have any money
    for gas.
        I yield back. Thank you.
        Mr. Conyers. I thank the gentlelady.
        Does the distinguished gentleman from Tennessee want to
    yield to the gentlelady to his right?
        Mr. Cohen. Can I ask a couple of questions, Mr. Chairman,
    first?
        Ms. Sutton. I will wait.
        Mr. Cohen. I will yield.
        Ms. Sutton. I have hung in here this long. I certainly am
    not going to go anywhere. I thank the Chairman and I thank my
    colleague from Tennessee.
        As has been mentioned here, obviously, this is an Antitrust
    Task Force and we are looking about probing collusion and a
    while ago, in the first round of questions, I asked you guys
    questions about whether or not you or any of the officials from
    your organizations had participated in the task force meetings,
    the energy task force meetings that Dick Cheney, Vice President
    Cheney held early in the Bush administration.
        And I just want to make sure that I understood what you all
    said, because this is great, but this hearing is taking place
    in the light of day so that the American people can have access
    to your answers to these questions and hear this exchange and
    see what is going on.
        When I asked you that question, I believe, Mr. Simon, and I
    want you to correct me if I am wrong, as we go down the line
    here, Mr. Simon, you said you didn't participate and your
    organization did not participate. Is that correct?
        Mr. Simon. That is correct.
        Ms. Sutton. Mr. Malone, you said that your chief executive
    officer participated, but not necessarily in the task force,
    just had a meeting with the Administration. Is that correct?
        Mr. Malone. Yes. And I have since been informed we also had
    one meeting with the task force from my company. So, yes, we
    did meet with the task force.
        Ms. Sutton. We will come back to that in a minute, but
    thank you for that clarification.
        And, Mr. Lowe, you said that no one from your organization
    had participated, correct?
        And, Mr. Robertson, if I recall correctly, you said that
    while you didn't participate, you sent some detailed policy
    recommendations or something to that effect, correct, and also
    to Congress?
        Mr. Robertson. I said we did not participate and I said
    when the new Administration came in, we sent a letter to the
    President of the United States and a copy to some Members of
    Congress, both sides of the aisle, with some detailed
    recommendations on this impending issue that we have of the
    shortage of product in the world.
        Ms. Sutton. That is what I recollect. Okay.
        And, Mr. Hofmeister, you said that your company did not
    participate, correct?
        Mr. Hofmeister. That is correct.
        Ms. Sutton. Okay. The reason why I am perplexed and a
    little bit dismayed is as I look back and, as I said, it is so
    important to do this stuff in the light of day, way back in
    2005, I am looking at an article from The Washington Post
    headline ``Document Says Oil Chiefs Met With Cheney Task
    Force.''
        And I will enter this into the record, Mr. Chairman.
        Mr. Conyers. Without objection.
        [The information referred to follows:]

        Ms. Sutton. Thank you. ``A document obtained this week by
    the Washington Post shows that officials from Exxon Mobil
    Corporation, Conoco, before its merger with Phillips, Shell Oil
    Company, and BP America met in the White House complex with
    Cheney aids who are developing a national energy policy, parts
    of which became law and parts of which are still being
    debated,'' and, of course, this was, again, an article that is
    a couple of years old.
        And on the point of Chevron, it says, ``Chevron was not
    named in the White House document, but the Government
    Accountability Office has found that Chevron was one of several
    companies that gave detailed energy policy recommendations,''
    and that is consistent, I believe, with what you said, ``to the
    task force.''
        And on BP, I think that maybe this is what you are
    referring to, ``Cheney has a separate meeting with John Brown,
    BP's chief executive, according to a person familiar with the
    task force work.''
        I am concerned about what this says in relation to
    everyone, frankly, but Chevron, because I do have the
    underlying document here, too, about who was at the task force
    meeting and it is clear to me, it says Exxon, Jim Rouse. Do you
    know who Jim Rouse is?
        Mr. Simon. Jim Rouse used to have our Washington office
    here.
        Ms. Sutton. Jim Rouse obviously participated in this. Going
    on to BP, Mr. Malone, it actually says that you participated in
    a task force meeting.
        Mr. Malone. That is not correct. I never met with the task
    force nor did I meet with--I met with a staff member after the
    task force report was written.
        Mr. Simon. And I want to go on record as saying Mr. Rouse
    did not meet with the task force and if that is reported, that
    is inaccurate.
        Ms. Sutton. Well, again, I am going to put this into the
    record and I would love to have you look at it, because it says
    that Mr. Rouse actually was there February 14, 12 p.m.
        With respect to BP, there were four people listed on this
    document, Bob Malone, Peter Davies, Deb Beaubien, and Graham
    Barr.
        Mr. Conyers. Without objection, it is entered into the
    record.
        [The information referred to follows:]

        Ms. Sutton. With respect to Shell Oil, Sir Mark Moody-
    Stuart, Steven Miller. Do you know them?
        Mr. Hofmeister. Yes. And I said in my earlier testimony
    that there were meetings in the White House with my
    predecessors in the new Administration, but that had nothing to
    do with any task force.
        Ms. Sutton. Okay.
        Mr. Simon. And I think that might be the difference here,
    Congresswoman, is that there are meetings that take place
    between us and government official, but not in the capacity of
    that task force.
        Ms. Sutton. So we are talking about semantics here.
        Mr. Simon. No, no.
        Ms. Sutton. What is called a task force and what isn't.
        Mr. Simon. I don't think we are talking about semantics at
    all. I think what is referenced there is Mr. Rouse had
    presented our energy outlook, which was public knowledge. It
    was out in the public. It was shared with the press. It is
    shared with Congress.
        There was no intention there to try to influence policy in
    that task force.
        Ms. Sutton. Okay. Well, I would disagree that that is the
    way that it appears to either certain Members of Congress,
    certainly, or the American people. And what this is entitled is
    ``Energy Task Force Meetings Participants,'' this document.
        So if you are telling me that this is different than the
    other meetings that you had and that you were having meetings,
    but we are calling them different things, and that is how you
    get all of this information to work out together in a way that,
    in some minds, might appear consistent, it just doesn't look
    consistent to me and I am sure it doesn't look consistent to a
    lot of people and the American public.
        And it is extraordinarily troubling, as we see this and
    then we see gas prices where they are and we have the answers
    during this hearing which has been, obviously, very long and I
    am sure not all that pleasant for you, certainly not all that
    pleasant for us, and certainly not all that pleasant for the
    American people given the subject matter of what we are doing
    here today.
        I just want to do this one more time.
        Mr. Simon, did somebody from Exxon Mobil meet in the White
    House as part of the Vice President's energy task force or in
    other meetings that were going on simultaneously in the same
    time period early in the Bush administration to discuss energy
    policy?
        Mr. Simon. We did not have any meeting in relationship to
    that task force.
        Ms. Sutton. Did you hear my question? Or any other meetings
    that were going on----
        Mr. Simon. We had meetings all the time with government
    officials.
        Ms. Sutton. In the White House during the early days of the
    Bush administration.
        Mr. Simon. I think our Chairman had a meeting with Vice
    President Cheney at one time, but it wasn't in connection with
    that task force. That is what I am trying to say,
    Congresswoman.
        Ms. Sutton. Was there a separate subject other than energy
    policy and what the views of Exxon Mobil might be?
        Mr. Simon. It was to share a public document that is our
    energy outlook that we share with everybody every year.
        Ms. Sutton. And that was all, it was just to----
        Mr. Simon. That is it.
        Ms. Sutton [continuing]. Hand them a copy of that document
    and that was it.
        Mr. Simon. That was it.
        Ms. Sutton. How about you, Mr. Malone? Do you recall a
    meeting?
        Mr. Malone. No, I do. Again, I was not there when our
    former chief executive had the meeting. It was not with the
    Cheney task force, but it was during that time period of your
    question.
        Our meeting that I was present at was not with the Cheney
    task force, but it was with a staff member. Peter Davies is our
    global chief economist. We were presenting our statistical
    review material with him.
        Ms. Sutton. And the staff member that you met with was to
    the energy task force staff?
        Mr. Malone. No. It was not a member of the energy task
    force.
        Ms. Sutton. Just a member of the Vice President's staff.
        Mr. Malone. Correct.
        Ms. Sutton. Sir?
        Mr. Lowe. No one from Phillips Petroleum Company at the
    time or, subsequent to that, ConocoPhillips. I think I have
    seen references to Conoco representatives, but I am not aware
    of those.
        Ms. Sutton. Mr. Robertson, anything to add?
        Mr. Robertson. I stand by what I have already said.
        Ms. Sutton. Mr. Hofmeister?
        Mr. Hofmeister. Sir Mark Moody-Stuart and Steve Miller, in
    the normal course of business, did have discussions, as I have
    testified, and, subsequent to that, I have had meetings with my
    boss with the vice president.
        I think that is good business and I know of no prohibition
    in law that would prevent members of a company from meeting
    with elected officials in the White House.
        Ms. Sutton. Thank you, sir.
        I yield back.
        Mr. Conyers. The Chair recognizes the very polite gentleman
    from Tennessee, who has yielded to two Congresswomen in one
    afternoon.
        Mr. Cohen. Thank you, Mr. Chairman. I appreciate that
    description and, yes, I did yield to two women. I want that to
    be noted well.
        Just a couple of questions. Do any of you all--let me start
    with Mr. Hofmeister, just in general.
        Do you have any idea how much oil we use every day or in a
    year, what percentage of oil we use, that is consumed in this
    country, what percentage might be the oil that we use in the
    military in Iraq?
        Mr. Hofmeister. Well, I know that Americans use 10,000
    gallons of oil a second in this country, which is about 20
    million barrels a day.
        The amount of oil consumed in Iraq, I have no idea.
        Mr. Cohen. Anybody have any idea, any ballpark figure? No.
        Do any of you drill any oil in Iraq? Nobody drills in Iraq.
        Do you know who is drilling in Iraq?
        Mr. Robertson?
        Mr. Robertson. Well, the Iraqi oil company is a great big
    operation and they drill in Iraq.
        Mr. Cohen. Do you have any idea how much they drill?
        Mr. Robertson. No. But I think they produce about--it is
    obviously been varying, but I think the produce up to 2 million
    barrels a day.
        Mr. Simon. It is about 2.2 million barrels a day.
        Mr. Cohen. And where is that going? Is it being used there
    in Iraq, do you have any idea?
        Mr. Simon. No. I think a good bit of that is being
    exported.
        Mr. Cohen. It is being exported. And so they would be
    making, theoretically, a lot of money on what they are making
    in oil, as you are, as well, the Iraqi government.
        Mr. Simon. I have no way of knowing what their balance is
    or how much they are making on that.
        Mr. Cohen. But supply and demand is what determines what
    they are going to be making, isn't that correct? And supply is
    down and demand is up. So they must be doing pretty good.
        Mr. Simon. I would believe they would be getting market
    price for that.
        Mr. Cohen. You all are getting a whole lot of criticism
    from us and from the American public, but don't you think a
    whole lot of that criticism that the American public has got in
    outrage about the price of oil should be directed toward the
    Middle Eastern sheiks and Saudis and the people we spend all
    the money and lives going over there?
        Mr. Simon. No, I don't believe that at all. When you look
    at our dependence on imports, again, about 60 percent of our
    petroleum consumed in this country is on imports.
        When you look at where that comes from, only about 15
    percent of our imports come from the Middle East. But the rest
    of it comes from other parts of the world and when you look at
    the market today in contrast to what I think some people would
    believe, it is well supplied.
        We are not short of supplies. We have 35 refineries around
    the world and there is not a single one of those that is having
    any trouble finding the crude and feed stocks to fill up those
    refineries.
        So we can be angry about it and we can frustrated about it,
    I understand that, but I don't think we point the finger at
    them. It is a world market situation.
        Mr. Cohen. Don't they help set the price?
        Mr. Simon. I think the market sets the price.
        Mr. Cohen. Okay. That is just a disagreement, I guess, we
    have. Let me ask you this. A few years ago, Mr. Raymond made
    $400 million 1 year, Mr. Simon.
        Now, is that money you all have already paid out or are we
    still paying his $400 million for that year?
        Mr. Simon. Well, we have the stock programs that we have
    pay out over 5 and 10 years. So all of that has not even been
    vested yet. So that is still being paid out.
        And I think that was a misconception that he received $400
    million in cash the year that he retired, and that just wasn't
    accurate at all.
        About 10 percent of that, a little over 10 percent was
    actually applied to the year, that year, and much of that,
    about 75 percent, didn't even pay out for 5 to 10 years.
        A lot of the rest of it was what he had earned over the
    previous 10 years, which hadn't vested yet, and then he had a
    pension that was calculated the same way that everybody else's
    pension is calculated in our corporation.
        And people keep throwing that $400 million number up and,
    quite frankly, it is just misrepresented, and I think quite
    unfair.
        Mr. Cohen. And just for the record, what was his position?
        Mr. Simon. He was the chairman of Exxon Mobil.
        Mr. Cohen. And he left in what year?
        Mr. Simon. He left in 2005.
        Mr. Cohen. And he did get a package, though, however, if it
    is 5 years or 6 years. The package, apparently $400 million,
    seems to be accepted.
        Mr. Simon. No, that is not accurate. It wasn't a package.
    It wasn't a package. He received a pension of about $98
    million, which was calculated based on his years of service and
    a formula that is applied to everyone else. That is not a
    package.
        He received compensation, cash compensation in that year.
    The total amount of compensation in that year was $42 million
    out of the $400 million that you are talking about.
        Seventy-five percent of that didn't pay out for 5 or 10
    years into the future. It was applied to a number of years. In
    that year, it was $42 million, not $400 million.
        Mr. Cohen. Well, to be honest with you, I think $42 million
    is--even if you are a baseball player or a rock star or
    whatever----
        Mr. Simon. Well, I understand that, but I do think--I just
    wanted to clarify that it wasn't all in 1 year and was not a
    package.
        Mr. Cohen. Has Exxon done anything to assure that that
    won't happen again, that that kind of payout package won't
    happen? Have you reformed your pension package in any way or
    your compensation?
        Mr. Simon. Again, it was not a package. It was a pension
    calculated the same way as everybody else's is, and we have not
    modified that.
        Mr. Cohen. How was his pension calculated?
        Mr. Simon. It is based on the years of service and then a
    multiple and I would be happy to give you that formula, if you
    would like it. It is calculated the same way mine is going to
    be calculated and everyone else.
        Mr. Cohen. Congratulations.
        Mr. Simon. Believe it, it won't be that high for me, but--
    --
        Mr. Cohen. It will be comfortable.
        Mr. Simon. I am not saying--I am not underpaid. I am well
    paid, I am well compensated, and I understand that. But, again,
    when you look at our compensation and you look at other people
    in comparable positions of responsibility, an independent
    committee of the board determines that, looking outside,
    compensating our executives commensurate with what others are
    being compensated in similar positions.
        Mr. Cohen. What is the God pod?
        Mr. Simon. The God pod?
        Mr. Cohen. Yes.
        Mr. Simon. I am not sure.
        Mr. Cohen. It is an Exxon term, isn't it?
        Mr. Simon. I am not familiar with it. I guess I am not a
    part of it, I don't know.
        Mr. Cohen. You are not a part of it. I think I saw
    something, maybe it is here. It is suggested that $50.6 million
    at ConocoPhillips and the gentleman from ConocoPhillips here,
    Mr. Lowe, you are the vice president, et cetera.
        This was the figure for the chief executive. Do you know
    what the chief executive at ConocoPhillips made last year?
        Mr. Lowe. No. I know it is on page 36 of the proxy, though,
    because I looked at my compensation last night on page 36 of
    the proxy. But I don't recall what his compensation was.
        Mr. Cohen. Whatever they are, I think we have made our
    point through the day, Mr. Chairman, that the compensation----
        Ms. Jackson Lee. Would the gentleman yield?
        Mr. Cohen [continuing]. Compensation has been extremely
    good, the profits have gone up extremely high.
        I still have a problem understanding why the profits have
    to be that great if you are just saying that it is just supply
    and demand. Somewhere there is profit and the profit is paid
    for at the pump by the consumer, and that is what has got
    people and the airlines and business and folks buying food
    where the food prices have gone up.
        The price of gas has affected the entire economy and really
    we have to do something other than just the idea of drill,
    drill, drill.
        Ms. Jackson Lee. Would the gentleman yield for a moment?
        Mr. Cohen. I will yield to the lady.
        Ms. Jackson Lee. The crux of what we are all trying to get
    to is if we give you more, if we give you the drilling off of
    the Gulf, if there is some consensus between Mr. Keller and
    myself or Mr. Keller and Mr. Cohen from Tennessee that drilling
    can occur off the coastline of Florida, we are perplexed as to
    why then we can't match that drilling, what you are asking us
    for, one of those points Mr. Lowe made, to a lower price of
    gasoline or gas at the pump.
        Then the second part of that is there is a war in Iraq. Has
    the war in Iraq helped generate a greater opportunity for
    access to resources to any of your companies and have the
    policies in Iraq, if you will, been such that it creates
    opportunities for American companies?
        Start with you, Mr. Simon, if the gentleman would yield for
    their answers.
        Mr. Simon. I apologize, Congresswoman, I forget the first
    question.
        Ms. Jackson Lee. The first one was if we give you the--if
    Republicans and Democrats, whoever agrees with drilling come
    together and say you now can go off the coast of Florida, I am
    compromising, I think ANWR doesn't generate much, somebody said
    it lowers the price $0.01 if you go into ANWR.
        But if you go off the coast of Florida, OCS off the coast
    of Florida and your supply goes up, are you going to tell me
    that we can get a lower price at the pump?
        And in Iraq, has the Iraq war contributed to better access
    to energies in Iraq? Is their policy such that you are getting
    a greater supply potentially out of Iraq?
        Mr. Simon. In terms of access, first of all, I do not agree
    with the $0.01 associated with ANWR. I don't know where that
    came from.
        Ms. Jackson Lee. It is documented here and I don't want to
    pursue that, but I believe it is 16 billion, I think, 16
    billion barrels and they say over 20 years, it might lower it
    by $0.01.
        Mr. Simon. But when you look at----
        Ms. Jackson Lee. There are 83 billion elsewhere. So let's
    talk about the OCS.
        Mr. Simon. When you look at what is off limits today, and I
    have seen numbers of 30 billion barrels of oil and 125 trillion
    cubic feet of gas, what I think we can assure you is, if given
    access to that, it will have downward pressure on the price
    paid at the pump.
        What I cannot tell you or guarantee you is it will be lower
    or higher than where it is today, but I can assure you it would
    be lower than it would otherwise be if we are not given access.
    That is what we all can say, because it would add plus supplies
    and plus supplies are going to put downward pressure on prices,
    because it puts downward pressure on the crude price, which
    today constitutes about 75 percent of the price that your
    constituents and our customers are paying at the pump.
        In terms of Iraq, I am not aware--I am not in a position to
    say whether it is helped or hurt us, what the policy is. I will
    say that we are currently in discussions of a technical
    agreement with the Iraqis, which we are in pursuit of. We will
    see how that plays out.
        Ms. Jackson Lee. Mr. Malone?
        Mr. Malone. Just to your last question, we are in the same
    place. It is competitive and we are having technical
    discussions.
        Ms. Jackson Lee. But has the Iraq war contributed to your
    ability to get access to those resources?
        Mr. Malone. Not that I am aware of.
        Ms. Jackson Lee. And would the offshore Florida addition--
    you could not see a vision of lower prices because of the
    increased supply?
        Mr. Malone. Again, it would clearly put downward pressure
    on the crude price with additional supply in the market,
    absolutely.
        Ms. Jackson Lee. That is a lower price answer. You have
    just given me a potential lower price at the pump.
        Mr. Malone. Yes.
        Ms. Jackson Lee. A potential lower price at the pump
    because of that. And I have only said offshore Florida, by the
    way. I just wanted to make sure.
        Mr. Lowe?
        Thank the gentleman for yielding.
        Mr. Lowe. Getting access to the outer continental shelf
    would be extremely well received. It would generate hundreds of
    millions of dollars in lease sales and it would bring added
    supplies.
        Iraq, while the opportunities are not there today, the
    resource potential there is enormous and if we would have
    access to Iraq to develop the oil there, that would be very
    substantial in helping.
        Ms. Jackson Lee. But you would not--are you suggesting the
    war helps you get access?
        Mr. Lowe. At this point, we are in the same boat as
    everyone else. We are trying to look at signing technical
    agreements to help the Iraqis get their----
        Ms. Jackson Lee. I understand. But did the war contribute
    to helping you get access?
        Mr. Lowe. Well, we had no access before.
        Ms. Jackson Lee. So you would have supported the war in
    order to get access to oil.
        Mr. Lowe. That is putting words in my mouth. I think that
    is inappropriate. No. All I am saying is----
        Ms. Jackson Lee. I am just asking if that is what you are
    saying.
        Mr. Lowe. No. What I am saying is we had no access to Iraq
    before and there is tremendous resource there, whoever develops
    it. There is tremendous resource there that could add to
    supply.
        Ms. Jackson Lee. And did you tell me that the amount would
    go down at the pump if you had access in OCS off the coast of
    Florida?
        Mr. Lowe. That is correct.
        Ms. Jackson Lee. Mr. Robertson?
        Mr. Robertson. What I can tell you about Florida is I don't
    know whether--I think it would be a great benefit to the
    America people to drill offshore of Florida.
        We have drilled offshore of Florida and we found natural
    gas. I believe that, from my knowledge, it is more natural gas
    offshore of Florida than oil.
        If we found oil, it would have the impact that the
    gentleman said. It would reduce the world market price of oil,
    I think.
        If we found gas, the same people that are paying the
    gasoline bills are also buying electricity and if we could
    produce gas offshore of Florida, which we plan to do, that
    would substitute for LNG that is being brought in from the rest
    of the world.
        The United States, natural gas market actually is pretty
    isolated. And so additional supplies in the U.S. will bring
    prices down.
        Bringing LNG from Angola is very expensive. So drilling
    offshore of Florida, finding natural gas would bring down
    electricity bills in Florida, which is the same kinds of
    consumers we are talking about that are paying for gasoline.
        So I think in both cases, in oil, it is a world market, it
    would depress the world market. In gas, it is much more of an
    American market and that would have a bigger impact and that
    would be very important.
        So drilling offshore of Florida would bring jobs to the
    United States, lots of them, would bring resources to the
    United States in the gas market and if we found oil, it would
    certainly help depress the price of gasoline.
        Ms. Jackson Lee. And that all would be based on an
    agreement. You couldn't go there if we didn't get a consensus
    in this Congress and in the population.
        Mr. Robertson. Well, everywhere we go, we have to the
    agreement of the community before we can do it.
        Ms. Jackson Lee. And Iraq?
        Mr. Robertson. In Iraq, like everybody else, we are in
    discussions with the Iraqis in terms of technical support. The
    Iraqis, if and when they pass a petroleum law and allow people
    to compete for access there, then if the security situation is
    adequate, Chevron will certainly see whether we can do
    something there.
        I have no idea what the circumstances would have been had
    there not been a war and that is all I can say. That is all I
    know about that circumstance.
        Ms. Jackson Lee. Mr. Hofmeister?
        Mr. Hofmeister. With respect to the potential of more
    access in the eastern Gulf of Mexico, I would stand by my prior
    statements that more supply would bring less pressure on future
    oil prices, and I believe that would have beneficial impact
    across the board, to the whole global supply chain, not only to
    the American.
        With respect to Iraq, Shell was in Iraq for many, many
    years, until the Iraqi government at the time nationalized the
    oil company in Iraq. Shell was asked to leave. We did leave.
        There is a new government today in Iraq. If that government
    invited us to participate in the oil industry, I think Shell
    would look forward to that opportunity.
        Ms. Jackson Lee. I thank the gentleman for yielding.
        Mr. Cohen. Thank you.
        Let me just ask, how many of you all do business with
    Halliburton? All of you?
        Mr. Simon. I am sure we do, as well.
        Mr. Cohen. What does Halliburton do for you all?
        Mr. Lowe?
        Mr. Lowe. They provide technical services.
        Mr. Cohen. How much do you think your contract with
    Halliburton is a year, approximately?
        Mr. Lowe. I don't know for sure, but it would be a few
    hundred million dollars, I would guess.
        Mr. Cohen. Were you there when Vice President Cheney was
    involved with Halliburton? Were you with your company?
        Mr. Lowe. I was not part of the upstream part of the
    business.
        Mr. Cohen. Anybody part of the industry when Vice President
    Cheney--you were?
        Mr. Simon. I was part of the industry, but I was not in the
    upstream part of the business.
        Mr. Cohen. You weren't.
        Mr. Robertson, you were. How much business do you all do a
    year with Halliburton?
        Mr. Robertson. I couldn't tell you the exact number, but--
    --
        Mr. Cohen. Give or take.
        Mr. Robertson [continuing]. I am sure it is hundreds of
    millions of dollars.
        Mr. Cohen. Hundreds of millions. And Mr. Cheney was
    involved at that time.
        Mr. Robertson. He was the CEO of the company.
        Mr. Cohen. Right. So you dealt with him a bit.
        Mr. Robertson. I don't deal with him.
        Mr. Cohen. You didn't. Okay. We don't either, but----
        Mr. Robertson. But we deal with Halliburton every day in
    hundreds of places around the world and certainly have dealt
    with him when he was the chairman and CEO of the company.
        Mr. Cohen. With the price of oil going up, the crude oil
    and the profits of the oil companies going up, does Halliburton
    necessarily make more money as part of this whole scheme?
        Scheme is the word, but----
        Mr. Robertson. Halliburton sells services. So to the extent
    that we contract to Halliburton to do oil field services, to
    help us produce wells, to help us in a myriad of different
    services, for every service they provide us, we pay them a
    contracted fee.
        So if there is more activity, if we are spending more
    capital to find more barrels of oil or TCFs of gas around the
    world and there is more production, Halliburton, certainly,
    that is their business.
        Mr. Cohen. So if we drill off of Florida or we drill in the
    ANWR, Halliburton is going to make a lot of money, aren't they?
        Mr. Robertson. Well, I don't know whether it is going to be
    Halliburton. Service companies, whether it is Schlumberger or
    Halliburton or Baker Hughes or a myriad of others, they will
    compete for the business.
        Mr. Cohen. Is Halliburton the biggest of those three
    companies?
        Mr. Robertson. No.
        Mr. Cohen. They are not.
        Mr. Robertson. No.
        Mr. Cohen. But they are up there.
        Mr. Robertson. Yes, they are up there, but they are not the
    biggest.
        Mr. Cohen. It is just kind of hard to believe, it is almost
    surreal that we are defending the salary and saying that this
    man didn't make $400 million, he only made $42 million.
        $42 million comes to over $100,000 a day, even if you
    worked on Saturday and Sunday--$100,000 a day.
        There is something wrong with that type of salary and even
    if it is just $42 million, it is obscene when people are having
    to pay $4 a gallon. The whole salaries are just obscene.
        Does Halliburton do anything in renewables at all? Do you
    all have any idea? Are they strictly oil?
        Mr. Robertson. I am certainly not aware of whether they do
    or do not, but, again, their business is a service business.
    They provide services on request and that is more of their
    business than producing a product by itself.
        Mr. Cohen. Who did Mr. O'Reilly work with?
        Mr. Robertson. Who did he work with?
        Mr. Cohen. Is he still the CEO?
        Mr. Robertson. Yes.
        Mr. Cohen. And what was his salary last year?
        Mr. Robertson. Well, his salary, I just described my salary
    of $2.5 million in salary and bonuses. Last year, it was $5.2
    million in salary and bonus.
        Mr. Cohen. O'Reilly's?
        Mr. Robertson. And on top of that, he got some options and
    performance shares that will be valuable depending on the
    performance of the company.
        Mr. Cohen. When I read in the New York Times that maybe his
    salary was $37 million, when you put it all together, in 2006,
    would that be accurate?
        Mr. Robertson. That number, $31 million, is the number in
    the proxy, but it includes appreciation of awards that he got
    previously.
        Mr. Cohen. And that is, again, about $100,000 a day.
        Mr. Robertson. But he didn't earn $31 million in----
        Mr. Cohen. No, I am sure he didn't earn it. Thank you.
        Thank you, Mr. Chairman.
        I want it to be noted that I yielded to three different
    beautiful, intelligent women.
        Mr. Conyers. All in the same day.
        Mr. Cohen. That is right. It was a great honor.
        Ms. Jackson Lee. We should end on that good note. When he
    says something like that, that should be for the record, Mr.
    Chairman.
        Mr. Conyers. Well, I want to thank the witnesses for their
    experience and knowledge and, most of all, their endurance. We
    appreciate the testimony you have given and I think this is a
    very important hearing.
        And we look forward to you feeling free to make any
    additional communications with us to go into the record or not
    into the record, if there are any things that you want to amend
    or any corrections you want to make to your oral testimony, we
    will be happy to accept it.
        And, again, thanks for your contribution to the subject
    matter.
        And the hearing is adjourned.
        [Whereupon, at 4:51 p.m., the Task Force was adjourned.]
                                A P P E N D I X

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                   Material Submitted for the Hearing Record