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



DRILLING FOR ANSWERS: OIL COMPANY PROFITS, RUNAWAY PRICES AND THE PURSUIT 
                            OF ALTERNATIVES

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

                                HEARING

                               before the

                          SELECT COMMITTEE ON
                          ENERGY INDEPENDENCE
                           AND GLOBAL WARMING
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                             APRIL 1, 2008

                               ----------                              

                           Serial No. 110-30


             Printed for the use of the Select Committee on
                 Energy Independence and Global Warming

                        globalwarming.house.gov








   DRILLING FOR ANSWERS: OIL COMPANY PROFITS, RUNAWAY PRICES AND THE 
                        PURSUIT OF ALTERNATIVES

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

                                HEARING

                               before the
                          SELECT COMMITTEE ON
                          ENERGY INDEPENDENCE
                           AND GLOBAL WARMING
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 1, 2008

                               __________

                           Serial No. 110-30









             Printed for the use of the Select Committee on
                 Energy Independence and Global Warming

                        globalwarming.house.gov







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                SELECT COMMITTEE ON ENERGY INDEPENDENCE
                           AND GLOBAL WARMING

               EDWARD J. MARKEY, Massachusetts, Chairman
EARL BLUMENAUER, Oregon              F. JAMES SENSENBRENNER, Jr., 
JAY INSLEE, Washington                   Wisconsin
JOHN B. LARSON, Connecticut            Ranking Member
HILDA L. SOLIS, California           JOHN B. SHADEGG, Arizona
STEPHANIE HERSETH SANDLIN,           GREG WALDEN, Oregon
  South Dakota                       CANDICE S. MILLER, Michigan
EMANUEL CLEAVER, Missouri            JOHN SULLIVAN, Oklahoma
JOHN J. HALL, New York               MARSHA BLACKBURN, Tennessee
JERRY McNERNEY, California
                                 ------                                

                           Professional Staff

                     Gerard Waldron, Staff Director
                       Aliya Brodsky, Chief Clerk
                 Thomas Weimer, Minority Staff Director











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............     1
    Prepared statement...........................................     3
Hon. F. James Sensenbrenner, Jr., a Representative in Congress 
  from the State of Wisconsin, opening statement.................     5
Hon. Earl Blumenauer, a Representative in Congress from the State 
  of Oregon, opening statement...................................     6
Hon. John Shadegg, a Representative in Congress from the State of 
  Arizona, opening statement.....................................     6
Hon. Jay Inslee, a Representative in Congress from the State of 
  Washington, opening statement..................................     8
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     8
Hon. John Larson, a Representative in Congress from the State of 
  Connecticut, opening statement.................................     9
Hon. Candice Miller, a Representative in Congress from the State 
  of Michigan, opening statement.................................    10
    Prepared Statement...........................................    12
Hon. Emanuel Cleaver II, A Representative in Congress from the 
  State of Missouri, opening statement...........................    21
    Prepared Statement...........................................    22
Hon. John Sullivan, a Representative in Congress from the State 
  of Oklahoma, opening statement.................................    23
Hon. John Hall, a Representative in Congress from the State of 
  New York, opening statement....................................    23
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    24
Hon. Jerry McNerney, a Representative in Congress from the State 
  of California, opening statement...............................    25
Hon. Hilda Solis, a Representative in Congress from the State of 
  California, opening statement..................................    25
    Prepared statement...........................................    27
Hon. Herseth Sandlin, a Representative in Congress from the State 
  of South Dakota, opening statement.............................    28

                               Witnesses

Mr. J. Stephen Simon, Senior Vice President, Exxon Mobil Corp....    29
    Prepared Statement...........................................    31
    Answers to Submitted Questions...............................   187
Mr. John Hofmeister, President, Shell Oil Company................    35
    Prepared Statement...........................................    37
    Testimony Attachment.........................................    47
    Answers to Submitted Questions...............................   215
Mr. Peter Robertson, Vice Chairman, Chevron......................    66
    Prepared Statement...........................................    68
    Answers to Submitted Questions...............................   236
Mr. John Lowe, Executive Vice President, ConocoPhillips..........    89
    Prepared Statement...........................................    91
    Answers to Submitted Questions...............................   261
Mr. Robert A. Malone, Chairman and President, BP America, Inc....   130
    Prepared Statement...........................................   132
    Answers to Submitted Questions...............................   311

                          Submitted Materials

National Petroleum Council, Hard Truths: Facing the Hard Truths 
  About Energy, 2007.............................................   356
Chevron Technology Ventures, Chevron Biofuels Research 
  Collaborations, 2008...........................................   329
Hon. Joe Barton and Hon. John Dingell letter of June 7, 2006 from 
  Lisa B. Barry..................................................   353

 
   DRILLING FOR ANSWERS: OIL COMPANY PROFITS, RUNAWAY PRICES AND THE 
                        PURSUIT OF ALTERNATIVES

                              ----------                              


                         TUESDAY, APRIL 1, 2008

                  House of Representatives,
        Select Committee on Energy Independence and
                                            Global Warming,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 12:00 p.m., in Room 
210 Cannon House Office Building, Hon. Edward Markey [chairman 
of the Committee] presiding.
    Present: Representatives Markey, Blumenauer, Inslee, 
Larson, Solis, Herseth Sandlin, Cleaver, Hall, McNerney, 
Sensenbrenner, Shadegg, Walden, Miller, Sullivan, and 
Blackburn.
    Staff present: Morgan Gray.
    The Chairman. The Select Committee on Energy Independence 
and Global Warming is called to order, and we welcome all of 
you to our very important hearing today.
    Yesterday Americans saw that the price of gasoline hit a 
record high price. Today on April Fool's Day, consumers all 
over America are hoping that the top executives from the five 
largest oil companies will tell us that these soaring gas 
prices are just part of some elaborate hoax.
    Unfortunately, it is not a joke. For nearly eight years 
this administration's energy policy has been in the tank. 
Shortly after President Bush took office, the price of oil was 
under $20. A few weeks ago oil reached an all time record high 
of $111, and currently trades at about $100 a barrel.
    During the same period, the price of gasoline has nearly 
tripled from $1.11 a gallon in 2002, to yesterday's all time 
high when it hit $3.29 a gallon. And as we approach the summer 
driving season, skyrocketing gas prices are likely to soar even 
higher.
    Each week American consumers go to the gas pump and pay the 
price for this administration's failed energy policy. Twenty 
percent of all households in America make less than $20,000 a 
year. With gas prices at $3.29 a gallon, the poorest 20 percent 
of American households are spending nearly ten percent of their 
income just on gasoline.
    American consumers also know that the major oil companies 
are reaping a major financial windfall. Big oil's profits have 
more than quadrupled over the last six years. Just last year 
alone Exxon Mobil recorded more than $40 billion in profit, the 
greatest corporate profit in history, and the five companies 
sitting before us today netted a combined $123 billion in 
profit in 2007.
    And what is the oil industry doing with all of this profit? 
Unfortunately, it goes as much to financial engineering as to 
renewal engineering. Last year the five largest oil companies 
spent more than $50 billion on schemes to prop up the price of 
their stock, and as they rake in the profits at a record clip, 
the major oil companies supported by the Bush administration 
are opposing legislation that would take $18 billion in tax 
breaks they currently receive and redirect it to renewable 
fuels and clean energy.
    In April of 2005, President Bush said, ``With $55 a barrel 
oil, we don't need incentives for oil and gas companies to 
explore,'' and that was true in 2005. With the price of oil now 
doubled and our planet's thermometer rising, this 
administration must end its opposition to the renewable energy 
incentive package that the House passed last month.
    So on April Fool's Day the biggest joke of all is being 
played on American families by big oil while using every trick 
in the book to keep billions in federal tax subsidies even as 
they rake in record profits.
    Three things must happen immediately in order to insure the 
consumers can begin to get relief from high prices. First, the 
poorest Americans are now spending an average of ten percent of 
their income to pay for gasoline. We need the companies here 
today to make a similar commitment to American families and 
pledge to invest at least ten percent of their profits in 
renewable energy and biofuels, to develop alternatives that 
will help consumers.
    Second, your companies and the Bush administration must 
support, not oppose, legislation, that will unleash the 
renewable revolution we need in order to become energy 
independent and cut global warming emissions.
    And finally, the Bush administration must stop filling the 
strategic petroleum reserve during periods of high prices in 
order to send a signal to the market and oil speculators that 
Americans will not be held hostage by those high prices. For 
too long this administration's energy policy has led to tax 
breaks for big oil and tough breaks for American families. 
American consumers should not have to break the bank to fill 
the tank.
    The American people deserve answers, and it is time for big 
oil to go on record about these record prices.
    And now I would like to recognize the Ranking Member of the 
Select Committee, the gentleman from Wisconsin, Mr. 
Sensenbrenner.
    [The prepared statement of Mr. Markey follows:]



    
    Mr. Sensenbrenner. Thank you, Mr. Chairman.
    Today's hearing is about high gas prices, and it is an 
issue that my Wisconsin constituents understand all too well. 
Due to a host of factors, including one of the highest gasoline 
taxes in the nation, my constituents pay some of the highest 
gas prices in the nation. In fact, just yesterday the American 
Automobile Association showed that gasoline is more expensive 
in my district than it is in Manhattan. In both places gas is 
at least 50 cents a gallon higher than it was at this time last 
year.
    Already reports are showing that Wisconsin residents may 
soon be feeling even more pinched due to rising fuel costs. The 
Capital Times in Madison reported that freight truck drivers 
are feeling the weight of higher diesel prices, citing data 
from AAA Wisconsin that shows diesel averaging $4.08 a gallon, 
up more than 50 cents from just last month.
    The story correctly notes that about 80 percent of the 
goods shipped in the U.S. use diesel powered trucks. The truck 
drivers are feeling the pinch, but it is being passed on to all 
of us. In fact, the high price of oil is one reason why my 
local investor owned utility, We Energies, is asking state 
regulators to approve a rate hike.
    It is not surprising that gas and oil prices are going up. 
Worldwide demand is skyrocketing, too. Not only is there an 
increasing need for energy resources in this country, but 
countries like China and India have energy demands that far 
exceed their historical needs.
    One thing we know for sure is that the worldwide demand for 
energy resources is going to keep growing in the future and 
that we need an energy policy that will allow us to meet those 
needs without slowing the economy.
    Last May the Select Committee had a hearing on rising gas 
prices where we heard about the big impact that the oil and gas 
companies have on the economy. Everyone knows the impact that 
gasoline can have on goods in the market, but we also heard 
that these companies create a lot of good jobs and their 
expanded investment in market driven research and technology 
only serves to create more jobs.
    The oil companies that we will hear from today are going to 
be called on to help meet the rising global energy demand. 
Naturally they are looking for new sources of traditional 
fossil fuels, and it is my hope they will continue to bring 
these new energy sources on line. Unfortunately, many of those 
sources are on unstable parts of the world with unsavory 
leadership, places like Nigeria and Venezuela.
    But from their testimony today, it is clear that the oil 
companies are looking for new sources of energy like wind, 
solar, and biofuels. There is a growing market for these new 
technologies. These executives know what the future holds both 
from their own studies and from groups like the National 
Petroleum Council. They know that their companies will have to 
be able to draw on diverse sources of energy in order to meet 
the rising demand.
    Now, I, too, believe that energy diversity must be a key 
part of U.S. energy strategy, and that includes traditional 
fossil fuels in addition to renewable energy, improved energy 
efficiency, and nuclear power. Any reasonable energy policy 
must recognize that we need affordable supplies of energy, and 
that oil and gas must continue to play a dominant supply role 
for the foreseeable future.
    I look forward to today's testimony from our witnesses who 
are striving to meet the challenge of securing energy in an 
insecure world and yield back the balance of my time.
    The Chairman. Okay. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oregon, Mr. 
Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman.
    I appreciate the opportunity to hear from the witnesses 
about their ideas about how to increase the use of renewable 
and alternative energy sources and reduce our dependence on 
oil.
    You framed part of the question. People are, I think, 
understandably anxious about issues, the juxtaposition of 
record profits while paying more from the pump, and I look 
forward to people clarifying that part of the equation.
    But it leads to a discussion about what subsidies, if any, 
oil companies actually need to continue to be successful and at 
what part of the energy business. We have seen the industry 
capable of making profit selling existing cost effective 
technology, but still we see billions of dollars in subsidies 
from the American taxpayer, one of which it never really was 
intended to get when we made the change in 2004 repealing an 
export subsidy that was in violation of the WTO rules. The oil 
and gas industry was explicitly not eligible for the repealed 
subsidy, yet through the magic of the legislative process found 
themselves included in the replacement benefit, a bonus to the 
industry that was already booming, and as you quoted President 
Bush, oil at $55 a barrel he said did not need incentives for 
oil and gas companies to explore.
    I am interested in being able to explore with our witnesses 
at what point an industry becomes sufficiently mature that it 
no longer needs as much taxpayer help, and what parts of the 
businesses that are represented here today do need specific 
subsidies to be profitable.
    In the written testimony that I have reviewed, you describe 
a robust renewable and alternative energy program that 
virtually all of the companies are involved with now and 
express support for renewing tax credits for the production of 
wind and solar power.
    I personally believe that this is where we should be 
putting scarce taxpayer resources, not into existing technology 
which probably no longer needs our help, but in areas where the 
cost of production and the curve of cost effectiveness is not 
quite as clear.
    And I look forward to being able to explore with our 
witnesses how we have passed this point and where we need to go 
in the future to maximize our entry into a renewable, 
sustainable future.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    The gentleman's time has expired. The Chair recognizes the 
gentleman from Arizona, Mr. Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman, and I assume that we 
are working under the rule that if I abbreviate my opening 
statement I get more time to ask questions?
    The Chairman. I think it is an all or nothing.
    Mr. Shadegg. It is an all or nothing situation. Very well. 
Well, then it is an all.
    Thank you very much, Mr. Chairman, for holding today's 
hearing. I think it is extremely important for us as Members of 
Congress, as well as for all Americans to understand the myriad 
of reasons for today's extremely high oil prices and the 
consequent high price of gasoline.
    In that respect, this hearing is very timely considering 
that oil prices recently reached a $112 per barrel high just a 
few weeks ago. I am extremely interested in this issue as 
representing a western state where we travel great distances 
and our commutes are dramatically longer than those of my 
colleagues who represent states along the East Coast. These 
issues are extremely important to me.
    And I also find that there is a sad lacking of basic 
economic understanding both here in the United States Congress 
and in the nation at large. There are many issues, I believe, 
which are contributing to the high price of oil and the 
consequent high price of gasoline.
    I have in the past tried to encourage further construction 
of refining facilities without much luck. I believe we are 
relying on oil for many uses that would be better suited to 
other fuels.
    I am concerned that if you look at both the issues of 
supply and demand, we face a myriad of problems. We face 
government imposed restrictions on supply. There are many, many 
places, I think, that all of us know here in America where we 
have known reserves of supply, but we are not allowed for 
various political reasons to go and look.
    Just over a year ago this Congress looked at trying to get 
either oil production or natural gas production on the Outer 
Continental Shelf at distances far enough off the shore where 
it would be literally unknown to anybody on land, and yet we 
could not enact that legislation.
    In the Air Mountain West where I live, we have thousands of 
acres of land that are locked up, and we walk away from that 
supply at a time when demand around the world is growing 
dramatically. China has moved quickly toward being a developed 
nation. It has an incredible demand for all commodities, 
including oil, and as that demand goes up, of course, that 
creates a greater demand around the world.
    The result of this is, I believe, not surprising, and it is 
a spike in the cost of oil for Americans and a spike in the 
cost of gasoline for my constituents who are deeply concerned 
about the issue. As my colleague, Mr. Sensenbrenner, noted, we 
are forced regrettably to rely on nations that are not our 
friends to supply oil, and it is my understanding at least that 
U.S. oil companies control less than ten percent of the world's 
proven oil reserves, leaving American consumers often subject 
to oil prices determined largely by foreign countries and in 
some instances by foreign countries who are not our friends and 
who use that money to oppose us.
    Obviously, we have a tremendous interest in exploring 
alternative forms of energy. I am keenly interested in that 
myself and would like to hear what you have to say about it. I, 
however, do not believe that funding alternative energies by 
taxing current forms of energy serves American consumers well.
    And with that, I yield back the balance of my time.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Washington State, 
Mr. Inslee.
    Mr. Inslee. Thank you.
    Just as I was walking in this room I had a fellow from 
Virginia, told him where I was headed into, and he said, 
``Congressman, I own stock in one of those companies, but give 
them hell anyway.''
    And I thought it was kind of indicative of what you know is 
the public sentiment out across the country, but I think that 
public sentiment is not because Americans do not understand the 
laws of supply and demand and we know that demand is going up 
with China and India and supply is somewhat limited. It is 
because of these two great abuses that they feel are going on 
that create this great anger besides just the price rise, and 
that is, first, they cannot understand when they're paying 328 
or 344 out in my State of Washington at the pump why then you 
then reach into their pockets and take out another $18 billion 
on April 15th out of their tax bill. They cannot understand 
that.
    And when they ask me to give you H., I think that is one of 
the reasons, because Americans believe and I think rightfully 
so that if you were going to give awards for taxpayer abuses, 
this would win the Heisman and the Oscar and the Nobel Prize, 
to reach into Americans' pockets at tax time to take this when 
these prices are going up like this.
    And, secondly, Americans are concerned that even though we 
know, we know we have to wean ourselves off of oil and gas, 
that global warming demands this, even though Americans know 
that we are the most innovative people on the face of the 
earth, we are still seeing a very, very small as a percentage 
of your revenues investment in the clean energy technologies 
that Americans know that we can perfect to really create a 
clean energy revolution in this country.
    So I hope that we will produce some thoughts about that. I 
will give you one saving grace. I know this to be a difficult 
hearing for you. I am not going to ask for your home phone 
numbers, and that could be the most effective regulatory system 
we have, but that is the one break you will get today.
    Thank you.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oregon, Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman, and thank 
you for holding this hearing.
    I want to welcome our witnesses, and we look forward to 
your testimony.
    I share the concerns you have already heard from members of 
both sides of the aisle. Certainly in a district that spans 
70,000 square miles, I can tell you I am hearing a lot from 
folks I represent, farmers and ranchers and others who commute 
extraordinarily long distances, about the price of fuel.
    You know that. We hear it for diesel as well, especially in 
the farm community. The inputs into our agricultural products 
are a real problem.
    What I would like to get to today is to find out how do we 
overcome this. Now, I am a big supporter of renewable energy 
and have been before it was even popular. Over the last month I 
bought my second hybrid vehicle. I now drive one in Oregon and 
one here in Washington, DC, and with all due respect, I have 
cut my payments to you by 66 percent with my new one in Oregon.
    I want to know though how we do both. How do we meet the 
oil and gas needs of today in America while we develop the 
renewable energy sources, the biofuels, the alternatives that, 
frankly, are being developed in my district and elsewhere 
around the country? How do we get those going while we still 
meet this demand?
    And we know part of the price spike we are paying on the 
world market is related to the devalued dollar. I mean, that is 
basic economics. You see it. We import so much. How do we get 
America more energy independent? How do we rely less on imports 
from foreign countries, many of whom, quite frankly, let's be 
honest, do not like us very well, Venezuela among them? So how 
do we develop our own resources?
    What can we do to help in that effort rather than just 
throw rocks at you and your profits, which I think probably a 
lot of them have come from most of our districts? I want to 
know how we solve the problem.
    That is what Americans want us to do here. We can gang up 
on you all, and certainly that will happen probably today, as 
you well anticipate, but I want to get beyond that and know how 
do we fix the problem in America so that we are energy 
independent, so we are secure in this country, so that we have 
the oil and gas we need as well as develop the renewables so 
that over the span we can grow out of an oil-based economy.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    The gentleman's time has expired. The Chair recognizes the 
gentleman from Connecticut, Mr. Larson.
    Mr. Larson. Thank you, Mr. Markey, and thank you for 
conducting this hearing, and thank you gentlemen for joining us 
today.
    Let me start with saying that I believe that the laws of 
supply and demand, especially as relates to oil, are completely 
broken and malfunctioning. I would like to know your opinion on 
this. I would like to know whether you think that, in fact, 
speculators are driving up the cost, and paper is to account 
for a number of the reasons that let's say senior citizens have 
to turn over their entire Social Security check in order to pay 
for oil that is delivered to their homes in the Northeast.
    And inasmuch as you receive 107 billion annually in 
taxpayer dollars, do you think that that is appropriate? I 
believe that the Independent Connecticut Petroleum Association 
is outraged, these rock-ribbed Republicans screaming that this 
whole situation has been nothing more than manipulation around 
greed, and they see it day in and day out with the customers 
that they are attempting to make deliveries to who are getting 
their homes foreclosed on, cannot afford prescription drugs, 
cannot afford to buy the food necessitated for their living, 
and yet are turning over their Social Security checks so that 
they can pay for their fuel.
    That is the kind of problem that we are in, and lastly, 
with three percent of the reserves entirely in this nation, is 
it possible, do you believe that we can actually drill our way 
to energy independence?
    The Chairman. The gentleman's time has expired. The Chair 
recognizes the gentlelady from Michigan, Mrs. Miller.
    Mrs. Miller. Thank you, Mr. Chairman.
    This Committee was formed to study the issue of global 
climate change, how it impacts society, how it impacts our 
environment, and today we are going to hear from the leaders of 
companies that many in the environmental movement blame for 
many of the challenges that we face today. Of course, these are 
the big oil companies.
    And in the difficult economy that our nation faces, this is 
the one industry that is thriving more than ever because of the 
incredibly high cost of oil. And everybody complains about the 
high cost, including probably every member of Congress as well, 
but I will say this at the outset. I think we should all take a 
very good look in the mirror as to some of the culprits about 
some of the high costs. We have done nothing as a Congress to 
advantage ourselves of our own domestic supply of energy 
resources in places like the ANWR or offshore reserves that 
would make us much less dependent on foreign oil.
    We have not made it very much easier to site new refineries 
that could increase the supply of gasoline and reduce prices, 
and we have regulated ourselves to an extent that drives prices 
up.
    But we have asked many in industry to make sacrifices and 
new investments, and many of them have actually responded. Our 
domestic auto manufacturers have borne the brunt, quite 
frankly, of this effort, and they are responding. They have 
heard the call. They have shouldered the mandates, and they are 
responding.
    Many other American companies and industries are also 
responding as well. But despite all of this effort, our economy 
is still overly reliant on oil. The big oil companies continue 
to reap huge benefits.
    And I say this. I believe this very strongly, that before 
we are members of Congress or before we are oil executives or 
what have you, before we are anything else, we are all 
Americans. And every American has a responsibility to help 
reduce our dependence on foreign energy sources and also to 
conserve energy.
    And I hope on this Committee that we all are very familiar 
with the record profits being reaped by the oil industry, which 
in fact stand in very sharp contrast to the financial 
situations of many other industries who have been asked to make 
sacrifices to help us solve our energy problems. I hope that 
your companies, who are in a position really to be a major 
player in a brighter economic environmental future, that you do 
the right thing with these profits.
    Simply having these profits fatten the checkbooks of a few 
instead of investing for the good of us all is down the wrong 
path. You are in the position to invest in new, cleaner 
technologies that will not only change your industry, but could 
change the entire world if you have the courage and the 
foresight to do so.
    And if you do not have that courage, if you refuse to 
change with America, then I believe you are going to see a 
backlash from your customers, the American people who are sick 
and tired of paying huge prices at the pump only to see your 
companies swimming in their money, and you are going to see a 
backlash from other industries that are being decimated by high 
fuel prices.
    And because of that, you will also see a backlash from this 
Congress that could go further than just the elimination of tax 
breaks that you currently enjoy when we see that your companies 
have made combined profits of over $123 billion last year 
alone.
    And I also think you will see a backlash from your 
shareholders who will bear the brunt of the pain if you do not 
evolve to other energy technologies that will eventually 
replace oil as a primary energy source. So I hope that what we 
will hear today is not just a defense of record profits or a 
casting of blame on others for high prices or defensive tax 
breaks without the needs of good corporate citizenship or 
sticking your head in the sand and denying the effort to bring 
about alternatives to oil, and I look forward to all of your 
testimony.
    Thank you, Mr. Chairman.
    The Chairman. The gentlelady's time has expired.
    [The prepared statement of Mrs. Miller follows:]



    The Chair recognizes the gentleman from Missouri, Mr. 
Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Chairman and Ranking Member Sensenbrenner, thank you 
for this meeting.
    I think all of you are already hearing what is going on at 
home. We have been on a break. It has actually been a work 
break for most of us, and one of the things that we hear over 
and over again is what are you guys going to do about the high 
price of gasoline, and I spoke with a woman about a week ago 
who earns $18,000 a year and cannot afford to fill up her tank 
to get to work. Kansas City, Missouri does not have mass 
transit. We only have buses, and so she is about to lose her 
job because she cannot afford to get to it. And so she is 
losing all the way around.
    And with the skyrocketing price of a barrel of oil and 
people paying more than $3 a gallon in Missouri, the anger 
level is rising significantly, and my concern is that we not 
have a dialogue today about, you know, whose fault it is. I 
think I came here prepared to hear everyone say, ``It is not 
our fault,'' but I think it is the fault of people in this 
room, and I think something can be done.
    The perception is terrible. I mean people talk about the 
perception of Congress, and you know, our approval ratings. 
Your approval ratings are lower than ours, and that means you 
are down low, and I think you probably have the lowest approval 
ratings in the nation.
    So I am hoping that before this session is over you can 
raise your approval ratings by giving some real answers.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    The Chairman. Great. The gentleman's time has expired.
    [The prepared statement of Mr. Cleaver follows:]



    
    The Chair recognizes the gentleman from Oklahoma, Mr. 
Sullivan.
    Mr. Sullivan. Thank you, Mr. Chairman.
    And I am really glad that you are here today. I appreciate 
you taking the time to come here to discuss climate change and 
energy independence. We want to see our country move toward 
energy independence, but we want to do it in a way that does 
not sacrifice jobs in America.
    Congressman Cleaver, I, too, was on a break recently, and I 
heard people talking about things, but one of the biggest 
things I heard about when I was home is that people are 
concerned about their food prices going up because of ethanol. 
They think that they are using all of the corn in this country, 
that people are going to the grocery store. A loaf of bread 
costs a lot of money right now, and that is one of the ways we 
tried to address it, and I think that that is a big problem. I 
heard that more than people talking about gas prices, actually, 
talking about a loaf of bread. You know, that is a big problem.
    I want to thank again all of you for being here. Also, Mr. 
Lowe from ConocoPhillips, I appreciate you being here. The 
ConocoPhillips is in my district. It is a big company, and they 
employ a lot of people.
    One of the things, too, I get tired of hearing about, is 
everybody, all politicians, you cannot hear a political speech 
almost daily without someone saying big oil, big oil. I guess 
every politician has to have a tangible devil to fight, but I 
get tired of hearing that.
    I do want to hear about what you guys have to say about 
what is going on, and I appreciate you, again, for being here 
and taking the time to discuss this very important issue.
    Thank you.
    The Chairman. Great. The gentleman's time has expired. The 
Chair recognizes the gentleman from New York State, Mr. Hall.
    Mr. Hall. Thank you, Mr. Chairman, and thanks to all of our 
witnesses for being here.
    As we all know, the price of oil has been rising at a 
dizzying pace for the last several years, recently shattering 
the all time high and hovering above $100 per barrel. The 
numbers and impacts on both sides of the equation are 
staggering. Today the average price of regular unleaded gas in 
the United States is $3.29, up 60 cents from just last year.
    In New York the situation is even worse with the cost at 
over $3.40, and my constituents talk about the rockets and 
feathers syndrome where the price seems to go up like a rocket 
and when it comes down, it kind of comes down like a feather, 
not quite so fast.
    President Bush may not have known about the concern that 
gas was going to break the $4 mark, but with prices already 
well above $3 before the summer, most Americans do not need to 
be reminded. They already see the impact on their bottom line 
every day.
    On the other side of the coin, we have the companies you 
gentlemen represent before us today. Since 2002, the combined 
profits of the five largest oil companies have quadrupled. Last 
year they made over $123 billion, shattering dollar records of 
their own. During this hearing there will be a great deal of 
discussion trying to explain away these profits saying we need 
to reinvest. We are a big company. Per dollar we do not make 
that much more than anybody else.
    But the bottom line is that these are the biggest profits 
in corporate history and that if the oil companies are not 
making a killing off of these prices, who is? Certainly not the 
average family that pays more than it can afford to drive to 
school or for Dad to drive to work. Something is wrong, and we 
need to fix it. We need to stabilize our economy, give working 
families a break, and take action to mitigate climate change.
    On this last front I am encouraged that some of the 
witnesses have expressed support for a carbon reduction plan 
and support for and indeed investment in renewable and 
alternative energy sources. I hope we will be hearing today 
about how you can follow through and work with Congress to 
shape a policy that will take on climate change and also save 
our constituents from the squeeze they are current caught in 
the middle of.
    Thank you very much, Mr. Chairman. I yield back.
    The Chairman. I thank the gentleman from New York. His time 
has expired.
    And the Chair recognizes the gentlelady from Tennessee, Ms. 
Blackburn.
    Ms. Blackburn. Thank you, Mr. Chairman.
    I want to thank each of you for coming before us today, and 
my hope is that our Committee will have a reasoned discussion 
with you and that we will benefit from your experience and from 
your expertise and insight.
    I also hope that we are not going to sit here and try to 
place blame for what may be causing this. We have a problem to 
solve, and the problem is the high cost at the pump.
    Now, since January '07, we have passed new energy taxes, 
new mandates, new burdens, new regulatory burdens on energy 
companies trying to impose and move toward renewable energy, 
and it would appear that we are not getting the results that we 
want from some of those actions because we have seen gas go 
from $2.26 a gallon up to $3.29, where it is today.
    We have seen over a 44 percent increase on the family 
budget. For every one dollar that gallon of gas goes up, that 
costs the family, an average family, about $600 directly out of 
their pocketbook.
    You all know the prices of crude, and today they are 
hovering right around $100. So there are some that would like 
to place blame on all of you and would place extra taxes on 
you, but I have got a question that I would like to pose, and 
it is this. If we take those actions, if we put more taxes on 
you and more regulation and more compliance, would it put this 
nation at risk for even more dependence on foreign, unfriendly 
sources of oil?
    What about a carbon tax or a cap and trade system? What is 
that going to do to the American public? We all know that 
America has the capacity to become energy independent and help 
lower energy cost. Do we have the national will to do this?
    We all know we have vast coal, oil, and gas resources lying 
on or within our land and off the coast, and these can be 
developed, and our allies to the north are developing access to 
one of the world's largest sources of natural energy resources 
in the Canadian shale oil.
    Let's not be shortsighted. Let's put the family first. 
Let's not let fear grip and manipulate our policies. We have a 
problem to solve. We need to work together on this.
    I yield the balance of my time.
    The Chairman. The gentlelady's time has expired.
    The Chair recognizes the gentleman from California, Mr. 
McNerney.
    Mr. McNerney. Thank you, Mr. Chairman.
    I also want to thank the witnesses for joining us today on 
this critical topic, particularly to thank Mr. Robertson for 
coming here to represent Chevron, which is located in my 
congressional district in San Ramon, California.
    Well, it is obvious that businesses must show profits and 
be accountable to their shareholders. We seem to have a perfect 
storm of factors that have led us to the topic we are 
considering today, record high oil prices, record high profits 
for oil companies and clear evidence that the Earth's 
atmosphere is warming.
    But I am hopeful today's hearing will help us better 
understand exactly what the industry's perspective on these 
issues is and as someone with a background in renewable energy, 
I do not believe that the oil and natural gas companies should 
be at odds with the renewable industry. The two should work in 
concert, and that makes perfectly good business sense.
    While petroleum resources are limited, renewable resources 
have the potential to address our nation's long-term energy 
needs. So by investing in renewable energy, oil and gas 
companies can look toward the future and can pioneer 
initiatives with your resources that will give us significant 
long-term dividends.
    We know that progress is being made by companies such as 
Chevron, which is investing in energy efficiency, geothermal, 
hydrogen, and biofuels. This approach should be more widely 
adopted, in my opinion, and embraced across the board. The 
companies' representatives today have at their disposal the 
resources necessary to move forward securing our nation's long-
term energy future, and what we need now is a commitment and 
vision to make that happen.
    Again, I look forward to your testimony and yield back to 
the Chair.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentlelady from California, Ms. 
Solis.
    Ms. Solis. Thank you, Mr. Chairman, and thank you for 
having this important hearing.
    And also welcome to our witnesses. While I do not pretend 
to lay blame on you specifically, I do lay blame on the fact 
that our constituents certainly need to have some questions 
answered.
    And how is it that I can explain when I go back home, 
coming back from our recess, that the price of a gallon of 
gasoline in my district, East Los Angeles, San Gabriel Valley, 
working class blue collar, is upwards of $3.69 a gallon. For 
diesel it is over $4.00.
    And the questions that I get from people, especially our 
truckers because we have a very busy port in Los Angeles and 
much of that transaction occurs through my district, so people 
are going broke; they are going bankrupt. But they want to know 
why is it that these folks are making such a heavy profit, a 
large profit over a small span of time, and that money then, 
and also those profits, cannot be redirected into renewable 
energy and fuels and hopefully increase the ability to create 
new green collar jobs.
    Every time that we keep away from the message of creating 
and investing in the United States with renewable energy, I 
think we are losing upwards of 100,000 jobs. At least that is 
what I am being told.
    So I am just asking you to please step up to the plate. 
Help us find those answers to our questions. Help us look for 
other alternatives, and the suggestions that I do not want to 
hear are that we are going to keep drilling where we already 
know, folks in our district particularly, California, do not 
want to allow for more drilling along our coast and opening up 
old refineries like in the City of Wittier.
    Nixon Country it used to be known as, where we have some 
oil fields owned by, I think, Chevron.
    So I would just leave you with that and ask you to please 
keep in mind the constituents that we represent, and yield back 
the balance of my time.
    [The prepared statement of Ms. Solis follows:]



    
    The Chairman. The gentlelady's time has expired, and the 
Chair recognizes the gentlelady from South Dakota, Ms. Herseth 
Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman, and thank you 
to our witnesses for being here today at this hearing.
    Yesterday, as we know, light sweet crude for May delivery 
was trading above $101 per barrel on the New York Mercantile 
Exchange, and these developments continue to be shocking and 
financially burdensome for families and businesses across the 
country, especially rural America like South Dakota, the state 
that I represent here in the Congress, since people drive such 
long distances daily to get to work, to get their kids to 
school, to transport goods for their small businesses.
    The average price for a barrel of oil in January of '02, 
about six years ago, was less than $20 a barrel. So even if we 
discount all of the other problems, whether they are 
geopolitical, environmental, supply, that flow from our 
addiction to oil, its price volatility alone seems to me 
dictates that we must more aggressively move to diversify our 
energy sources.
    Now, I strongly believe one solution to this oil addiction 
is an increased use of domesticly produced biofuels, such as 
ethanol, which have the potential to meet a significant portion 
of our nation's energy needs over the coming decades if we put 
the proper policies in place. This includes the robust and 
aggressive renewable fuel standard passed last December that 
drives the development and large scale production of cellulosic 
ethanol in the decades to come.
    And I just would have to note for my colleagues on the 
Committee, I know Mr. Sullivan mentioned the concern of his 
constituents about food prices. It has been shown that it has 
been energy prices associated with the processing and the 
transport of food far more than the cost of the commodities, 
such as corn and wheat, that are substantially driving up costs 
of food, and perhaps what we should evaluate, Mr. Chairman, and 
that is some of what we have been trying to do and some of what 
we have proposed in energy policies that have passed the House 
as it relates to reevaluating some of the policies we put in 
place years ago, including in 2005, but before that.
    Because for those of you who do not represent agriculture, 
our farm policies, most of them, kick in when prices are low. 
So we save taxpayers money when we are not paying loan 
deficiency payments or counter cyclical payments, when the 
price of corn is where it has been, over $4 a bushel, the price 
of wheat, the price of soybeans with what they have been.
    And so we need to look at doing the same thing when it 
looks like other commodities' prices are so volatile and going 
up, to reevaluate how we spend taxpayer dollars when prices are 
high and when they are low, and we will look forward to getting 
your thoughts on that, as well as your thoughts on biofuels 
distribution and production across the country.
    Thank you, Mr. Chairman.
    The Chairman. The gentlelady's time has expired and all 
time for opening statements from the Members has been 
completed. So now we will turn to our panel, and we will give 
each one of them an opportunity to make an opening statement 
before this Committee.
    Our first witness today is Mr. Stephen Simon, Senior Vice 
President for ExxonMobil. Mr. Simon has over 40 years of 
experience in the oil industry, 35 of them spent with Exxon. He 
has served in his current role as Senior Vice President since 
2004.
    We welcome you, Mr. Simon. Whenever you are ready, please 
begin.

STATEMENT OF STEPHEN SIMON, SENIOR VICE PRESIDENT, EXXON MOBIL 
  CORP.; ACCOMPANIED BY JOHN HOFMEISTER, PRESIDENT, SHELL OIL 
 COMPANY; ROBERT ROBERTSON, VICE CHAIRMAN, CHEVRON; JOHN LOWE, 
EXECUTIVE VICE PRESIDENT, CONOCOPHILLIPS; AND ROBERT A. MALONE, 
            CHAIRMAN AND PRESIDENT, BP AMERICA, INC.

                   STATEMENT OF STEPHEN SIMON

    Mr. Simon. Thank you, Chairman Markey, Ranking Member 
Sensenbrenner, and members of the Committee.
    The world's economy runs on energy. Americans depend on it 
every day to fuel their cars, heat their homes, and power their 
businesses. Because energy is so important, all of us have a 
responsibility to engage in an open, honest, informed debate 
about our energy future that is grounded in reality and intent 
on finding viable solutions.
    In that spirit, I would like to make three points during my 
allotted time. First, our earnings, although high in absolute 
terms, need to be viewed in the context of the scale and 
cyclical long-term nature of our industry, as well as the huge 
investment requirements.
    Second, stable tax and regulatory policies are essential to 
encouraging needed investments. Imposing punitive taxes on 
American energy companies which are already paying record taxes 
will discourage the sustained investments needed to continue 
safeguarding U.S. energy security.
    Third, all reliable and economic forms of energy are needed 
to meet growing needs, but the pursuit of alternative fuels 
must not detract from the development of oil and gas.
    Allow me to elaborate on each point in turn.
    Because of the massive scale of our industry, our 
profitability in absolute terms is large, particularly in the 
current up cycle, but in 2007, the oil and gas industry earned 
on average about 8.3 cents per dollar of sales, near the Dow 
Jones Industrial Average of major industries of 7.8 cents per 
dollar of sales.
    Because ours is a commodity business, earnings rise and 
fall in cycles. We are currently in an up cycle, strongly 
influencing our current profitability, but we have seen up and 
down cycles before. In 1980 crude oil prices reached record 
levels, approaching the equivalent of over $100 a barrel in 
today's dollars, and many were predicting that oil prices would 
soar to over $250 a barrel in today's dollars, but those 
predictions were wrong.
    By the mid-1980s, prices had fallen dramatically and the 
industry was in dire straits. Ours is a long-term business with 
energy projects requiring enormous investments spanning decades 
that must carry through both the up and down cycles.
    Over the last 25 years, we have invested $355 billion, 
which is more than we earn. In the last five years alone, we 
have invested almost $89 billion, including about $25 billion 
in North America. Over the next five years, Exxon Mobil plans 
to invest at least $125 billion.
    We depend on high earnings during the up cycle to sustain 
this level of investment over the long term, including the down 
cycles.
    Regarding taxes, currently the energy industry pays record 
levels. While our worldwide profits have grown, our worldwide 
income taxes have grown even more. From 2003 to 2007, our 
earnings grew by 89 percent, but our income taxes grew by 170 
percent. Over the last five years, Exxon Mobil's U.S. total tax 
bill exceeded our U.S. earnings by $19 billion.
    A recent survey by Tax Notes of 80 leading U.S. companies 
revealed that these companies had an average income tax rate of 
30 percent. Exxon Mobil's effective income tax rate in 2007 was 
44 percent.
    To discriminate against American energy companies, as the 
proposed changes to Section 199 in the foreign tax credit due 
would not only add to these taxes, but also impact investment 
in future energy supplies by redirecting needed capital and 
creating competitive disadvantages for American energy 
companies competing overseas.
    Taxes should be fair, stable, and pro competitive, 
principles these proposals violate.
    Finally, regarding alternatives, the International Energy 
Agency forecast that oil and gas will continue to meet about 54 
percent of global energy demand in 2030. Alternative fuels also 
play an important role, but the IEA forecast that renewable 
energy sources, such as biofuels, wind, solar and geothermal 
combined, will account for only about two percent of global 
energy supply in 2030, again, an indicator of the scale 
required.
    These findings are closely aligned with our own Energy 
Outlook of 2007, which I respectfully submit into the records 
of this proceeding for the Committee's consideration.
    The market is the most effective means of determining the 
future energy mix in a way that maximizes supply and minimizes 
cost. Government mandates and subsidies distort market forces 
and impeded technological innovation. Raising taxes on oil and 
gas production to subsidize alternatives will likely lead to 
less overall energy production, not more.
    And as many independent observers are now noting, such 
mandates can have unintended consequences, continuing to 
provide Americans with the energy they need reliably and 
responsibly is a challenge Exxon Mobil employees are determined 
to meet. Government can help by creating a level playing field 
and promoting fair, stable, pro competitive regulatory and tax 
policies.
    It is this kind of leadership that is needed to meet our 
nation's energy challenges.
    Thank you.
    [The statement of Mr. Simon follows:] 



    
    The Chairman. Thank you, Mr. Simon.
    Our next witness is Mr. John Hofmeister. He is the 
President of the Shell Oil Company and has led that company 
since March of 2005.
    We welcome you, Mr. Hofmeister, and if you could move in a 
little bit closer to the microphone, I think it would help 
everyone.

                  STATEMENT OF JOHN HOFMEISTER

    Mr. Hofmeister. Chairman Markey, Ranking Member 
Sensenbrenner, members of the Committee, I welcome the 
opportunity to be here today.
    If there is no objection, I will summarize the statement I 
have submitted for the record.
    This hearing comes at the end of Shell's 18-month national 
dialogue on energy security. We traveled to 50 cities engaging 
more than 15,000 Americans in a dialogue on energy security. We 
heard what you are hearing. Americans are worried about the 
rising cost of energy.
    Mr. Chairman, I believe you have said that the nation's 
energy challenge requires a commitment on the scale of the 
Manhattan Project during World War II or the Space Program of 
the 1960s. I agree.
    The price of a barrel of light sweet crude has gone up 300 
percent in four years. This increase is due to a combination of 
factors which are for the most part not controlled or much 
influenced by the actions of oil companies, for example, growth 
in global demand for oil, geopolitical events affecting 
international supply, developments in the financial market 
contributing to the rise in prices, skyrocketing cost of 
materials, labor, and engineering services, a shortage of 
capacity in energy services and materials, more difficult 
access to oil and gas resources around the world.
    Available energy resources are found in difficult or 
hostile areas, and closer to home, U.S. energy resources are 
unavailable.
    Today I will talk about three aspects of the energy 
challenge: first, what is the energy supply-demand outlook; 
second, what is Shell doing to meet the energy challenge; and, 
third, what policy makers can do.
    First, the energy supply-demand outlook is sobering. Demand 
is increasing unrelentingly. Although oil and natural gas will 
be used to meet more than half of our energy needs for decades, 
U.S. oil and gas production has fallen steadily for the last 35 
years. Why? Because government policies place domestic oil and 
gas resources off limits. The U.S. government restricts supply 
to U.S. consumers.
    The result, we import more oil to meet our growing demand. 
In 2006, we imported 3.7 billion barrels of oil, more than 
seven times the amount imported in 1970. This brings me to my 
second point, what Shell is doing to meet the energy challenge.
    We are making significant capital investment to produce 
more energy and more kinds of energy to meet global demand. 
Today we have doubled the number of new projects under 
construction that we had in 2004. Last year we spent some 25 
billion on capital investment worldwide to develop energy 
projects.
    This year Shell will spend between $28 and $29 billion, the 
largest capital expenditure program in the oil and gas energy.
    Wind, we are involved in 11 wind projects across Europe and 
the United States where we have wind farms in six states with 
more under development.
    Solar, Shell is an international developer of thin film 
solar technology to generate electricity from the sun's energy.
    Biofuels, Shell is the world's largest blender of biofuels 
by volume and one of the world's largest distributors of 
transport biofuels. Shell is a leader in the development of 
advanced biofuels, such as cellulosic ethanol.
    Hydrogen, Shell is a leader in developing transportation 
solutions with hydrogen. We operate the nation's first 
integrated gasoline hydrogen station nearby here at our Shell 
station on Benning Road. We also have proprietary gasification 
technology to convert coal and biomass into cleaner fuel. We 
lead in gas to liquids technology to produce cleaner 
transportation fuels. We hold a leadership position in the 
production of liquefied natural gas, here in the U.S., 
including at two existing LNG terminals.
    But Shell continues to be an industry leader in the deep 
water Gulf of Mexico. Note that the costs of deep water 
exploration and production are immense and rising. Last year, 
for example, the average daily cost for a deep water 
exploration well in the Gulf of Mexico per day was $759,000.
    Shell has a world class manufacturing organization to 
better meet customer demand of finished products. In the U.S. 
our joint venture at Motiva is spending around $7 billion to 
double the capacity of its refinery at Port Arthur, Texas. When 
finished, it will be one of the largest refineries in the U.S. 
and the world.
    In oil sands and oil shale, Shell is investing in the 
technology and infrastructure to develop vast oil sands in 
Canada and oil shale in the United States.
    To my third point, what can policy makers do to meet the 
energy challenge? First, the oil and gas development can occur 
in an environmentally responsible way. In 2006, Congress opened 
new areas in the Gulf of Mexico to exploration and development. 
More such access is warranted so that U.S. consumers can have 
access to U.S. natural resources.
    Congress also provided energy producing states and local 
coastal communities with a revenue stream to help ensure 
economic and environmental stability. Such revenue sharing 
should be made available to all areas adjacent to offshore 
development.
    Second, we need all forms of energy, plus conservation and 
energy efficiency. I commend Congress for including stronger 
CAFE provisions and other conservation measures in the 2007 
energy bill. Congress should continue to encourage 
conservation.
    Third, Shell supports reducing greenhouse gases through a 
cap and trade program coupled with sector approaches. We must 
work now to address CO2 emissions as we make the 
transition from fossil fuels to new energy sources.
    Thank you, Mr. Chairman. I'll be happy to answer questions.
    [The statement of Mr. Hofmeister follows:] 



    The Chairman. Thank you, Mr. Hofmeister.
    Our next witness is Mr. Peter Robertson, who is the Vice 
Chairman of Chevron. He has served as Vice Chairman of the 
board of Chevron since 2002. He has spent 15 years with that 
company.
    We welcome you, sir.

                  STATEMENT OF PETER ROBERTSON

    Mr. Robertson. Thank you.
    Good afternoon, Mr. Chairman, Ranking Member Sensenbrenner, 
and members of the Committee. My name is Peter Robertson, and I 
am Vice Chairman of Chevron Corporation, and I am here today 
proudly representing 59,000 Chevron employees, 27,000 of whom 
work here in the United States.
    I appreciate the opportunity to discuss the energy issues 
that are very much on your minds and those of all Americans. I 
will address three issues: rising oil prices; our commitment to 
providing energy, including renewables; and policies to insure 
that we enhance our energy security.
    Four years ago we sent a letter to members of Congress, the 
administration, cabinet members, as well as trade associations 
and think tanks. It foreshadowed the issues we face today and 
included concrete ideas for action. The letter said we face a 
new reality: volatility, high prices, greater competition for 
resources, and heightened geopolitical risks.
    Today this new reality is here, and it is costing us. All 
Americans feel the pain of $100 oil, and it is not just at the 
pump. Everything is more expensive. People are concerned about 
rising costs and rightly so.
    The world is consuming oil at an ever increasing rate, and 
it is projected to continue. There are a billion people who 
enjoy our standard of living, and there are billions more 
striving for the same.
    The current system is straining to meet their needs. There 
is dramatically reduced spare capacity, and there is no room 
for error. Any disruption or perceived threat of disruption 
typically sends prices up, and the declining value of the 
dollar has only worsened the situation. The situation is not 
sustainable, and it is time to take urgent action.
    So what are we doing? Chevron produces almost one billion 
barrels of oil equivalent a year, and as large as that number 
sounds, it serves less than three percent of world demand. And 
in the U.S. our refineries produce six billion gallons of 
gasoline each year, another large number, but that is less than 
five percent of America's gasoline consumption.
    Between 2002 and 2007, Chevron invested approximately $73 
billion in new energy supplies, more than we earned. This year 
we will spend another $23 billion, including 2.3 billion in 
U.S. refining and marketing activities. We have added one 
million gallons a day in gasoline capacity over the last two 
years.
    Let's talk about renewable energy. Today Chevron is the 
world's largest producer of geothermal energy. Between 2007 and 
2009, we plan to spend $2.5 billion on renewables and energy 
efficiency services. We formed a range of partnerships to 
pursue next generation biofuels. Let me give you one example.
    We teamed up with Weyerhaeuser Corporation because we need 
partners. They know plants; we know fuels. Together we provide 
the unique combination necessary to meet this challenge.
    But it will take time to have a meaningful impact. A large 
biofuels plant in the U.S. produces in a year what one of our 
refineries produces in a single week. The enormous scale of the 
energy system means that we must continue to bring traditional 
energy supplies to market even as we accelerate the development 
of renewables.
    But increasing supply is only one important step. We also 
need to aggressively moderate demand. America needs to become a 
nation of energy savers. Chevron Energy Solutions has completed 
more than 800 energy efficiency and renewable energy projects, 
largely in public facilities, reducing emissions and saving on 
average nearly 30 percent in energy and operational costs.
    In closing, I want to emphasize what we can do together to 
help consumers. The National Petroleum Council study involved 
1,000 participants, scientists and NGOs, industrial consumers, 
and policy experts. It recommended five strategies ranging from 
moderating demand to expanding supply, to increasing research. 
It has given us sound, sensible, achievable solutions. Now we 
need action.
    We strongly urge you to implement its recommendations, but 
first we need to change our nation's conventional wisdom about 
energy development and use. On the demand side, our country 
needs to value energy as a precious resource. We need a ``made 
in America'' solution enabled by everything from human 
ingenuity to smart buildings, to advanced vehicles.
    On the supply side, we need to be sensitive to the scale 
and time frames required to alter the energy mix. We need to 
help to open up the 85 percent of the outer continental shelf 
that is off limits. We cannot expect other countries to expand 
their resource development to meet our need as we limit our 
development without good reason.
    And we need your help in dealing with inefficiencies in the 
gasoline market. There are 17 boutique fuel requirements across 
the country. More requirements on fuels are being added through 
renewable fuel mandates and proposed climate policies. These 
important policies must be advanced in a way that Americans can 
afford.
    The time for action is now. During the five minutes it took 
me to deliver my remarks, the world has consumed the energy 
equivalent of 35 million gallons of oil equivalent. Our 
collective leadership and ingenuity can set a path for true 
progress.
    At Chevron we will continue to do our part.
    Thank you very much.
    [The statement of Mr. Robertson follows:]



    The Chairman. Thank you, Mr. Robertson.
    Our next witness is John Lowe. He is the Executive Vice 
President of ConocoPhillips. Over the last eight years he has 
held the multiple senior level positions with that company.
    We welcome you sir. Whenever you are ready, please begin.

                     STATEMENT OF JOHN LOWE

    Mr. Lowe. Thank you.
    Good afternoon, Mr. Chairman. We appreciate the opportunity 
to come before the Committee to discuss our alternative fuels 
investments, as well as our investments to meet current energy 
needs.
    ConocoPhillips favors developing all forms of energy, 
conventional, renewable, and alternative. However, we recognize 
that even with aggressive implementation of alternative energy, 
most sources estimate that fossil fuels must still supply two-
thirds of world energy in 2030. We cannot attain an alternative 
energy future in a few short decades. Global energy demand is 
too high. Technological development and infrastructure 
construction take too long, and the cost would be too great.
    This makes it essential that we build the political will to 
utilize our fossil fuel resources. We must also develop the 
ability to use them in cleaner forms, and we must disavow the 
misconception that alternative sources can quickly and easily 
assume the energy burden.
    ConocoPhillips is already preparing for the future. Our 
reinvestments into our business continue exceeding our income. 
We earned $12 billion in 2007, but reinvested $13 billion, and 
we have over $15 billion in investments planned for 2008.
    In North America, we are spending billions of dollars to 
expand supplies by developing the Canadian oil sands and 
building infrastructure to transport the oil to the U.S. In 
pursuit of natural gas, we are conducting major drilling 
programs and building pipelines in two LEG re-gas terminals.
    Downstream we are increasing our refining capacity and 
ability to produce cleaner fuels.
    You have also asked us to describe our efforts in renewable 
and alternative energy. Although these are currently not part 
of our core businesses, ethanol represents five percent of our 
U.S. gasoline volumes, making us one of the nation's largest 
ethanol blenders and users.
    We are test marketing E85 and biodiesel. We have produced 
renewable diesel fuel. We are working to develop biofuels from 
agricultural waste. We are funding university research into the 
next generation of renewable fuels like cellulosic ethanol.
    We are evaluating opportunities to invest in solar, wind 
and geothermal power. To make electric vehicles more practical, 
we are developing better materials for lithium ion batteries 
and to transform coal and petroleum coke into clean burning 
synthetic natural gas, we have developed proprietary technology 
and have two multi-billion dollar projects planned.
    This Subcommittee is also charged with addressing climate 
change. ConocoPhillips favors congressional enactment of a 
mandatory framework to reduce carbon emissions, and we are 
actively researching potential carbon capture and storage. 
These efforts show what can be achieved by the industry's 
technical, financial, and human resources.
    Our capabilities must not be undermined by punitive tax 
measures or counterproductive policies like those that threaten 
our co-venture with Tyson Foods. Two years ago we formed a 
unique relationship with Tyson to develop a new technology to 
produce renewable diesel from byproduct animal fats. Unlike 
most biofuels, our product can be transported by pipeline.
    Congress enacted an incentive for the feedstock, but the 
House is attempting to deny us equal treatment in utilizing 
this incentive, which is afforded to all other biodiesels. This 
would make our technology uncompetitive.
    If Congress intends to encourage meaningful alternative 
fuels development, it is critical that all related tax policies 
and mandates be feedstock and technology neutral, and that R&D 
efforts not be undermined. The market should decide which 
technologies go forward.
    Hopefully, government and industry can move beyond today's 
all too often adversarial relationship. There is much we can do 
together to increase supplies, encourage efficiency, develop 
alternatives, and address climate change. But have no doubt. 
The U.S. is engaged in a global race. Other countries are 
working cooperatively with their energy industries to secure 
new supplies. Unless our domestic companies are allowed to 
compete on level ground, we run the risk of marginalizing U.S. 
oil and gas industry and ultimately undermining U.S. energy 
supply.
    Mr. Chairman, this concludes my statement. Thank you.
    [The statement of Mr. Lowe follows:]



    
    The Chairman. Thank you, Mr. Lowe.
    And our final witness is Mr. Robert Malone, who is the 
Chairman and President of BP America. Mr. Malone has led BP 
America since 2006.
    We welcome you, sir. Whenever you are ready, please begin.

                 STATEMENT OF ROBERT A. MALONE

    Mr. Malone. Thank you, Mr. Chairman, Ranking Member 
Sensenbrenner, members of the Select Committee.
    Good afternoon. My name is Bob Malone, and I am the 
Chairman and President of BP in America.
    We are the nation's largest producer of domestic oil and 
gas and one of the nation's largest energy investors. We expect 
to spend here in the United States $30 billion over the next 
five years to expand and extend production of natural gas from 
the Rocky Mountains west to renew critical oil and gas 
infrastructure on the North Slope of Alaska, to continue 
development in the deep water Gulf of Mexico, and to increase 
gasoline production from key midwest refineries.
    In the area of alternative energy, we are nearly doubling 
the capacity of our Frederick, Maryland solar plant, the 
largest integrated solar manufacturing facility in the United 
States.
    By the end of this year we expect to have 1,000 megawatts 
of U.S. wind power capacity on line, increasing to 2,400 
megawatts by the end of 2010. That is enough to power more than 
700,000 homes.
    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 biofuel 
that contains more energy, has less impact on the environment, 
and which is not made from a food crop.
    We know high energy prices are having an adverse impact on 
our nation's economy and your constituents and our customers. 
We cannot change the way the world market relies and this 
nation relies on 60 percent of its oil from foreign countries. 
But we can work with this Congress, with the administration, 
and with governments and consumers across this nation to move 
towards greater energy security and a lower carbon energy 
future.
    To be clear, BP America is working hard to expand and to 
diversify U.S. energy supply and is committed to reducing the 
environmental impact of both energy production and consumption. 
Our operations span the country, and many employ technologies 
that did not even exist a decade ago.
    Our investment across the entire energy spectrum is huge. 
Over the last five years, we have invested $31.5 billion in 
development of U.S. energy security. During 2007, we invested 
three-quarters of a billion dollars or ten percent of our 
capital budget on alternative energy.
    But the hard truth is that even the major improvements in 
energy efficiency with the rapid growth of solar wind and 
biofuels, the United States will consume more oil, more natural 
gas and coal in 2030 than it does today. The United States with 
five percent of the world's population consumes 25 percent of 
the world's daily oil production.
    The U.S. should produce more of the energy it consumes, and 
it has a responsibility to use that energy wisely. U.S. energy 
policy must address both energy supply and energy demand. 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 result 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 an gas. On the demand side we have to 
encourage conservation and drive energy efficiency.
    Mr. Chairman, members of the Committee, in the notice of 
this hearing you expressed a desire for a real conversation 
about energy. I am here on behalf of BP to have that 
conversation. The energy challenge facing this nation is 
enormous. BP 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, affordable power that 
consumers want.
    My company stands ready to work with you and others to 
address the energy and environmental needs of this nation.
    Thank you.
    [The statement of Mr. Malone follows:]



    
    The Chairman. Thank you, Mr. Malone, very much, and that 
completes the time for opening statements from our witnesses.
    And now we will turn to recognize members of the Committee 
for questions of the panel. The Chair will recognize himself 
for five minutes for that purpose.
    Mr. Simon, last year Exxon Mobil reported $40 billion in 
profits, $28 billion in stock buy-backs, $7.5 billion in 
dividends and executive compensation, but all I can really find 
is no more than a commitment of $100 million in investment in 
renewables over the next ten years. Why is that, Mr. Simon? Why 
is your company not investing in renewables?
    Mr. Simon. Well, thank you, Mr. Chairman, for giving me the 
opportunity to address the area of alternative fuel. When you 
go back to the year 2000-2001, we as a corporation recognized 
that we had a huge challenge in front of us not only as a 
corporation, but as an industry in meeting a significant growth 
in energy requirements, estimated about 40 percent in the year 
2030 compared to 2005, while still managing the risks 
associated with climate change as driven by the increase in 
greenhouse gas emissions.
    At that time we looked at every component, every facet of 
alternative energy. We had our best and brightest minds, the 
scientists and engineers of the highest caliber in our 
corporation look at it on a fundamental basis. We looked at it 
all the way from production, on the one hand, all the way 
through consumption, on the other. We called a well to wheels 
analysis. We looked at it on an energy basis, on the energy 
balance.
    The Chairman. How much have you invested in renewable 
energy, Mr. Simon, for 2008? What is your budget for renewable 
energy at Exxon Mobil.
    Mr. Simon. And I will get to that, Mr. Chairman.
    The Chairman. I only have five minutes. It is important for 
us to get it out on the table. What is the investment in 
renewable energy, please?
    Mr. Simon. Recognizing that we needed to do something of a 
great magnitude, the current generation of fossil fuels do not 
work. What we did was we said we needed the best and brightest 
minds from all walks of life, and we initiated the global 
climate and energy project at Stanford University, which is 
about----
    The Chairman. And how much money are you paying for that?
    Mr. Simon [continuing]. A $100 million investment over----
    The Chairman. One hundred million dollars, but you made $40 
billion last year.
    Mr. Simon. Mr. Chairman, putting more money into something 
does not necessarily equal progress.
    The Chairman. Well, Shell is putting money into wind. BP is 
putting money into renewables, and we are not talking about 100 
million over ten years. We are talking about billions of 
dollars which are being invested. Why is Exxon Mobil resisting 
the renewable revolution that is being embraced by other 
companies even in the oil and gas sector?
    Mr. Simon. Our analysis is that we are not going to be able 
to meet the challenge that you would like to meet and I would 
like to meet with current generation. That is our assessment. 
We need to leapfrog current generation technology. We need to 
have breakthroughs that are world changing, and that is what 
the objective of our global climate and energy project is at 
Stanford University. We have 40 breakthrough programs underway 
looking at every aspect of renewables.
    We are looking wind. I mean solar. We are looking at 
biofuels, biomass.
    The Chairman. We do not have time, Mr. Simon. Okay? We have 
got people you heard in my opening statement. For the poorest 
20 percent in America it is now ten percent of their income 
going to paying their gasoline bill. So as these consumers are 
at the pump being tipped upside down and having money shaken 
out of their pocket, your message to them is that you cannot do 
anything for them, that you are about to begin a partnership to 
think about what you are going to do about a renewable energy 
agenda, and that is not going to send any message that we are 
going to put pressure on OPEC that we are about to change 
business in our country.
    Mr. Simon. Well, if we are going to have a kind of impact 
that you and I want longer term, it is going to take 
breakthroughs, and that is what we are trying to do there.
    That does not say that we cannot do something to try to 
address the price at the pump today. About 80 percent of that 
price or 70 percent of that price is crude oil. What can we do 
there? One thing, we can moderate demand in terms of the 
transportation sector.
    The Chairman. But you cannot have it both ways, Mr. Simon. 
You cannot, on the one hand, be nickel and diming renewables at 
Exxon Mobil and at the same time be recording $40 billion worth 
of profits and simultaneously fighting our efforts to move over 
the billions of dollars into the research in renewables which 
this country needs to break its dependence on imported oil. You 
cannot do that, Mr. Simon.
    Exxon should make a commitment that they are going to put 
ten percent of their profits into renewables so that America 
has a comprehensive strategy to fight that dependence upon 
imported oil. Are you willing to make that kind of a 
commitment?
    Mr. Simon. Mr. Chairman, we continue to look at that area. 
If we identify an area where we think it can have the impact 
that you are alluding to, we will do that, but we have studied 
all forms, even anticipating some improvements, and the current 
technologies just do not have an impact, any kind of 
appreciable impact on this challenge that we are trying to 
meeting.
    The Chairman. Mr. Simon, that is just going to be a 
continuation of a policy of tax breaks for the oil companies 
and tough breaks for consumers at the pump, and that just does 
not work.
    OPEC has us over a barrel, and you are saying you are going 
to study the issue for another ten years, and with all due 
respect to Stanford, you have competitors here on this panel 
who are already investing in multi-billion dollar strategies in 
alternative energy, and I just think that it is time to move to 
this new agenda for the sake of our country and for the 
consuming public that really does feel as they have been short 
changed in terms of protecting them against what looks like to 
be a devastating, long-term prospect of paying $3.29, $4.29 and 
more at the pump for the indefinite future.
    My time has expired. I turn to recognize the gentleman from 
Wisconsin, Mr. Sensenbrenner.
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
    One of the things that I learned when I got to Congress is 
that we do not have the power here to repeal the law of supply 
and demand. Obviously demand is up, particularly as a result of 
the increased demand in emerging economies like China and 
India. Supply is restricted, partly due to the fact that we 
have not been able to build new refineries in this country to 
increase supplies to consumer, and then as a result of our low 
interest policy, which we need to prevent a complete collapse 
of the housing market, you see the value of the dollar tanking 
on overseas markets, and the OPEC nations who do sell us oil 
are not going to want to get paid in cheaper dollars.
    Now, all of that on the table and not too much we are able 
to do about it either in Congress or on your side of the table, 
what do each of the five of you think is the single most 
important policy that Congress can make to increase supply and 
thus take the pinch off of higher prices?
    You can start, Mr. Simon.
    Mr. Simon. Well, Congressman, I do not think there is any 
silver bullet here.
    Mr. Sensenbrenner. Well, we know that, but I am asking you 
to prioritize, and I have got three and a half minutes left and 
you have got four colleagues that want to speak.
    Mr. Simon. To me it would be to open access to supplies 
that are currently off limits. We have 31 billion barrels, 105 
trillion cubic feet of natural gas. That is enough to power ten 
million automobiles and heat 15 million homes here in the 
United States for over 100 years.
    Mr. Sensenbrenner. Okay. Mr. Hofmeister.
    Mr. Hofmeister. I think the Congress should look at short-
term, medium-term and long-term solutions in a comprehensive 
strategy that would take into account everything from more 
access to the new and developing technologies of the future. If 
we do not look at it short term, medium term, long term, we 
will suffer enormously in the next several years from a 
shortage, a continuing shortage of hydrocarbons.
    Mr. Sensenbrenner. Mr. Robertson.
    Mr. Robertson. Well, I think there are a lot of things that 
the Congress can do. I think, you know, starting to leave an 
efficiency message to the American people is the first most 
important thing, but after that, I think we need access to all 
kinds of energy supplies, renewables and oil and gas.
    The single biggest thing I think would be to open up the 85 
percent of the offshore acreage in the United States that is 
currently unattainable. I think it is unrealistic to ask the 
rest of the world to open up their areas without us doing the 
same ourselves.
    Mr. Sensenbrenner. Mr. Lowe.
    Mr. Lowe. Yes, we need to support all forms of energy, but 
particularly as my colleagues have said, we need more access 
here in the United States.
    Mr. Sensenbrenner. Mr. Malone.
    Mr. Malone. Congressman, access is number one, but I would 
also emphasize the huge potential that sits north of us in 
Canada, as we have the Saudi Arabia of North America sitting 
there ready to provide us with needed energy.
    Mr. Sensenbrenner. Okay. Now, that all being said, I guess 
the common thread that I have heard from each of you is that we 
need more access, and you have all alluded to where the access 
is.
    If you got the access, would you have the refining capacity 
to be able to increase the supply to the consumer and thus at 
least take the pressure off of ever increasing prices? We have 
not built a new refinery in this country in 30 or 35 years. So 
if you have the access but you cannot refine it, how do you get 
the product to the consumers at at least the same price if not 
a lower price?
    Why don't we start with Mr. Malone?
    Mr. Malone. Access, for example, two of our projects are to 
expand our existing refineries with the use of access being 
allowed on Canadian heavy crude. Both of those, that will 
result in something like 2.2 to 2.5 million gallons a day more 
gasoline. So physically we can expand our refineries, which we 
have been doing for years.
    Mr. Sensenbrenner. Mr. Lowe.
    Mr. Lowe. Yes, we are spending billions of dollars to 
expand not only the capacity of our refineries, but also the 
capability of our refineries to run these heavier crudes, but 
we have encountered significant difficulties. Even though we 
are trying to increase capacity and produce cleaner fuels, we 
have encountered significant difficulty in permitting these 
projects.
    Mr. Sensenbrenner. Mr. Robertson.
    Mr. Robertson. The U.S. use of oil in the last few years 
has been about flat. So if we produce more oil and gas in the 
United States, we would have to import less. We have the 
refining capacity in the United States to deal with the market 
today, I think. So I think the issue is around if you produce 
more oil in the United States, more on the world market, prices 
directionally are lower. We import less.
    Mr. Sensenbrenner. Mr. Hofmeister.
    Mr. Hofmeister. I mentioned the $7 billion investment that 
is currently ongoing in Port Arthur, Texas. This will more than 
double the size of a refinery and take it to over 600,000 
barrels a day, one of the world's largest. I think we have the 
refining capacity to meet future demand.
    Mr. Sensenbrenner. My time is up, but can I ask Mr. Simon 
to put his two cents worth in?
    Mr. Simon. We have expanded our capacity at a rate 50 
percent higher than industry. We do not think we will have any 
issues in terms of continuing to expand our existing capacity 
sufficient to meet demand in the future.
    Mr. Sensenbrenner. Thank you.
    The Chairman. The gentleman's time has expired. The Chair 
recognizes the gentleman from Oregon, Mr. Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman.
    I would just make a request. Mr. Simon, not now because you 
wouldn't have time to explain it and I would like to see it on 
paper, if you could just explain? Have someone submit to the 
Committee the accounting assumptions that are used to explain 
how you pay more in taxes than you earn in the United States, 
what assumptions you are making about downstream business 
versus upstream profits overseas would be very useful for me.
    I appreciate the couple of references that were made to the 
demand side of the equation. Mr. Hofmeister, I don't think you 
got to it in your testimony on page 9, but you talked about 
land use and demand management and how people use the 
automobile, notions about some very specific things that we 
need to think about in terms of 17 boutique. I mean, these are 
important things for us to hear.
    But there are two points, I guess, that I would like to 
just zero in on. There are implications here that if we just 
opened up all our sensitive areas to oil exploration, that 
somehow we wouldn't be in the fix that we are in today. But 
your testimony referenced the fact that we are five percent of 
the world's population with three percent of the world's proven 
reserves. And we are consuming 25 percent of the world's oil 
supply.
    Do any of you think any circumstance that we wouldn't be in 
a serious situation today given those facts and that we are 
going to need to change it in the future? Anybody think this is 
sustainable?
    Mr. Robertson. Well, I think in my testimony, I think I 
said it is not sustainable.
    Mr. Blumenauer. Does anybody think the current situation is 
sustainable? Thank you.
    Mr. Simon. Well, I certainly feel that we are going to be 
able to meet increased requirements given access and given the 
opportunity to do so.
    Mr. Blumenauer. Which is different than the current 
situation of being sustainable with 25 percent. Is there any 
reason that any of you think that American technology, 
conservation, demand management, that over the next 10 or 15 
years, we can't at least come close to what other countries are 
doing in western Europe, in Japan? Is there any reason we can't 
come close to reducing our per capita energy utilization over 
the next 10 or 15 years with those mechanisms?
    Mr. Robertson. I think we can do an awful lot on demand 
management. I think I said that was the most important thing 
that we can do.
    Mr. Blumenauer. But can we catch up with the Japanese----
    Mr. Robertson. Yes.
    Mr. Blumenauer [continuing]. And the Europeans over the 
next 10 or 15 years?
    Mr. Robertson. Yes, I think absolutely. We have a company 
called Chevron Energy Solutions that delivers energy efficiency 
services to other public agencies and to companies. They have 
done 800 projects over the last few years. Many of them 
involved putting in solar panels, putting in fuel cells, 
putting in whatever it takes that particular facility to reach 
their energy use.
    Mr. Blumenauer. Mr. Robertson, I appreciate your 
clarification. I think that is very important. I appreciated 
what a number of you said in terms of diversifying and to being 
truly global energy companies.
    Mr. Robertson. But there is----
    Mr. Blumenauer. Now, I would like----
    Mr. Robertson. And the energy cost is 30 percent on average 
of the places they have been.
    Mr. Blumenauer. What I would like to do is just with my 
remaining seconds is to clarify on the last point because you, 
some of you more aggressively than others, understand that the 
future is going to be weighted in significant ways towards 
renewable energies, towards solar, towards--some of you are 
doing geothermal now--biofuels, wind.
    I am curious at what point the mature part of your 
business, the oil production, which didn't even have the 
manufacturing benefit up until 2004, at what point it is mature 
enough that we can focus the subsidy on areas of the emerging 
energy business and, in fact, many of you are involved with 
that appear to need it more, like wind and like solar. At what 
point do we make that switchover?
    Mr. Hofmeister. I think in the first instance, Congressman, 
your time frame of 10 to 15 years is too short. I think there 
is too much to be done to change behaviors, technology, and to 
refleet America, so to speak.
    We don't have the benefits of the dense housing that exists 
in other parts of the world. So we have long commutes. We don't 
have the benefits of mass transit systems.
    But, coming to your more recent question, I think that the 
issue that is most troubling in terms of the 199 withdrawal is 
a fact that the Congress is punishing 5 companies by name. I 
think that there is a----
    Mr. Blumenauer. My point is, at what point do you no longer 
need it and it can be shifted to areas that do?
    Mr. Hofmeister. You know, we are mature already. We are 
successful as a company. I testified two years ago that we are 
not asking for a----
    Mr. Blumenauer. And wind and solar are not yet as mature?
    Mr. Hofmeister. Wind and solar have lots of obstacles to 
overcome, even though we are investing today and moving as 
rapidly as we can. There is not enough turbine manufacturing. 
There are not enough transmission lines to make wind viable in 
terms of rapid growth.
    Mr. Blumenauer. Thank you. I see my time has expired. I 
appreciate your clarification.
    Mr. Chairman, I appreciate your indulgence. I guess my only 
concern is that we ought to be serious about taking this as 
something in terms of the time frame being too long. I think 10 
to 15 years may be actually that we don't have that much time 
as gasoline goes to $5 and $10 a gallon, a supply becomes more 
tenuous, as the global warming reality sets in.
    And I suspect with your help and with a couple of 
reauthorization bills and a national strategy for 
infrastructure, I think we could put these pieces together 
sooner. I don't know that we have a choice.
    Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Arizona, Mr. 
Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman.
    Gentlemen, this is a hearing structured to deliver a fair 
amount of criticism to you. It seems Congress is good at that 
and not necessarily good at pointing a finger at itself.
    I want to ask you about a policy that this Congress enacted 
which I think deserves some criticism itself. It is my 
understanding that as a result of a loophole in the U.S. Tax 
Code, we have created a policy now recognized as splash and 
dash, where we created an incentive to produce biodiesel and 
enacted policies which provide that if you add as little as one 
gallon of biodiesel to 99 gallons of diesel produced by 
standard means and then you export that fuel, the U.S. 
government will provide you a dollar a gallon subsidy. This has 
become known as splash and dash.
    It has cost the American taxpayers, I believe, $30 million. 
Several attempts have been made to repeal this by the Congress 
in the last few years. None have done so. I understand Senator 
Schumer is working on a repeal.
    I would like to just begin by asking each of you if you are 
familiar with that and if you think there is any justification 
for that kind of a waste of American taxpayer dollars.
    Mr. Simon. Congressman, our position is that we do not need 
and should not have incentives to encourage us in the 
renewables area. If there is an opportunity there and it will 
make sense, it ought to stand on its own. And free enterprise 
will go after it.
    Mr. Shadegg. Are any of you aware of this splash and dash 
practice, where biodiesel is added?
    Mr. Robertson. Yes.
    Mr. Shadegg. Yes, sir, Mr. Robertson?
    Mr. Robertson. I am aware of it. I think you characterized 
it probably right. We haven't taken advantage of it and don't 
need it.
    Mr. Shadegg. My characterization is quite accurate, then?
    Mr. Robertson. It is pretty accurate, yes.
    Mr. Shadegg. And it is costing the American taxpayers as a 
result of this subsidy. And, as I understand it, the diesel 
fuel is actually then being exported. So the----
    Mr. Robertson. I don't know. I can't confirm the number 
that you said in terms of the millions of dollars, but I think 
your characterization of it as a way to export and take 
advantage of credit is right.
    Mr. Shadegg. I certainly hope that that kind of a loophole 
can be closed very quickly and that it makes no sense for us to 
be subsidizing foreign use of our diesel fuel to encourage the 
production of biofuels here in the United States. And it is my 
understanding that it has that economic impact. It is a dollar 
per gallon by simply adding one gallon of biodiesel to 99 
gallons of regular diesel.
    Mr. Simon, can you tell me what percentage of the world's 
ten biggest oil companies or natural gas companies are owned or 
operated by foreign governments?
    Mr. Simon. Well, if you look at the top companies, only 
about 2 of the top 13, as I recall, are national oil companies. 
And the rest of them are international oil companies.
    Mr. Shadegg. And do you know what percentage of the world's 
proven reserves U.S. oil companies control?
    Mr. Simon. Well, I know what it is in terms of national oil 
companies. It is about six percent. I am sorry. The 
international companies is six percent. National oil companies 
is about 80 percent.
    Mr. Shadegg. Mr. Hofmeister, you testified that U.S. oil 
production has declined, I believe you said, over the last--I 
am not sure if you said decade. While our demand has gone up, 
our production has gone down.
    Mr. Robertson, you explained that we have enacted 
increasing policies to restrict access to fuel supplies here. 
And you expressed concern about the rest of the world being 
asked to produce more energy supplies while we are restricting 
access to energy supplies here.
    One of my colleagues up here said, well, perhaps you were 
suggesting that the answer is that we be allowed to drill in 
every sensitive area. I suspect there are areas that are less 
sensitive than others. And I suspect that or I would like to 
know, is there a correlation between the number of areas that 
have been reserved or locked off over the last decade and the 
decline in production and are there areas that you could point 
to where we could be exploring, either of you or any of you, 
where we could be exploring for reserves or using reserves that 
are there to increase production here in the United States 
without doing environmental damage?
    Mr. Robertson. Well, I mean, you know, one of the things 
that I would point out is that the offshore, most of the 
offshore, in the United States has not been looked at with 
modern technology in many, many, many years. It was really 
1980s and 1970s technology, seismic technology, that looked at 
that.
    So the first thing that I think would make sense to do--and 
the government, frankly, could do this--is sponsor a seismic 
survey of the offshore, of the entire continental shelf of the 
United States. And then at least you would be talking about 
facts.
    You would know what was prospective and what wasn't 
perspective. You could look at the areas that were 
environmentally sensitive and the areas that aren't 
environmentally sensitive. And you could zero in and be 
debating on real information, as opposed to worrying about the 
whole offshore, because it is pretty clear that there are going 
to be some areas that are prospective for drilling and there 
are going to be some areas that aren't.
    So at least you could narrow the playing field, it seems to 
me, very dramatically and figure out where the likelihood of 
America's opportunity is.
    Mr. Shadegg. And do you believe that is substantial?
    Mr. Robertson. I believe it is substantial, very 
substantial, yes.
    Mr. Simon. Mr. Hofmeister.
    Mr. Hofmeister. Absolutely. I think knowing what we know 
from past surveys, I think the API estimates there are more 
than 100 billion barrels of reserves that are not coming from 
what some people might term sensitive areas. These are outer 
continental shelf deposits that have been there for geological 
areas.
    And not having had access for some 30 years, we have seen 
this steady increase in imports and steady decline in American 
production. We have geared our exploration and production to 
around the world, rather than the United States.
    Mr. Shadegg. I thank you for your testimony. I assume 
technology has improved in that 30 years in terms of protecting 
the environment.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Washington State, 
Mr. Inslee.
    Mr. Inslee. Thank you.
    First off, we need to say something good about the industry 
here. One point of this hearing, I want to congratulate BP for 
meeting their Kyoto CO2 reduction targets of their 
internal operations within, I think, three or four years, 
showing that this can be done. It is a good example for the 
rest of us.
    I want to ask,--this is a question to all of you--did you 
or any of your associates participate in the secret Vice 
President Dick Cheney Energy Task Force in 2001?
    Mr. Robertson. We did not.
    Mr. Hofmeister. I testified previously the answer is no.
    Mr. Simon. No.
    Mr. Malone. Yes.
    Mr. Inslee. And, Mr. Malone, could you make your documents 
related to that, secret meetings, available to the Committee?
    Mr. Malone. Yes, sir.
    Mr. Inslee. Thank you. We would make that request.
    Mr. Simon, listening to your testimony makes me even more 
convinced that we need to act to create an incentive for 
decision-makers and industry to really make real investments in 
the clean energy revolution, rather than relatively small ones.
    And the reason I say that is that listening to you, as far 
as I can tell, you are spending less than half a percent of 
your gross revenues on clean energy research. Is that right?
    Mr. Simon. It would be a very modest amount. I would 
acknowledge that. But I would not acknowledge that we are not 
doing a lot to address greenhouse gas emissions.
    Mr. Inslee. Well, considering that we have to cut our 
greenhouse gas emissions 80 percent in this country below our 
levels by 2050, would you agree that if your company continues 
on its present course, it will fall several hundred orders of 
magnitude short of what we have to do to prevent cataclysmic 
global climate change?
    Mr. Simon. Well, the assumption there that that is required 
in order to do that, I would----
    Mr. Inslee. How is it going to happen? I mean, oil isn't 
going to, all of a sudden, become clean. We need to do the 
research to figure out these technologies.
    Mr. Simon. No, but the fact is that we are going to have 
oil and gas and coal. And it is going to constitute about 80 
percent of the energy equation.
    With that as a given, how do we then address and do what we 
can to mitigate greenhouse gas emissions with that being the 
case?
    Mr. Inslee. Would you agree with me, sir, that if Exxon 
continues on its present course of having less than one-half of 
one percent of its revenues associated with clean energy 
sources other than oil and gas, that the world is going to 
suffer significantly unless Exxon and its like changes its 
behavior?
    Mr. Simon. No, I don't agree with that. And I think we can 
do a lot more in terms of emitting greenhouse gas emissions by 
focusing on the areas that we are, transportation, efficiency 
improvements being one.
    Mr. Inslee. So if you don't put research dollars into it, 
is it going to come from the oil fairy somehow? These new 
technologies are going to show up?
    Mr. Simon. No.
    Mr. Inslee. We have got to put some real money in this, 
don't we?
    Mr. Simon. Given the fact that, again, we got oil and it is 
in our equation and it is going to be a significant factor, we 
are focusing on how do we make the use of that oil much more 
efficient.
    Mr. Inslee. Well, let me suggest--I hope that you will go 
take from this hearing a much more optimistic viewpoint of our 
capability.
    You mentioned the money you are putting into Stanford. I 
was at Stanford last weekend talking to their scientists. And I 
was very excited by going over a report called a renewable 
energy solution to global warming presented by Mark Jacobson, 
Atmospheric Energy Program, Department of Civil and 
Environmental Engineering, Stanford University.
    And what they concluded--and I will just read you a couple 
of sentences in the summary--``The U.S. could replace all on-
road vehicles with battery electric vehicles powered by 71,000 
to 122,000 5-megawatt wind turbines less than the 300,000 
airplanes the U.S. produced during World War II. Wind battery 
electric vehicles could reduce U.S. carbon dioxide by 25.5 
percent. Solar battery electric vehicles can reduce it by 23.4 
percent.''
    Now, would you agree with me that this, a vision from 
Stanford, the folks that you are giving some money to, is one 
that the United States really needs and that with your 
pathetically small research budget we are not going to meet 
unless something changes?
    Mr. Simon. No, I don't agree with that, Congressman. And I 
would invite you to go look for yourself at what we are doing 
in a global climate and energy project. I think you would find 
it to be quite significant. It has long-term very significant 
impacts in terms of what it can do on the energy equation and 
greenhouse gas mitigation.
    Mr. Inslee. We actually did ask your company to give us the 
investments they were making in this, and you refused to give 
it to us. But you have helped us by telling us it is less than 
one-half percent.
    Now, I can tell you that there are a lot of constituents 
that think that that is an inadequate contribution to the 
future of the planet Earth. And I just hope things change. And 
obviously we have got to change them by changing this tax 
policy.
    Thank you.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oregon, Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman.
    I just have to ask this question because I know if my 
constituents were here, they would ask it. With your record 
high profits, have you thought of lowering the price of 
gasoline with any of that?
    I mean, I am a small business owner for 21 years. There is 
that margin where you don't have to charge quite as much if you 
are making a profit.
    Mr. Hofmeister. Could I say something in favor of profits? 
Profits are what enable capital investments to increase the 
supply.
    Mr. Walden. You are talking to a capitalist.
    Mr. Hofmeister. Lowering our prices happens in many markets 
based upon local supply and demand. The prices go up. The 
prices go down. These prices are set at the street level in the 
local marketplaces where they come from.
    The global price of crude, however, is the real issue. That 
is the real problem in the cost of gasoline. And the global 
price of crude will not go down unless the supply increases.
    Mr. Walden. Or the demand goes down. And that is what I 
fear is happening in our country today. It is not that the 
demand is going down because of conservation. The demand is 
going down because our economy is taking a big hit. The people 
are having to make some really tough choices.
    You have got the independent truckers today that are 
boycotting or striking to send a message. I mean, we are at a 
very, very perilous time in our economy right now.
    I am not against profits. Don't get me wrong. Again, I am a 
small business owner for 21 years. I understand that it's 
important to make the next set of capital investments. I also 
understand the reinvestment can come to helping your consumers 
once in a while, too, in terms of price where that is 
appropriate.
    Mr. Robertson, I have a question for you regarding ethanol. 
I understand that Chevron blends--about 40 percent of gasoline 
that you sell in the United States has ethanol in it. Can you 
speak to us about the volatility in price that has specifically 
been documents related to ethanol in that mix? Is that driving 
gas up or not?
    Mr. Robertson. I think ethanol prices have been pretty 
erratic here in the last couple of years. And they were----
    Mr. Walden. Is your mike on, sir?
    Mr. Robertson. Yes, it is.
    Mr. Walden. Okay.
    Mr. Robertson. Ethanol prices have been pretty volatile 
over the last couple of years, but I think it is a very small 
part, frankly, of the price of gasoline. I think it has been 
already testified 70 percent of the price of gasoline is crude 
oil, 15 percent of the price of gasoline is taxes.
    So the balance, effectively, if you take today $100 oil and 
42 gallons is $2.50, 2.50 a gallon is crude oil, add 40 cents 
for taxes, $2.90, there isn't much left. So I think, frankly, 
even though ethanol is about five percent of our gasoline, that 
volatility hasn't had that much of an effect.
    Mr. Walden. Okay. I appreciate that. I used to chair the 
Forestry Subcommittee and have been very interested in your 
partnership with Weyerhaeuser in terms of biofuels. And I know 
my colleague from South Dakota and I both have been real 
interested in trying to correct a wrong in the energy bill that 
passed. It said woody biomass of federal forest lands or unless 
it has grown specifically for biomass, doesn't count toward 
renewable fuels standard, which seems sort of bizarre if we are 
serious about getting to the next generation of fuels.
    Can you talk to us about any breakthroughs you are seeing 
on cellulosic development, where we can turn woody biomass into 
a fuel we can burn in our vehicles at an economic rate?
    Mr. Robertson. You know, I don't think I can tell you much 
about any new breaks. I mean, the JV with Weyerhaeuser is 
relatively new, although we have been working with them for 
about a year.
    Mr. Walden. Right.
    Mr. Robertson. The thing that is important is they have got 
a huge amount of forestry, obviously, and timberland in the 
United States----
    Mr. Walden. Right.
    Mr. Robertson [continuing]. And a lot of knowledge on 
chemistry of forest products. We have got a lot of knowledge on 
fuels and the chemistry of fuels. And we are pretty convinced 
that, working together, we can come up with something that we 
can create, make into a commercial scale project. But at the 
moment, it is really about technology and about trying to find 
the breakthrough.
    We have also got a whole series of partnerships with 
universities: one in Georgia Tech, which deals with forest 
products; one in UC California, Davis because they have got 
different kinds of agricultural projects there; one in Texas, 
so different places, trying different kinds of feed stocks. But 
I can't report any breakthroughs yet. It is not that the 
science doesn't work. It is the scale, the scaling.
    Mr. Walden. Right.
    Mr. Robertson. We have got the science in lots of places. 
We just----
    Mr. Walden. I think it holds great promise, indeed.
    Mr. Robertson. Yes, I think it is great promise.
    Mr. Walden. Mr. Malone, while you are here, I also serve on 
the Energy and Commerce Committee and the Oversight 
Investigation Subcommittee. And we did some oversight hearings 
on your pipe issue up in Alaska. Can you give us an update on 
the security of that piping system up there?
    Mr. Malone. Thank you, Congressman. I remember the hearings 
well.
    Yes. Excellent progress. As you know, we said we would have 
it done in two years. Because we have to do it during the 
winter season, with our partners, the lines have now been 
replaced.
    We are finishing up the last bit of it. It will be done on 
schedule, maybe even ahead of time. We actually have oil 
flowing through the one section of the new transit line.
    Mr. Walden. And the last time I was in Alaska, there was a 
discussion about the end of the Prudhoe Bay oil because the 
amount it takes to come down the pipeline may get to a point 
where it is just not adequate to flow. Can you give us an 
update on the status of that and the effect to the market when 
that happens?
    Mr. Malone. Well, first of all, there are lots of 
opportunities. Again, there are several of us producing up 
there. But from our perspective, we see a 50-year future if we 
are able to move into some of the heavier oils and also the in-
field enhancements that we have.
    We originally thought we would recover somewhere around 25-
30 percent of the oil. This field has the potential actually to 
recover 65 percent. So right now we are working as hard as we 
can to continue the flow from Prudhoe Bay.
    Mr. Walden. Thank you. And thank you, Mr. Chairman, for 
your indulgence.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Connecticut, Mr. 
Larson.
    Mr. Larson. Thank you, Mr. Chairman. And thanks to all of 
the witnesses as well for your testimony.
    I want to make an assumption. I think it is pretty broad 
but pretty clear that your primary responsibility, your primary 
fiduciary responsibility, is to the shareholders of your 
companies. And when you make decisions based in the free 
enterprise system and in the marketplace, it is based on 
results for the shareholders. Is that a fair assumption? Is 
there anyone who would disagree with that?
    When we make decisions--and a lot of our decisions are 
policy decisions based on the citizens that we are sworn to 
serve. And there was a lot of testimony and very productive 
testimony. And thank you for that.
    I want to get back to this whole issue of supply and 
demand. In my district, the independent Connecticut petroleum 
dealers' association is saying that whole system has gone 
amuck. The laws of supply and demand are not operating on the 
street, as you were alluding to, Mr. Hofmeister.
    I understand in general what you are saying, but in the 
instance of particularly oil and gas, we have seen this 
speculation. We see people who do not either receive or store 
oil but are pushing paper forward and causing the artificial 
rise in price of oil.
    Do you agree with the independent petroleum council or are 
they way off base here? Start with Mr. Simon. We will go right 
down the line.
    Mr. Simon. When you look at the fundamentals of our 
business, Congressman, the supply/demand fundamentals, our 
assessment would be the price should be somewhere around $50-55 
a barrel. There is a disconnect.
    To me, there are three factors that contribute to that. One 
is the monetary issue, the weaker dollars we have already 
talked about. The other is geopolitical risk. And the third, we 
believe, is speculation. And you could probably break that into 
three parts. And it is about 30 to 40 percent of----
    Mr. Larson. Would most of you agree with that assessment or 
would you alter your assessment? Most of you would agree with 
those three factors? I would agree with those three factors. 
What would you do about the----
    Mr. Robertson. I think the price of the dollar is part of 
it as well.
    Mr. Larson. Okay. What would you do about the speculators?
    Mr. Robertson. What would I do about--I mean----
    Mr. Malone. How do we get rid of the Jim Fisks and Jay 
Goulds of the crude oil? How do we stop this artificial 
influctuation of prices?
    Mr. Robertson. Well, I agree with what was just said, that 
the main things that I think are driving the price of oil are 
the huge demand in the world, the reduction in spare capacity 
in the world, the price of the dollar.
    Mr. Larson. Because of the economy, we have just witnessed 
that demand is lessening here. Hopefully through conservation, 
demand will lessen as well. And, yet, we see----
    Mr. Robertson. We are part of a world system. And the----
    Mr. Larson. We are part of a world system, but here in this 
country, we are responsible to our citizens. And how do we say? 
As I said at the outset, how do you turn to the lady who has to 
turn over an entire Social Security check to pay for her oil 
bill? That the laws of supply and demand are in effect?
    How do we deal with the fact that people can in this system 
manipulate the price in such a manner that, even through all of 
your good efforts--and then it has us saying to you, in turn, 
``Hey, what do you need that tax cut--what are spending? What 
are we giving you a tax break of $107 billion for?''
    People at Augie & Ray's in my hometown are asking that very 
question.
    Mr. Robertson. We have chosen by our policy to be dependent 
on oil from overseas. That is our choice. We chose not to 
develop our own resources in this country. That was our choice. 
And the fact of the matter is we are part of the world. We are 
part of the growing demand in the world. And we----
    Mr. Larson. As long as it is more profitable. What 
incentive is there for you to develop alternatives as long as 
it is profitable and you are able to get the rates that you are 
currently able to get? And if your sworn fiduciary 
responsibility is to provide the greatest return for your 
shareholder, geez, I don't know,----
    Mr. Robertson. We are spending a lot of----
    Mr. Larson [continuing]. But it seems to me like, hey, if I 
were one of your shareholders, I would be saying, ``You know, 
they are not doing a bad job. I am getting a pretty good yield 
on my dollar here.''
    But if I am a citizen of this country, I am saying, ``We 
are not making out so well here.''
    Mr. Robertson. Our shareholders only get return if the 
customers are being satisfied with the product. If we don't 
sell a product that our customers want, that our shareholders 
are going to----
    Mr. Larson. This is a matter of customers not--they don't 
have a choice here. When it is between heating your home or 
freezing to death, that is not much of a choice. You know, when 
it comes down to whether or not you are able to get back and 
forth to work, that is not much of a choice.
    Mr. Robertson. Oh, I understand----
    Mr. Larson. It is what my grandfather says. Trust everyone 
but cut the cards. And somewhere in here, there is a 
disconnect. We need your help in trying to fix this disconnect.
    Mr. Stupak was here, who left, also has proposals that are 
talking about the manipulation of the market. I guess----
    Mr. Robertson. We are doing our damnedest to fix this. We 
are spending as much money as our company can with our human 
people that we have and the infrastructure that exists. We are 
spending as much as we can to produce energy for the people in 
this country and the people in the world. We don't know how 
to----
    Mr. Larson. My time is up, but I would be interested if 
you, all of you, could in writing--I would love to hear your 
opinions on what you would do to the speculative side of this 
market that distorts the entire market and your integrity as 
well.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentle lady from Michigan, Mrs. 
Miller.
    Mrs. Miller. Thank you, Mr. Chairman.
    And I did mention in my opening statement and I would then 
agree with some of the comments that have been made by some of 
our witnesses here that we have made a choice as a nation, 
unfortunately in my estimation, not to advantage ourselves of 
much of our own energy supplies. And that is to our own 
disadvantage, I think.
    But, however, we have made that choice as a nation. But, as 
has been mentioned, we are in a global market for energy. And 
so my first question would be in regards to supply.
    Being from Michigan, a border state, we look across to our 
wonderful neighbors in Canada. And we see all of the oil sands 
that are there. One of you mentioned about the oil sands.
    I am just wondering, what is the actual percentage of our 
foreign supply that we get to the United States actually comes 
from Canada now? In regards to the oil sand, could any of you 
tell me generally what you think the potential might be there 
for an increase in the supply to us from Canada? And I also 
have an interest--I mean, I have heard, for instance, that 
China is up there trying to lock down a contract for as much as 
they can of the oil sands.
    And then also in regards to the process of refining, I 
believe it is Shell that is going to be about 20 miles from my 
district, actually, on the Canadian side was building a very 
large refinery for the oil sands, the Canadian oil sands. I am 
not sure who I am directing this to.
    Mr. Lowe.
    Mr. Lowe. ConocoPhillips is the largest landholder in the 
Canadian oil sands. And we have a number of different 
projects----
    The Chairman. Is your microphone on, Mr. Lowe?
    Mr. Lowe. Yes. Sorry.
    The Chairman. If you could move in a little bit closer, 
please?
    Mr. Lowe. ConocoPhillips is the largest landholder in the 
Canadian oil sands. We have a number of very good projects, 
each multibillion-dollar projects, that we are advancing. And 
we believe that ultimately the Canadian oil sands can supply 
about 20 percent of the U.S.'s oil needs.
    But we are going to have to develop our refining 
infrastructure and our pipeline infrastructure to make sure we 
can get that crude into our refineries and make sure our 
refineries can process the heavier crude.
    Mrs. Miller. Twenty percent? What is it currently how much, 
approximate percentage?
    Mr. Lowe. It is relatively small.
    Mrs. Miller. I see.
    Mr. Robertson. I will make a comment. The U.S. uses about 
20, a little over 20, million barrels a day of oil. Today there 
are about 2 and a half million barrels a day of oil comes from 
Canada.
    So our largest importer, our largest imports of oil, come 
from Canada. Second largest come from Mexico. But the oil 
sands, as was described, could potentially be two or three 
million barrels a day, maybe higher than that. So they could 
double the input from Canada and be 10 percent or 15 or 20 
percent of U.S. demand.
    Mrs. Miller. When do you see that happening? I mean, what 
time frame? Two years?
    Mr. Robertson. No, no.
    Mrs. Miller. A hundred years?
    Mr. Robertson. Ten, 15, 20 years.
    Mrs. Miller. I see. Mr. Malone.
    Mr. Robertson. It is going to build up over time.
    Mr. Malone. I just wanted to add that, you know, we have 
two Midwest refineries, one in Indiana, one in Ohio, that 
through either joint ventures now or through supply agreements, 
we are going to expand both those refineries to take on a 
significant, essentially completely have a Canadian crude for 
the Midwest, again including your state, it is somewhere in the 
area of 2.6 million gallons more a day. So the supply is there.
    Mr. Hofmeister. I think a point should be made that the oil 
sands are successful because of a national energy strategy that 
was developed by our neighbor to the north. We have the same 
opportunity in this country to develop a national energy 
strategy.
    The United States is blessed with more than a trillion 
barrels of potentially recoverable resource in the oil shale of 
Colorado, Utah, and Wyoming.
    We have, Shell has, been in that region for more than 20 
years testing, experimenting, environmentally sound ways to 
potentially extract that resource. And we do not see support 
coming forward to make that a reality in terms of national 
policy. And it might be something for Congress to consider.
    Mrs. Miller. Congress doesn't always do well in national 
policy. And, Mr. Hofmeister, I know in your testimony, you said 
you applauded the higher CAFE standards. But the domestic auto 
industry, my personal observations are, we are going to end up 
bankrupting the domestic auto industry because of the mandates 
that we put on it. But I appreciate what you have said there.
    I only have 30 seconds left. What about China? We keep 
hearing about China up there contracting for the oil sands. 
Does anybody have any comment on that and what is happening 
there that might shut us out of the supply?
    Mr. Robertson. I don't see they are going to shut us out of 
the supply. I mean, China is in many ways just like the United 
States. They are competing in the world for energy supplies. We 
are competing with them. They are investing in projects around 
the world, just like we are.
    They are investing in Canadian projects, like we are. But I 
don't think there is any shutout by Canada. In fact, most of 
the oil in Canada mostly like is going to come south to the 
United States.
    Mr. Simon. I would agree with that. I think we also have to 
be careful about passing legislation here that would cut us off 
from that supply of heavy tar sands and heavy oil from Canada, 
which I think is a real issue that Congress needs to address.
    Mrs. Miller. Thank you, Mr. Chairman.
    The Chairman. The gentlelady's time has expired.
    The Chair recognizes the gentleman from Missouri, Mr. 
Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman. I am going to try to 
ask short questions and so I can get short answers in my time.
    My father worked all of his life. He never earned more than 
$25,000 a year. And there were years that he actually worked 
three jobs, most of the time just two. He sent four children to 
college. He is 86 years old.
    There will be people like my father all over the country. 
And I will have some of them at a meeting next Saturday when I 
do my monthly coffee with the congressmen.
    Mr. Simon, what can I say to them to help them understand 
how Lee Raymond received a $400 million severance package from 
ExxonMobil, which translates into $141,000 a day? What do I say 
next Saturday to the people who come to my meeting who are 
struggling to get to work now because they can't afford to put 
gasoline in their car?
    Can you help me get them to understand how it is okay for 
Mr. Raymond to get a $400 million package and they struggled 
and oil company profits are at an all-time high?
    Mr. Simon. Well, I would hope that would be behind us by 
now, Congressman, but I would just----
    Mr. Cleaver. Why?
    Mr. Simon [continuing]. Point out, as we have said before--
--
    Mr. Cleaver. Why?
    Mr. Simon. Because that is in the past. It hasn't been 
adhered recently. What----
    Mr. Cleaver. Well, we can only talk about gas prices from 
yesterday. I mean, everything we talk about here is in the 
past.
    Mr. Simon. Well, I agree, but yesterday is a lot different 
than, let's say, when that occurred. But I believe, as we 
testified before, when you break down that, I think there was a 
misconception of how much of that was due to past, how much of 
it was due to future, and how much was due to current earnings 
there. And I think it was blown out of proportion.
    Mr. Cleaver. So you think I should tell people in my 
district and probably all over the country that the $400 
million package was blown out of proportion?
    Mr. Simon. I think when you look at it, Congressman, and 
you break it down and you look at that pay package relative to 
others that were doing the same kind of jobs, you would 
consider it was competitive. And it was done by outside 
directors. There was not management involved in that at all. 
And they looked at others to make sure we are competitive.
    Mr. Cleaver. This is a rhetorical question. Whatever 
happened to shame?
    Since we are having difficulty providing access that I 
think all of you agreed that we need, are any of you right now 
going back to oil wells that were tapped out or deemed to be 
somewhat unprofitable when oil was sold at a far less price? I 
mean, are any of you now unplugging or upgrading old wells?
    Mr. Robertson. Well, we are certainly going back to 
facilities that maybe oil fields that are producing and looking 
at the opportunity to put more technology into those oil fields 
and more ways to extract more from those wells.
    So, for example, in the San Joaquim Valley in California, 
where we have a big field, that field has now been producing 
for 100 years. It is likely to get up to--originally we 
probably thought we would be able to recover 320 percent of the 
oil that is in that field. Today we are looking at ways to get 
up to 80 percent.
    So more technology, higher prices obviously lead to the 
opportunity to put more money and more technology into existing 
fields that can make them last a lot longer and make them 
increase the production. So in that sense, yes.
    Mr. Cleaver. We could get the impression that the oil 
industry is struggling. I mean, if you listen, you don't think 
it is struggling.
    Mr. Hofmeister. I think we struggle for access, 
Congressman. We struggle for access in which we can have 
appropriate investments that are making the return on that 
investment worthwhile.
    In other words, we are looking for the ample reserves. We 
could spend an awful lot more money with very low return if we 
were looking in the old fields in which a lot of that oil has 
already been extracted.
    I agree with my colleague that there are wonderful 
technical opportunities to get more from existing fields, but 
until the nation has a means by which we could use, for 
example, CO2 for enhanced oil recovery in the large 
quantities that would be necessary, many of these old fields 
will not have the ability to produce a lot more oil.
    Mr. Cleaver. All of your companies are doing well, right?
    Mr. Robertson. Well, we are working darned hard. I mean, we 
have got a big challenge to meet. We have got the world, 
including this country, that needs a lot of energy. And we are 
spending and putting more human energy into these investments 
into these projects than we ever have before. So life is not 
easy.
    Mr. Cleaver. Well, you are stuck in the 85.13. I think 
Exxon was 85.45 closed out yesterday. That doesn't sound much 
like a struggle.
    Mr. Robertson. I didn't say it was a struggle. I said we 
were working hard to try and solve a problem that exists.
    Mr. Cleaver. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oklahoma, Mr. 
Sullivan.
    Mr. Sullivan. Thank you, Mr. Chairman. And thanks again for 
being here.
    I believe that global warming is occurring. I think that 
man has something to do with it. It doesn't have everything to 
do with it but has a part to play in this. And we want to see a 
reduction in greenhouse gas emissions as we go forward in the 
future. And I am trying to kind of boil down what everyone here 
has said in my mind.
    What I think you are basically saying--and I want to see if 
this is a true statement--is that you believe that we want to 
spur domestic production, looking at other areas to drill in or 
explore in, and for gas and oil mainly to displace the oil and 
gas that we get from other countries.
    You said, I think Mr. Hofmeister said or one of you said, 
that 80 percent of the reserves are owned by foreign companies, 
national companies. Is that true? Is it something like that?
    Mr. Robertson. More than that.
    Mr. Sullivan. More than that? So, really, you guys 
collectively represent about, I guess, less than ten percent of 
the global reserves?
    Mr. Robertson. Chevron is 0.6 percent of the global----
    Mr. Sullivan. I thought it was more than that, actually.
    Mr. Robertson. Chevron is 0.6 percent of global oil and gas 
reserves.
    Mr. Simon. We are 6.
    Mr. Sullivan. So, really, it is a national security issue. 
We want to displace that. And you are saying that you are not 
opposed to moving into renewable fuels, into alternative fuels? 
You are doing research and development in that. You want to 
move in that direction and get those accomplished.
    But I think, Mr. Hofmeister, again, you said that--and I am 
for that, too. I want to see us move away from gas and oil 
eventually in the future, you know, towards renewable fuels. I 
am for that. But we can't even do it immediately. I mean, in 
the short term, you said 15 to 20 years to develop this 
technology. And we need to do that.
    I guess my question is I am for all of these renewables. I 
am for alternative fuels. I think we need to move in that. But 
basically you are saying that oil and gas are still going to be 
very much a part of the equation as we move into this new 
frontier of alternative fuels.
    And all of you are willing to do that. All of you think 
that is what we are trying to do. Would that be a fair 
statement to say?
    Mr. Hofmeister. I think it is important for the American 
people to understand the scale of what is going on in the U.S. 
economy. Ten thousand gallons of oil a second is consumed in 
this country, 60 billion cubic feet of gas a day. If we stack 
those cubic feet on top of each other, it would be from here to 
the moon and back 25 times. Twenty rail cars of coal are burned 
a minute in this country. This is every minute of every day and 
every second of every day.
    And so the scale of the massive amounts of hydrocarbons 
that are consumed to support the world's largest economy and 
one of the most creative and innovative economies is absolutely 
necessary. And the demand for electricity continues to rise 
across this country. We may see a dip in liquid fuel demand 
because of prices currently and other economic factors, but to 
be able to move to an alternative requires the technology to 
make it possible to make it commercial.
    What is slowing the movement to alternatives is the lack of 
commerciality yet. In other words, people aren't making a 
profit at it. People are investing in it, but they are not yet 
making a profit.
    As we get up larger scale, as we learn more up the maturity 
curve, I think we will make a lot of money in alternative and 
renewable energies. And the technology will be a propulsion 
engine for the nation's economy in the future.
    Mr. Simon. Congressman, I would want to support your 
comment. When you look at our outlook, if you look at the 
National Petroleum Council study, if you look at the IEA 
outlook, oil and gas will continue to represent the dominant 
source of energy, at least up through the year 2030. If you 
look at total fossil fuels, including coal, about 80 percent. 
That is where it is today.
    I think when you look at any outlook in terms of the impact 
of renewables, it is going to be very, very small, down in the 
two percent, three percent range.
    Mr. Sullivan. Well, I am from Oklahoma. And I remember when 
I was in college in the 1980s. I remember a lot of people were 
petroleum land management. They got out of it.
    I know that I have seen people lose jobs. I have seen 
people get out of this industry. I have seen it hurt my 
community by people, the down turn by low oil prices. I 
remember it was $9 a barrel, $16 a barrel. People panicked. The 
state wasn't getting the revenues that they needed.
    So you guys are making record profits right now, but have 
you ever lost money? You have lost money, too. Would that be a 
true statement? You have lost money.
    Mr. Robertson. Yes. I mean, I was there and head of our 
North American Division in 1999 when we closed the books and 
our earnings were zero, zero for North America.
    Mr. Sullivan. How does your equity investment rate of 
return compare to other industries, for example? Have you ever 
done any analysis on that?
    Mr. Robertson. Well, as was I think already said, our 
profits per dollar of sales, which is a typical way of looking 
across industries, is about 8.3 cents per dollar sales. The 
average for the U.S. is 7.8.
    Mr. Sullivan. Another thing, if I could mention, how many 
people domestically do each one of you employ? And do you offer 
retirement benefits and then health insurance?
    Mr. Hofmeister. At Shell, we have about 250,000 people who 
have jobs because of Shell every day in America. We have about 
25,000 working directly for Shell, but in our gas stations, our 
Jiffy Lube stores, tens of thousands of additional people work.
    Mr. Robertson. We have 27,000 Chevron employees in the 
United States. The average worker, salaried worker, is about 
$125,000 a year. The average hourly worker is about $75,000 a 
year. They all have pension plans, and they all have health 
plans.
    Mr. Sullivan. Anyone else?
    Mr. Simon. We have about 30. And I would echo what they 
said in terms of if you look at the pension plan and the amount 
paid.
    Mr. Malone. Thirty-eight thousand and a multiple of roughly 
four times contractors in support, a multiple even higher than 
that, health care pension plans.
    Mr. Lowe. Congressman, the point I would make is kind of 
one of the points you are making. When I started working at 
Phillips Petroleum Company in 1981, we had over 9,000 employees 
in Bartlesville. We went through some rough times. In 1998, we 
were down to 2,000 employees in Bartlesville. That was due to 
tough times.
    Mr. Sullivan. Thank you very much.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentleman from California, Mr. 
McNerney.
    Mr. McNerney. Thank you, Mr. Chairman.
    With varying degrees of emphasis, each of you has indicated 
that you have investments in renewable or energy-efficient 
technology. What I would like to see is what your vision in the 
long term and the short term is as your companies make up in 
relation to oil versus alternative new energy technologies, 
starting with Mr. Robertson.
    Mr. Robertson. Well, you know, we are supportive of the 
data that was in the National Petroleum Council study that 
basically said in 2030, 85 percent of the world's energy would 
still come from coal, oil, and gas. So we think we are probably 
in a fossil fuel environment for some time.
    We are spending something like--we are going to spend two 
and a half billion dollars over the next two years in the area 
of renewables and energy efficiency. And I think the biggest 
opportunity--and we have been talking a lot about supply here.
    And I know that the biggest opportunity for us, frankly, I 
think, as a country and maybe as a world is in energy 
efficiency and using energy more wisely. So I think that, you 
know, the evidence from our company that goes around doing 
these projects with public agencies is that we can get 30 
percent reduction in use of energy from these projects.
    Our own evidence inside our company, we are now 27 percent 
more energy-efficient than we were 15 years ago. And most of 
that time we were expecting oil to be $20 a barrel. So there is 
an opportunity for us all to become a whole lot more energy-
efficient.
    And, frankly, I still think the number one issue, the 
number one thing that the--and the Congress did some things in 
the last energy bill in terms of energy efficiency and 
appliance standards and those things, but I think in terms of 
leading the nation, leading the nation, towards becoming a set 
of energy savers and becoming a--this being a scarce resource, 
that is the biggest source of energy as far as I am concerned.
    Mr. McNerney. Thank you, Mr. Robertson.
    Mr. Hofmeister, do you think that we have reached a maximum 
output possible of oil in historical terms? And if so, do you 
believe that the Alaska and offshore resources would change 
that peak oil timing at all?
    Mr. Hofmeister. I do not subscribe at all to peak oil 
theory. I think it is a theory that is based upon very narrow 
assumptions. I think if you look at the National Petroleum 
Council study, which has been referred to, or other studies 
around the world, the idea of moving from 80 million, 85 
million barrels of production today, which we do, to somewhere 
near 110-115 million barrels a day is in the focus of most 
international oil companies and do believe and certainly Shell 
believes that the world can produce significantly more oil than 
it does today, even while the focus is on other alternatives.
    Mr. McNerney. So what is the bottleneck, then? Why are we 
such a logjam to oil prices?
    Mr. Hofmeister. I think that is an excellent question. I 
think there are bottlenecks around the world where, for 
example, within nations that are oil-exporting nations, where 
national oil companies dominate, access from international oil 
companies is limited in many cases.
    I think the United States is probably the world's best 
example of having lots of resources that are not permitted to 
be developed. And so we are not able to go into 85 percent of 
the outer continental shelf, for example.
    Mr. McNerney. So you don't think that the Hubbard's results 
are accurate or reflect reality?
    Mr. Hofmeister. Not at all because, in addition to what I 
have described in terms of what is out there, that theory makes 
no remarks with respect to unconventional oil, such as oil 
sands or oil shale.
    Mr. McNerney. What do you think the makeup of your company 
will be in terms of oil versus other alternatives?
    Mr. Hofmeister. Well, we were part and parcel of the 
National Petroleum Council study, as were other companies. And 
I subscribe to the outcomes of that study that by 2030, we will 
still be dominantly a hydrocarbon economy.
    Mr. McNerney. All right. I am finished with my questions.
    The Chairman. The gentleman's time has expired.
    The Chair recognizes the gentlelady from Tennessee, Ms. 
Blackburn.
    Ms. Blackburn. Thank you, Mr. Chairman. I am tempted to ask 
for his extra time, but I won't.
    I want to thank you all very much for being here. I am 
struck by the fact that you have mentioned many times that we 
have all made choices, our nation has made choices when it 
comes to energy policy. And those choices have consequences. 
And I think that some unwise choices 20-30 years ago are 
yielding what we are seeing today.
    And we need to realize that sometimes policy, we need to 
take a long-term view. And I appreciate that you all are 
willing to come here and sit down with us and begin to get our 
hands around this problem and get this thing solved.
    I want to just ask you a couple of quick things, but I want 
to start with this. When a consumer buys a gallon of gas and 
they are paying their $3.29 at the pump, we know that 69 
percent of that is going to crude. And if anybody disagrees 
with this, I want you to pipe up and tell me. We know that 13 
percent of that is going for taxes and that 18 percent is there 
to cover refining, distribution costs, and marketing. Does 
anyone disagree with those percentages and allowances? [No 
response.]
    Ms. Blackburn. So would it be true that the government 
actually makes the most as a single entity out of a gallon of 
gas, that they are realizing the most? Mr. Simon.
    Mr. Simon. That is correct.
    Ms. Blackburn. That is correct? Okay. Because I think it is 
so interesting that that is where a lot of the money goes and 
that is affecting what we are paying at the pump.
    I want to come back to a point that was also made about 
comprehensive strategy because we have to find out how we are 
going to deal with this. And I am going to borrow from you, Mr. 
Hofmeister. I think you are exactly right: short-term, mid-
range, and long-term.
    What I would like to hear from you is what you all are 
doing in each of those categories. And I am not going to ask 
for you to sit here and articulate anything right now because 
we know some of the things that you are doing for alternatives 
and for future. I would like to have this in the form of just 
one sheet when we are talking with individuals.
    You didn't cause all of this problem. Policy has caused 
part of this problem. You all may be partly to blame. The House 
and the Senate and the administration can all be partly to 
blame in this. The problem is we weren't looking far enough 
down the road early enough to address it. And, as I said, that 
should have been a few years back.
    We do need to work on something that is a comprehensive 
strategy for this country that is going to consider supply, 
demand, that takes into account a global marketplace, takes 
into account that you all are dealing with companies that are 
owned by governments, that are not independently owned.
    So I am going to ask you all to submit that to us, what you 
are doing that you think will give us the greatest impact in 
the short term, where your mid-range focus is as we look toward 
2030 and we look toward our fossil fuel needs moving toward 
2030, what you are doing there, the policies that would help us 
with that and then long term the policies and the actions that 
we can take that create the environment for you to do your 
best. I would like to hear that.
    And then my last question that I wanted to touch on, 
windfall profits tax, like the ones that were proposed last 
year, how would that affect your bottom line? And what would it 
do to fuel prices? Mr. Malone, I will start with you. And let's 
just work down the line.
    Mr. Malone. Well, we are investing dollar for dollar in 
this country. So you take a dollar more in taxes. It is going 
to be a dollar left available for investment.
    Ms. Blackburn. Very good.
    Mr. Lowe.
    Mr. Lowe. Yes, same for us.
    Ms. Blackburn. Same?
    Mr. Lowe. It just reduces the amount of supply.
    Ms. Blackburn. Okay.
    Mr. Robertson. I think what this Committee is after is 
increasing supply of energy, not reducing. I think that would 
reduce it.
    Ms. Blackburn. Okay.
    Mr. Hofmeister. I think windfall profits were tried before. 
And it has resulted in some of what the problem is we face 
today: lack of supply. And I would also say we are dollar for 
dollar in the United States.
    Ms. Blackburn. Mr. Simon.
    Mr. Simon. I would say the same. The policy if you tax 
something, you are going to get less of it.
    Ms. Blackburn. Okay. And, Mr. Simon, I want to clarify one 
thing. In your testimony, you said from '03 to '07, your 
earnings grew by 89 percent, but your income taxes grew by 170 
percent. Over the last 5 years, ExxonMobil's U.S. total tax 
bill exceeded your U.S. earnings by $19 billion.
    Mr. Simon. That is correct.
    Ms. Blackburn. That is correct?
    Mr. Simon. That is correct.
    Ms. Blackburn. Okay. Thank you, sir.
    Mr. Chairman, thank you. I yield back.
    The Chairman. Great. The gentlelady's time has expired.
    The Chair recognizes the gentlelady from California, Ms. 
Solis.
    Ms. Solis. Thank you.
    I have been listening attentively to many of your 
statements regarding different investments that you all have 
made. And I want to particularly commend BP, Mr. Malone, 
because I had an opportunity on a visit with this Select 
Committee. We visited the Chancellor Merkel and some folks, 
some business folks, out there and had a very extensive 
discussion with your representative about solar panels and 
investments here in the United States and collaboratives that 
you have with universities. And it seems to me that you made an 
investment a long time ago, maybe a decade ago, that you were 
going to address this issue of green gases and how 
CO2 is affecting our entire environment.
    I failed to understand why your other colleagues haven't 
been able to maybe come up to speed in that same vein. And I 
wonder what led you, then, to make those kinds of decisions, to 
make those investments because you are a global market.
    Obviously your tentacles are everywhere but especially in 
the EU. And because there are dramatic changes occurring there 
with governments, I think that has, in my opinion, given you 
the impetus to do more.
    So if you could just touch on that? Because what I am 
trying to sense here is that we are not doing enough to create 
an incentive so that your other colleagues would do the same. 
But I see that happening in Europe. Tell me what you see.
    Mr. Malone. Well, just a couple of comments. Yes, early on, 
my company--although the science was incomplete, we made the 
policy decision that we could not take the risk with global 
warming while we are waiting for science to settle. And that 
was our decision seven years ago. What we have been asked----
    Ms. Solis. Would you put a price on that risk at that time? 
Was there a risk factor there----
    Mr. Malone. No.
    Ms. Solis [continuing]. For you to fail?
    Mr. Malone. No.
    Ms. Solis. No?
    Mr. Malone. No.
    Ms. Solis. Okay.
    Mr. Malone. No. But we knew that we were in the carbon 
business. And we knew that our business emits greenhouse gases 
and that we needed to start. And we implemented--a number of 
things have been referenced here internally.
    I think the important thing, though, there is a missing 
link now. We are seven years down the road. And we still don't 
have any way to price and market carbon in this country. So, 
even though you can do some things internally, we are now faced 
with these refineries we are talking about with greenhouse gas 
emission increases of CO2. And if you can't 
sequester it, there is no market mechanism for us to be able to 
move forward.
    So seven years later, we do have the ability to have acted 
on a piece of legislation. And we are hoping to be a part of 
that.
    Ms. Solis. Okay. One of my other concerns is that most of 
you here talked about the barriers that federal government or 
maybe even local government has put up roadblocks for you to 
develop those current leases that you have. Could you tell me 
specifically why you have not been able to develop those leases 
that you currently have that have about 80 percent of the oil, 
the U.S. oil, that is available? And I will go to Mr. Simon.
    Mr. Simon. I don't know of any that we are not developing. 
Those that we already have access to, developing in as rapid a 
fashion as we can.
    Ms. Solis. Go on to the next.
    Mr. Hofmeister. Leases are generally a ten-year time 
horizon. And during that period of time, we are continuously 
evaluating where we can best use our technology and science to 
develop those leases.
    Sometimes ten years isn't long enough because of the 
tremendous capital expenditure that is necessary. For example, 
in the Gulf of Mexico, it is easily a billion dollars now for a 
major deep water project in just one lease.
    Ms. Solis. But then how do you explain your record profits 
that are well over one billion----
    Mr. Hofmeister. Well, the profits----
    Ms. Solis [continuing]. That can't be redirected in some 
way or apportioned?
    Mr. Hofmeister. The profits are cumulative around the 
world, but in the case of, let's say, the Gulf of Mexico, we 
are limited by the amount of manpower that we have. We don't 
have the kind of human resource that can do all of the leases 
simultaneously. And so we do----
    Ms. Solis. So the obstacle isn't from the federal 
government. It is a market obstacle. That is your obstacle.
    Mr. Hofmeister. The federal government's obstacle has been 
to prohibit the granting of leases in the outer continental 
shelf more broadly. Had we had the confidence that we could do 
more leasing, we would be scaling up our operations to go after 
more leases.
    Mr. Robertson. I am not sure whether there is a 
misunderstanding here, but certainly all the leases that we 
have--that we have spent money on with the government--we are 
working on and trying to develop.
    And obviously we work the biggest prospects. I mean, once 
you get a lease, then you do some work on it. You do some 
seismic work. You do some drilling. And you see which ones are 
the best to develop. And we develop them. After a period of 
time----
    Ms. Solis. But there are different stages of that 
development.
    Mr. Robertson. Yes, but after a period of time----
    Ms. Solis. And not all of them are----
    Mr. Robertson. After a period of time----
    Ms. Solis. The spigot isn't open on all of them is what I 
am trying to get at.
    Mr. Robertson. After a period of time if we don't do 
something, we have to turn it back to the government. So we are 
working on the leases.
    You asked another question about so many years ago. Twenty 
years ago Chevron started developing geothermal energy in 
California. Today Chevron is the largest geothermal energy 
company in the world. It is still relatively small in the scale 
of the world's energy business, but it is 1,200 megawatts of 
power.
    So I think we have been doing this for many, many years.
    Ms. Solis. Mr. Chairman, could I just ask----
    Mr. Robertson. It makes a difference.
    Ms. Solis [continuing]. If we could get from the witnesses 
a listing of those current leases and at what stage they are at 
so I have a better understanding of what is in existence, what 
is being utilized, and what isn't?
    The Chairman. Okay. The gentlelady has propounded that 
request. Would the witnesses at the table be willing to----
    Mr. Lowe. A short example, when lease acreage has become 
available; for example, two Gulf of Mexico deep water lease 
rounds last fall, a recent Chukchi Sea lease round off Alaska--
ConocoPhillips has been high bidder on a billion dollars for 
those leases. So we are starved for access. Access really is 
the issue.
    The Chairman. We would ask for that information to be 
provided for the record to the Committee.
    The gentlelady's time has expired.
    The gentleman from Oklahoma. For what purpose does the 
gentleman seek recognition?
    Mr. Sullivan. Mr. Chairman, I would like to ask unanimous 
consent to enter the National Petroleum Council's book, ``The 
Hard Truths About Energy.'' If I could submit this?
    The Chairman. Without objection, it will be included in the 
record.
    [The book offered by Mr. Sullivan follows:]
    Mr. Sullivan. Thank you, sir.
    The Chairman. Thank the gentleman.
    The Chair recognizes the gentlelady from South Dakota, Ms. 
Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    On March 24th, Patrick Barta wrote in the Wall Street 
Journal that ``Without biofuels, oil prices would be even 
higher'' than they are now. His report cited Francisco Blanch 
at Merrill Lynch as observing that, according to the piece, 
``oil and gasoline prices would be about 15 percent higher if 
biofuel producers weren't increasing their output,'' meaning 
oil would be priced above $115 per barrel.
    Do each of you agree with Blanch's analysis, ``Yes'' or 
``No''? And if not, why not?
    Mr. Lowe. I think there is an argument there. Roughly five 
percent of liquid fuels are now ethanol in this country, some 
small amounts of biodiesel. I think there would be some impact, 
but I don't know that it would be 15 percent.
    Mr. Robertson. I think any amount of additional energy in 
the world will directly lower prices. So more oil would lower 
prices. More gas would lower prices, more coal, more biofuels. 
So I have no doubt that it has some marginal effect. I would be 
very surprised if it is as big as you suggest.
    Mr. Lowe. Certainly directionally I would agree. That is 
why we need all forms of energy.
    Mr. Malone. I would agree.
    Mr. Simon. I would just point out I think you have got to 
look at the cost associated with producing biofuels versus 
gasoline out of crude. If you look at $5 per bushel of corn 
price today and $100 per barrel crude, the production cost of 
biofuels is about $3.15 a gallon. And crude is $2.70. So it is 
hard for me to see how that would have a positive impact in 
terms of the price of gasoline that people pay in terms of the 
biofuels there.
    Ms. Herseth Sandlin. So you don't agree, Mr. Simon, that it 
has any impact whatsoever in light of what you claim to be the 
production cost of corn ethanol today?
    Mr. Simon. I think we have got to be careful if you think 
you are lowering the price that the consumer pays at the pump 
by mandating a higher cost liquid fuel that goes into 
producing----
    Ms. Herseth Sandlin. Right. I understand you probably have 
been opposed to the renewable fuels standard either, the one 
that we included in the 2005 Act or even the one that we 
recently passed. Is that correct, Mr. Simon?
    Mr. Simon. Our corporation does not think that mandates and 
subsidies are the right approach.
    Ms. Herseth Sandlin. What is the percentage of ethanol that 
ExxonMobil blends in U.S. gasoline today?
    Mr. Simon. Today we blend about eight percent.
    Ms. Herseth Sandlin. Eight percent. And so you would be 
blending that, even if there wasn't a renewable fuels standard?
    Mr. Simon. No, that is not correct. I think if there were 
not a renewable fuel standard, it would be lower than that.
    Ms. Herseth Sandlin. And do any of your companies support 
higher ethanol blends beyond E10 in light of recent studies 
that suggest a blend of 20 percent and even 30 percent ethanol 
increased fuel efficiency and do not pose any types of damage, 
corrosive damage, to the vehicles, as some have suggested?
    Mr. Robertson. Well, to start with, we are working in 
California to get the limit raised from 5.7 percent, which is 
today's limit in California because of environmental 
restrictions, to 10 percent. So that is the first place we have 
got to go.
    I do believe that going over ten percent in the nation 
would stretch the food system to the point that you don't want 
to go any further. So we have the first generation, second 
generation ethanol from cellulosic conversion. And we are 
working as hard as we know how to generate that kind of 
technology and to produce that kind of stuff.
    So going beyond ten percent across the country would not 
work in today's environment.
    Ms. Herseth Sandlin. You mentioned the impact on food 
prices. And I think that there was perhaps some suggestion of 
this, Mr. Simon, in a comment you made in your opening 
statement about developing renewable fuels and leading to 
unintended consequences.
    Mr. Simon. Yes.
    Ms. Herseth Sandlin. Do any of you have any independent 
analysis that you can share with the Committee that it has been 
the cost of the price per bushel of corn or wheat that has 
directly led to the increase in food prices and what percentage 
that constitutes versus energy costs associated with processing 
or transporting the food?
    Mr. Robertson. I do not that I am aware of.
    Ms. Herseth Sandlin. None of you have any independent 
analysis to make that claim?
    Mr. Simon. I think there have been independent studies done 
in that regard, but we certainly don't have them.
    Ms. Herseth Sandlin. Okay. But you tend to cite----
    Mr. Simon. I believe based on all that I have read from 
lots of different places that the price of food has been 
impacted by the requirement to turn a lot of corn into ethanol.
    Ms. Herseth Sandlin. And would you also agree with the 
statement, though, that the price of food is also affected by 
increased energy costs?
    Mr. Simon. Sure.
    Ms. Herseth Sandlin. But you haven't done any independent 
analysis that would break down the percentages associated with 
energy versus other commodities?
    Mr. Simon. I have not.
    Ms. Herseth Sandlin. Okay. Well, my time is up. So I will 
yield the remainder of my time. Thank you, Mr. Chairman.
    The Chairman. Okay.
    Ms. Herseth Sandlin. Oh, one last question. Are any of the 
other four companies, other than ConnocoPhillips, test 
marketing E85 or biodiesel?
    Mr. Hofmeister. Yes. Shell has a test market in Chicago 
where we are looking at consumer acceptance of the product.
    Mr. Robertson. We have got a test going with the State of 
California with several hundred vehicles that are running on 
E85. And we sell E85 at a very small number of service stations 
around the country.
    Mr. Simon. We have E85 at only about 30 service stations.
    Mr. Malone. We have limited E85. We are waiting on some 
pump approvals. But we do have it under the canopy now.
    The Chairman. The gentlelady's time has expired.
    The Chair recognizes the gentleman from New York State, Mr. 
Hall.
    Mr. Hall. Thank you, Mr. Chairman. And forgive me if my 
questions were already asked by somebody. I was across the 
street at another hearing.
    I wanted, first of all, to comment on my colleague and my 
friend from Tennessee, who is no longer here, Ms. Blackburn's 
statement that the actions of Congress so far on energy have 
not gotten results. And I would just point out that, as I 
understand it, the attempt by the House to take back the $14 
billion the previous Congress had given in tax breaks to oil 
companies has not passed the other body or been signed by the 
President. So that has no effect on what is going on.
    And, secondly, the energy bill we passed with the CAFE 
standards increased was signed in December, just a couple of 
months ago. And, therefore, we are looking at 2020 before that 
goal is supposed to be reached. So one couldn't reasonably 
expect that that action would already be doing much visibly.
    Here is a question. I have got a constituent who called one 
of our offices in Carmel, New York and said, ``I just bought 
myself a flex fuel vehicle. Where can I get some flex fuel?'' 
And our staff had to disappoint her by telling her that, to our 
knowledge, there were only two pumps in New York at the time 
selling E85.
    And the question is, to the extent that you have stations? 
I understand many gas stations are independently operated, but 
many others are run under the flag of your companies.
    Could you or would you have a policy or make a commitment 
to have at least one biofuel pump at each gas station? And if 
not, why not? Forgive me if you have already answered that 
question but maybe Mr. Simon and then down the row.
    Mr. Hall. No, I would not make that commitment. We don't 
make a biofuel. Therefore, we cannot warranty it. And, 
therefore, we would not want to sell it under our brand. We do 
not deny our dealers the right to do so, but they simply cannot 
do that under our brand.
    Mr. Hall. Okay. Thank you very much.
    Mr. Hofmeister.
    Mr. Hofmeister. I mentioned a few minutes ago that we do 
have a pilot project at company-owned stations in Chicago in 
which we are testing the market acceptance of E85. I must say 
that the results are very poor to date from a consumer 
acceptance standpoint.
    But we do not prohibit our independent dealers and 
franchisees across the nation from making a decision to put a 
pump on their site.
    Mr. Hall. Thank you very much. I am sorry for cutting you 
off. I just have a short time here.
    Mr. Robertson. Yes. I mean, the----
    Mr. Hall. Same?
    Mr. Robertson. The vast majority of service stations in the 
United States flying a Chevron flag are independently owned.
    Mr. Hall. Right.
    Mr. Robertson. They are entitled to put in----
    Mr. Hall. If they want, they can do it?
    Mr. Robertson [continuing]. A fuel pump if they want. They 
have to make sure that it doesn't interfere with the brand, but 
they can do that. And some have.
    Mr. Hall. Okay.
    Mr. Lowe. Yes.
    Mr. Hall. Mr. Lowe.
    Mr. Lowe. ConnocoPhillips is test marketing E85. 
Potentially we have identified over 2,500 sites. But, as Mr. 
Hofmeister noted, so far the consumer acceptance hasn't been 
very----
    Mr. Hall. And, Mr. Malone.
    Mr. Malone. We do have sites that are non-BP-owned that 
have E85. We don't prohibit it. We are very concerned, though, 
about the UL listing on the pump.
    Mr. Hall. Right. Okay. Diesel obviously is a different 
kettle of fish. I mean, I am burning similar fuel, burning 20 
percent biodiesel in my home heating oil. And it doesn't seem 
to require an adjustment to the system. I have friends who have 
driven off-the-lot diesel vehicles made in America that were 
driven actually on 100 percent biodiesel from wood in this 
particular instance.
    I wanted to ask if you--I am sure you are all familiar with 
the Fischer-Tropsch reaction and the use by the Nazis during 
World War II to make liquid fuels from coal. There have been 
some studies recently showing that this can be done taking 
carbon dioxide from the air and especially in parts of the 
country where there is nearly constant sunshine or nearly 
constant wind to use renewables as the driver for this process.
    Are you aware of this or is this among the things that any 
of you are studying? Mr. Hofmeister, maybe you would go first 
on that.
    Mr. Hofmeister. Our work thus far has been on solid 
materials, not gaseous materials other than natural gas, which 
we are turning into a liquid form for fuel purposes.
    Mr. Robertson. Well, we have a global joint venture with 
Sasol of South Africa, who have been the main users of Fischer-
Tropsch technology. And we are building a gas-to-liquids plant 
using Fischer-Tropsch technology. But I am not aware of a 
system that can take carbon dioxide out of the air if that is 
what you were saying.
    Mr. Hall. It might be worth looking into. And it would be a 
huge public relations boon not to mention, I think, a 
moneymaker for you.
    And the last question I guess I would ask you because it is 
amazing how fast five minutes run out, I wanted to ask you if I 
could be imprecise here, if you are making, say, $2 gazillion 
of profit in a given time period, would you consider using half 
a gazillion or a quarter of a gazillion or whatever, however 
much of your advertising budget.
    Now that a number of you have said conservation is 
important, demand management is important, would you as a 
patriotic move and for the good of I think all of us in the 
United States, certainly our national security, use some piece 
of your advertising budget to tell people that they should 
conserve, that it is patriotic to conserve and that it is 
certainly good for----
    Mr. Hofmeister. Shell does that in all of its 14,000 
branded stations across the country currently.
    Mr. Robertson. I think if you have been looking at Chevron 
advertising, you see a lot of our conservation but absolutely.
    Mr. Lowe. Yes, we are already doing it.
    Mr. Malone. We are already doing it.
    Mr. Simon. We are a strong proponent of using our products 
more efficiently and work hard to educate the public in that 
regard.
    Mr. Hall. I will be looking for that advertising more. 
Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Okay. The gentleman's time has expired. And 
all time for questions by the members of the Select Committee 
has expired. But Mr. Stupak has been waiting for 2 hours and 40 
minutes to ask questions. And Ms. Jackson-Lee has been a more 
recent arrival. But out of courtesy to them, I make a unanimous 
consent request that they be allowed as guests of the Select 
Committee to ask questions of the witnesses who are testifying 
before us today.
    Mr. Sensenbrenner. Mr. Chairman, reserving the right to 
object, I am not sure that a committee can by unanimous consent 
suspend a House rule that applies to the Committee. And I am 
looking specifically at House rule 11(2)(g)(ii)(c), which says 
that other members are welcome at committees but in a non-
participatory manner.
    And I would ask the Chair to withdraw the unanimous consent 
request because I don't think that it is proper and in 
compliance with the rules to waive a House rule in a committee.
    The Chairman. Well, if the gentleman would yield----
    Mr. Sensenbrenner. I yield.
    The Chairman [continuing]. Under House custom, any one of 
its rules can be waived by unanimous consent. And, again, I 
remake that proposal to the members of the Committee----
    Mr. Sensenbrenner. Well----
    The Chairman [continuing]. That we waive the rule by 
unanimous consent.
    Mr. Sensenbrenner. Well, reclaiming my time, I don't think 
that we can waive a House rule in committee. I think that that 
requires an action by the House, largely through the Rules 
Committee. So I object.
    The Chairman. The Chair hears an objection. And, as a 
result, the Chair is constrained by that objection to recognize 
the guests of the Committee.
    Mr. Stupak. Jim, if you were going to object, why didn't 
you tell us three hours ago?
    Mr. Sensenbrenner. Well, I move to strike the last word. I 
did not know that there would be this request that would be 
made. It was not cleared with the minority.
    The Chairman. I apologize to the gentleman from Michigan. I 
appreciate the----
    Mr. Stupak. No apologies necessary. What goes around comes 
around.
    The Chairman [continuing]. Position that the gentleman has 
been----
    Ms. Jackson Lee. I thank you for extending the offer, Mr. 
Chairman. It is an important issue. And we are here for that 
reason. I was here starting from 1:00 p.m. Thank you.
    The Chairman. Thank the gentlelady.
    So we have reached the conclusion of this hearing. I would 
say to the oil company executives that, as President Kennedy 
used to say, to those whom much is given much is expected. 
There has been a windfall of revenues, which has fallen to the 
oil companies represented here over the last several years. It 
is highly likely to continue this year and into the indefinite 
future.
    I think that with that great opportunity that you have been 
given, there is a responsibility that you have to discharge. As 
I asked earlier, there should be a commitment that each of you 
make. I would recommend that it be ten percent of your profits 
go into renewable energy projects.
    We will not be able to solve this global climate challenge 
unless you do so. You are the leading energy companies in our 
country and in the world. We cannot solve this problem without 
your full participation.
    And, similarly, consumers will not be able to deal with 
this issue without your focused attention upon them. The 
poorest, the working class are going to be devastated. They 
will have to choose between heating and eating. We are reaching 
that point in our country. And it is your responsibility to 
deal with this issue in a responsible fashion.
    To the extent to which you don't have to take all of this 
as profit and you can lower your prices, I think you should do 
so. To the extent to which you can deal with this as an issue 
of speculation in the marketplace and you can support the 
deployment of the strategic petroleum reserve, which I 
recommend as a way of piercing this speculative bubble, I 
recommend that you take that position.
    I recommend that you take any position that helps the 
consumer and that will help this renewable energy revolution. 
But that is up to you. But all I can tell you is--and I can 
predict this with a guarantee--that this is the first of many 
hearings that you are going to have this year before the 
Congress.
    My father always said try to start out where you are going 
to be forced to wind up anyway. And so I am asking you each to 
deal with that issue of the amount of your profits that you put 
into renewable energy resources this years and for every 
subsequent year and to also deal with this issue of how it is 
going to affect blue collar and poor citizens of our country.
    We thank you each for your testimony here before us today. 
And, with that, this hearing is adjourned.
    [Whereupon, at 2:46 p.m., the foregoing matter was 
concluded.]



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