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


 
WHAT'S COOKING WITH GAS: THE ROLE OF NATURAL GAS IN ENERGY INDEPENDENCE 
                      AND GLOBAL WARMING SOLUTIONS

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

                                HEARING

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

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 30, 2008

                               __________

                           Serial No. 110-46


             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, Ranking Member
JOHN B. LARSON, Connecticut          JOHN B. SHADEGG, Arizona
HILDA L. SOLIS, California           GREG WALDEN, Oregon
STEPHANIE HERSETH SANDLIN,           CANDICE S. MILLER, Michigan
  South Dakota                       JOHN SULLIVAN, Oklahoma
EMANUEL CLEAVER, Missouri            MARSHA BLACKBURN, Tennessee
JOHN J. HALL, New York
JERRY McNERNEY, California
                                 ------                                

                           Professional Staff

                   Gerard J. 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. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
Hon. Hilda Solis, a Representative in Congress from the State of 
  California, opening statement..................................     7
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     7
Hon. Stephanie Herseth Sandlin, a Representative in Congress from 
  the State of South Dakota, opening statement...................     8
Hon. John Sullivan, a Representative in Congress from the State 
  of Oklahoma, opening statement.................................     9
Hon. John Hall, a Representative in Congress from the State of 
  New York, opening statement....................................     9
Hon. Emanuel Cleaver II, a Representative in Congress from the 
  State of Missouri, opening statement...........................    10
    Prepared statement...........................................    12

                               WITNESSES

Aubrey McClendon, Chief Executive Officer, Chesapeake Energy.....    13
    Prepared statement...........................................    15
Marc Smith, Executive Director, Independent Petroleum Association 
  of Mountain States.............................................    24
    Prepared statement...........................................    26
Clay Harris, Chief Executive Officer, Suez LNG North America.....    31
    Prepared statement...........................................    33
David Manning, Executive Vice President, National Grid...........    39
    Prepared statement...........................................    41
Rich Wells, Vice President Energy, The Dow Chemical Company......    53
    Prepared statement...........................................    55
John German, Manager, Environmental and Energy Analysis, American 
  Honda..........................................................    70
    Prepared statement...........................................    72


 HEARING ON WHAT'S COOKING WITH GAS: THE ROLE OF NATURAL GAS IN ENERGY 
               INDEPENDENCE AND GLOBAL WARMING SOLUTIONS

                              ----------                              


                        WEDNESDAY, JULY 30, 2008

                  House of Representatives,
            Select Committee on Energy Independence
                                        and Global Warming,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:28 p.m., in Room 
B-318, Rayburn House Office Building, Hon. Edward Markey 
[chairman of the committee] presiding.
    Present: Representatives Markey, Blumenauer, Inslee, Solis, 
Herseth Sandlin, Cleaver, Hall, Sensenbrenner, Walden, 
Sullivan, and Blackburn.
    Staff present: Ana Unruh Cohen.
    The Chairman [presiding]. Welcome to the Select Committee 
on Energy Independence and Global Warming. We have a very 
important hearing today that I think is going to illuminate an 
issue that has not really been discussed as fully as it should 
in our country.
    Natural gas has been called the prince of fossil fuels, and 
with good reason. It is cleaner burning and emits half the 
carbon dioxide of coal and one-third the amount of oil. Natural 
gas supplies a quarter of U.S. energy needs. It is a crucial 
component in many aspects of the U.S. economy, from home 
heating to electricity generation to transportation fuel, to a 
feedstock for the chemical industry for everything from 
fertilizer to pharmaceuticals.
    Over the last decade, the price of natural gas has 
increased dramatically, leaving consumers with bills that 
require a king's ransom to pay. Despite the recent dip, natural 
gas prices remain two- to three-times higher than they were at 
the beginning of this decade. It would be hard to imagine on a 
hot July day, but winter will be here soon and many of our most 
vulnerable families will struggle to pay their heating bills.
    High prices have allowed the extraction of natural gas, 
using more expensive drilling techniques and spurred new 
exploration and the discovery of significant new on-shore 
resources. If developed in an environmentally responsible way, 
U.S. natural gas production could increase substantially. But 
we must not forget that natural gas, like all fossil fuels, is 
both a finite resource and a contributor to greenhouse gases. 
Because of that reality, we must use it wisely in a targeted 
manner, and we must use it efficiently and in ways that help 
transform our economy to one that is more energy secure and 
climate friendly.
    Today, our witnesses will discuss a number of natural gas 
uses that are already helping to achieve those goals, and what 
might be possible in the near future. For example, the chemical 
industry produces composites that make our cars stronger and 
more fuel efficient, and insulation that reduces energy use in 
buildings. Natural gas is helping to supply cleaner electricity 
to dense urban areas and expands the use of renewable 
technologies by providing electricity when the wind isn't 
blowing or the sun isn't shining.
    New highly efficient micro-combined heat and power systems 
will allow homeowners to generate electricity and heat their 
homes while barely increasing their usage of natural gas. 
Natural gas vehicles are already displacing gasoline and diesel 
and improving air quality. The replacement of diesel fleets 
such as buses and trucks with natural gas-powered vehicles has 
especially helped reduce dangerous air pollution in some of our 
most polluted cities. Fuel-cell vehicles hold the promise of 
using natural gas more efficiently in the transportation 
sector.
    As Congress considers energy policies that will increase 
our energy independence and help solve global warming, 
understanding the role of natural gas is critical. The 
testimony of our witnesses today should help us understand what 
policies are necessary to best deploy this precious natural 
resource.
    That completes the opening statement of the chair, and I 
will turn to recognize the ranking member of the committee, the 
gentleman from Wisconsin, Mr. Sensenbrenner.
    [The prepared statement of Mr. Markey follows:]

    [GRAPHIC] [TIFF OMITTED] T1956A.001
    
    [GRAPHIC] [TIFF OMITTED] T1956A.002
    
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
    Natural gas is one of the most versatile and useful fuel 
sources in the world. It fires power plants, heats homes, and 
is a feedstock for many fertilizers and pharmaceutical 
products, and it can be used as an automotive fuel. Not only 
that, natural gas is one of the cleanest-burning fossil fuels 
there is. It produces much less CO2 than coal or oil 
and almost negligible amounts of nitrogen oxide and sulfur 
dioxide.
    Our country needs more of this useful fuel. In fact, there 
is plenty of it out there for us to use. The United States uses 
about 23 trillion cubic feet of natural gas a year and the 
Interior Department's Mineral Management Service believes that 
there may be as much as 420 trillion cubic feet of natural gas 
on the outer continental shelf. Unfortunately, 85 percent of 
this potential natural gas bonanza is off-limits to production 
right now, thanks to a congressional moratorium on exploration.
    But the congressional moratorium on natural gas doesn't 
just stretch to offshore exploration. The testimony of Marc 
Smith of the Independent Petroleum Association of the Mountain 
States, shows that of the 279 million acres of federal land 
that have oil and natural gas potential, 145 million of these 
acres are closed to leasing. Many of those acres are in the 
natural gas-rich intermountain west.
    It is not just the cost of gasoline that is skyrocketing. 
People are starting to feel the pinch of higher natural gas 
prices as well. The Energy Information Administration projects 
that the average cost of natural gas for home heating will rise 
by more than 40 percent this winter. That is an average of $364 
per home and for most people that is not chump change.
    And these high costs are having a profound effect on 
industry, too. The testimony of Rich Wells of the Dow Chemical 
Company shows that Dow's expenses for natural gas have 
quadrupled since 2002. With these skyrocketing energy costs, it 
is a wonder more manufacturers like Dow aren't taking their 
operations overseas. And did I mention that natural gas is 
cheaper in China and India?
    The Democratic governor of Pennsylvania, Ed Rendell, 
understands the value of natural gas. His state uses more than 
500 billion cubic feet a year, nearly half of which is for 
residential uses. Just this April, Governor Rendell opened up 
75,000 additional acres of state forest for natural gas 
exploration, while acknowledging the need for cleaner-burning 
fuels and increased energy independence. If the Democratic 
governor of Pennsylvania can do it, why can't Congress?
    Republicans are for increasing our domestic energy supplies 
across the board. We call it our all-of-the-above energy 
strategy. And yes, that includes renewables like solar and wind 
power, but as Mr. Smith notes in his testimony, natural gas 
will have to serve as the backup power source for these 
renewable energy sources because sometimes the wind doesn't 
blow and sometimes it is cloudy or even snowy where I come 
from.
    From the testimony today, I think it will be clear to 
everyone how valuable natural gas will be to our economy and 
our energy security. I think it will be clear to everyone that 
increasing our domestic supply of natural gas will help improve 
our economy, as well as our environment.
    What won't be clear is why the House Democratic leadership 
is blocking a vote on opening these offshore areas for 
production of this vital natural resource. It sure isn't clear 
to me, and I am sure it isn't clear when many people get their 
home heating bills this winter, and it won't be clear to them 
either. I urge Speaker Pelosi to let the House vote on this 
important issue today because the American people can't wait 
until tomorrow for relief from these high energy prices.
    I thank the chair and yield back.
    The Chairman. Great. The gentleman's time has expired.
    The chair recognizes the gentleman from Oregon, Mr. 
Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman.
    I, too, look forward to the conversation here. Natural gas 
is going to play a critical role. We are going to have again 
and again pointed out that it has less than half the greenhouse 
gas emissions of coal. It has flexibility. It can be, as my 
good friend from Wisconsin points out, a bridge. It is also 
going to be important that we capture some of the natural gas 
that is currently being flared off.
    I hope that we are also able to focus on ways that we are 
going to be able to also do a better job of conserving the 
resource. I am pleased that we were able to advance an 
amendment earlier in this Congress to promote de-coupling, so 
that gas companies are not penalized for conservation. I would 
be interested if any of our witnesses have thoughts and 
observations about how we might further adjust the regulatory 
scheme so that they are actually rewarded for conserving--
something that comes up periodically as we have had these 
conversations.
    I look forward to an opportunity to explore this in greater 
length with our witnesses, and I will just sort of yield back 
at this point so we can get to it.
    The Chairman. The gentleman's time has expired.
    The chair recognizes the gentlelady from Tennessee, Mrs. 
Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman. I thank you for 
the hearing, and I want to welcome all of our witnesses. I want 
to thank you for submitting your testimony so that we had it in 
order to prepare for the hearing today.
    I think we are all interested in what you have to say. I 
will say this, the chairman mentioned what a precious resource 
natural gas is. I think that we all realize that. But in order 
for Americans to benefit from that, it means it is going to 
require some action on behalf of Congress to enable companies 
to get to our natural resources, to actually be able to move 
that gas to the marketplace.
    I think we have to realize that, and we know that that is 
what our constituents want to see happen. Take, for instance, 
Memphis. That is in my district in Tennessee. There was a 13.5 
percent increase in the natural gas rates from MLGW last year. 
The prediction is that those could go up 30 percent more this 
year.
    For families who are already feeling the pain at the pump 
or families who know that their home heating is going to 
increase as much as their electric power rates are increasing 
this summer, and that their usage is going to change, doing 
nothing and not addressing the supply issues that we have is 
not something that they are willing to accept. They want to see 
some action. They want to see the supply problem solved. That 
means that we need to agree on how to best do that.
    We all know the attributes of the product that you are 
going to talk about. We know that it is important to the 
portfolio of options that we have. We know that we as 
Republicans are supporting an all-of-the-above strategy. We 
welcome you and we are looking forward to hearing your remarks.
    The Chairman. The gentlelady's time has expired.
    The chair recognizes the gentlelady from California, Ms. 
Solis.
    Ms. Solis. Thank you, Mr. Chairman. I appreciate having the 
hearing this afternoon, and also to thank our witnesses for 
being here.
    We know that the U.S. is home to about 3.4 percent of the 
global reserves of natural gas, and I am pleased to note that 
about 2 percent of the proven technically recoverable natural 
gas reserves in the OCS are currently available for leasing and 
development. The multiple uses of natural gas as we know, 
however, pose an interesting alternative to oil. In the 
district I represent, there is a concerted effort to switch to 
cleaner-burning vehicles. I am happy that I was able to secure 
funding for one of my local cities who actually reconverted 
their buses to a natural gas system.
    So I think the movement is happening more and more readily 
across the country. I am eager also to hear today about the 
efforts of Honda Corporation and hopefully other auto 
manufacturers will take their lead as well and begin to look at 
alternative vehicles that can be more useful and better proven 
for our economy, as well as for our environment.
    We had a terrible earthquake yesterday in Los Angeles. It 
did affect my area. It was a 5.8 I believe. We are always 
worried about LNG facilities and safety factors and 
containment, so that is an issue that I personally have of 
concern. We have had our issues also with respect to the siting 
of a potential LNG facility out along the coast in Santa 
Barbara, I believe it was. Not Santa Barbara, actually one of 
the cities close to East Los Angeles where I represent.
    Just a lot of issues regarding consulting the local 
communities and making sure that input is available where these 
sitings are going to be placed. I think it is a way that we 
have to realistically look at, but we also have to look at 
where we place these particular plants. In my case, we suffer 
from a large number of egregious projects that have been placed 
in a city that has been overburdened many times. We refer to it 
as an environmental justice playground for people because they 
site a lot of different sites there that are heavily 
contaminating. Of course, our community becomes concerned and 
affected.
    Just with that, I just want to raise those questions and 
hopefully have some opportunity to talk to you about that. 
Thank you.
    The Chairman. The gentlelady's time has expired.
    The chair recognizes the gentleman from Oregon, Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman.
    I want to welcome our panelists and guests today. 
Obviously, this issue of natural gas and its availability and 
affordability are paramount no the minds of those of us on this 
select committee, those of us on the Energy and Air Quality 
Committee, as well as our constituents. I know in the Northwest 
in Oregon, they have announced a residential rate increase of 
35 percent to 40 percent for natural gas for this coming 
heating season.
    So consumers who are feeling the shell-shock at the pump 
are going to feel it when they get their home heating bill this 
winter. And that is going to be yet another shock to the family 
budget and shock to the economy of our country. I already hear 
it when I go out in my 70,000-square-mile district and talk to 
farmers and ranchers who are paying double for their fertilizer 
costs, when you are seeing $5 diesel to run the vehicles.
    This is a real problem in this country. This Congress has 
been an absolute failure when it comes to addressing access to 
energy, America's great reserve of energy. I am preparing to 
introduce legislation that will open up the outer continental 
shelf, give states new unprecedented authorities out to 12 
miles, share the revenue back with those states, but also 
invest in renewable energy in a way that actually produces real 
revenue, not some mystical, magical offset or something where 
we come up every year and figure out how to extend like the 
production tax credit, but a real 10-year investment from the 
royalties in production of geothermal, wind, solar, and other 
alternative resources.
    It also has a provision in there for conversion of gas 
guzzlers to natural gas in a match grant arrangement, as well 
as helping those on low incomes to be able to afford their home 
heating bills, and allow for full payment in our part of the 
world for county timber payments, which is a commitment the 
federal government has apparently given up on.
    We can do that. We don't have to be mired the way we are 
today thinking America is going to be third-rate to some other 
country while we ship billions of dollars overseas to countries 
that hate us. It doesn't have to be that way. This Congress 
needs to act. We will have legislation to do that. I just hope 
that the majority will allow it.
    Thank you, Mr. Chairman.
    Mr. Blumenauer [presiding]. Thank you.
    The gentlelady from South Dakota.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    I thank our witnesses for being here today. I think this is 
a very important hearing. I represent the state of South 
Dakota, an agricultural district. Like Mr. Walden, I hear from 
the farmers I represent more than anyone else about the cost of 
natural gas and the need to increase supply because of the 
essential component of natural gas into nitrogen fertilizer.
    So unlike those who may believe that farmers are reaping 
substantial profits given the price of commodities, when you 
look at the doubling of their fertilizer and fuel costs, they 
are demanding additional action to increase supply. It also 
makes me wary not only for them, but those of my constituents 
who through investor-owned utilities supply electricity with 
natural gas to those in some of our larger communities and our 
more rural ones as well, but these proposals are seeking to 
propel an increased demand for natural gas before we really 
grapple with the supply issue.
    So I am looking forward to hearing from the witnesses today 
and posing some questions, particularly as it relates to 
agricultural constituents, and not just fossil fuel and natural 
gas, but renewable natural gas. I think one of the witnesses 
will talk about it at greater length.
    So Mr. Chairman, I thank you and yield back.
    Mr. Blumenauer. The gentleman from New York, Mr. Hall.
    Oh, I am sorry, John. The gentleman from Oklahoma.
    Mr. Sullivan. Thank you, Mr. Chairman.
    Thank you for holding this hearing on the important role 
that natural gas can play in helping our nation achieve energy 
security. If our nation is going to be serious about reducing 
the price of gasoline and lowering our dependence on foreign 
oil, then natural gas must be an important part of any 
comprehensive energy policy that Congress pursues.
    In the first session of the 110th Congress, I introduced 
bipartisan legislation with Congressman Towns and Congressman 
Hall which reauthorizes the Department of Energy Natural Gas 
Research, Development, Demonstration and Deployment Program for 
an additional 5 years. I look forward to hearing testimony from 
all our witnesses, and especially Aubrey McClendon, chairman 
and CEO of Chesapeake Energy. Chesapeake Energy is located in 
my home state of Oklahoma and is the largest independent 
producer of natural gas in the United States.
    Mr. McClendon also serves as the chairman of the American 
Clean Skies Foundation that just today announced a 
groundbreaking study about the supply of natural gas. It is my 
understanding that the study does not take into account areas 
that are currently in moratorium. I can only imagine the impact 
on supplies if we can successfully lift the moratorium on these 
areas in the west and off-shore.
    I am glad that our committee will get to hear first-hand 
about these important findings, and I thank you and yield back 
the balance of my time.
    Mr. Blumenauer. The gentleman from New York.
    Mr. Hall. Thank you, Mr. Chairman.
    Before I make my prepared remarks, I just wanted to say 
that contrary to some of the comments of some of my friends on 
the other side of the dais, I and other members of this caucus, 
the majority Democrats, are not against exploiting our 
resource. We are not against drilling. In fact, we voted for 
the Drill Act last week, which was unfortunately defeated 
largely through the opposition of the minority, which would 
have required oil companies to drill on the 68 million acres-
plus that they already have leased and permitted and are ready 
to put the drill-bit in the ground, but for some reason they 
are not doing it.
    So I just would like to lay that once again to rest. I am 
also for renewables. Thirty years ago, I co-founded a nonprofit 
that raised over $1 million and gave it away in small grants 
for solar, wind, geothermal and conservation and other 
alternatives. I only wish the government had been doing that 
for the last 30 years, or we wouldn't be where we are today, 
where the skyrocketing prices of oil and gasoline have 
rightfully garnered a significant amount of attention and 
debate.
    In which context, it would almost be understandable to call 
natural gas the forgotten fuel. This would be a drastic mistake 
and I am glad the committee is taking time to examine the 
issues surrounding the use and potential of natural gas. 
Natural gas tends to be cleaner-burning than oil and coal, and 
proportionately we have more of the world's gas resources than 
we do oil reserves.
    It makes sense, then, that increasingly the choice for new 
power generation is natural gas. While natural gas does have 
advantages, it would be dangerous to delude ourselves into 
thinking it can be a cure-all for our energy crisis, because it 
is also an important feedstock for chemical production of 
fertilizer and a number of other uses. We have to be careful 
that we factor in the impact of increased demand on these 
commodities as we discuss how to best capitalize on our natural 
gas resources.
    Likewise, we must make sure that as we contemplate 
developing natural gas resources, we fully understand and 
address the impacts of exploration. My district in the Hudson 
Valley of New York state is very close to areas that are 
considered part of the Marcellus shale gas reserve. Much of the 
discussion about exploring the reserve has centered on the 
method of hydrofracking, which could have severe water-use and 
environmental impacts.
    I look forward to hearing the thoughts of our panel on how 
we can make the most effective and responsible use of our 
natural gas resources. I yield back.
    The Chairman [presiding]. The gentleman's time has expired.
    The gentleman from Missouri, Mr. Cleaver, is recognized.
    Mr. Cleaver. Thank you, Mr. Chairman.
    I would like to associate myself with the comments of my 
colleague, Mr. Hall, the preface he made before his comments 
about natural gas.
    I would also like to welcome our distinguished guests. We 
appreciate your presence here today.
    Natural gas is cleaner, and I had to do this argument last 
night with a group of people pushing something else, but it is 
much cleaner than coal. It releases about half the carbon 
emissions of coal, and it has the potential of becoming a 
viable replacement for coal to heat and cool homes, and to 
power vehicles.
    I am always fascinated by and have much appreciation for 
the buses that move up and down the streets of the District of 
Columbia. They have the lettering on the side that this bus is 
powered by clean natural gas. I have also made attempts to get 
our area transportation authority interested in trying to get 
more buses that are fueled by natural gas in Kansas City, 
Missouri.
    The collection of natural gas is an invasive process and 
increased demand could encourage calls for drilling in 
protected areas. Additionally, natural gas is a limited and 
finite resource. The supply that exists within our borders 
today will last only until it is all gone. After all the 
natural gas is utilized by our homes and our vehicles, we will 
still have to find a new source of energy.
    So I think realistically we need to look at natural gas as 
a temporary solution and to leave such a fate to future 
generations is a morally bankrupt thought. I think it is our 
responsibility now to have the vision to do those things that 
will enable future generations and even their progeny to 
inherit a cleaner planet.
    So I look forward to hearing what our witnesses have to say 
about this critical issue and what the future of natural gas is 
for our country.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    [The prepared statement of Mr. Cleaver follows:]

    [GRAPHIC] [TIFF OMITTED] T1956A.003
    
    The Chairman. Great. The gentleman's time has expired.
    Now, we will turn to our panel and recognize our first 
witness, Mr. Aubrey McClendon. He is cofounder and serves as 
chairman of the board and CEO of Chesapeake Energy Corporation. 
Chesapeake Energy is the largest independent producer of 
natural gas and is responsible for 4 percent of domestic 
natural gas production.
    We welcome you, Mr. McClendon. Whenever you are ready, 
please begin.

  STATEMENTS OF MR. AUBREY McCLENDON, CEO, CHESAPEAKE ENERGY, 
 OKLAHOMA CITY, OKLAHOMA; MR. MARC SMITH, EXECUTIVE DIRECTOR, 
 INDEPENDENT PETROLEUM ASSOCIATION OF MOUNTAIN STATES, DENVER, 
    COLORADO; MR. CLAY HARRIS, CEO, SUEZ LNG NORTH AMERICA, 
 HOUSTON, TEXAS; MR. DAVID MANNING, EXECUTIVE VICE PRESIDENT, 
NATIONAL GRID, WASHINGTON, DC.; MR. RICH WELLS, VICE PRESIDENT 
 ENERGY, THE DOW CHEMICAL COMPANY, MIDLAND, MICHIGAN; MR. JOHN 
 GERMAN, MANAGER, ENVIRONMENTAL AND ENERGY ANALYSIS, AMERICAN 
                     HONDA, WASHINGTON, DC.

                 STATEMENT OF AUBREY McCLENDON

    Mr. McClendon. Thank you, sir.
    Thank you, Mr. Chairman and members of the committee for 
the opportunity to discuss the great promise of natural gas in 
the United States. I am Robert McClendon, CEO of Chesapeake 
Energy and also chairman of the American Clean Skies 
Foundation.
    Today, we issued a groundbreaking new study which proves 
that America's natural gas resources will last for at least the 
next 100 years. We are a public company founded in 1989. We do 
produce 4 percent of America's natural gas. We drill 9 percent 
of America's new natural gas wells. In 2008, we will invest $10 
billion to develop new reserves of natural gas right here in 
America.
    If there is one message I would like to effectively 
communicate today it is that America is at the beginning of a 
great natural gas boom. This boom can largely solve our present 
energy crisis. The domestic gas industry through new technology 
has found enough natural gas right here in America to heat 
homes, generate electricity, make chemicals, plastics and 
fertilizers, and most importantly, potentially fuel millions of 
cars and trucks for decades to come.
    This great new period of discovery in our industry has 
largely gone unnoticed by the media and most policymakers. Our 
industry has recently learned how to extract natural gas from 
massive rock formations called gas shales buried deep below the 
earth's surface.
    For example, just a month ago Chesapeake announced a new 
area in Louisiana and Texas called the Haynesville shale, which 
was featured 2 days ago on the front page of the New York 
Times, that we believe will become the nation's largest gas 
field and the fourth largest gas field in the world. In just 
the past month since we made that announcement, natural gas 
prices have declined by about 35 percent. Just by itself, we 
believe this one field has enough gas to meet the country's gas 
needs for 20 years.
    I believe natural gas can be the driving force for how 
Congress can take bold action to free our country from the 
death grip of high prices for imported oil, thereby improving 
our economy, enhancing national security, and helping the 
environment. How might Congress lead us to that freedom? It is 
actually very easy. All you have to do is provide incentives 
for gasoline station owners to add a CNG pump, provide 
incentives for homeowners with natural gas already piped into 
their homes to add a home refueling device, provide incentives 
for manufacturers to make cars and trucks that run on CNG, and 
finally provide American consumers with incentives to buy new 
CNG vehicles or retrofit their existing vehicles to CNG.
    Why should you provide incentives to switch to CNG? It is 
simple. Nothing less than the survival of the American way of 
life is at stake. Oil production around the world has 
stagnated, while demand in developing countries is rising 
rapidly. The result is that the days of cheap oil are over and 
America has been left holding the bag, a bag into which we put 
$700 billion each year of our national wealth and export it to 
various countries around the world. We are on the road to 
national bankruptcy and we must change our ways.
    The good news is it is easy to do. We don't need a new 
fuel. We don't need new technology, and we don't need hundreds 
of billions of dollars. All you have to do is modify or replace 
today's gasoline and diesel engines with engines that run on 
CNG. That is natural gas that costs half the price of gasoline, 
is more than two-thirds cleaner, is made in America and we have 
plenty of it.
    Imagine tomorrow if you could announce a new energy plan 
that would in one stroke cut your constituents' gasoline bills 
in half, reduce our oil imports, improve our air quality, 
enhance national security, strengthen the dollar, reduce 
greenhouse gas emissions, and create tens of thousands of new 
jobs in the U.S. I believe your upcoming reelection chances 
would be even higher than they already are if that were 
possible. [Laughter.]
    In closing, I would like to offer my 100 percent support to 
Representative Sullivan's bill, as well as the Emanuel-Boren 
New Alternative Transportation to Give America Solutions Act, 
or more simply, the NATGAS Act which was introduced on July 22, 
that would start us down the road of freedom from foreign oil. 
I urge each of you to become a cosponsor of this legislation 
and lead America out of our energy wilderness into a brighter 
future fueled by clean, affordable, abundant American natural 
gas.
    Thank you.
    [The statement of Mr. McClendon follows:]

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    The Chairman. Thank you, Mr. McClendon, and thank you so 
much for dramatically increasing the likelihood of the 
reelection of Mr. Sullivan. We appreciate that. [Laughter.]
    Let me now turn to recognize our second witness, Marc 
Smith, the executive director of the Independent Petroleum 
Association of Mountain States, a nonprofit trade association 
responsible for oil and natural gas development in the 
intermountain west. Mr. Smith has also worked in research for 
teacher planning and government affairs.
    We welcome you, Mr. Smith.

                    STATEMENT OF MARC SMITH

    Mr. Smith. Mr. Chairman, members of the committee, thank 
you for the opportunity to appear before you today. This is a 
very important and timely hearing.
    I am here today on behalf of the Independent Petroleum 
Association of Mountain States, a nonprofit, nonpartisan 
organization representing more than 400 independent oil and 
natural gas producers and related companies committed to 
environmentally responsible oil and natural gas development.
    Armed with new technologies and a new generation of high-
tech savvy employees, America's independents are producing 
energy from complex reservoirs that were thought to be 
uneconomic just 10 years ago. This Congress could help put 
America on a path to greater energy independence and a 
sustainable energy future by lifting restrictions on OCS 
drilling and addressing the barriers that are limiting 
development of new supplies of oil and natural gas in the 
intermountain west.
    As the cleanest-burning fossil fuel, natural gas will also 
play an increasingly important role in a carbon-constrained 
world as an essential part of any plan to reduce greenhouse gas 
emissions. If we increase demand for natural gas, we need to 
have corresponding policies to plan for the development of new 
supplies. Natural gas producers don't need special subsidies. 
They need access to the places where energy resources are found 
and a predictable regulatory and tax structure in order to make 
long-term investment decisions that ensure uninterrupted 
supply.
    Some of the most promising areas for future development of 
natural gas are the outer continental shelf and the on-shore 
federal lands in the intermountain west. In total, 279 million 
acres of federal land have oil and natural gas potential. Of 
these acres, 145 million are close to leasing and another 20 
million are inaccessible because of surface occupancy or ground 
disturbance is prohibited.
    The intermountain west is possibly best poised to help the 
U.S. meet its near-term energy needs. The region already 
supplies more than 25 percent of our nation's natural gas, 
while occupying less than 1 percent of federal lands in the 
region. Production from this region has grown by nearly one 
billion cubic feet a day this year, and has grown more than 50 
percent in the last decade.
    Recently, there have been misleading claims that U.S. 
energy companies are not actively developing federal lands they 
have already under lease. As a remedy, congressional leaders 
have proposed use-it-or-lose-it legislation in the Drill Act. 
The use-it-or-lose-it approach is the wrong approach and would 
not solve the real problems that exist with developing federal 
leases, which are the extensive restrictions, expensive 
permitting requirements, bureaucratic delays, and frivolous 
lawsuits that hinder timely development of American energy 
supplies.
    Drilling new wells is and will continue to be critical to 
maintaining supply. To highlight this point, consider the fact 
that 50 percent of the natural gas we use today comes from 
wells that were drilled in the last 3\1/2\ years. In fact, 
according to the Cambridge Energy Research Associates, natural 
gas drilling in the intermountain west will need to increase 75 
percent over the next 10 years to sustain current production 
levels.
    If Congress increases the demand for natural gas by moving 
forward with cap-and-trade legislation to reduce CO2 
emissions, it should carefully consider policies that ensure 
timely access to some of the most promising areas for future 
supply. Ignoring the current policies that contribute to 
bureaucratic delays and limit access to federal lands will only 
serve to deepen our nation's energy challenge.
    Please consider the following list of policy 
recommendations as tangible, near-term steps that can be taken 
to ensure supply. Congress should increase the budget for the 
Bureau of Land Management oil and gas programs so that the 
agency has the necessary staff and resources to process 
applications for permits to drill and rights-of-way for 
gathering and pipeline infrastructure.
    Congress should consider ways to shorten the timeframe for 
processing APDs and other environmental analysis. The 
bureaucratic delays and runaway costs associated with 
environmental studies provide no additional environmental 
protections. Instead, they artificially restrict the 
development of new supplies of oil and natural gas.
    Congress should not delay the leasing of areas with 
significant natural gas resources. Legislation currently 
pending before Congress, such as the Roan Plateau Oil and Gas 
Leasing Improvement Act of 2008 would place significant 
restrictions on the development of new natural gas supplies on 
the former naval oil shale reserves.
    Congress should carefully consider how the creation of new 
wilderness areas will limit America's ability to meet future 
energy needs. The Red Rocks Wilderness Act and the Colorado 
Wilderness Act of 2007 present specific threats to some of our 
nation's largest supplies of natural gas.
    Congress should also consider limiting the ability of 
obstructionist groups to stop leasing, exploration and 
development on federal lands. And Congress should appropriate 
the statutorily mandated funds for research and development of 
new technologies, the section 999 program.
    The Chairman. If you could summarize, Mr. Smith.
    Mr. Smith. As this committee examines the daunting task of 
ensuring America's energy independence and addressing the 
important issue of climate change, independent oil and gas 
producers stand ready to help. Thank you for allowing us to 
appear today.
    [The statement of Mr. Smith follows:]

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    The Chairman. Thank you, Mr. Smith.
    Next, we welcome Mr. Clay Harris, a geologist by training 
and the CEO and president of Suez LNG North America, an 
international energy company that is one of the main LNG 
importers in the U.S. market.
    Please begin whenever you are ready.

                    STATEMENT OF CLAY HARRIS

    Mr. Harris. Thank you, Chairman Markey and members of the 
committee, for inviting me to present testimony regarding LNG 
and for your leadership on the important issues of energy 
independence and global warming.
    I will concentrate on three points. First, LNG can 
contribute substantially to a region's energy supply. As you 
know, Mr. Chairman, our terminal in Everett meets 20 percent of 
New England's natural gas demand. We supply the fuel for one of 
the region's largest power plants, which can generate enough 
electricity for 1.5 million homes. If LNG resources were not 
available in New England, supplies would be far tighter and 
consumers would suffer.
    We are also starting construction of our new offshore re-
gasification system near Gloucester, which is designed to 
provide an additional 400 million cubic feet a day to the New 
England market. In Florida, we are working to complete the 
permitting process for a similar offshore re-gasification 
facility near Fort Lauderdale. This project could ultimately 
bring as much as one billion cubic feet a day of natural gas to 
the Florida market. We believe that wherever there is a re-
gasification facility, LNG keeps downward pressure on prices by 
helping to diversify and increase a region's energy supply.
    Second, LNG alone cannot meet all of our growing needs for 
natural gas. We view LNG as an important energy source in 
addition to other North American natural gas supplies, not as a 
substitute for them. As a nation, we need to do a better job of 
developing our natural resource base, in part because 
traditional fuel sources are going to be the backbone of the 
energy system for some time.
    We at Suez are fully committed to renewable energy, with 
about 430 megawatts of renewable capacity either installed or 
under construction, and another 2,000 megawatts in development, 
but the data is clear. Last year, renewables account for 4.4 
quadrillion BTUs of the more than 101 quads that we consumed. 
By comparison, fossil fuels accounted for 86 quads of energy 
last year. Consequently, we believe that we will need more 
supplies of natural gas, including LNG, in the future.
    In the last few years, expansions and new construction have 
raised LNG re-gasification capacity in North America to around 
14 billion cubic feet a day. By 2015, that number will be more 
than 22 billion cubic feet a day.
    With respect to actual imports, even though 2008 imports of 
LNG will likely be only half of 2007 imports, they are 
projected to return to 2007 levels next year and continue to 
increase. EIA has projected that by 2030, we could bring as 
much as 2.8 tcf of LNG into the United States, which could be 
as much as 10 percent of the total gas demand.
    On a related note, it is important for policymakers who are 
concerned with our energy security and carbon emissions to look 
at opportunities to further improve the use of natural gas in 
electric power generation. Right now, natural gas accounts for 
about 20 percent of electricity generation, and it is clear 
that it is being looked to as a bridge fuel for power 
generation for the foreseeable future.
    Unfortunately, in some regions, particularly those that 
have not adopted competitive and fully transparent tocell power 
markets, older, less efficient natural gas power plants 
continue to operate, while newer, more efficient and cleaner 
natural gas power plants remain idle or underutilized. Such 
inefficient use of natural gas not only increases emissions and 
wastes natural gas, but increases the electricity cost to the 
consumer.
    Third, I would like to address the international aspects of 
LNG. While LNG is a global commodity, it is premature to talk 
about a world gas price. In reality, there are several regional 
markets for natural gas and the prices in each one vary 
according to local circumstances. Additionally, on a global 
scale, there is more re-gasification capacity than there is 
liquefaction capacity. That is the nature of the LNG business 
model. More re-gasification capacity provides flexibility in 
supply and price responsiveness to markets, but also means a 
growing proportion of the LNG marketplace, perhaps as much as 
20 percent, consists of divertible cargoes.
    Finally, the presence of LNG means that there are some 
interrelationships between the regional gas markets. For 
instance, when Japan's gas demand spiked last autumn due to a 
shutdown of nuclear units, divertible LNG went to Japan. 
Similarly, when the price of natural gas in Great Britain 
dropped last spring and summer, divertible LNG wound up being 
shipped to the United States. Those transfers simply reflect 
market dynamics.
    Thank you again for inviting me. We think LNG can be and is 
an important part of the energy supply equation for the United 
States. I look forward to answering any questions you might 
have and working with the committee on these important issues.
    Thank you.
    [The statement of Mr. Harris follows:]

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    The Chairman. Thank you, Mr. Harris, very much.
    Now turning now from natural gas production to its use, we 
welcome Mr. David Manning, the executive vice president of U.S. 
external affairs at National Grid, an international electricity 
and gas supplier. He has previously served as the executive 
vice president and chief environmental officer of KeySpan, one 
of the nation's largest gas distributors. Early in his career, 
he served as deputy minister for energy of the province of 
Alberta in Canada.
    So we welcome you, Mr. Manning. Whenever you are ready, 
please begin.
    Move in closer to the microphone, please.

                   STATEMENT OF DAVID MANNING

    Mr. Manning. Thank you very much. That is better. I 
apologize.
    If I could speak with the mic from the consumer's end of 
the pipeline. Just a quick word about National Grid. We are one 
of the largest distributors of natural gas and electricity. We 
have about 9,000 miles of transmission. We serve about 15 
million people. We move 718 billion cubic feet of gas per year 
to generators and to home and to businesses which accounts for 
about 3 percent of the U.S. supply.
    So obviously, these issues are very critical to us. We 
spend about $1.5 billion in energy efficiency programs in New 
England alone. Energy efficiency is obviously one of our 
primary missions as a company, both on the gas and electric 
side. So we do believe that while natural gas is critically 
important and offers a great advantage in terms of its 
CO2 emissions, it is also the fuel which facilitates 
the greatest opportunity for energy efficiency technology.
    So if I could just go a little bit further. The generation 
side of natural gas is critically important to the Northeast. 
Forty percent of the generation in New England is now running 
on natural gas, slightly more than that. In New York, it is 
probably about 12 percent pure natural gas, but about 24 
percent of the plants in New York state run on some combination 
of gas and oil.
    We are the largest--today, we are the largest independent 
power generator in New York state and all of our plants, of 
course, are running on natural gas currently, which is better 
for the environment and also has a price advantage, so it is 
critically important.
    But more important than that, of course, if I could just 
repeat, and I know that the chairman brought this up, pounds 
per billion BTUs of energy, 117,000 for natural gas, 164,000 
for oil, 208,000 for coal. This is not to say that we shouldn't 
try and drive our clean-coal technologies and shouldn't find 
ways to improve the use of all these energy fuels, because as 
every member has pointed out, your constituents are being 
afflicted by high energy costs.
    So I think National Grid's agenda is we need to first and 
foremost drive energy efficiency of all fuels, and the fuels 
that we do use not only must be available, but they must be 
used in the best way possible, both for the environment and 
also in terms of energy efficiency to reduce our dependence on 
imported fuels.
    So turning to electricity just again, not only do you have 
the opportunity for combined cycle cogeneration--there is a 
wonderful plant in Oregon I had the opportunity to cut the 
ribbon in a former life, as the chairman pointed out--where 
natural gas comes in and runs the generator. The waste heat 
from that generator runs a second turbine. Two sources of power 
go to Spokane. That, of course, is cogeneration, so you have 
two sources of power.
    The waste heat from that second--now, it is still waste 
heat from the generator--goes out the back end, so for those of 
you who haven't been, Idaho and Oregon have a lot of potato 
farms, all run by satellite. It is wonderful to see. The waste 
heat from that steam blows the skin off the potato, slices, 
fries, freezes, and cycles back into the plant.
    Now you have taken a power generator into a much higher 
efficiency level, and of course that same kind of technology is 
available at homes, businesses, with the technologies like 
combined heat and power, which of course are driven primarily 
and best by natural gas.
    Honda has the best example we have seen, which is freewatt, 
which is a unit for the home which we can discuss in a moment. 
Also, natural gas vehicles, we have tremendous expertise I 
believe as a company. This has been an issue for us for many 
years. Mass Bay Transit, we have converted over one-third of 
their fleet, 100 percent of the vehicles in the Long Island bus 
fleet are operating now on natural gas. We have a fleet of 
Honda natural gas vehicles for our customer service. We have 
our own corporate fleet of natural gas vehicles.
    Our benefits, however, have been primarily in fleets, and 
our current emphasis is on school buses. We have converted the 
entire school division because those school buses not only are 
running more efficiently, but they are also improving the air 
quality of the passengers, which we think is a critically 
important opportunity.
    Not to leave aside, however, electric vehicles, because 
again our point is these are prime fuels. They are premiums 
fuels and we must use them efficiently. We have a combined 
cycle plant, the most efficient plant in New York. It has not 
stopped since the day it started in 2004. But between the hours 
of 2 a.m. and 6 a.m., it drops from 250 watts to 160. So the 
idea of plugging in your hybrid to a windmill is a great idea, 
but in the near term plugging into Ravenswood dramatically 
improves the air quality from that point alone.
    I look forward to your questions. Thank you, Mr. Chairman.
    [The statement of Mr. Manning follows:]

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    The Chairman. Thank you, Mr. Manning.
    Our next witness is Rich Wells, the vice president of 
energy at the Dow Chemical Company, one of the world's leading 
manufacturers of chemicals and plastics. Dow is committed to 
corporate sustainability and since 1990 has reduced its 
emissions of greenhouse gas emissions by 20 percent.
    We welcome you, Mr. Wells. Whenever you are ready, please 
begin, if you can turn on the microphone and move it up close 
to you.

                    STATEMENT OF RICH WELLS

    Mr. Wells. It is on, thank you.
    Thank you, Chairman Markey, Representative Sensenbrenner--
--
    The Chairman. Pull in the microphone a little bit more 
close.
    Mr. Wells. Certainly.
    Thank you, Chairman Markey, Representative Sensenbrenner, 
and other members of the committee. Thank you for the 
opportunity to provide our views on natural gas and its role in 
the future and energy climate change policy of our country.
    First, I would like to address the role natural gas plays 
for Dow. As the nation's largest chemical and plastics 
producer, Dow uses natural gas and natural gas liquids as both 
a fuel and a raw material. For its global operations, Dow uses 
the energy equivalent of 850,000 barrels of oil each and every 
day. Of this total, approximately half is in the United States.
    Dow converts natural gas and natural gas liquids into more 
than 3,000 products essential to our economy and our citizens' 
quality of life. These products serve as building blocks for 
everything from pharmaceuticals, insulation, electronic 
materials, fertilizers and much more.
    The rising price of natural gas has had a dramatic impact 
on Dow's operating costs. In 2002, our total annual energy and 
feedstock bill was $8 billion. For this year, it is projected 
to be $32 billion. As a result, we have taken a number of 
actions necessary to sustain our operations and retain the 
ability to invest in our future.
    Let me give you some examples of what we have done. Our 
relentless focus on energy efficiency has saved over 1,400 
trillion BTUs of energy since 1994. That is enough to power 
every home in California for 16 months. We have shut down over 
90 facilities since 2003. In the last 2 months, we have 
announced price increases totaling 45 percent. These increases 
will be reflected in the prices consumers pay for items such as 
trash bags, diapers, detergents, food and many other daily 
household items.
    We are pursuing alternative and renewable energy end-feed 
stock projects. As an example, we are building a world-scale 
plastics plant in Brazil where polyethylene will be made from 
sugar cane. And finally, we are preferentially investing in 
other parts of the world where energy costs are considerably 
lower. In fact, Dow has announced projects in Brazil, China, 
Kuwait, Libya, and Saudi Arabia. These investments will create 
10,000 direct and 60,000 indirect jobs. Many of these jobs 
would have been created here in the U.S. but for the high and 
volatile cost of natural gas.
    We believe natural gas is of greatest value as a raw 
material for value-added products. At Dow, we turn $10 billion 
worth of natural gas and natural gas liquids into $45 billion 
of value-added products each year. Chemistry creates wealth by 
converting precious resources like natural gas into value-added 
products essential to our way of life.
    With additional proposed uses of natural gas, the 
industrial sector will become the shock absorber in the form of 
demand destruction. Demand destruction is a sterile economic 
term for job loss. In fact, with natural gas prices increasing 
more than 460 percent over the last 8 years, our country's 
manufacturing sector has lost 3.7 million jobs.
    As our country becomes more concerned with energy security 
and reducing global warming, we run the risk of dramatically 
increasing demand for natural gas. As an example, natural gas 
in the power sector could ramp up dramatically under a climate 
change policy that does not rapidly deploy nuclear technology 
and carbon capture sequestration.
    To prevent this, we recommend that Congress enact a 
comprehensive energy policy that addresses high prices, 
dependency on foreign sources of energy, and climate change. We 
believe this can best be accomplished by focusing on aggressive 
energy efficiency measures, increasing and diversifying 
domestic energy supplies, including more natural gas 
production, further developing alternative and renewable 
sources of energy, and passing environmentally effective and 
economically sustainable climate change legislation.
    Recent proposals, such as the Pickens plan, have some 
positive elements, like increased wind and solar power 
generation. However, we are concerned that adding new uses for 
natural gas such as in transportation will create new and 
relatively inelastic demand that we may not be able to meet 
without high prices and further demand destruction in the 
industrial sector.
    In conclusion, the U.S. needs a comprehensive, sustainable 
energy policy. Simply increasing demand for natural gas without 
addressing the supply issue is not a sustainable policy. It 
seems that members of Congress are talking past each other on 
energy policy. We need serious action on both supply and 
demand. It is a need that cries out for bipartisan solutions.
    I thank you for the opportunity to participate in today's 
discussion.
    [The statement of Mr. Wells follows:] 

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    The Chairman. Thank you, Mr. Wells.
    Our final witness is Mr. John German, the manager of 
environmental and energy analysis for the American Honda Motor 
Company. Honda is the only company currently offering a 
compressed natural gas passenger vehicle, the Civic GX, in the 
United States. Since its introduction in 1998, both EPA and the 
American Council for Energy Efficient Economy have ranked it as 
one of the greenest cars in America.
    We welcome you, Mr. German, and we look forward to your 
presentation. We will just wait a second here so you can get 
your props set up.
    Mr. German. I am taking a page out of your book, Mr. 
Chairman. [Laughter.]
    The Chairman. I think it has already got my attention. I 
like props. We have a little bit of an obstructed view there. 
If you can pull that out a little bit further. All right. 
Beautiful. Thank you.
    So Mr. German, please begin.

                    STATEMENT OF JOHN GERMAN

    Mr. German. Okay, thank you.
    Mr. Chairman and members of the committee, good afternoon. 
I appreciate the opportunity to appear today to discuss Honda's 
work with natural gas. I request that my full statement be 
submitted for the record.
    Honda believes there is no single solution to America's 
dependence on petroleum and global warming. As a result, we are 
dedicated to advancing and implementing a variety of fuels and 
technologies. Our objective is to introduce technologies that 
lower emissions, improve energy conservation, and increase fuel 
economy, while meeting the needs of our customers and of 
society.
    One such technology is our dedicated natural gas vehicle, 
the Civic GX. It is the only natural gas vehicle produced or 
sold in America. Natural gas offers significant benefits when 
used as a transportation fuel, as it operates cleanly and 
efficiently in internal combustion engines and works in a 
variety of vehicle applications. Natural gas also has low 
upstream emissions and a lower ratio of carbon-to-energy output 
than petroleum, which reduces greenhouse gas emissions.
    First introduced in 1997, the GX is produced at Honda's 
Liberty manufacturing plant in Ohio. It has been called the 
cleanest vehicle ever tested by the USEPA. Historically, our 
sales have been between 500 and 1,000 vehicles per year, but 
Civic GX demand is now at an all-time high and the market is 
growing due to the combination of high gasoline prices, 
concerns about energy security, and the introduction of a home 
refueling station.
    The price of the Civic GX is approximately $25,000, which 
is about $7,000 more than a comparable gasoline engine Civic. 
Part of this price differential is offset by a federal tax 
credit of up to $4,000. The price premium, due primarily to the 
increased expense of key components such as the special tank 
and fuel system, could be lowered somewhat by increased volume. 
The GX has a range of up to 220 miles and an eight-gallon gas 
equivalent fuel capacity.
    Compared to plug-in hybrids, fuel cell and battery electric 
vehicles, the cost increment for gasoline--I am sorry--the cost 
increment for natural gas vehicles is much less. Due to 
infrastructure constraints, Honda's initial market for the 
Civic GX was fleets. However, with the development of a home 
refueling device known as PHILL, Honda has begun to market the 
vehicle to retail customers. PHILL, which is illustrated up 
here, that is a full-size photo, taps into the consumer's 
residential natural gas line, connects to the vehicle and fills 
the tank overnight.
    We have found that the convenience of home refueling is a 
major attraction to many customers. Mile for mile, natural gas 
is much less expensive than gasoline, particularly at 
residential rates. Every gallon-equivalent of natural gas 
displaces one gallon of gasoline and cuts CO2 
emissions by about 25 percent.
    Honda's experience with natural gas vehicles also serves as 
a pathway to hydrogen fuel cell vehicles. The physical 
properties of hydrogen and natural gas are similar and so are 
many of the components. Natural gas being the base fuel in many 
cases for producing hydrogen, Honda is testing an innovative 
home energy station that generates hydrogen from natural gas. 
Honda's home energy station, developed in cooperation with Plug 
Power of New York, makes efficient use of a home's existing 
natural gas supply for production of hydrogen, while providing 
heat and electricity to the home.
    Our fourth generation station is currently deployed at our 
Torrance campus and is used to fuel the Clarity, our new fuel 
cell vehicle. Incidentally, last week Honda leased its first 
Clarity to a retail customer in California. We will be 
releasing 200 additional Clarity vehicles to individuals over 
the next several years at the rate of $600 per month for 36 
months.
    Honda also makes a micro combined heat and power system for 
the home. This is the freewatt system illustrated on the other 
one. It is a home natural gas cogeneration unit that produces 
about one-third less carbon dioxide emissions than a 
conventional heating system, with electricity provided from the 
grid. The product is marketed in New England and sold through a 
joint venture known as Climate Energy. The system combined two 
technologies: an advanced furnace provided by ECR of Utica, New 
York, and a natural gas-fired generator produced by Honda. 
Economic viability of the system would be further increased if 
the electric grid could accept excess electricity generated by 
freewatt.
    Our energy and global climate challenges are so immense we 
are going to need rapid deployment and implementation of as 
many feasible technologies as possible. Although supplies of 
natural gas are not unlimited, natural gas vehicles are one of 
a number of important near-term technologies.
    Natural gas may also be a core fuel for what may be our 
best long-term technology, fuel cell vehicles with hydrogen 
extracted from natural gas.
    This concludes my statement. I would be happy to answer any 
questions.
    [The statement of Mr. German follows:]

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    The Chairman. Great. That completes the time for the 
opening statements from the witnesses. I think we will have 
time for Mr. Sensenbrenner and for myself to ask questions, so 
I will begin, and then we will come back right after the roll 
call to recognize other members.
    So the chair will recognize himself, and I am going to ask 
Mr. McClendon and Mr. Smith, you both mention in your testimony 
that U.S. natural gas production is up, while demand has 
remained relatively flat, but prices are still high, and many 
American families are already worried about paying for their 
heating bills this winter.
    Will prices come down substantially as more and more of 
this natural gas goes into the system? And will expanded use of 
natural gas, as we have heard from Mr. Wells in the vehicles 
sector, have an impact on pricing for home heating purposes if 
there is that expanded demand part? Mr. McClendon.
    Mr. McClendon. Thank you, Mr. Chairman.
    The first thing I would say is that gas production has 
actually been increasing for the last 3 years at a compounded 
rate of 6 percent.
    The Chairman. Over the last 3 years?
    Mr. McClendon. Over the last 3 years on a compounded rate. 
Before then, for the last 5 or 6 years before, then gas 
production was flat to slightly declining. This year looks like 
we will have the industry's best year in modern history. We 
will be up probably 9 percent, and that is the equivalent of 
four or five tcf a day of new production in the U.S.
    So do we have enough natural gas to meet all these new 
needs for natural gas? We see demand going up for natural gas 
for electricity. Certainly, it has become harder and harder to 
build a coal plant these days. It is difficult to build a 
nuclear power plant. Our view on that is simply that gas is 
there. It is clean. It is affordable and we think it ought to 
be used.
    With regard to whether or not there is enough to fuel the 
automobile industry, right now if you were to move two million 
cars to natural gas, it would be about 1 percent of the U.S. 
car fleet. We think that would increase natural gas demand by 
about .75 percent. So the Emanuel-Boren bill seeks to increase 
the amount of cars in the U.S. that run on natural gas 10 
percent. We think that that would require only about a 7.5 
percent to 8 percent increase in demand for natural gas. Again, 
that is over 10 years, and in the context this year, our 
industry will increase production by 9 percent.
    The Chairman. Can I talk for a second about using natural 
gas to generate electricity? We will have in some manner, shape 
or form legislation that passes here over the next couple of 
years that is a cap-and-trade system that puts some price on 
carbon. How much of these new discoveries can be used in order 
to make it possible to retire dirty old coal-generating plants, 
and as a result help us to meet whatever commitments the United 
States makes in the Copenhagen round?
    Mr. McClendon. Well, the American Clean Skies Foundation 
today released a study that had been performed by Navigant 
Consulting, which the authors of that report have concluded 
that over the next 20 years, you could begin to retire the 
dirtiest of the coal-fired plants and not affect the price of 
natural gas, again because of the amount of production increase 
that we have.
    The Chairman. Do you know how many megawatts they are 
talking about in terms of retired coal-fired plants?
    Mr. McClendon. I don't, but you have about 500,000 
megawatts of installed power and use about 400,000 of it in----
    The Chairman. On a daily basis.
    Mr. McClendon. Right. Most incremental megawatt----
    The Chairman. So is it possible that 50,000 new megawatts 
of natural gas electrical generation, or 100,000 new megawatts 
of electrical generation is possible?
    Mr. McClendon. Right now, 20 percent of all electricity is 
made from natural gas, and that only consumes about 25 percent 
of natural gas in the U.S. So if you are increasing natural gas 
by 5 percent to 10 percent per year, you can add tens of 
thousands of megawatts a year and not impact.
    The Chairman. So is it possible, in other words, to reduce 
from 50 percent the electrical generating capacity for coal in 
the United States, down to let's say 35 percent, and to 
increase the natural gas electrical generation from 20 percent 
up to 35 percent of our total needs, and as a result meet a big 
climate change goal that we would have?
    Mr. McClendon. Three years ago, I would have said no. 
Today, I say yes because of the technological breakthrough that 
has occurred in drilling for natural gas into these shale 
deposits.
    The Chairman. So with the supply available, how long do you 
think it would take to make a transition like that?
    Mr. McClendon. I am not an expert in that. What I am an 
expert in doing is telling you that I believe that we can 
increase the supply of natural gas----
    The Chairman. You are saying the supply will be there----
    Mr. McClendon [continuing]. By at least 5 percent per year. 
How the market decides to use that, whether it be for cars, 
whether it be for electricity, whether it be for more plastics 
and chemicals, I can't really comment on, but I think the 
surprise that I have for people today is that the technological 
breakthrough that we have developed in finding gas from shales 
changes everything about what you think about natural gas 
scarcity in America.
    The Chairman. Thank you, Mr. McClendon.
    Mr. Sensenbrenner is recognized.
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
    As the chairman knows, I am a sharp critic of what I refer 
to as cap-and-tax, because it is an indirect tax that people 
will pay through their utility bills and at the pump and 
practically everyplace else. We have heard today from many of 
the witnesses that if there is a cap-and-tax proposal passed by 
the Congress, there will be a huge incentive for utilities that 
generate electricity from coal to convert to natural gas 
because they won't have to buy many carbon credits by using 
natural gas. That is going to increase the demand in natural 
gas and put pressure on increased prices.
    With that in mind, I do not share my chairman's feeling 
that cap-and-tax is inevitable, but if it does pass, does that 
increase the urgency of lifting the moratorium on offshore 
drilling? And even if it didn't, I would like to ask all of the 
witnesses simply to give me a yes or no answer of whether they 
support lifting the moratorium on offshore drilling right away.
    Starting with you, Mr. McClendon.
    Mr. McClendon. We don't drill offshore. We don't drill in 
the Rocky Mountains, but I am for all things American, so I 
think we should develop all of our American assets. I will tell 
you that this new surge of shale production comes from private 
lands and I think it is something we all need to recognize, 
that there is a lot of gas coming out of some traditional----
    Mr. Sensenbrenner. The clock is ticking both across the way 
and here.
    Mr. Smith.
    Mr. Smith. Policies that call for increased demand without 
corresponding plans to increase supply are a recipe for 
disaster. We absolutely believe that we should be developing 
all of our energy resources in the U.S., especially in the 
intermountain west and the outer continental shelf.
    Mr. Sensenbrenner. Okay, thank you.
    Mr. Harris.
    Mr. Harris. Sir, just a simple yes.
    Mr. Sensenbrenner. Okay.
    Mr. Manning.
    Mr. Manning. [OFF MIKE]
    Mr. Sensenbrenner. Okay. Thank you.
    Mr. Wells.
    Mr. Wells. The answer is yes.
    Mr. Sensenbrenner. Okay.
    Mr. German.
    Mr. German. It is a little different. We produce vehicles. 
We are not on the fuel-generation side, but Honda is certainly 
on record as saying that we need to reduce consumption and all 
ways to help do that should be on the table.
    Mr. Sensenbrenner. Okay.
    The Chairman. Can the record just at this point note that 
the chairman could have had six people who took the opposite 
point of view, so it just showed the open mindedness of the 
chairman of this panel. [Laughter.]
    Mr. Sensenbrenner. Well, we will excuse the mistake the 
chairman may feel that he made on this, and I yield back the 
balance of my time.
    The Chairman. I thank the gentleman.
    We are going to take a--how much time is left? Does anyone 
know, on the roll call right now? What I am going to do is 
recognize the gentleman from Oregon, Mr. Blumenauer, and pass 
the gavel to him, and he can make a decision as to how long he 
wants his question period to go.
    Mr. Blumenauer [presiding]. Thank you for your courtesy, 
Mr. Chairman.
    I do appreciate the gist of the presentations here and 
particularly, Mr. McClendon, starting with what you were 
talking about in terms of increased supply. As you see, there 
is a modest difference of opinion around here in terms of point 
of emphasis. The evidence we have received from the 
administration is that the majority of the outer continental 
shelf is already available. There is only about 2 percent of 
the 7 percent of the gas that is off limits, and that basically 
nothing is going to happen for 20 to 30 years that is going to 
profoundly affect supply here.
    So there are a couple of choices. We can spend all our time 
in energy battling over something that may happen 15 or 20 or 
30 years from now, burn a lot of political energy. Or we can 
focus on what you have been talking about here--maximize 
supply. What I mentioned in my opening statement about 
providing incentives for people to actually conserve and reward 
people for stretching it more, and be able to talk about the 
amazing flexibility that the product that you are talking about 
here today offers for the next 10 or 15 years, while we are 
still increasing domestic supply, while we can deal with things 
that don't have people at each other's throats, and be able to 
actually make some progress.
    I am curious, starting with you, sir, if you have some 
thought that maybe we might be able to have an energy policy 
for this century that talks about substitution. For example, 
why in the world would we have anybody heating hot water with 
electricity today from coal-fired plants, until we deal with 
it.
    I am trying to get a sense of if you have some thoughts 
about how we might be able to get past the knife fight and the 
dueling statistics that won't make any difference for 20 years, 
and maybe get at what you are talking about here, to change the 
system, provide the incentives, and make that transition.
    Mr. McClendon. I believe my role in this hearing and in 
this world is to do one thing, and that is to increase the 
supply of affordable, clean-burning, American natural gas. I am 
not an expert on access. I am not an expert on offshore 
drilling. What I can offer is that our company is going to 
spend $10 billion this year to increase our number one position 
in the industry by 25 percent. Our production this year is 
going to increase by 25 percent. We produce 4 percent of our 
nation's natural gas.
    I am here to testify that from existing sources, areas of 
production--Texas, Oklahoma, Louisiana, Arkansas--that there 
are enormous new resources of natural gas that in my view will 
increase the supply of natural gas in this country for at least 
the next decade by a minimum of 5 percent per year. What the 
market wants to do with that in terms of making cleaner cars, 
making cleaner electricity, I will leave that to the market, 
but I will tell you that it will take a while for people to 
adjust to this news----
    Mr. Blumenauer. I am sorry. I want to move to Mr. Manning.
    I appreciate what you are saying, but I think it is very 
important if we are going to be able to roll the--nothing that 
we are hearing indicates that some of the peripheral things are 
going to make any difference for 10 or 15 years, but you are 
looking for policy changes that will make a difference almost 
immediately. You have confidence that we can do this within the 
range of supply?
    Mr. Manning. I am sorry, I missed it again.
    The tankless water heater which we now have to source from 
Europe gives you a 70 percent reduction in heat energy to heat 
water, and it only heats water when you need it. So there is a 
tremendous amount of low-hanging fruit out there. I think you 
are right. Decoupling and those sorts of policy initiatives, 
like the OCS debate, that starts to bring in the states and the 
opportunity for the federal government to work with the states 
and to create some sort of a set of rules with a transparent, 
clear understanding of how to get this stuff done. The cheapest 
power plant is the one that you never build.
    Mr. Blumenauer. I appreciate your courtesy. I apologize 
that I am running off to vote and leave you to your own 
devices. But I would like to follow up with each of you about 
the policy framework that we should be doing here in the next 
10 years. One of the things we are advocating is with Senator 
Obama, with the House Democratic leadership and trying to make 
it part of a discussion, is an infrastructure plan for this 
century that is realistic about what we do with energy and 
making these pieces, particularly as it relates to natural gas, 
be able to coax as much out of that as possible.
    I would be very interested in being able to explore with 
you the sorts of--your comfort level for being able to go ahead 
for the next dozen years or so, and the specific policies that 
we might be able to do to encourage transition, encourage 
appropriate conservation. I mean, I feel good that my hot water 
heater in Portland is not working when I am here in Washington, 
D.C., but there are other things I think large and small that 
we would really like the benefit of your counsel so that when 
we finish the partisan knife fighting and we do all this stuff, 
we are able to move forward with things that will make a 
difference this next decade.
    I appreciate your courtesy and how informative your 
testimony was. It was very useful.
    [RECESS]
    The Chairman [presiding]. So ladies and gentlemen, we 
welcome you back to this Select Committee on Energy 
Independence and Global Warming, and our discussion of the role 
which new discoveries of natural gas can play in our energy and 
climate change legislative deliberations in our country.
    I am looking around, and not seeing any member, I will 
recognize myself, which is the prerogative of the chair.
    Mr. German, Honda has some of the best engineers in the 
world. I find it interesting that after building a compressed 
natural gas passenger vehicle, Honda's engineers have pursued a 
fuel cell passenger vehicle based initially on producing 
hydrogen from natural gas. Explain to the select committee 
Honda's reasoning here. Was this driven by a desire to find a 
more efficient way to use natural gas in the transportation 
sector?
    Mr. German. No. The fuel cell----
    The Chairman. Would you turn on the microphone, please?
    Mr. German. It should be on.
    Our fuel cell vehicle uses compressed hydrogen simply 
because right now that is the best option for powering a fuel 
cell vehicle. We looked at all the other ways of doing it, at 
least the current states of technology, and that was the best. 
If you are using compressed hydrogen, then there are a lot of 
things you can learn from compressed natural gas, both from the 
customer side, how they respond to refueling, especially 
refueling at home.
    We see the home refueling stations as a way to help break 
the chicken-and-egg problem that you have with new technologies 
and new fuels. It is very interesting in that this home 
refueling is very similar for both natural gas and for 
hydrogen, so there are just a lot of similarities there. So we 
have been continuing our natural gas program. One of the 
advantages of that is that we get experience that we think will 
translate into fuel cells.
    The Chairman. Now, can you talk a little bit about this 
heat electricity product that you have that people can purchase 
in their homes? How many have you sold in the United States?
    Mr. German. So far in the U.S. it is probably double 
digits, but this is something that we have been selling in 
Japan----
    The Chairman. So more than nine.
    Mr. German. More than nine, yes. [Laughter.]
    But we have been selling this similar product in Japan 
since 2003 or 2004, and we have sold 70,000 of them.
    The Chairman. Seventy-thousand of them in Japan?
    Mr. German. In Japan.
    The Chairman. And they are in residences?
    Mr. German. Yes, primarily.
    The Chairman. And is there a tax break for that in Japan?
    Mr. German. I don't know. Sorry.
    The Chairman. Would it be advisable for us to have a tax 
break here in the United States to encourage people to move in 
that direction?
    Mr. German. In general, Honda thinks that temporary near-
term incentives can be really helpful in getting a new 
technology started. So yes, that could be something that could 
help jumpstart it here in the U.S.
    The Chairman. Okay. Is there a difference between the 
receptivity in the Japanese market and the U.S. market? Or is 
it just that you focused on Japan first and you are just 
breaking into double digits here because of a later start?
    Mr. German. Yes. We have just started in the U.S. and we 
are starting in the Northeast. There is probably one major 
difference between Japan and the U.S., and that is the 
complexity of the regulatory structure. Where in Japan 
basically you work it out with one place and you have the whole 
country covered, and here you have every utility and every 
state has different rules.
    The Chairman. So you can sell the electricity back into the 
grid in Japan?
    Mr. German. Yes.
    The Chairman. And you can't really do that in the United 
States.
    Mr. German. No.
    The Chairman. Is that a law we have to change here to move 
to net metering?
    Mr. German. It doesn't necessarily require a law. 
Certainly, a law would help streamline things, but the 
utilities and the PUCs certainly have the ability to allow it 
and to set it up without that.
    The Chairman. Right, but----
    Mr. German. Yes, they are not.
    The Chairman. Except for the fact that they are not.
    Mr. German. Right.
    The Chairman. If you leave aside the fact that they are 
not, do you think a law would help?
    Mr. German. Yes, it would certainly help. There is a major 
market----
    The Chairman. If there was a law that actually allowed for 
net metering across the whole country and you sold 70,000 units 
in Japan right now, how many units do you think you could sell 
in the United States?
    Mr. German. I can't answer that. One of the problems you 
have is that----
    The Chairman. You are not in--this is the development 
sector. [Laughter.]
    Mr. McClendon would have answered that section. Okay?
    Mr. German. Honda made the mistake of sending an engineer 
here. [Laughter.]
    The Chairman. My time is--okay.
    Mr. German. It is a unique product. Anytime you have a 
unique product, you have a consumer education process that you 
have to go through to get them comfortable with it.
    The Chairman. Okay. I won't be throwing bigger watermelons 
across the plate for the rest of the day.
    Let me turn and recognize the gentleman from Oklahoma, Mr. 
Sullivan.
    Mr. Sullivan. Thank you, Mr. Chairman.
    I have some questions for Mr. McClendon. Can you speak 
about the outlook for Barnett shale and Marcellus shale? Is 
there adequate pipeline capacity to market the Barnett shale 
production?
    Mr. McClendon. Sir, let me give you some context here. The 
Barnett produces about four bcf a day out of about 53 bcf 
produced in the U.S. right now, so about 7 percent or 8 percent 
of the nation's gas--the largest gas field in the country. The 
Marcellus you referred to is the formation that underlies 
Pennsylvania, New York and parts of West Virginia.
    There is sufficient pipeline capacity now, but as 
production increases both in those two areas and also in the 
Woodford in Oklahoma and in the Haynesville in Louisiana, we 
are going to have to build more pipelines. But the industry has 
the financial ability to do that. We have the responsibility to 
do that, and we will.
    Mr. Sullivan. What is the break-even point for gas shale?
    Mr. McClendon. Today, I believe the break-even point using 
Henry Hub pricing is somewhere around $8 per MMBTU for the 
natural gas industry. That includes some return on investment. 
That is why I think that the range of prices for natural gas 
will over the next call it 3 to 5 years average between $9 to 
$11 per MMBTU.
    Mr. Sullivan. Are you currently considering exploring in 
areas of Pennsylvania that were under drilling moratorium that 
were lifted by Governor Rendell?
    Mr. McClendon. We have operations or leaseholds, rather, 
all across Pennsylvania. We are drilling there today. We were 
not affected by the previous moratorium, but we are now 
affected by one in New York, which has been passed by the 
governor in the past couple of weeks that has shut down 
Marcellus drilling in New York until further environmental 
impact work has been completed.
    Mr. Sullivan. Thank you very much.
    Mr. German, how many cars are you guys making right now--
the ones that are dedicated NGVs a year?
    Mr. German. Yes. Since we introduced it in 1997, we have 
sold about 7,500. Currently, the demand has spiked with the 
spike in gas prices. We can't currently keep up with it, so it 
is something we have to evaluate increasing the sales in the 
future. But it has been averaging less than 1,000 a year so 
far.
    Mr. Sullivan. How much do they cost?
    Mr. German. It is $25,000, which is about a $7,000 
incremental over a comparable Civic.
    Mr. Sullivan. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Do you rest your case? Natural gas speaks for 
itself.
    The gentlelady from California, Ms. Solis, is recognized.
    Ms. Solis. Thank you, Mr. Chairman.
    I just wanted to mention that on Monday I had the privilege 
of attending a special hearing that was held between 
Republicans and Democrats in New Orleans. The subject matter 
was energy independence and security, and a lot of the issues 
were talked about here.
    But I am still kind of concerned about comments that Mr. 
Smith made regarding our inability to open up more 
opportunities to drill, when the facts are that we do have 
about 68 million acres that are available in the national 
petroleum reserve that is available that we are not really 
taking advantage of. Those are already available. There are 
leases. There are permits.
    I haven't heard of any major environmental problems that 
have come up to restrict any further opportunities there. In 
fact, several years ago one of the refinery companies in 
Arizona, in Yuma to be more exact, asked for permits and they 
were issued, and the company there decided not to go forward as 
a result of costs--not environmental costs, but costs that they 
thought wouldn't be profitable, so they didn't go ahead and 
build their refinery.
    With respect to the outer continental shelf, we have passed 
legislation in the past 2 years to allow for drilling. In fact, 
that was something that was done by this Congress. I don't 
understand why there is this insistence that we continue to 
have this dependence on fossil fuel when we know that it is 
detrimental, it is limited. There should be other ways of 
looking at alternative fuels and technology.
    My question at that debate, and would be for you, is what 
are the petroleum companies doing to invest in renewable 
technologies? I mean, obviously you are up against many 
financial factors as well, in terms of having adequate 
equipment and the workforce and what have you. But what are we 
looking at down the line so that we can really kind of cut our 
dependency on what happens in the Middle East and geopolitical 
matters that we are never going to be able to control?
    So I would like to have a response.
    Mr. Smith. I think that is a very appropriate and good 
question. Natural gas, as you know, is really the silent 
partner to renewable energy. It is the thing that takes 
renewable energy from a vision to a reality. Today, wind power 
provides .77 percent of our electricity demand and it has the 
potential to grow quite a bit more. Solar is about .01 percent 
of our electrical demand today, or electrical production.
    When utilities build new production or new capacity for 
natural gas or for wind and solar, they want to be able to 
ensure their customers that when the sun isn't shining and the 
wind isn't blowing that they can still produce electricity for 
homes and for businesses. So natural gas is that source of 
power that gets billed as the intermittent source that backs up 
those renewable supplies of energy.
    So it is not an either-or. Natural gas is the partner to 
renewable energy as we move towards a more renewable future.
    Ms. Solis. But you didn't answer my question, though. What 
kinds of investments can your industry make to help? Or is 
there any talk about that? I mean, that is what is disturbing 
to me. We are in a recession. We have high unemployment. We 
have people paying outrageous amounts for their energy, their 
electricity, and it is going to get worse. In places like mine 
in California, it is unstoppable. We are seeing a little 
relief--20 cents--but that doesn't make it. People need to step 
up to the plate and take responsibility.
    I am glad to hear there are other sources of energy that we 
can look at, and I agree that liquefied natural gas is 
something that we should be looking at. But it needs to be done 
also in a very safe manner because the placement of facilities 
in communities, there was a project that was going to be placed 
in East Los Angeles and many in the community were very alarmed 
because they were not notified appropriately about what 
elements were being taken into consideration--safety, first 
responders, who is responsible if there is something, an 
accident; who is going to be liable for much of that?
    So those are some of the questions I have also. I am not 
turning it off, but I am saying that I think there is an 
important factor there because there aren't a lot of 
regulations on the books also that talk about protecting where 
sitings are. And I don't even know if that is where we need to 
go on this, because we import a lot of our natural gas, but I 
think that it is something that we are going to have to talk 
about as well.
    The Chairman. The gentlelady's time has expired.
    The chair recognizes the gentlelady from South Dakota, Ms. 
Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    I again thank the witnesses.
    I support increased domestic production of natural gas on 
the outer continental shelf as well as on public lands. I think 
technology has brought us a long way to look at some 
unconventional ways of extracting this resource in an 
environmentally sound way. You know, it is all about how the 
mix of incentives that we set forth for the different energy 
sources that I think all should be on the table as we move 
forward to meet the nation's energy needs.
    One of the areas I wanted to explore, Mr. German, was an 
area you didn't get a chance to talk about in your opening 
remarks, but it is in your written testimony, and that is 
biogas. So with non-fossil renewable methane gas, whether it is 
coming from cellulosic biomass, whether it is coming from 
sewage and other organic material, if you could just explain 
for the committee, describe for us the current state of the 
technology for turning biogas into liquid fuel for use in 
conventional vehicles, and what more Congress can do to help 
advance renewable biogas.
    Mr. German. The current source that is already being 
utilized to some extent is natural gas that is produced as 
landfills deteriorate. It is just a matter of capturing it. A 
lot more could be done with that, but that supply is inherently 
limited. We should try to take advantage of as much as we can, 
but it is never going to be a large percentage of the fuel that 
is produced.
    The more interesting case is from cellulosic feedstocks, 
where a lot of work has been going into that. It is recognized 
that cellulose should have much lower greenhouse gas emissions 
and much lower energy needs than trying to produce ethanol from 
starches, for example.
    But there is a lot of work that still needs to be done on 
the development of that process, and it is by no means certain 
that fermentation of cellulosic is going to work better than 
some other processes. If gasification proves to be a better 
solution in the long run, now you could have a very large 
supply of renewable biogas.
    So now the question comes, what do you do with this biogas? 
You can either take it through another step and liquefy it, or 
you can use it directly, perhaps in natural gas vehicles. So 
looking down the road, if gasification of cellulosic feedstocks 
becomes feasible, then that could be a major boost to 
compressed natural gas vehicles.
    Ms. Herseth Sandlin. We certainly do hope it becomes 
feasible, and Mr. Manning, I want to hear from you as well. As 
you may know, in the farm bill, a different committee on which 
I sit, the Agriculture Committee, we took important steps to 
facilitate research and development of cellulosic biofuels, and 
we do hope that working with USDA and the Department of Energy 
that we will see the types of advancements made to make it 
commercially available to consumers across the country. I think 
there are some additional steps that Congress can take in that 
regard.
    Mr. Manning, did you have a comment?
    Mr. Manning. Very quickly. Our company was the first to 
capture methane off a landfill in Staten Island, probably 30 
years ago. You are exactly where you need to be, and of course 
there is the opportunity with agricultural waste, animal waste, 
but there is also the opportunity to use the whole chicken, for 
lack of a better word. I recently met last week with Tysons and 
partaking of what they are doing.
    So I think it is still very early days. I think it is also 
very interesting, coming from an urban environment like we do, 
the tipping fees, the refuse fees from our cities in this 
country, are enormous. So there should be a tremendous 
opportunity for Congress, I would think, to look at that as a 
very real option.
    As you know, the components, the methane components are 
quite practical. So there is a whole array of options. Part of 
the issue that we face, if I could just finish, is 
transmission--in other words, getting it from the farm to the 
load; getting it from the solar desert to the load; getting 
natural gas moved around. Transmission is a critical issue for 
Congress. We have been trying to build a pipeline that will re-
power a number of power plants in the New York area for 6 years 
without success. All federal approval is in place, and we were 
defeated. And that would just immediately back-out use of oil 
for natural gas. So that is a very important issue as well.
    Ms. Herseth Sandlin. I appreciate your comments. My time is 
almost expired, but you know, where I am from, we don't say use 
the whole chicken. We say we use the whole plant. You know, 
corn ethanol gets a bad rap, but there is a lot of agricultural 
waste when you are talking about corn harvests, whether it is 
corn stover, whether it is the corn cob. There is a whole host 
of opportunities here for us technologically.
    And I couldn't agree with you more on transmission, whether 
it is the siting of pipelines and the construction of those 
pipelines, or the siting of energy corridors to get the vast 
amounts of wind and solar that we have in certain parts of the 
country transmitted to more populated areas.
    So I thank you all for your testimony, and I yield back.
    The Chairman. Great.
    The chair recognizes the gentleman from Missouri, Mr. 
Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. McClendon, based on your testimony, I think you would 
agree that while natural gas is much cleaner, it is finite, and 
I think you mentioned we may have supplies for 100 years.
    Mr. McClendon. It is 118 today, and that is at least in way 
of thinking----
    Mr. Cleaver. We will all be gone when it runs out, most of 
us.
    Mr. McClendon. It is 118 years on what we know today, with 
the technology that we have today, on the resources that we 
have found. So it is a pretty ingenious human species that we 
are, and I would think 50 years from now we will find more gas 
and we will find more ways to get a higher percentage, a higher 
recovery factor out of these shales that we are drilling into 
right now.
    Mr. Cleaver. The point I want to make along those lines is 
while I agree with your testimony, and I also think that we are 
probably not moving fast enough toward using natural gas in any 
number of ways, but my concern is that it is invasive when we 
extract it. How do you compare the process of getting natural 
gas with fossil fuel--well, both are fossil fuels--but oil in 
terms of their impact on the environment?
    Mr. McClendon. Well, when you talk about invasive, I think 
about a weed that takes over the country. I think the good news 
today is that the natural gas that we are finding in the shales 
is being found, frankly, underneath gas fields that have 
already been in production for decades--Oklahoma, Louisiana, 
Arkansas, Texas. And so these are places where people are 
comfortable with additional drilling. Pennsylvania is the 
cradle of the American oil industry, 1859.
    So I wouldn't agree that we are an invasive species. We are 
certainly drilling in more areas today, but I think the good 
news is 33 of the 50 American states do produce. I would say 
that if you are looking at the total environmental impact--
natural gas versus oil versus coal--that natural gas ends up 
being very low on the environmental impact scale. So it is 
produced today in areas where people want it to be produced, 
and it is the key to rolling back oil prices, gasoline prices 
to where they were 5 years ago. I know of no other way to do 
that, but natural gas can do that.
    Mr. Cleaver. I represent Kansas City, Missouri, but I was 
born and raised in Texas, and went to college, my first year, 
in Oklahoma. There were gas and oil fields less than a mile 
from the house, from the public housing project where I grew 
up. But the environmental issue is something that I am 
concerned about.
    Many Texans probably are as confused as me. You drive down 
the highway and you will see flames coming out of the ground, 
just flames with no apparent danger. My assumption is that that 
is natural gas.
    Mr. McClendon. My assumption would be it would be illegal. 
Our company operates 38,000 wells, the largest number in the 
country, and we are not allowed to flare gas anywhere in the 
United States. So I really need you to think about, on the 
environmental balance sheet, natural gas is the fuel that can 
back out dirtier oil, back out dirtier coal, and on a net-net 
basis we are much ahead by using natural gas.
    Mr. Cleaver. So you have never seen the flames?
    Mr. McClendon. I have seen them in pictures and I know that 
in the Middle East today and in Nigeria today they flare a lot 
of natural gas, but in the states where we operate, we are not 
allowed to flare natural gas, and we are the biggest producer 
of gas in Texas, so that is news to me that you can flare gas 
in Texas. Again, maybe a long time ago I think you probably 
could, but----
    Mr. Cleaver. Well, are you suggesting that I am old?
    Mr. McClendon. Pardon me? [Laughter.]
    You know, you are not any older than I am I don't think, 
and things have changed a lot in our lifetimes, for sure.
    Mr. Cleaver. Yes, I haven't seen it in the last few years 
because I don't live there, and maybe it is a practice that has 
been discontinued.
    Mr. McClendon. It really has. I mean, for a lot of reasons, 
not the least of which is for environmental reasons, but also 
why would you flare something that is as valuable as natural 
gas today? You capture it and sell it.
    Mr. Cleaver. Well, yes, that was the point I was going to 
make. That was the question I was going to ask, about 
environmental damage and also wasting.
    All right. I yield back the balance of my time.
    The Chairman. Great. The gentleman yields back.
    The chair recognizes the gentleman from Washington state, 
Mr. Inslee.
    Mr. Inslee. Thank you.
    There is I think a discrepancy in a couple of the 
testimonies that I want to see if we can clear up. I think Mr. 
German in his testimony provided a graph showing CO2 
emissions reductions associated with natural gas. It was well-
to-wheel emission reductions and it showed CO2 
reductions, as I read it, about 42 percent or something in 
there. Is that about right, Mr. German? Am I reading that?
    Mr. German. That is for the Civic GX compared to an average 
vehicle.
    Mr. Inslee. Okay. And I was reading this, I think Mr. 
Manning's testimony that quoted a figure of 90 to 95 percent 
reduction, as I understand it.
    Mr. Manning. [OFF MIKE]
    Mr. Inslee. I am sorry?
    Mr. Manning. Yes, I am sorry. I apologize. That number 
relates to if you take old technology and convert to natural 
gas. In other words, the least efficient, we are making 
reference there to displacing ancient technology.
    Mr. Inslee. I see. Okay.
    Mr. Manning. Mr. German is comparing new to new, which is 
probably the better number.
    Mr. Inslee. Got it.
    Mr. Manning. We are talking about getting old vehicles off 
the road with brand new technology running on natural gas.
    Mr. Inslee. So if we replaced--comparing new gasoline-run 
internal combustion sleet, a new internal combustion gasoline-
powered fleet, with a new internal combustion natural gas-
powered fleet, the best evidence is we would reduce 
CO2 emissions about 40 to 42 percent. At least that 
is Honda's experience, then, is that right?
    Mr. German. If you convert a larger car to natural gas, the 
savings won't be as large. If you converted the entire fleet, 
the CO2 reductions would probably be 25 to 30 
percent.
    Mr. Inslee. I will take your word for it. I know there is a 
good rationale, and I won't get into it. So if we were, as 
opposed to replacing our fleet with gasoline-powered internal 
combustion engines, if we replaced the whole fleet with natural 
gas internal combustion engines with the same model-type and 
size, the CO2 reductions would be about what number?
    Mr. German. About 25 to 30 percent.
    Mr. Inslee. About 25 to 30 percent. Okay. Thank you.
    Mr. German. Of course, this would be on top of any 
technology improvements you make to the baseline vehicle.
    Mr. Inslee. Right. Right, which can be very significant, by 
the way. We are very excited about that. I just drove a plug-in 
hybrid that Toyota has made just as kind of a prototype 
yesterday, and of course Honda's got a lot of fuel cell 
progress, and GM has I think made a commercial decision to do a 
plug-in hybrid vehicle, the Volt. I believe this is really in 
the near-term future, the electrification of the car. So I am 
very excited about that, but we have to have the electricity 
obviously to run the cars. So I want to ask you about that.
    We are having this debate, this discussion of offshore 
drilling in part for natural gas. I want to try to ask you all 
about the parameters of the possible of natural gas exploration 
domestically, compared to the potential parameters for other 
fuel sources. For instance, I am advised that the National 
Renewable Energy Lab found that if you look at the land 
domestically that could be available just for solar 
technology--let's just take solar-thermal technology, to use 
thermal energy with mirrors that bounce the heat onto a pipe, 
you heat up salt, and you drive a steam turbine engine.
    They found that if you exclude mountain ranges, if you 
exclude cities, if you exclude environmentally protected areas, 
if you exclude areas that the grade would not allow--if you 
just look at the areas that are really suited for solar energy 
in the American Southwest, we could produce seven times more 
than the entire energy usage of the United States, just using 
solar-thermal power.
    Now, today that would be considerably more expensive than 
natural gas with today's situation, before we enjoy scales of 
economy. But nonetheless, it is significant. I just met with a 
company that has plans to produce in America--it is the MON 
Company. It is now a German company, but they tell me that in a 
90-mile area of the Southwest, you could produce all of the 
electricity the United States used and run, according to the 
Pacific Northwest Lab, and run the entire transportation system 
of the United States once cars are electrified, which I think 
is relatively soon.
    So I guess looking at those enormous potential growth, how 
does natural gas stack up as far as potential growth in 
domestic production? Is it the same? Is it more? Is it less? 
Just give me some ideas in that regard.
    Mr. Manning.
    Mr. Manning. If I could just take the first shot at that. 
The critical role of natural gas--and this has been discussed a 
little bit--is that technology when the sun goes down and the 
load is still maintained for a couple of hours, the best way 
obviously as you say you have salt storage. There are other 
ways to do that, but a lot of the benefit of natural gas is to 
accommodate intermittent power, be it wind or solar. The 
opportunity to balance the grid, which is a critical need, is 
best with natural gas generation because it can come up very 
quickly.
    Large baseload plants can't respond quickly. Natural gas 
plants can. So you could use a combination of peaking plants. 
This leaves aside the whole conversation about high-efficiency 
technologies and distributing your generation. There are lots 
of things that you can do, but what my friend referred to here 
was the silent partner of renewable power is natural gas 
because it can facilitate.
    What you are talking about is large desert solar, massive 
installation, the cover story in Scientific American last 
year--absolutely, that opportunity is there, but natural gas I 
do believe still plays a major role. But we have also been 
speaking about the opportunity to use natural gas for things 
like the freewatt unit by Honda, where you can actually--
natural gas is very efficient in its final use. It can be very 
efficient at the burner tip.
    So then, of course, one of the biggest issues and the 
challenges that you referred to in terms of major central plant 
solar is transmission. How do you get that power from those 
large opportunities into the load? And so transmission is very 
difficult to do, and if you only want to build transmission 
that is just intermittent power, that is just solar or wind, 
which of course, you know, I recognize that is important in 
your bill.
    The challenge that we have, of course, then is how you 
balance that load. And that is an area of real challenge for 
our industry.
    Mr. Inslee. There is an answer to that, which is pass my 
bill on establishing a high-capacity corridor. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    What we will do is we will go to a round of 2-minute 
questioning from the members.
    Mr. McClendon, I would like to talk to you about water, the 
role that water plays in the hydraulic fracturing. New York 
state has just passed a law which requires there to be a 
consideration of the environmental impact that this new natural 
gas drilling will have on the water supply. Can you talk about 
it?
    Mr. McClendon. I can. Water cannot be separated from the 
discovery of natural gas any more than water can be separated 
from any industrial process. It is part and parcel of 
agriculture. It is part and parcel of industry, and we have to 
have a lot of water to drill our wells.
    Now, how do we go about getting that water? We operate in 
some of the most arid parts of the United States--west Texas, 
western Oklahoma--places with less than 10 inches of rain. We 
do a good job of building collection dams for water in those 
areas. We use municipal water. In New York state and 
Pennsylvania, there is a fair amount of stream water that we 
think we can access.
    We have to work with the Susquehanna Water District, the 
Delaware Water District, and other water districts, but we are 
just like any other industry that comes to an area and wants to 
set up shop to create jobs. We are going to have to have water 
and we will be responsible users of that water.
    The Chairman. Okay, great. I think it is going to be a big 
issue for us to have to deal with. This water issue is not 
unlike the corn, ethanol, food issue. You know? You wind up 
with a tension, and I think we are going to have a tension here 
on water and we are going to have to get down to the bottom of 
it and create a policy.
    One final question, yes and no. You were good to do the 
outer continental shelf drilling issue, and each of you 
expressed a lack of expertise in it. That is subject material. 
So I am going to give you another issue. Pending before the 
Senate right now is the extension of the renewable tax credit. 
We have passed it through the House four times. Should the 
Senate pass the renewable tax credit before we adjourn this 
year, and put it on the president's desk?
    Mr. McClendon.
    Mr. McClendon. I don't know really anything about it.
    The Chairman. You said earlier you wanted all assets on 
it--so this is how to get the asset out there.
    Mr. McClendon. I am just there to provide the firm 
foundation underneath renewables, and if the market wants 
renewables----
    The Chairman. Okay.
    How about you, Mr. Smith?
    Mr. Smith. Who pays for it?
    The Chairman. The American taxpayer, the same people who 
give the tax breaks to your industry. [Laughter.]
    Who else?
    Mr. Smith. I would ask, with the prices we have today for 
energy, why aren't those sources of energy competitive on their 
own?
    The Chairman. That is what we are saying about the natural 
gas tax breaks, the oil tax breaks, so thank you for raising 
that issue.
    Mr. Harris.
    Mr. Harris. Yes, an unqualified yes.
    The Chairman. Okay, thank you.
    Mr. Manning.
    Mr. Manning. Unqualified yes, and it should be a top 
priority.
    The Chairman. Thank you.
    Mr. Wells.
    Mr. Wells. Yes.
    The Chairman. Thank you.
    Mr. German. Yes.
    The Chairman. Thank you, Mr. German, very much.
    That completes my time. I will recognize the gentleman from 
Oregon, Mr. Blumenauer.
    Mr. Blumenauer. Thank you.
    I am curious if any of you have some thoughts or 
observations about, as we are dealing with the primary role 
that coal is playing now and is going to probably continue to 
play for the foreseeable future, even with natural gas as a 
transition, if there is some potential in your judgment for 
some of the technologies to create gas in the coal seams, some 
of the processing that is underway sort of dealing with a 
combination of carbon sequestration and conversion in a way 
that appears to have some promise.
    Mr. Wells.
    Mr. Wells. Yes, excellent question. As part of our effort 
to diversify our sources of energy today for pure energy, we 
are 99 percent dependent on natural gas, and are looking into 
the gasification of coal into natural gas. We have several 
projects that we are working with partners around the United 
States looking at deploying that.
    Mr. Blumenauer. Great.
    Mr. Wells. As part of that gasification process, you do 
produce a purer stream of CO2, which makes the 
potential for carbon sequestration much easier.
    Mr. Blumenauer. Mr. McClendon.
    Mr. McClendon. My opinion is it is completely unnecessary. 
You have an inferior molecular product in the form of coal. You 
are trying to turn it into a superior molecular product in the 
form of natural gas. Nobody is trying to coalify gas and there 
is a reason for that. Gas is a superior environmental product 
to coal. People want to gasify coal for a reason. Once you are 
done, you still have a lump of carbon over there that you have 
to get rid of.
    So I would ask Congress to spend more time thinking about 
how to enhance the production of the superior molecular 
product, natural gas, as opposed to spending billions of 
dollars on coal gasification.
    Mr. Blumenauer. There are people who are using the 
technology, as I understand it, developed by Hitler and Stalin, 
that looks promising in terms of actually being able to 
sequester that carbon. But you think not?
    Mr. McClendon. I sure haven't seen it, and I notice that 
Congress killed most of the funding for that research earlier 
this year.
    Mr. Blumenauer. It was the president that pulled the plug 
on it. It was not the Congress.
    Mr. McClendon. Okay.
    Mr. Blumenauer. We put money behind it because we were 
trying to have a balance, and the administration killed it.
    The Chairman. The gentleman's time has expired.
    Mr. Blumenauer. Can I just see if anybody else had some 
thoughts on gasification?
    Mr. Smith. Yes, just a quick comment on that. Basically in 
countries where the coal gasification is utilized is in 
countries where there is no domestic source of natural gas, 
basically.
    Mr. Blumenauer. Thank you.
    The Chairman. The chair recognizes the gentleman from 
Missouri, Mr. Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman.
    I mentioned the D.C. buses with the signs on natural gas. 
What--any of you--how much do you think we can do to create a 
higher level of natural gas usage in vehicles? What amount of 
natural gas that is available could we inject into the market 
right now to power vehicles?
    Mr. Manning. If I could just start, I can't quantify that 
immediately, but what I can tell you is that Long Island Bus 
has 400 buses 100 percent committed. They did it when it was 
non-economic to do so. They did it in large measure with 
incentives from the company and from the state and from the 
federal government a number of years ago. Now, it probably 
makes good economic sense, now they are ahead of the game.
    As I indicated, there is a lot of interest right now. We 
are probably over one-third of the buses in the Massachusetts 
area are now converted to natural gas. It is a money issue. 
There is competing technology in diesel hybrids. One of the 
numbers that we did have in our testimony is that you have a 99 
percent reduction in particulate when you have a natural gas 
vehicle bus.
    The beauty of buses, of course, is they are centrally 
fueled, so that we are big fans of natural gas vehicles, but 
our success has been where they are centrally fueled, such as 
buses. But what we had to do, we built 17 gas depots in New 
York City. We built 15 in Boston, and we built the Jackie 
Gleason bus garage for $3 million 2 decades ago to force the 
MTA's hand to get them to do this. They had a bit of a love 
affair with diesel hybrid. Now, they are coming back to natural 
gas. It may be a price issue, but it is a money issue, but it 
is there.
    The Chairman. The gentleman's time has expired.
    Mr. McClendon has to leave. We usually ask the witnesses to 
give us a 1-minute summation. So before I recognize Mr. Inslee, 
could you give us your 1-minute before you run out the door?
    Mr. McClendon. Certainly. My 1 minute would be, as you all 
go home for recess, I hope that you take back the message to 
your constituents that you have a plan that can lower their 
gasoline costs in half; that you can allow them to drive 
environmentally more friendly cars; and that you can allow them 
to use a product that creates American jobs as it is consumed; 
and use a product that enhances national security.
    Natural gas does all that, and this industry can increase 
natural gas production by at least 5 percent per year for at 
least the next decade. Please think about your policies with 
regard to natural gas, with a mind-frame of abundance, rather 
than scarcity.
    The Chairman. Thank you, Mr. McClendon, very much.
    Mr. McClendon. Thank you for the opportunity to be here.
    The Chairman. Thank you, sir. Thank you for being here.
    The chair recognizes the gentleman from Washington state, 
Mr. Inslee.
    Mr. Inslee. Yes, a question for the whole panel. Are any of 
you opposed to the adoption of a cap-and-trade system to limit 
the amount of global warming gases emitted and have a permit 
system for those who are emitting them? Are any of you opposed 
to the adoption of such a system?
    No one is opposed?
    Mr. Smith. I think the devil is in the details. I think 
everyone would want to see the details of that plan before they 
blindly said yes.
    Mr. Inslee. Well, do you think, Mr. Smith, do you think we 
ought to have a national limitation on our emissions of global 
warming? And do you think we ought to have a permit system that 
polluters pay for to pollute?
    Mr. Smith. I think one in five Americans today currently 
qualify for energy assistance, and they are struggling to pay 
their heating and electricity bills. They are struggling to get 
to work. They are struggling to pay for their food. I think you 
need to ask the American public if that is their highest 
priority is to make energy more expensive or if there are more 
creative market-based approaches to help lower the price of 
energy, while also reducing carbon emissions and other 
greenhouse gases.
    Mr. Inslee. So do you think polluters should pay to pollute 
in this country? And let me tell you, I ask you, when you go to 
the garbage dump and you unload your pickup load of stuff, I 
bet they charge you $10 to $20 to do that where you live. You 
are shaking your head yes.
    So do you think that industries that use our one atmosphere 
as a refuge dumping spot should have to pay for the right to 
use that as a garbage dump?
    Mr. Smith. I am not sure if I understand. I think generally 
what you are saying, or what you are asking me is should there 
be a cost to pollute, and I would agree with that. That is 
probably fair.
    Mr. Inslee. I appreciate that. I will remind you of that 
next year when we are working on this cap-and-trade system. 
[Laughter.]
    Thanks.
    The Chairman. That completes the time for questions, so we 
will go to the summation of each of our witnesses, 1 minute 
apiece, what the big thought is that you want us to remember as 
we move forward legislatively.
    Mr. Smith.
    Mr. Smith. Thank you.
    Well, it is clear from the testimony today that energy 
drives our economy, and we have heard compelling reasons why we 
need more natural gas for transportation, for food, for 
feedstocks, and for electricity. Natural gas, especially off of 
federal lands, is a critical supply today and it looks like it 
will be for quite some time. It is proven. It is a near-term 
solution, and we can't kick the can down the road anymore on 
the deciding whether or not these areas should be open for 
development. It will just be delaying those problems for future 
generations, and I hope this Congress will look at opening the 
OCS and providing better, more timely access for development in 
the intermountain west.
    The Chairman. Okay.
    Mr. Harris.
    Mr. Harris. Yes, I think I would like to close by saying 
global warming and energy security are issues we should 
address, and I believe the way to address those issues are 
access to resources and the ability to build the infrastructure 
necessary to bring those resources to the marketplace, and also 
import LNG and other products that will diversify our energy 
supply.
    The Chairman. Mr. Manning.
    Mr. Manning. We have made an 80 percent commitment to 
reduce climate change emissions by 2050. We are 37 percent of 
the way there. I was a delegate to Kyoto in 1997 for 13 days. 
We have been working on this file now since about 1994, by my 
recollection, in terms of strategies. We think that this could 
be a critical component, the work that you are doing today.
    We think that gas is a critical facilitator of the 
technologies that we will need to do that. We would encourage 
you to give us a set of rules so that we can invest in a set of 
rules, probably involving cap-and-trade, and that kind of 
certainty will drive that kind of investment which we believe 
will allow us to use less fuel.
    Natural gas is a precious commodity. It facilitates a great 
deal of technological change. We should use it wisely.
    The Chairman. Okay. Thank you.
    Mr. Wells.
    Mr. Wells. Thank you.
    I sit here representing a solutions provider to a lot of 
the issues that we talked about today. My company alone 
develops products like styrofoam insulation, which that product 
alone saves over 200 million metric tons of CO2 each 
year. You mention in your opening the lightweight plastics that 
get to be used in automobiles, that allow them to be more 
efficient. We talked about landfill gas. We have been a pioneer 
in the use of landfill gas. Just last week, we signed an 
agreement with EnRel to use plant waste towards ethanol and 
towards auto fuels.
    But we sit on the natural gas margin. As natural gas prices 
will rise as demand increases, we will be the industry that 
leaves. We want to invest in the U.S. We want to provide these 
solutions to the U.S. by being in the U.S. We ask for policy 
that allows us to do so. Thank you.
    The Chairman. Thank you, Mr. Wells.
    Mr. German.
    Mr. German. Yes, hi. Certainly, needs are great and we need 
to pursue multiple avenues to meet our transportation needs. 
Natural gas has a lot of potential to be a significant part of 
the near-term solution, but there are a lot of other potential 
solutions and a long-term need to avoid mandates. Set 
performance standards. Let the best technologies win in the 
long term.
    Of course, this assumes equal playing fields for different 
technologies, and along those lines we would like to work with 
the committee on how to address selling electricity from our 
freewatt system back to the grid.
    The Chairman. Thank you, Mr. German, very much.
    We thank each of you. Obviously, if the predictions come to 
pass, this is an incredible development. Some of our witnesses 
are maintaining that there could be a doubling of natural gas 
production in the United States over the next 10 years. If that 
is true, it is incredible news.
    Right now, we produce about eight million barrels of oil 
per day in the United States; about 11 million barrels of oil 
equivalent in natural gas; and about 10 million barrels of oil 
equivalent in coal. If natural gas could be used to substitute 
for coal in the eventuality that a carbon capture and 
sequestration plan is not in place over the next 10 years; if 
natural gas could be used to displace oil in the vehicles which 
we drive--obviously in both global warming and in energy 
independence, there is something quite big as an ingredient, 
which is being added to the formula.
    We thank you for being witnesses at our first hearing on 
this subject. I think it is going to rise in prominence as each 
month passes as we try to put in place the policies to solve 
these problems.
    With that, this hearing is adjourned with the thanks of the 
committee.
    [Whereupon, at 3:51 p.m., the committee was adjourned.]
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