[Senate Hearing 110-1023]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1023

                ENERGY SECURITY: AN AMERICAN IMPERATIVE

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 22, 2008

                               __________

       Available via http://www.gpoaccess.gov/congress/index.html

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs




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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
   David McIntosh, Legislative Assistant, Office of Senator Lieberman
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
           Amy B. Carroll, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk
         Patricia R. Hogan, Publications Clerk and GPO Detailee
                    Laura W. Kilbride, Hearing Clerk











                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Collins..............................................     2
    Senator Voinovich............................................    11
    Senator Domenici.............................................    13

                               WITNESSES
                         Tuesday, July 22, 2008

T. Boone Pickens, Founder and Chief Executive Officer, BP Capital 
  Management.....................................................     4
Gal Luft, Ph.D., Executive Director, Institute for the Analysis 
  of Global Security, and Co-Founder, Set America Free Coalition.    25
Geoffrey Anderson, President and Chief Executive Officer, Smart 
  Growth America.................................................    28
Habib J. Dagher, Ph.D., Director, Advanced Structures and 
  Composites Laboratory, University of Maine.....................    31

                     Alphabetical List of Witnesses

Anderson, Geoffrey:
    Testimony....................................................    28
    Prepared statement...........................................    64
Dagher, Habib J., Ph.D.:
    Testimony....................................................    31
    Prepared statement...........................................    71
Luft, Gal, Ph.D.:
    Testimony....................................................    25
    Prepared statement...........................................    58
Pickens, T. Boone:
    Testimony....................................................     4
    Prepared statement with attachments..........................    41

                                APPENDIX

Deutsche Bank's Report titled ``From Shale to Shining Shale,'' 
  submitted by Mr. Pickens.......................................   125

 
                ENERGY SECURITY: AN AMERICAN IMPERATIVE

                              ----------                              


                         TUESDAY, JULY 22, 2008

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:35 a.m., in 
room SD-106, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman, Chairman of the Committee, presiding.
    Present: Senators Lieberman, Carper, Collins, Voinovich, 
and Domenici.

            OPENING STATEMENT OF CHAIRMAN LIEBERMAN

    Chairman Lieberman. The hearing will come to order. Thank 
you very much for being here. Good morning and welcome to this 
hearing, which is entitled ``Energy Security: An American 
Imperative.''
    The high price of gasoline today is literally wounding 
American families, businesses, and farmers, and it is causing 
the American economy to stagger. It threatens to impose 
terrible hardship this winter on families in places like New 
England that rely heavily on home heating oil.
    The near total dependence of our economy, the energy sector 
of it--and particularly the transportation sector--on oil is 
weakening our Nation's position in the world while enriching 
and strengthening a lot of countries in the rest of the world, 
many of them volatile and some of them just plain hostile to 
the United States of America.
    For well over a generation, America's leaders have seen 
this growing dependence on foreign oil but essentially sat back 
and watched passively as trillions of dollars of our American, 
hard-earned wealth has been used to buy that oil and thereby go 
to countries abroad. And during that more than a generation, 
America's leaders have done little or nothing about that 
problem. Apparently, it took $4-a-gallon gasoline to wake up 
the American people and their leaders here in Washington, to 
make all of us angry and anxious enough to get serious about 
breaking our national dependency on foreign oil.
    And at this moment of crisis and opportunity in America, T. 
Boone Pickens comes on to the national stage with a classically 
American message of honesty, determination, and can-do 
optimism. He said some things in that advertisement on 
television that I think are going to be long remembered and 
that have aroused a lot of Americans, who, like him, are sick 
of talk and want some action. I, for one, as a Senator who has 
been here for a while, have been very pleased with what T. 
Boone Pickens has done. And he is not just talk. He has offered 
us a plan--the Pickens Plan--which has been described, 
accurately, I believe, as a sweeping and innovative action 
program to loosen the grip that oil has on America.
    The Pickens Plan has attracted attention, in part, because 
the author of the strategy to cut our reliance on oil is 
himself a legendary oil man. It has also attracted attention 
because T. Boone Pickens has invested a large amount of his own 
money to educate the public about the crisis and his proposed 
response to it. But, most important, I think, the plan has 
attracted attention because it is bold.
    I am very pleased to have Mr. Pickens here as a witness 
today. Frankly, I am pleased because I hope his boldness will 
infect a lot of other people here in Washington with the power 
to do something about it so that we will be motivated to come 
together, forget our political differences, and do what is 
right for our country by getting something big done to break 
our dependence on foreign oil.
    We have taken incremental steps over the years, and I have 
supported them. But the fact is they are woefully inadequate to 
the crisis that America faces. I, for one, am spoiling for some 
bold T. Boone Pickens-type action, and I know I am not alone.
    We have a second panel that will testify today--three 
witnesses who, like Mr. Pickens, are well positioned to 
recommend strong steps that can enhance U.S. energy security 
and lift an economic burden from American families, farmers, 
and businesses.
    Immediately after this hearing, Senator Collins and I are 
going to join Senators Brownback and Salazar in taking one such 
bipartisan step. We are going to introduce a bill called the 
Open Fuel Standard Act. One of our witnesses, Dr. Luft, has 
helped craft that bill, and I would not be surprised if he 
discusses it this morning. For me, this morning's hearing 
provides an important opportunity to listen, learn, and then, 
together, act.
    Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman.
    First, let me thank you for holding this hearing this 
morning. You and I have worked on a lot of important issues 
together, and I believe that our undertaking this hearing is 
one of the most important, for the fact is that our Nation 
faces an energy crisis.
    The soaring price of oil is causing great harm to our 
economy, from the major industries that move our Nation to the 
small businesses that are the backbone of our communities. As I 
travel throughout Maine, I hear time and again of the hardship 
the skyrocketing cost of gasoline and home heating oil is 
causing families.
    Although it is still summer, Mainers are deeply worried 
about how they will stay warm this winter. One woman told me 
that every month, half of her Social Security check goes to 
meeting the budget plan for her home heating oil. She is 
literally choosing between keeping warm and eating well, a 
choice that no American should ever have to make.
    Beyond the impact on countless families struggling with 
high costs, our growing dependence on foreign oil is a threat 
to our national and economic security. One of our witnesses, 
Mr. Pickens, has vividly illustrated our ever-increasing 
dependence on foreign sources of oil in the Middle East and 
Venezuela. We are impoverishing ourselves while enriching 
regimes that are in many cases hostile to America. Ending our 
dependence on foreign oil and securing our own energy future is 
an American imperative.
    Our Nation must embrace a comprehensive strategy to reduce, 
and ultimately eliminate, our reliance on Middle East oil. We 
must expand and diversify American energy resources, and while 
doing so, improve our environment.
    To understand how we can meet the challenge of energy 
security, we can look back a half-century ago to another time 
when our Nation faced a great test. On October 4, 1957, America 
was in shock. We were stunned by an object the size of a beach 
ball, weighing just 184 pounds. That object was the Soviet 
satellite called ``Sputnik.''
    We responded not by giving up, but with our own satellite 
launches and later an energetic commitment to land a man on the 
Moon. A strong partnership of government, research 
institutions, universities, and the private sector formed to 
support a bold new initiative in scientific advancement. And, 
as a result, in 1969, an American flag flew on the Moon.
    The most remarkable aspect of that story is not that 
America met a challenge by developing superior technology, but 
that we embarked on that journey confident that the American 
spirit and know-how would triumph.
    By contrast, our Nation missed an enormous opportunity on 
another October day 35 years ago. On October 17, 1973, the 
Organization of Arab Petroleum Exporting Countries, the 
predecessor of the Organization of Petroleum Exporting 
Countries (OPEC), hit the United States with an oil embargo.
    The immediate results were soaring gasoline prices, fuel 
shortages, lines at filling stations, and an economic 
recession.
    Unfortunately, after the immediate crisis passed, the long-
term result was a steady increase in oil imports and a 
dependence that worsens each day. The 1973 embargo was a wake-
up call that we failed to heed. The current crisis is a fire 
alarm that we must not ignore.
    Meeting this challenge requires the skills and commitment 
that we see in our line-up of witnesses today--the 
entrepreneurial spirit of the private sector, an understanding 
of the specific economic and environmental issues at stake, and 
a commitment to the research and development of new 
technologies in all regions of our country.
    It also requires action by government. From establishing a 
timeline for energy security to undertaking critical 
investments to stimulate research in alternatives to expanding 
the production and conservation tax credits, government has a 
critical role to play.
    Above all, we must follow through. Let me give my 
colleagues one example of the lack of resolve that has been all 
too common for all too long.
    The easternmost city in the United States is Eastport, 
Maine. Visit this pretty little city, and you will find the 
remnants of a tidal power project initiated in the 1930s by 
President Franklin Roosevelt, who grew up observing the 
incredible tidal range there from his family's summer home on 
Campobello Island, across the bay in New Brunswick. Causeways 
to impound the water to turn the generators were built, as was 
housing for thousands of construction workers. Then, after just 
2 years of preliminary work, Congress pulled the plug and 
canceled the project.
    Why? Because Congress decided that it would be cheaper and 
easier to rely on conventional, fossil fuel generation closer 
to the population centers of southern New England. The 
challenges of building a transmission system to connect this 
rural region of Maine to the cities were deemed not worth the 
effort. Federal and State authorities failed to cooperate. The 
project was abandoned.
    The technology of generators to tap tidal power has 
advanced greatly since the 1930s. Regrettably, the need for 
government to be more farsighted has not.
    I have called for American energy independence by the year 
2020, the same 12-year time frame that elapsed between Sputnik 
and Apollo 11. Some experts believe that such a goal is too 
ambitious, but I know that no goal is ever reached without 
first being set. Just as the America of a half-century ago 
boldly stated its intentions to reach the moon, we must now 
declare our intention to achieve energy independence and energy 
security.
    Today, we will hear four proposals for improving America's 
energy security. I welcome Mr. Pickens to his first appearance 
on Capitol Hill since he unveiled his comprehensive plan to 
bolster America's energy security. Dr. Luft and Mr. Anderson 
will discuss transportation and community planning. And I am 
particularly pleased to welcome an engineering professor with 
whom I have worked closely, Dr. Habib Dagher of the University 
of Maine. I know that the Committee will be very interested in 
his presentation on harnessing the power of winds offshore and 
geothermal energy underground. Our witnesses will provide 
invaluable perspective on how we can progress toward a goal 
that is truly the new American imperative.
    Thank you, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator Collins, for that 
excellent statement and, if I may say so, for your own bold 
plan and proposal.
    Mr. Pickens, thanks very much for being here. Thanks for 
this extraordinary act of leadership, I would say patriotism. 
The Committee looks forward to hearing your testimony now.

 TESTIMONY OF T. BOONE PICKENS,\1\ FOUNDER AND CHIEF EXECUTIVE 
                 OFFICER, BP CAPITAL MANAGEMENT

    Mr. Pickens. Chairman Lieberman, Ranking Member Collins, 
and Members of the Committee, thank you for having me here 
today. We are more fragile today from a national security 
standpoint than we have been since World War II. The danger 
stems from our overwhelming $700 billion dependency on foreign 
oil annually.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Pickens appears in the Appendix 
on page 41.
---------------------------------------------------------------------------
    In 1945, we were exporting oil to our allies. By 1970, we 
were importing 24 percent of our oil. By the 1980s, it was 37 
percent. And in 1991, during the Gulf War, it was 42 percent. 
Today, we are approaching 70 percent.
    Much of our dependency is on oil from countries that are 
not friendly, and some would even like to see us fail as a 
democracy and as the leader of the free world. I am convinced 
we are paying for both sides of the Iraq war. We are giving 
them tools to accomplish their mission without ever having to 
do anything but sell us oil.
    This is more than a disturbing trend line. It is a recipe 
for national disaster. It has gone on for 40 years now. This is 
a crisis that cannot be left to the next generation to solve, 
and it is a shame if we do not do something about it. And we 
can, without bringing our economy and way of life to a halt.
    I have been traveling the country with a simple message. 
Our country is in a deep hole, and it is time to stop digging. 
I have a plan to do just that. The response from the American 
people has been overwhelmingly positive, and I have talked to a 
lot of people.
    The Pickens Plan starts with harnessing wind and building 
solar capabilities. We are blessed with some of the best wind 
and solar resources in the world. The Department of Energy 
estimates that we can produce 22 percent of our country's 
electrical energy needs just by utilizing the wind resources in 
the Great Plains. And, actually, if you wanted to go beyond 22 
percent, you could go to 40, 60, 80, whatever you want. That 
resource is unlimited. The plan substitutes electricity 
generated by natural gas-fired plants with wind-generated 
electricity. Natural gas-fired is 22 percent; the wind is going 
to replace that 22 percent.
    The natural gas freed up is directed to transportation 
needs of the country. The natural gas is cheaper, cleaner than 
gasoline, and its supply is plentiful. And, most of all, it is 
American.
    The Deutsche Bank today released a 50-page report,\1\ which 
is called ``From Shale to Shining Shale.'' What they are 
telling us is that there is a huge amount of shale gas 
available to us in the United States. Don't confuse this with 
the oil shale that is on the western slope of the Rocky 
Mountains. It is not the same geological situation.
---------------------------------------------------------------------------
    \1\ The Deutsche Bank report referenced by Mr. Pickens appears in 
the Appendix on page 125.
---------------------------------------------------------------------------
    The result would be a reduction of our dependency on 
imported oil by 38 percent. This plan is based on proven, 
existing technologies. It is simple, and it is doable. It 
provides a significant bridge--``bridge'' underlined--to the 
future that gives us time to develop the next generation of 
alternative fuels, including electric or hydrogen vehicles. It 
results in revitalizing much of rural America; $1 trillion of 
private investment would go into the Great Plains of this 
country. Instead of enriching other nations, we would actually 
recover our rural areas. It can be accomplished with private 
investment, but it cannot be achieved unless our national 
government clears the way for action.
    Government should move immediately to build the east-west 
transmission corridor to ensure wind power gets to market. This 
would include transmission rights-of-way. I envision this could 
be like in the Eisenhower Administration when they declared an 
emergency and built the interstate highway system. The way I 
recall it--and I have been around for a long time, so I should 
be able to recall it--there was an emergency because of the 
Cold War, and it was a way to move, if we had to move rapidly, 
our military.
    But I also feel that this is an emergency, too, and believe 
maybe that could be the approach as it has to be done quickly 
because we are pressed by not only the 70 percent we are 
dependent on foreign oil, but the $700 billion a year that we 
are pouring out. And I am convinced that $700 billion is a 
minimum number because I think the price of oil is going to go 
up. I would project out for 10 years it is going to cost us--if 
we continue on the same route that we are on now, we will have 
bought $10 trillion worth of oil from foreign producers. 
Government must extend for at least 10 years the production tax 
credits (PTCs). The cost pales in comparison to the cost of 
foreign oil.
    Let me quickly address what I call the five Pickens 
principles that should be used to assess any of the energy 
plans brought before you.
    First, the plan has to slash our dependence on foreign oil 
by at least 30 percent in 10 years.
    Second, the plan needs to rely on 100 percent North 
American resources.
    Third, the plan needs to utilize existing and proven 
alternatives to foreign oil.
    Fourth, the plan needs to call on private enterprise to 
execute quickly.
    Finally, the plan requires the Federal Government to clear 
the path for implementation.
    We have walked into a trap, and we have got to get out of 
it. We are the ones that put ourselves there. Nobody else. I am 
not pointing the finger at anybody. It is not going to help. 
But we have to work together and solve this national security 
crisis together. Thank you.
    Chairman Lieberman. Thank you, sir. That was an excellent 
beginning.
    We will do 6-minute rounds so we can get as many Senators 
involved as possible.
    Focus in, if you will, on exactly what you would like to 
see the Federal Government do to play its part in the 
implementation of the Pickens Plan. In other words, what are 
the kinds of tax credits, for instance, that you would like to 
see us adopt?
    Mr. Pickens. OK, let me identify--I will answer all 
questions. You know that. But I would like to comment that our 
problem and the reason why we have not done the things that we 
should have done to protect ourselves is because of cheap oil. 
And we sat here and really said, ``Send us the oil. Never mind 
the price.''
    Chairman Lieberman. Right.
    Mr. Pickens. Then the price went vertical, and when it did, 
everybody said, ``I can't stand it. I didn't know I was signing 
up for this.''
    And so here we are, and we can expect that price to remain 
vertical. It will maybe plateau and go again, but I promise 
you, the people that have the oil are going to get the best 
price they can for it. I do not care what they say. I do not 
believe them. I do not believe when they say we want to 
stabilize prices. When Russia, the largest producer with Saudi 
Arabia, both about 9 million barrels a day, are having meetings 
to stabilize the price, I do not think that is what they are 
talking about.
    Chairman Lieberman. I think you are right.
    Mr. Pickens. And here we are, we are the odd man out in the 
deal.
    The PTCs for 200,000 megawatts of power, the PTCs for that 
would be $15 billion a year, and that would start it moving. 
Now, I know you are struggling with the PTCs now, and it 
expires in December, and you extend it one year at a time. To 
stabilize the opportunity, to cause the money to come into it, 
you should give a 10-year extension of the PTCs. But when you 
look at $700 billion going out of the country every year for 
the purchase of oil, a $15 billion PTCs is somewhat 
insignificant.
    Chairman Lieberman. Right.
    Mr. Pickens. I am not saying throw money away. You know 
that. But the $700 billion is so overpowering. But, anyway, 10 
years with the PTCs----
    Chairman Lieberman. Would you change it at all from the way 
it is structured now to incentivize, for instance, wind and 
solar?
    Mr. Pickens. I am sorry. I cannot answer that. I am not 
that familiar with what the----
    Chairman Lieberman. Good enough. So you are saying lock in 
the production tax credit for a 10-year period so people can 
count on it.
    Mr. Pickens. Yes.
    Chairman Lieberman. And be prepared to put in $15 billion 
into that a year.
    Mr. Pickens. Right. And what will happen, I believe--and I 
have heard this, too, from some of the manufacturing companies 
that would like to be involved in developing some of this. They 
say if we could have PTCs for 10 years, we can move into the 
area, and we can develop this.
    Now, let me give you an example. I am doing the largest 
wind farm in the world at Pampa, Texas. It is 4,000 megawatts. 
That is about the equivalent of two and a half nuclear plants. 
We will have manufacturing there. We had an economic study, and 
it would create 1,500 jobs for that area. And it amounts to 
$380 million a year in economic benefit to that.
    And you can just see, I mean, the model town for this is 
Sweetwater, Texas. The town's population was 12,000, and it 
went below 10,000. Now it is above 12,000. Over 20 percent of 
the jobs there are related to wind energy. And you can see, I 
mean, it is a model that--it is not something that we studied 
and believed would happen. We know it will happen.
    Chairman Lieberman. In other words, it is real.
    Mr. Pickens. It is real.
    Chairman Lieberman. Some people are still coming around to 
the point that they think wind energy, and even solar, is a 
little bit flaky or a vision. But I have never associated the 
word ``flaky'' with you, now that I think about it. [Laughter.]
    But we know it works.
    Mr. Pickens. We know it works. And, if you look at the most 
wind energy per size of country, it is Germany. And Germany 
does not even have good wind. We have fabulous wind. I would 
like to ask you to look at the map on the right.\1\
---------------------------------------------------------------------------
    \1\ The posters referenced by Mr. Pickens appear in the Appendix on 
page 53.
---------------------------------------------------------------------------
    Chairman Lieberman. Yes. We have copies of that up here.
    Mr. Pickens. Yes, you have it in front of you there.
    Chairman Lieberman. Yes, we do.
    Mr. Pickens. But that is a fabulous resource for this 
country, and you have it all along the coast, too. I mean, that 
is available if the people want it.
    Now, I do not want it mandated that we have to develop for 
wind. I am telling you, the people in that central part of the 
United States call me. I have leased 300,000 acres to put wind 
turbines on.
    The other day we were in Sweetwater, Texas, and we were 
with an ABC crew. And the ABC people were asking questions, and 
they said to one of the locals there in Sweetwater, ``Are 
people unhappy with the development of the wind turbines?'' He 
said, ``No. The only people here that are unhappy are the ones 
that don't have the turbines.''
    Chairman Lieberman. Got it.
    Mr. Pickens. They want them because it is income to them, 
and they need the income.
    Chairman Lieberman. Last week, former Vice President Gore 
made a proposal, another bold plan, which is to try to get 
America to produce within 10 years 100 percent of its 
electricity from renewables. Is that doable, do you think?
    Mr. Pickens. I do not know. Mr. Gore and I talked the other 
day--his concern is global warming.
    Chairman Lieberman. Right.
    Mr. Pickens. And global warming for me is page 2. Page 1 
for me is national security because of the 70 percent that we 
are importing. And also the $700 billion that is flowing out of 
the country. And I told Mr. Gore, I said, ``Al, I will get to 
page 2 after I clean up page 1.'' So mine is a different 
approach. And he said, ``Well, you are for outer continental 
shelf (OCS) drilling.'' I said, ``I am for everything that is 
American. Everything.'' Am I opposed to the electric car? 
Absolutely not. Plug-in electric, let's do it.
    Chairman Lieberman. Flex fuel? Anything that works.
    Mr. Pickens. Anything that is American. I only have one 
enemy, and that is foreign oil. That is what I want to get rid 
of. And if you look at it, my plan will reduce our dependency 
on foreign oil by 38 percent. And it was not designed this way. 
It just happened to be. It is a coincidence, maybe. But we have 
plenty of natural gas to do what we need to do, and if we could 
use natural gas for transportation fuel as a bridge fuel to 
hydrogen, electric, or whatever, by 2050 we have to be off of 
hydrocarbons. We will still have hydrocarbons in the country, I 
hope, but that will not be our primary transportation fuel. But 
if you look at our imports, 38 percent of our imports come from 
the Mideast and Africa, the two most unstable areas.
    Chairman Lieberman. Interesting.
    Mr. Pickens. We can replace 38 percent of the 
transportation fuel with natural gas.
    Chairman Lieberman. Excellent. My time is up. Thank you. 
Senator Collins.
    Senator Collins. Thank you.
    Mr. Pickens, your plan focuses on land-based windmills in 
the Midwest, and it has the advantage of helping to supply the 
electricity needs of a lot of the populated areas of the 
Midwest. I am obviously not from the Midwest. I am from New 
England, which has a huge reliance on natural gas for 
electricity. It is about double the national average, and that 
is something that I agree we need to change.
    What do you think that we should do in the Northeast, and 
New England in particular, to help reduce our reliance on 
imported oil? Eighty percent of the households in my State of 
Maine use heating oil, so this is truly a crisis in our State. 
Do you have any suggestions for broadening your plan to help 
the coastal areas of our country?
    Mr. Pickens. I will use a broad brush sometimes, OK? And if 
it is too much, well, pin me down. But heating oil--that is 
foreign. Assume it is foreign because we are importing almost 
70 percent. Some of it may come domestic, but, anyway, that is 
foreign. Get that over to natural gas, is what we should do, 
and the Northeast should get off of heating oil.
    As far as your using natural gas for power generation, 
don't worry about it. Keep doing it. What will happen is the 
power generation, the natural gas will move out of that sector 
as it moves into transportation fuel. So we do not have to shut 
down all of our natural gas power generation. It will just 
happen naturally. But what we have to do is we have to mandate 
the use. For instance, all government vehicles purchased in the 
future would be natural gas. That will send a message to 
General Motors, Ford, Chrysler, and all the others--I never 
recognize any manufacturers in the United States except those. 
Pardon me for that, but that comes with age. I just know three 
car manufacturers. I say that and I own a Honda GX natural gas 
car because I cannot get an American natural gas car.
    But GM makes 19 vehicles in the world today for natural 
gas. None are made in the United States. They are made in South 
America and Europe. So I know they know how to make them. So if 
the government mandated that all vehicles at some point would 
go to natural gas on new cars, they would get them. They would 
make them, and it would be a revitalization of the auto 
manufacturers in the United States. And God knows they need it, 
too. They need the help. They need all of it.
    This has great economic benefits for rural America, car 
manufacturers, and all kinds of different areas that we could 
help our economy with it. But it will happen if the leadership 
will say let's do this. Then let it unfold, and it will take 
place. Private industry will build the grid if you will give 
private industry the corridors that they can build in. That is 
what you have to do for us.
    And if the government wants to build the grid, that is 
good, too. But I think we should start to look at the future 
for energy for America, and that is that we have a national 
grid, that we can put this together and get the foreign oil 
dependency out of the way. We can do it. We have not been 
tasked, the American people have not been tasked to do what has 
to be done.
    For instance, people told me at breakfast this morning, 
``Well, wind is only 40 percent of the time.'' That is OK. Use 
the 40 percent. Baseload it with something, peak it with 
something. I am not an authority on power generation. That is 
not my field. I am a geologist. I know about the oil business. 
But I do know that we have not been charged with the 
responsibility to do it. Go do it, and everybody in this 
country will join together. The people will follow if we have 
the leadership, that's what it takes. And you are going to have 
to tell them that--explain to them first. They don't know. I 
promise you, the American people do not understand what we are 
up against. I know that from polling. I know it because I have 
been in the field; I have talked to people; I have looked at 
the focus groups. I have done everything. I think I am prepared 
to respond, and I know I would have never committed the $58 
million to telling this story had I not felt like the people 
did not understand.
    I will tell you what they do understand. They know it is 
something very bad about energy. They do not think they are 
being told the truth about energy. And it is confusing to them. 
I think when we come out of this, by the time we get--I want to 
elevate this into the presidential debate, and it is not there 
yet. OK. Elevate it there. By the time we get the elections 
over, whoever wins, the American people are going to demand 
they know the truth about energy, they know what they are up 
against, and they will respond.
    We will see the energy use go down dramatically when they 
see what it is going to cost. They can see that it does not 
have anything to do with Exxon or Chevron or anybody else 
running up the price. It does not have anything to do with some 
speculator on Wall Street. That is not what we are faced with. 
We are faced with 85 million barrels a day of production in the 
world, and we are using 25 percent of it, with 4 percent of the 
population, and we only have 3 percent of the reserves. In the 
United States, we have nothing to do with the price of oil. We 
only have 3 percent of the reserves.
    And so you tell me that a guy in China is buying a barrel 
of oil for $140 that he thinks it is somebody's fault in the 
United States. He does not think that. He understands. They 
know what it is. It is a global price for oil. You look at 
Brent crude, sold on the London exchange every day, and it is 
very close to West Texas Intermediate (WTI) crude.
    So, anyway, I have drifted off the question, but I really 
do get somewhat carried away with this subject.
    Senator Collins. Just a quick follow-up, if I may, Mr. 
Chairman.
    Chairman Lieberman. Go ahead.
    Senator Collins. When we look at your map, in addition to 
the wind corridor up through the Midwest, from Texas to the 
Canadian border, the other areas that have a lot of wind are 
offshore, for example, offshore of Maine's coast, the Great 
Lakes region. Do you see potential in offshore wind to also be 
part of the answer?
    Mr. Pickens. Sure. I see everything American is good--
offshore wind, central part of the country wind, electric car. 
Everything American is good. I am for that. Offshore, OCS 
drilling, Arctic National Wildlife Rescue (ANWR) drilling, yes, 
all of it. I want to see all of it. I want to get off of 
foreign oil. Yes, all that.
    If I could put up the map of the world there, and you have 
that in front of you, I believe.
    Senator Collins. Yes.
    Chairman Lieberman. Yes, we do.
    Mr. Pickens. But here, if you will notice, the United 
States has the best wind energy in the world. Now, you can see 
some areas over in Europe and around different places, but on 
landmass alone, we have the best wind energy. And we are going 
to use it. There is no question we are going to use it. And it 
can be melded with baseload peak and wind. Solar comes into 
play. Solar and wind work very well together. But we have not 
been pushed against--we are against the wall now, but we have 
not been charged with getting ourselves straightened out in 
America. And the reason is because the oil is so cheap. That is 
it. We sat around and just kind of lazied it, and here we are.
    Senator Collins. Thank you.
    Chairman Lieberman. Thank you, Senator Collins. Senator 
Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Mr. Chairman.
    What you have had to say is music to my ear. I have been on 
this Committee now 10 years, and we have had an environmental 
policy--you are talking about cheap oil, but we have had an 
environmental policy around here that ignores our national 
security, our economy, our energy needs, and the chickens have 
come home to roost. And now we are trying to figure out how we 
are going to get out from under this.
    Many of us feel that we ought to go after every drop of oil 
that is available to us, can be taken out environmentally. Many 
of us also believe that we need to have an Apollo type program 
as we did--President Kennedy said we were going to put a man on 
the moon in 10 years, and by golly, we did. There is no reason 
why we cannot figure out how we can get off of our appetite for 
oil.
    But one of the things that I never gave any consideration 
to, Mr. Pickens, was natural gas, and the reason--I have looked 
at renewables, plug-ins, hybrids, you name it. But I did not 
look at natural gas for the simple reason that the cost of the 
natural gas in this country has skyrocketed to the point where 
in my city of Cleveland, Ohio, my State, we were paying about 
$3 a Mcf back in 2000; now we are paying about $10 a Mcf, and 
the people in the gas association here in Washington say we may 
go up to $14 or $15 a Mcf. And part of the reason why, as you 
know, we went to natural gas is we made it easy for energy 
companies to use natural gas because it was cleaner and did not 
have as much emissions as, say, coal or something else.
    So I would like you to respond to the issue of how can we 
do this when natural gas has skyrocketed, and I think you 
probably know that in 1998 and 1999, we were exporting about 
$19 billion worth of chemicals. Today, we are a net exporter, 
and the reason why is because natural gas is a feedstock of the 
chemical industry, urea. So that is one question.
    The other one is the issue of wind in that currently wind 
produces about 1.5 percent of our energy in this country. I 
think renewables are about--let's see, about 9 percent, most of 
it is hydroelectric. How can you ramp that up over a quick 
period of time? And, second of all, as you know, down in Texas 
you have had some times when the wind just kind of stopped and 
you have had some reliability problems. And if you are going to 
use wind, you know that if you are going to have reliability, 
you are going to have to back up that wind with some ordinary 
baseload energy generation.
    So those two questions. How do we do this with the high 
cost of natural gas as it is? And, second of all, the whole 
issue of the reliability of wind in terms of a baseload 
provider of energy in this country.
    Mr. Pickens. Senator, on the expense of it, one Mcf of 
natural gas equals 8 gallons of gasoline in energy. OK. They 
will do the same job, one Mcf and 8 gallons. Today, natural gas 
is selling for $12 per Mcf. If you had 8 gallons of gasoline at 
$4, it would be $32. So natural gas is the cheapest of the 
fuels now. Natural gas is selling at 40 percent of heating oil. 
In the winter, heating oil and natural gas trade at parity. In 
the summer, not so, and we are in the summer now. So natural 
gas--I almost hate to tell you this--is cheap compared to the 
other fuels. When you look at oil at $140 per barrel, natural 
gas, at $12 or $15 per Mcf, is cheap.
    Senator Voinovich. Where do we get the natural gas? In 
other words, what we have done in a way is we have increased 
the demand for natural gas, but the supply of natural gas is 
down and, therefore, the price is up. And how do you reconcile 
that in terms of what you are talking about?
    Mr. Pickens. Supply is up. We are up year over year. We 
have increased the reserves of natural gas in the United 
States. We have doubled them in 5 years.
    Senator Voinovich. How come, then, we are going to be 
paying $15 an Mcf in Ohio for natural gas? And I think around 
the country they are predicting--they are coming to Congress 
right now and asking for more Low Income Home Energy Assistance 
Program (LIHEAP) money because of the fact that the natural gas 
costs are going to be skyrocketing.
    Mr. Pickens. It is because your energy costs are higher, is 
what it is. I mean, it is not a case that somebody is gouging 
you. Natural gas is selling at 40 percent of the cost of 
heating oil. Heating oil, you can call it foreign. So you are 
being--I mean, it is all swinging off of the price of oil, is 
where you are coming from. And when natural gas gets cheap 
enough that it will do a job that coal--I mean, it can compete 
with coal at times, it will get that cheap. It did a year ago. 
We were down to $6. Now it is up to $12. If not, it is $10. But 
it has been up to $12 this summer.
    But you are dealing with a market. I am going to send you 
this report that came out today on how we have developed in 
this country. In 5 years, we have doubled our gas reserves. 
This is huge. And as a geologist, if you had told me this would 
have happened 10 years ago, I would have not given you one 
chance in 10,000.
    Senator Domenici. What is it you have, Mr. Pickens? What is 
it you are going to give us?
    Mr. Pickens. Oh, I am going to send you this report from 
Deutschebank today. It is called ``From Shale to Shining 
Shale.''
    Senator Domenici. OK.
    Mr. Pickens. It is about the technology and how much gas 
has been discovered in the United States and how much we can 
have in the future. But this is nothing more than a bridge to 
the next fuel because when you get to 2050, we are pretty well 
maxed out on hydrocarbons as a transportation fuel. And 70 
percent of the oil is used for transportation. When a barrel of 
oil comes to the United States today, it will be moved to a 
refinery, refined, then go into marketing, then go into our 
cars, and in 4 months it is gone. It is gone. We burn it up. It 
is out of here. And so we have to get a hold of this situation 
and realize that we cannot control--one thing, though, that I 
will say, we have plenty of natural gas to do what I am talking 
about, and we can do it for 20 or 30 years.
    Senator Voinovich. If the price is way up and it seems that 
the supply must not be up, as much up in terms of the demand, 
you are telling us that we have the natural gas available, we 
just have to go after it. Is that what you are saying?
    Mr. Pickens. Sure. We have to develop the natural----
    Senator Voinovich. And you can't do this program without 
going after more natural gas in this country?
    Mr. Pickens. But don't get the idea that you are going to 
have natural gas cheap. All energy is more expensive. The 
cheapest that you are going to find is wind and solar. The rest 
of them are going to be expensive.
    Chairman Lieberman. Thanks, Senator Voinovich.
    Senator Domenici, welcome. I know that Mr. Pickens knows, 
but Senator Domenici was the long-time chair of the Energy 
Committee and is now the Ranking Member. We are glad to have 
you here this morning.

             OPENING STATEMENT OF SENATOR DOMENICI

    Senator Domenici. Thank you. Mr. Chairman, he knows me from 
a lot longer ago than you know me.
    Mr. Pickens. Senator Domenici and I have had business for 
40 years.
    Senator Domenici. And I am most amazed to see him at his 
age take this new business venture, and I am very pleased with 
the expertise that you are applying to it.
    I want to suggest a couple of things. You are so right that 
we must get the people to understand; that the United States is 
sending so much of our resources to foreign countries just to 
acquire crude oil; that it should be doubtful in the minds of 
intelligent people as to whether America can continue this kind 
of exportation of our assets, of our resources to foreign 
countries for 5 or 10 years. I actually do not believe we can. 
I believe we will become poorer and poorer and poorer as we 
send $500 to $700 billion a year overseas for crude oil. We are 
in a real mess.
    Some people tell me what you are for, and they confuse me, 
and so I want to ask you so we will get it here on the record. 
We have a bill coming up on the floor of the U.S. Senate that 
is supposed to create an energy debate. Even though it is the 
end of the year, we are supposed to have some time to discuss 
some of our energy woes and do something positive about them.
    You are not against us opening more of the offshore assets 
of the United States where there are 85 percent that are locked 
up in a moratorium of one type or another and you cannot drill 
even if you wanted to. Are you on the side of those who say 
lift those and start drilling in an appropriate----
    Mr. Pickens. I am saying do everything you can do to get 
off of foreign oil, is what I am saying.
    Senator Domenici. And that is one.
    Mr. Pickens. That is one. It is not going to do it.
    Senator Domenici. Oh, no. Of course not.
    Mr. Pickens. It is not big enough. You do not have enough 
reserves in the offshore to do it. It will just be a piece of 
our problem.
    Senator Domenici. Right.
    Mr. Pickens. And that is it.
    Senator Domenici. From the standpoint of the United States 
and paying what we are paying for oil, if we can get a reserve 
that is anywhere from 14 to 30 billion barrels, that is a 
pretty good addition to the world availability of oil that we 
are going to be committing to the pool if we take off those 
moratoria and say it is available.
    Mr. Pickens. If you did 13 billion, added 13 billion, you 
would add another Prudhoe Bay. Prudhoe Bay was the largest 
field ever found in the United States. If you added 13 billion, 
you would add--our reserves today are about 20 billion. So you 
would have 60 percent more than what we have now.
    Senator Domenici. It is commonly understood that without 
even using modern techniques for evaluating the asset value 
resource--because we have not applied modern techniques. We 
have not wanted to spend money, if you would believe it, to do 
a seismic evaluation of these assets because for 27 years we 
have locked them up with moratoria. That is a nice way to treat 
an American asset for 27 years, lock it up and then say we do 
not know what it is worth because we have not inventoried it.
    Mr. Pickens. Let's look at what we are talking about in the 
east and west coast, not ANWR.
    Senator Domenici. Yes.
    Mr. Pickens. The U.S. Geological Survey (USGS), I think, 
says you have 85 billion barrels. Now, know that is an in-place 
figure. That is not a recoverable all figure.
    Senator Domenici. Correct.
    Mr. Pickens. When they talk about the 90 billion off the 
coast of Brazil, that is an in-place figure again, not a 
recoverable. And I have seen some that have compared those two, 
that the Brazilians have 90 billion barrels, and we have about 
the same. Their 90 billion is not a proven number, and it is 
thrown around pretty loosely. But go to the facts and the 
biggest basin that we have where we have recovered the most oil 
in America is the Gulf of Mexico. So look at South Louisiana, 
Gulf of Mexico, and what have you recovered there? You have 
recovered 40 billion barrels, and it is by far the preferred 
place to look for oil instead of off the west coast or the east 
cost of the United States.
    Senator Domenici. Twenty-five percent of America's oil 
comes from just where you said.
    Mr. Pickens. That is right. And so it is--I am not a big 
believer--I think you are going to get a rude awakening as to 
value of the east and west coast when it is opened up and when 
it is put up for sale. When those tracts are put up for sale, I 
think you are going to be surprised at the price you get for 
the tracts.
    Senator Domenici. We will see. But, in any event, it is 
certainly worth it for the United States, for our people to 
understand that this is an asset of theirs and we ought to see 
what we have got and see how we can use it. And I just want to 
make sure that----
    Mr. Pickens. I agree.
    Senator Domenici [continuing]. You said that was so.
    Let me talk a minute with you about turbines that run the 
wind generation. I understand that the United States does not 
manufacture these turbines. Is that correct?
    Mr. Pickens. No. I bought them from GE, $2 billion worth of 
them, to do a thousand megawatts on our first step of our 
4,000-megawatt project. And they are manufactured in the United 
States by General Electric.
    Senator Domenici. It is generally understood by those of us 
who have been briefed that most of the turbine production is in 
Germany, not in the United States. Now, maybe GE produces----
    Mr. Pickens. Well, Siemens is in Germany and Vesta is in 
the Netherlands, and Mitsubishi is in the game, too. But we can 
get all that business into the United States.
    Senator Domenici. That is the point.
    Mr. Pickens. Yes. We can get it all here.
    Senator Domenici. If, in fact, we are on a stable path of 
multiple-year use, we can get them to move here.
    Mr. Pickens. If they know that we are committed to doing 
it, is where we are coming from.
    Senator Domenici. It seems to me it is kind of strange that 
all of a sudden we have come back to natural gas in cars. About 
10 years ago, we were pretty much hitting hard on let's get gas 
in fleets, let's have police fleets, let's have bus fleets. And 
then we sort of let it all pale off. And now there is a big 
push to get natural gas automobiles. Am I correct?
    Mr. Pickens. Yes, you are. And, actually, it was further 
back than 10 years ago. I was in Albuquerque, and because of 
the air quality there, they were interested in natural gas to 
replace gasoline and diesel. That was about 15 years ago.
    Senator Domenici. All right.
    Mr. Pickens. And Las Vegas has the same problem. And, of 
course, Los Angeles does. But if you look at the largest bus 
fleet in the world today, it is in Beijing--all natural gas. I 
was there in July of last year, and they have over 4,000 buses. 
The second largest bus fleet is Los Angeles MTA. And when you 
look at the Port of Los Angeles, which is switching over now 
from 22,000 18-wheelers, it is switching over to natural gas. 
And I think the first tranche was 8,000 18-wheelers there.
    But look at what happened last week, Senator. Gazprom 
announced they are building natural gas fueling stations all 
over Europe.
    Senator Domenici. Yes.
    Mr. Pickens. They are switching over, too. But here we are, 
we still drift. There are 8 million natural gas vehicles in the 
world today--8 million--and that has gone from 5 to 8 million 
in 2 years.
    Senator Domenici. And where are we?
    Mr. Pickens. One hundred and forty-two thousand.
    Senator Domenici. Right.
    Mr. Pickens. Out of 8 million. We have done absolutely 
nothing.
    Senator Domenici. Well, we are not promoting it. We have 
not yet decided that--your testimony here today, where you say 
there is an abundance of natural gas, we as a Nation have not 
yet decided that is true because we have had such pressure from 
the chemical industry and others that use it as feedstock to 
make it available to them so they can keep jobs here, that we 
have not focused on automobile engines to be fed by natural 
gas.
    I believe we are on the track right now, with electric 
automobiles, if we could add a bigger incentive for natural gas 
cars and trucks--if we could get that going, it seems to me 
that we would have taken a giant stride in the right direction 
toward minimizing our use of crude oil from overseas because 
automobiles and transportation drive our dependence.
    Mr. Pickens. If you take 22 percent of our power generation 
and make it with wind and take the 22 percent of natural gas 
that is doing power generation to transportation fuel, you will 
reduce our dependency by 38 percent. And what you will do is 
you will bring down the price of gasoline. I promise you that 
you will do that. And we will do it with our own fuel. It will 
not be some other--now, one thing--and Senator Voinovich 
mentioned that he is concerned about the price of natural gas.
    Senator Domenici. Yes.
    Mr. Pickens. But what happens is that we are not protecting 
the chemical industry with cheap anything. It is not our job to 
provide it cheap to the chemical industry. I mean, they are 
going to have to compete globally. Well, you think natural gas 
is cheap in Europe? Natural gas is $18. If you want a load of 
liquified natural gas (LNG) spot on the market day, you will 
pay $18 for it. And so we are in a global market, and the price 
of energy can be graded every day all around the world.
    Senator Domenici. Well, the report that you are going to 
give us on natural gas is coupled with some new reports that 
are saying that we have new finds of natural gas that you did 
not even dream of when you were a gas man. They are all over 
the country, and it is shale gas, and it is 5,000 to 6,000 feet 
deep, and it is in States like Ohio, States where we never did 
develop any natural gas, we are developing it. But that has not 
reached us yet in terms of information.
    Mr. Pickens. Let me say that the largest gas field in the 
United States, believe it or not--I can see it out the window 
of my office. If somebody had told me in the Fort Worth basin 
that Barnett shale would become the largest gas field in 
America, I would have bet you $100,000 to a cup of coffee and 
figured I would start drinking the coffee right away. 
[Laughter.]
    But what you have is the largest gas field, and that 
happened in 5 years. Now, the Hainesville, which is in northern 
Louisiana and East Texas, the Hainesville is five to six times 
the size of the Barnett. And then you have the Marcellus in 
Appalachia, and it is twice as large as the Barnett. And, you 
go to Fayetteville, you go to Woodford, you go to these 
different shale basins, there are 21 of them now, and the 
technology was developed by us--not me, but America. We did it 
here. We developed the technology to extract natural gas in 
large quantities. But on the price of that, though the cost to 
develop that, you are talking about $7 an Mcf. Everything is 
more expensive, is what it is. The big frac jobs go into that, 
but we have that resource here.
    I almost think it is divine intervention to have the gas 
show up at such a critical time for this country, and to be 
able to use it as a bridge to the next fuel in the next 20 or 
30 years.
    Chairman Lieberman. Thanks, Senator Domenici.
    Senator Domenici. Thank you, Mr. Chairman.
    Chairman Lieberman. How do you take your coffee? 
[Laughter.]
    We will do a second round of 6 minutes.
    I want to come to the price effect here. You mentioned it 
briefly in response to one of Senator Domenici's questions, and 
I understand if we implemented the Pickens Plan and we moved to 
wind and solar and natural gas, moved over and took over part 
of the transportation sector, that we would achieve for America 
and for our economy a significant reduction in the transfer of 
our wealth abroad. That is a major accomplishment.
    But let me come back to the consumer side of it because in 
a way, what has finally, as I said in my opening statement, 
sounded the alarm, Paul Revere-like, for the American people 
and even their leaders in Washington is that the price of 
gasoline has gone over $4 a gallon. I know it is hard to say 
this with any certainty, but if the Pickens Plan were 
implemented totally, in 10 years what do you imagine the 
effect--I am not asking you for an exact penny prediction here, 
but what would be the effect on the price of both electricity 
and energy to power our transportation sector? Do you think it 
would, generally speaking, go down a little, a lot, go up, stay 
the same?
    Mr. Pickens. We are 10 years out now?
    Chairman Lieberman. Yes.
    Mr. Pickens. There is no question that if I am right on the 
peak oil at 85 million barrels, in 10 years we are going to 
have less than 85 million barrels available to the world. Now, 
the question is: What is the demand?
    Chairman Lieberman. Right.
    Mr. Pickens. I have to think in 10 years the demand for 
oil--because the price now is going up. In 10 years, you are 
going to have $300 a barrel oil. Maybe higher, I don't know. 
But this is really--it is a tough question to look out 10 years 
on this one. But I can tell you this: In 10 years, if we 
continue to drift like we are drifting, you are going to be 
importing 80 percent of your oil. And I promise you, it will be 
over $300 a barrel.
    Chairman Lieberman. I am just imagining the movement on the 
commodity exchanges right now in response to what you just 
said.
    Mr. Pickens. Imagine the pain that you are going to----
    Chairman Lieberman. Yes, but I presume that what you are 
saying is, if we adopted your plan, the prices, generally 
speaking, for the consumer of electricity and transportation 
would be less than they would be if we do nothing.
    Mr. Pickens. They would be less if we do nothing?
    Chairman Lieberman. Than if we do nothing.
    Mr. Pickens. If we do nothing----
    Chairman Lieberman. Go with the status quo.
    Mr. Pickens [continuing]. It is going to be over the top.
    Chairman Lieberman. Right.
    Mr. Pickens. Say you go with my plan and we do get on wind 
and we end up with, say, 400,000 megawatts in the central part 
of the country--let's talk about everything now. You have 
revitalized rural America at this point. You have helped the 
economy at this point. Now, what is the cost of your energy? I 
am guessing in 10 years you are going to be a long way down the 
track to an electric vehicle. But, remember, an electric 
vehicle does not do heavy duty. So you are going to have to 
continue to use natural gas will do heavy duty.
    Chairman Lieberman. Heavy duty, you mean the longer trips?
    Mr. Pickens. No. I am talking about 18-wheelers.
    Chairman Lieberman. Bigger vehicles, got you.
    Mr. Pickens. Heavy-duty vehicles.
    Chairman Lieberman. Right.
    Mr. Pickens. So you have to look at the whole thing. I 
think that your power costs in 10 years, you could--I am not 
sure you could get them down. You could get them stabilized 
maybe. But at that point--and you mentioned that there was only 
1.5 percent on wind now.
    Chairman Lieberman. Right.
    Mr. Pickens. And that people are skeptical, you are not 
going to get too much on there. And then it is intermittent. 
But all these things are going to be solved. You are going to 
be able to store electricity. That is not too far in the future 
that we can store it. So I would say cheaper.
    Chairman Lieberman. Cheaper is good enough. It certainly is 
going to be a lot cheaper than it would otherwise be if we 
stuck with the status quo.
    Mr. Pickens. If you stick with the status quo--it will be 
much cheaper than that.
    Chairman Lieberman. Much cheaper.
    Mr. Pickens. Yes.
    Chairman Lieberman. Let me draw a few observations from 
what you have said this morning. The first point is an obvious 
one, but around here it is worth saying the obvious. You gave 
an example of what happens to a barrel of oil after a few 
months. We import it, it is refined, and it is gone. And then 
we have to go out and find another barrel.
    The great thing--I know you know this; that is why you are 
recommending it--about wind and solar is that they are always 
there, the good Lord willing. So it is literally a renewable 
source. You have already put the whole thing on a different 
plane.
    The other thing I want to say is that I appreciate the 
extent to which you have sketched a larger time horizon here. 
The Pickens Plan, as you have described it generally publicly 
so far, is a 10-year plan. Fair enough. And it is bold. And 
during that time, you have said develop any energy you possibly 
can here in North America, stop importing oil. But you have now 
taken at least me this morning to a longer time horizon and a 
higher vision, and you have basically said that we need bridges 
to take us out to 2050 and maybe beyond because we are moving 
to a time when we are going to have just about a non-
hydrocarbon-based energy system. It is going to be all the 
renewables, electric, biofuel, and all the rest.
    Am I hearing you right? Because I think that is an 
important vision, and maybe it will be helpful to some people, 
for instance, right now who are concerned about offshore 
drilling. That is one way to have a bridge to somewhere better 
for our economy and our environment, getting to page 2.
    Mr. Pickens. Well, oil is the key to the conversation here 
as I see it, and oil is--we had produced 1 trillion barrels of 
oil at the turn of the century. It is kind of interesting 
because if you look at King Hubbert's extension, peak oil, and 
what would happen, the guy was great, in my estimation. I am a 
disciple. I don't think there are 2 trillion barrels of oil as 
I see it right now. Now, then you say take the oil shale on the 
western slope and you take this and that and everything. You 
can add up a bunch of stuff. When you add it up, it is going to 
be very expensive oil. But in looking at conventional oil--I 
live and you live and everybody in this room lives in the 
hydrocarbon era, and that era started with the automobile in 
1900. Half of the oil that I see out there had been produced by 
the year 2000.
    Now, we have another trillion barrels, and you say, well, 
that is another hundred years. No. You started slow, ramped up, 
and now the next trillion is going to go out of the system here 
within the next 50 years.
    So you are going to be forced to abandon the hydrocarbon 
era. Can you imagine researchers 500 years out that come back 
and look at us? They are going to say, ``That was a strange 
crowd. They lived on oil as a fuel.'' And that is not going to 
even be used at that point. Oil will be used and oil will still 
be around, but it will be used for other purposes and will be 
very special and very expensive; that is the way it is going to 
turn out.
    But, yes, we are going to have to make it to the next fuel. 
But what is going to happen, if I am right on what I am trying 
to do, I am going to awaken the American people, and they are 
going to see what they are up against. When they walk out of a 
room, they will turn off the lights. They do not do that now.
    Chairman Lieberman. That all helps, doesn't it?
    Mr. Pickens. It helps. Every bit of it helps. I grew up in 
a home with a very frugal grandmother, and she said, ``Sonny, 
if you don't turn the lights out, you are going to get the bill 
next month.'' And I turned off the lights. It made sense to me. 
Why not? If I am going to leave them on, I should pay for it.
    So as it unfolds, we are going to become much more 
sensitive to energy in this country, and that is good. We are 
going to conserve. That is a big item. We are going to use 
different light bulbs. All these things count. Every bit of it 
counts. And so, as you unfold with this in mind, but if 
everybody understands, it is a lot easier to accomplish.
    Chairman Lieberman. Well, you have helped everybody 
understand. Incidentally, I had a very similar grandmother. 
[Laughter.]
    Mr. Pickens. Everybody must have.
    Chairman Lieberman. We are getting back to Grandma's wisdom 
now.
    Mr. Pickens. Yes.
    Chairman Lieberman. Thank you. Senator Collins.
    Senator Collins. Thank you.
    Mr. Pickens, you have made a very important point this 
morning when you stated that the cost of implementing your plan 
pales by comparison to continuing to export $700 billion year 
after year after year, in some cases to countries that do not 
wish us well. But do you have an estimate of what your plan 
would cost for achieving 20 percent of our electricity from 
wind?
    Mr. Pickens. I think I can give you a number. Let me see. 
You can go from my 4,000 megawatts to get to the number, and 
4,000 megawatts ramped up to 200,000 megawatts, which would be 
20 percent, would cost--it would cost about $500 billion.
    Now, you say, well, wait a minute, that does not include 
the--let me have that other map that was up there.
    Senator Collins. Does that include the transmission line?
    Mr. Pickens. It does not, but I am going to give you that 
number right here. If you can see the green lines on there, 
that is the Department of Energy's grid. And that grid, I 
believe they projected $70 to $100 billion. So now you are 
talking about a production tax credit of $15 billion; you are 
talking about the cost of the 200,000 megawatts is $500 
billion; and you are talking about a grid of $100 billion. It 
is interesting. You are starting to approach 1 year's supply of 
oil that you are buying. But don't get the idea this replaces 
that oil. It does not. It will only replace 38 percent.
    So it is a beautiful payout if that was it, and we would 
all love it if you said, ``OK, Boone, do it,'' and I come back 
in here in 3 years, and you said, ``Did you do it?'' So we got 
it. We did it, and it is appreciated so much, you opening 
corridors. We did do it, and we have reduced it by 38 percent. 
That would be beautiful.
    I am not sure I am that good, but I have confidence, and I 
know it has to be done.
    Senator Collins. And you have talked about the importance 
of the production tax credit. It seems to me that it is 
critical that Congress stop letting the production tax credit 
expire. There is too much uncertainty about when it is going to 
be extended. Do we need a long-term commitment to the 
production tax credit to bring your plan about?
    Mr. Pickens. That would, I think, solve the PTCs. Yes, the 
long term would help. It would bring the manufacturers in 
because they would see you are committed, and it would bring in 
the money to develop. I have kind of broken new ground here, 
which I have credit doing that several times. Sometimes it did 
not make people very happy, but, anyway, I have gone out and 
committed to the 4,000 megawatts, and Shell Oil Company has 
done 3,000 megawatts. They are building a hundred miles 
southwest of me. So this is unfolding. And I think the biggest 
producer of wind energy now is Warren Buffett with his 
operation in the Midwest.
    So, I mean, people believe in this. They know it will work. 
And if you do give an extension of the production tax credit, I 
think it would just accelerate the whole thing.
    Senator Collins. And just to clarify the cost issue, 
obviously the production tax credit is critical for this 
investment to take place. But you are largely talking about 
private investment, correct?
    Mr. Pickens. I am talking about private investment. But if 
the government wanted to build a grid, I mean, do it. But if 
they don't want to do it, I think the money is there to do it 
privately. And so it is kind of like either do it or get out of 
the way, but give us the corridors to put it in, and it will be 
done.
    You could put this on a very fast track if you wanted it to 
be on, and we have got to do it. There is no question we have 
got to do it. Are we going to do it fast, or is it going to be 
done over a long period of time?
    Senator Collins. You were just talking with Senator 
Lieberman, quoting your grandmother on turning off the lights. 
How much of the solution also should encompass energy 
conservation?
    Mr. Pickens. Oh, it has got to be on page 1, of course. We 
have got to conserve. There is no question about that. We have 
been very wasteful. But in our defense, we had cheap oil. We 
had cheap oil. And as long as we had cheap oil--I don't know 
whether you have seen this guy--I think it is Jim Kunstler. But 
his last name is Kunstler, and it is not the guy that was the 
lawyer back years ago that was in the Chicago 7 or whatever it 
was. It is not that guy. But it is another person. I went over 
to Southern Methodist University (SMU) and heard him the other 
night. He is worth hearing. He is a generalist, but he tells us 
where we made the mistakes. We did not develop our rail system.
    You look at the world today, we go places and we want to 
ride on a 200-mile-an-hour train. We have to go to a foreign 
country to do that. We don't have that. Why don't we have it? 
Because we had cheap oil. It didn't make sense for us to. It 
was expensive. We were going to subsidize it. And, it just 
didn't make sense for us. And he has got--we built too far away 
from our work. He says you are going to move to your work now 
because of the cost of energy. And it was really interesting 
because this was 2 years ago and the guy nailed it. I listened 
to what he had to say. I watched what has happened, and he was 
right on.
    Senator Collins. Thank you.
    Chairman Lieberman. Thanks, Senator Collins. Senator 
Voinovich.
    Senator Voinovich. Well, things have changed. We are in a 
global marketplace, and there are a lot of people who want what 
we have, and so we are paying more for it.
    We do rely on foreign oil too much, about 60 percent of our 
oil coming from overseas. But one of the things--and maybe you 
are aware of this--is that we do send that money overseas, but 
some of the same countries that we are buying oil from are also 
investing in our debt. As a matter of fact, since 2001, 70 
percent of the new debt has been picked up by China, Japan, and 
the OPEC nations. And I don't know about you, but I am worried 
about being at the mercy of people for our oil, and then before 
you know it, we are at their mercy in terms of our debt. And if 
they try to put the squeeze on us, we are in pretty bad shape.
    Mr. Pickens. I agree.
    Senator Voinovich. I went to some war games at the National 
Defense University, and they talked about the vulnerability 
that we have. And some folks out at Stanford said that in the 
next 10 years there is a 80-percent chance that the cut-off of 
oil will bring our economy to its knees. So we have a certain 
urgency that we have right now to get on with this.
    Mr. Pickens, from a public policy point of view, as I 
mentioned to you, I did not have natural gas in the 
alternatives to oil. I had biofuels, ethanol, we have got to 
get cellulosic, electric hybrids, we are working on the 
batteries, fuel cells--we need hydrogen for the fuel cells--and 
natural gas. And some have contended that in terms of where we 
should put our money is in the area of electric hybrids for the 
simple reason that you do not need to build an infrastructure 
for them. In other words, if you go to natural gas, you have 
got to have places where people can get it. If you go to fuel 
cells, you have got to go someplace where you can get the 
hydrogen. And if we go to the plug-ins, you just go home at 
night and plug it into your electric socket.
    What is your attitude towards that in terms of the 
infrastructure necessary to get us to that alternative so we do 
not have to rely so much on foreign oil?
    Mr. Pickens. This is the way I envision natural gas as a 
transportation fuel. We have 142,000 natural gas vehicles. 
There are 8 million in the world today. And you mandate the 
government fleets. Other fleets are mandated also to do the 
same thing. You have the Port of Los Angeles going to it very 
quickly now. All that can be done without--you don't have to 
subsidize that. That can be done between user and seller on 
that.
    As far as your plugging in at home, of course, I think--
listen, I am not knocking anything that happens in America. But 
the electric vehicle is not going to have very much range. But 
natural gas, you can plug in at home, too. In fact, my car, my 
Honda GX, I can plug in and my cost of fuel is $1.50 a gallon. 
I just buy the natural gas right off of my gas line that fuels 
my home and heats my home and cooks my food. So it is the same 
natural gas. I just have a small compressor. It is called a 
``fill'' and it fills my car.
    So these things I think are minor. One that is pretty 
interesting is Aubrey McClendon, CEO of Chesapeake Energy, and 
they are the biggest, I think, natural gas producer now in the 
United States. And Aubrey says, look, don't tax the oil 
companies, windfall profits tax, but also tell them that we 
will sidestep the tax, but you build the stations and take 
25,000 filling stations and put an island for natural gas in 
it. Four hundred thousand dollars is what it costs, so $400,000 
times 25,000 stations is $10 billion. And 25,000 stations, that 
will pretty well do it. But everything you----
    Senator Voinovich. You think that they would be more likely 
to do that. We have tried to encourage these depots for 
ethanol, for example, and there are a few more of them, but not 
a whole lot. We have got all these E85 cars out there that 
can't go someplace and get it. So you are thinking that you are 
going to be able to get the infrastructure to support natural 
gas a lot better than you would for ethanol?
    Mr. Pickens. Well, the point on that is ethanol is a light-
duty fuel. Ethanol cannot work for heavy duty. But natural gas 
can. So I am approaching it from natural gas would be heavy 
duty, first and all, but when it comes to a passenger car, let 
it be up to the individual on a passenger car. If they want 
natural gas, if they want electric, if they want E80--whatever 
they want, they have. Don't mandate anything for them. Let them 
do it. They will the cheapest way is what will probably happen. 
But just let that unfold however it goes. But mandate to the 
fleets that they have got to go to natural gas and American 
fuel. The movement of goods in America, back to the same number 
again, 38 percent--38 percent of the fuel used in America is 
used to move goods. And that is with trucks. So you have 38 
percent comes from the wrong foreign countries. You have got 38 
percent we get with natural gas, and that moves the goods.
    I think it works. If you said, can you assure me that it 
does, I know some part of it does. Enough of it does that we 
will be helped.
    Senator Voinovich. I have a theory--and I don't know 
whether it is a good one or not, but I believe that if this 
Congress, hopefully working with the next President or maybe 
even before that, would make it clear to the world that we are 
going after every drop of oil that is available to us, that we 
are going to do everything we can, as I just mentioned, to have 
some type of a pilot project that we are going to become less 
reliant on oil, and that includes your proposal and a bunch of 
other proposals, that would send a real message throughout the 
world that the United States finally is dead serious about 
dealing with our energy and oil problem, and that would have 
some impact on the price of oil that we are paying for right 
now and in the future.
    Mr. Pickens. I was in the Middle East last year, and they 
don't understand why we don't develop our resources, and they 
don't understand why we keep telling them to produce more. I 
mean, it is a little bit confusing, the message that we send.
    But think with me just a second. Let's say that had we 
developed ANWR 20 years ago and it went on production 10 years 
ago, it would have been halfway depleted now. So one thing 
about it, what we have not done we still have. And so I think 
that is interesting. Had we done it 20 years ago, the oil price 
would have been $15 a barrel. Today it is close to $150 a 
barrel. So the asset that we have not developed is worth 10 
times as much as it was 20 years ago.
    So that is pretty sobering, too, and I said I am ready to 
open it up, get everything we can. I think we would look a lot 
better to the world to develop our own resources than to say we 
are off limits but you are not. I think that is a hard sell, 
and it is not received well in the Middle East.
    So, again, I know you are finishing up on me here. I think 
maybe you have some timer. But what we have got to do is we 
have got to do everything American. Whatever it is, we have got 
to do it and get off the foreign oil.
    Chairman Lieberman. Thank you. Mr. Pickens, that is a good 
note to end on. I really thank you for being here. You have 
been not only educational but I think motivational, which is 
what we need to do. You are effectively putting a lifetime of 
experience in this field to work for your country in some ways 
that I suppose have surprised people. But you are not 
approaching it as an oil man--maybe in some ways you are 
because of that experience. You know the reality of the fact 
that we only have a limited amount of oil potential left in the 
world. Your recommendations are--actually, though they are 
visionary in one sense, they seem to me to be very practical in 
another sense and very balanced. And I not only thank you for 
this service to our country, but I hope you will stick with it. 
Knowing you, I know you will stick with it because I think in 
the end you have touched not only the nerve of a problem here, 
but also, if I may continue the anatomical metaphor, you have 
touched an American muscle, which is the muscle that when we 
see a problem, we have the ability, if we will it, to solve the 
problem to our benefit. That is the spirit you bring to the 
table, and may it reach the highest levels of our government 
and enable us to get something done really soon. Thank you.
    Mr. Pickens. I appreciate very much your time and your 
interest in what I have to say. But know this: I am first an 
American and second an oil man.
    Chairman Lieberman. Amen. And you know what? If everybody 
up here on Capitol Hill and elsewhere in Washington and in our 
government approaches it that way, I am first an American and 
everything else I am--Democrat, Republican, whatever else I 
am--is behind that because this problem is an American problem, 
and we can together devise an American solution. That is the 
road that you have shown us here this morning.
    Mr. Pickens. And, I have announced I am nonpartisan in this 
race. This issue is way above Democrat or Republican, and we 
need to approach it that way. I think we will approach it that 
way. I want to get it in this debate, and I want the American 
people to know.
    Chairman Lieberman. Thank you, sir. God bless you and good 
luck.
    Mr. Pickens. Thank you.
    Chairman Lieberman. We will now call the second panel of 
witnesses: Dr. Gal Luft, Geoffrey Anderson, and Dr. Habib 
Dagher.
    Gentlemen, welcome to the table, and thank you for being 
here. That is a tough act to follow, but you have all been 
active and leaders in this area. As I said at the outset, I 
think you each have made some proposals that are bold as well 
and can inform what we hope to do here in Washington. So we 
welcome you. We thank you for being here. And, Dr. Luft, please 
proceed with your testimony.

TESTIMONY OF GAL LUFT, PH.D.,\1\ EXECUTIVE DIRECTOR, INSTITUTE 
   FOR THE ANALYSIS OF GLOBAL SECURITY, AND CO-FOUNDER, SET 
                     AMERICA FREE COALITION

    Mr. Luft. Thank you, Mr. Chairman, Senator Collins, and 
Senator Voinovich. I was not planning on responding to the 
Pickens Plan, but I am afraid that in light of what I have 
heard today, I would like to make some comments on the plan 
because I think that there are some serious 
mischaracterizations that we heard here today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Luft appears in the Appendix on 
page 58.
---------------------------------------------------------------------------
    The most important one is that when we talk about national 
security, we need to realize that 63 percent of the world's 
natural gas reserves are in the hands of Russia, Iran, Qatar, 
Saudi Arabia, and United Arab Emirates. These countries are now 
in the process of developing and discussing the establishment 
of a natural gas cartel. So shifting our transportation sector 
from oil to natural gas is like jumping from the frying pan 
into the fire. This is a spectacularly bad idea for us to shift 
our transportation sector from one resource that we do not have 
to another that we do not have. And we only have 3 percent of 
the world reserves of natural gas. The situation is very 
similar to our situation with regards to oil. So we do not want 
to give at this point in time a gift to Iran.
    Second, one good thing that happened after the 1973 embargo 
is that we weaned the power sector from oil. We no longer 
produce electricity from oil, unless you live in Hawaii; and, 
therefore, solar, wind, nuclear, all these sources of energy 
have nothing to do with our oil dependence. Unless we have 
serious deployment of electric cars, these sources of energy 
are irrelevant.
    Now, Mr. Pickens says that we take 20 percent of our 
natural gas and replace it with wind. I am sorry, but our 
energy system is not a Lego. You do not take one cube and 
replace it with another. If we increase wind production, which 
is an excellent idea--excellent idea, we should do it--nothing 
guarantees that it will displace natural gas. It could displace 
coal. It could displace solar. It could displace geothermal. 
How do you control what the wind will displace.
    Just food for thought, and I want to move into the things I 
really want to talk about and start by agreeing with Mr. 
Pickens that we have a serious problem. Just to remind the 
Committee that 10 years ago, Osama bin Laden predicted that oil 
would be $144 a barrel. Everybody laughed at him. Oil was only 
$12 a barrel at the time. He was right, and as a result, we are 
exporting hundreds of billions of dollars. This is the first 
year that we actually are going to pay foreign countries more 
than we pay our own military to protect us.
    So in order to understand what should be the road to energy 
security, we must first understand why we are where we are. 
There are many reasons why we have the oil crisis now. Of 
course, strong demand in developing Asia, speculation, 
geological decline, geopolitical risk, all of them have 
contributed their share. But, in my view, by far the main 
culprit is OPEC's reluctance to ramp up production. This cartel 
owns 78 percent of the world's proven reserves, and it produces 
about 40 percent of its oil production.
    If you refer to page 2 of my testimony, you will see that 
in 1973, OPEC produced 30 million barrels of oil every day. 
Today, OPEC produces 32 million barrels of oil every day. In 
other words, OPEC today produces almost as much oil as it did 
35 years ago. Even though the world economy almost doubled, 
non-OPEC production almost doubled, OPEC included last year two 
new members--Angola and Ecuador--and they still produce almost 
the same amount of oil as they did 35 years ago. This is a 
scandalous practice, and we are stepping on our toes not 
telling OPEC that they are the main culprit behind everything 
that is happening now.
    Clearly, it is not in OPEC's interest to provide relief to 
the struggling global economy. The cartel enjoys a vertical 
monopoly of the world vehicle fuel supply, and it is currently 
at the receiving end of the biggest transfer of wealth in human 
history.
    Our energy security problem stems from the fact that our 
transportation sector is dominated by petroleum. And while 
being in a hole, we continue to dig. We put on the road 
annually 16 million new cars, almost all of them gasoline only, 
each with an average street life of 16.8 years. A Senator 
elected in 2008 will witness the introduction of 102 million 
gasoline-only cars during his or her 6-year term.
    The source of our predicament is that we have a cartel 
married to a monopoly, and if we want to solve our energy 
security problem, we must break both the cartel and oil's 
monopoly in the transportation sector. This means that neither 
efforts to expand petroleum supply nor those to crimp petroleum 
demand through increased Corporate Average Economy Fuel (CAFE) 
standards will be enough to reduce America's strategic 
vulnerability. Such non-transformational policies at best buy 
us a few more years of complacency, while ensuring a much worse 
dependence down the road when America's conventional oil 
reserves are even more depleted.
    To those who believe that increased domestic drilling is 
the solution, I propose to take a look at page 4 of my 
testimony, where you see OPEC's graph that clearly shows that 
when we drill more, they drill less. That is the history of the 
past 35 years.
    Rather than focusing on solutions that perpetuate the 
petroleum standard, we should invest in transformational 
policies that aim to diminish the strategic importance of oil 
by breaking its monopoly in transportation. We should do to oil 
what was once done to salt. Throughout history, salt was used 
to preserve food, enabling armies to march across continents. 
Those who owned the precious mineral acquired wealth and 
international prestige. Those who did not had to either pay for 
it or fight for it, just like with oil today. Salt-rich domains 
like Orissa, Tortuga, Boavista, and Turk Island enjoyed great 
strategic importance equivalent to that enjoyed today by city 
states like Dubai and Abu Dhabi. All this ended with the 
invention of canning and refrigeration. Salt is no longer a 
strategic commodity shaping global trends. It is just another 
commodity.
    The first thing we must do is to turn oil into salt and to 
ensure that the cars rolling onto America's roads are platforms 
on which fuels can compete. For the cost of $100 extra, 
automakers can make virtually any car a flex-fuel vehicle, 
capable of running on any combination of gasoline and a variety 
of alcohols such as ethanol and methanol, made from a variety 
of feedstocks.
    Now, we are all familiar with ethanol, and everybody has an 
opinion about it. But I would like to talk here about another 
alcohol that China is actually deploying at the moment, and 
that is methanol. Methanol today is China's alternative fuel of 
choice. Several provinces in China are already blending their 
gasoline with methanol, and scores of methanol plants are 
currently under construction there. The Chinese auto industry 
has already begun producing flex-fuel models that can run on 
methanol. Methanol packs less energy per gallon and is more 
corrosive than ethanol. But it is cheaper and far easier to 
produce in bulk. While ethanol can be made only from 
agricultural products and biomass, such as corn and sugar cane, 
methanol can be made from agricultural waste, coal, industrial 
garbage, natural gas, and even carbon dioxide. Yes, in my view, 
this is perhaps the most promising way of dealing with our 
carbon dioxide problem, is turning it into methanol.
    Electricity is key to the solution. As I said before, we do 
not produce electricity from oil, but if we shift to 
electricity as a transportation fuel through massive deployment 
of electric cars and plug-in hybrids, that will make a huge 
difference. A plug-in hybrid car does about 100 miles per 
gallon of gasoline. If this plug-in hybrid is also a flex-fuel 
car, you add the $100 feature, and you get 500 miles per gallon 
of gasoline. Not 500 miles per gallon, but 500 miles per gallon 
of gasoline. A nationwide deployment of flex-fuel cars, plug-in 
hybrids, and other alternative fuels can take place within two 
decades. But such a transformation will not occur by itself.
    On the grounds of national security, Congress should take 
swift action to require that new vehicles sold in the United 
States are flex-fuel vehicles through an Open Fuel Standard. 
Such an Open Fuel Standard would level the playing field and 
promote free competition among diverse energy suppliers. I am 
delighted that shortly after this hearing, Open Fuel Standard 
legislation will be introduced by a bipartisan group of 
Senators, which includes both the Chairman and the Ranking 
Member. This is an important piece of legislation and, in my 
view, the best way, the best mechanism to break OPEC's monopoly 
in the transportation sector. By making America a flex-fuel 
vehicle market, we will effectively make flex-fuel the 
international standard as all foreign automakers would be 
impelled to convert their lines over as well.
    Around the world gasoline would be forced to compete at the 
pump against alcohol fuels made from any number of sources, 
including not only commercial crops like corn and sugar, but 
also biomass, coal, natural gas, and recycled urban trash.
    I realize that many are opposed to any government 
interference in the market, even if it only means adding $100 
to the cost of a new car. Indeed, in a perfect world, 
government would not have to do things like that and intervene 
in the energy market, but in a time of war, the United States 
is taking an unacceptable risk by leaving the problem to be 
solved by the invisible hand. Choosing not to embrace an Open 
Fuel Standard is choosing to preserve oil's monopoly in the 
transportation sector and, with it, OPEC's growing stranglehold 
over the global economy and in essence guaranteeing continuous 
economic and strategic decline.
    Chairman Lieberman. Thanks, Dr. Luft. A lot for us to think 
about and do.
    Geoffrey Anderson is President and Chief Executive Officer 
of Smart Growth America. It is good to see you again. We 
welcome your testimony now.

    TESTIMONY OF GEOFFREY ANDERSON,\1\ PRESIDENT AND CHIEF 
            EXECUTIVE OFFICER, SMART GROWTH AMERICA

    Mr. Anderson. Thank you, Mr. Chairman, Senator Collins, and 
Senator Voinovich, for having a hearing on such an important 
topic.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Anderson appears in the Appendix 
on page 64.
---------------------------------------------------------------------------
    I think a lot of the focus to this point has rightly been 
on the transportation sector and on what we can do with respect 
to supply. But I think we need to think about this charge in a 
broader sense, and it is really about reducing dependence on 
oil, reducing climate emissions, ensuring that we actually help 
consumers to save money at the pump, and helping the economy at 
the same time. And so I think when we start to think about 
that, we also need to think about the demand side and some of 
the conservation things that T. Boone Pickens began to talk 
about. And that is where Smart Growth comes in.
    I think the real opportunity out there right now is to 
allow people to drive less and to be able to do more. And we 
can do that by essentially building more walkable and more 
complete communities. A lot of the growth in oil use has been 
as a result of spread-out, driveable landscapes that really do 
not give you any options besides driving. And there is a real 
move now to create more walkable communities where homes are 
closer to jobs, shops are closer to work, and all of these 
things can be reached either on foot, by bike, with transit, or 
by shorter car trips.
    I want to talk a little bit about a project called Atlantic 
Station because I think it does a lot to illustrate what we are 
talking about here, and the potential. It is a $4 billion 
redevelopment of a brownfield site in midtown Atlanta, 
basically done entirely for economic reasons. The developer 
wanted to make money. He thought there was a market out there 
and put in basically 10 million square feet of commercial, 
retail, office, 3,000 to 5,000 units of housing very close to 
transit, all in a walkable neighborhood. When the EPA 
calculated what the emissions impacts would be, the 
calculations were that residents would drive approximately 27 
miles a day compared to the average Atlantan who drives around 
34 miles. Recent studies of that neighborhood, in fact, show 
that people are now driving about 9 miles per day just because 
their car trips are shorter, the places they want to go are in 
closer proximity to the places they live, and it also obviously 
has climate implications as well.
    The total savings on a yearly basis run in the neighborhood 
of around 50 million miles of travel every year just from that 
development compared to what the driving characteristics would 
have been in the event that it was built in a more normal 
Atlanta pattern.
    If you look at what that might translate into over a period 
of time or over a larger scale, we can expect--and this is from 
a publication done by the Urban Land Institute called ``Growing 
Cooler''--that each increment of more compact, walkable 
development leads to about a 20- to 40-percent reduction in 
vehicle miles of travel. If you project that out over the time 
frame to 2030, if you shift a significant share of new growth 
to compact patterns, you can actually save 85 million metric 
tons of carbon dioxide in 2030. It is equal to about a 28-
percent increase in CAFE standards and roughly half the savings 
of the Senate's 35-mile-per-gallon CAFE bill. So it can be 
significant.
    The cost savings were calculated in the $24 billion range 
for consumers in the year 2030 or cumulative savings of around 
$250 billion. And by 2050, you could expect a 7 to 10 percent 
total reduction in carbon dioxide emissions accompanying 
driving and oil consumption really as a result of shifting some 
portion of our new growth over the smarter development 
patterns.
    A Natural Resources Defense Council (NRDC) analysis looked 
at just what would happen if you looked at a 10-percent shift 
of new growth to more walkable patterns and found that you 
could save around 4.95 billion gallons of gasoline, 118 million 
barrels of oil, and roughly $220 billion worth of household 
expenses. That was, of course, calculated in 2004, so I think 
the household expense number would be a little higher today.
    If those savings are available at scale, what is the 
likelihood of getting there, and does the market want to go 
there? And what our research indicates and research from others 
in the real estate field indicates is that about a third of the 
market is interested in having more walkable communities, more 
compact communities. The fact is that for the last 50 years, we 
have essentially built drive-only communities, so the two-
thirds of the market that really is interested in that product 
is well provided for. An analysis by Chris Nelson at 
Metropolitan Institute at Virginia Tech indicates that, in 
fact, from the perspective of market supply, we probably 
already have the demand met that will occur in 2025 for large-
lot single-family houses. The unmet demand is really in the 
area of smaller single-family houses on smaller lots, 
condominiums, apartments, and so forth. And there are a couple 
trends driving this. One is what they call in Minnesota--or at 
least that is where I heard it--the ``silver tsunami,'' the 
changing demographics where households are very different than 
they were even 20 or 30 years ago.
    In 1960, roughly half of American households had children. 
In 2025, that is expected to be around 28 percent, with around 
28 percent of households being single individuals. So the 
market is definitely changing, and that is why some of the 
market demands are changing and why the supply is so out of 
balance right now with the demand and the projected demand.
    It is true also in the retail sector that commercial 
products are changing as well. We have seen a vast drop-off in 
the big-box mall out in the middle of a parking lot, and a 
great increase of basically walkable, more town-center-style 
retail. So the market is really moving in this direction, and 
there is a big opportunity for the Federal Government to 
basically enable some of this. It is important for two reasons. 
One, with the market moving in this direction, I think there is 
opportunity for the private sector to really take advantage of 
that market demand and build the communities that will help 
consumers to be able to drive less and accomplish their daily 
needs. But it is often the hardest thing to do from a market 
perspective. The Atlantic Station development took years and 
years to get through regulatory barriers, to get through 
brownfield barriers, to address market institutional barriers 
of finance. And so from the development perspective, it is 
often the hardest product to build. It is zoning regulations at 
the local level. It is how we fund infrastructure at the State 
and national level, and a variety of other things.
    So the Federal Government has the opportunity essentially 
now to promote what the market is asking for in a way that will 
help to reduce the vehicle miles of travel that result from 
those developments. And I think there are a couple of actions 
that have been helpful in the past. The brownfields law, the 
clean-up programs, and the tax incentives for brownfields 
redevelopment have had a big impact, and I think a lot more 
could be done there. The historic preservation tax credits help 
to drive development to more infield locations where the market 
demand wants to move. The investments in transit, biking, and 
walking facilities are important public sector investments 
where the private sector responds to those by building 
communities that match those kinds of investments.
    In terms of the existing Federal legislation right now, I 
think obviously the climate legislation included some measures 
for funding transit and walkable communities, but I think that 
can be greatly increased. The new transportation bill that the 
Congress will be visiting probably in 2009 or 2010 is going to 
have real opportunities to invest in world-class transit, 
pedestrian, and bicycle infrastructure to make better 
connections between land use and to incentivize the building of 
more walkable neighborhoods that give people choices about how 
they get around, give them the opportunity to avoid high gas 
prices, and the opportunity to reinvest in our existing 
communities and infrastructure, and then to connect those 
communities, many of which are connected by short plane flights 
or by long-distance auto commutes, instead connecting them by 
rail and maintaining the economic synergies that currently 
exist between those places.
    I will wrap up there, and thank you for the opportunity to 
speak with you today.
    Chairman Lieberman. Thanks very much, Mr. Anderson. Very 
interesting testimony, and I look forward to asking you a few 
questions.
    Dr. Dagher, it is a pleasure to have you here. Dr. Dagher 
is a professor of civil and structural engineering at the 
University of Maine, which we on this Committee know as one of 
America's great public universities, and director of the 
university's Advanced Structures and Composites Laboratory.
    We thank you for being here and invite your testimony now.

  TESTIMONY OF HABIB J. DAGHER, PH.D.,\1\ DIRECTOR, ADVANCED 
   STRUCTURES AND COMPOSITES LABORATORY, UNIVERSITY OF MAINE

    Mr. Dagher. Thank you, Chairman Lieberman and Ranking 
Member Collins. Thanks for inviting me, Senator Collins, to be 
here today.
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    \1\ The prepared statement of Mr. Dagher appears in the Appendix on 
page 71.
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    I would like to start this testimony by acknowledging the 
inspiring role as a system architect, my colleague, George 
Hart, as well as Matt Simmons, who is well known for alerting 
our country to peak oil and peak oil issues.
    You have heard about the financial, geopolitical, and 
security dimensions of our energy crisis. I would like to put a 
human face on this crisis. Maine will likely be the first State 
to experience a heating state of emergency. I say that with 
confidence because we are living it right now, and Senator 
Collins has been very concerned about our future.
    Some statistics about Maine. Eighty percent of Maine 
families use heating oil to heat our homes, and heating oil 
costs are tracking those of crude. Next winter's heating oil 
costs will be $5 a gallon if you try to lock it today. That 
means the average Maine family will pay $5,000 a year just to 
heat their home next winter. In 2020, if we do not do anything, 
if we do not do the Pickens Plan or any other plan, those 
numbers will be $10,000 a year just to heat our homes.
    If you look at Chart 4 in the testimony, it shows you in 
red how much of the Maine family budget actually goes to 
energy. Ten years ago, less than 5 percent of the Maine family 
budget went to energy. Today, close to 25 percent, a quarter of 
the Maine family budget, goes to paying for energy. That is 
transportation, that is heating, that is electrical power. In 
10 years, if we do not make any changes, about half of the 
Maine family budget would go to energy. Clearly, this is not 
sustainable. The State of Maine pays close to $5 billion a year 
in energy costs, and we only have a little over a million 
people.
    So what is the solution? You have heard about T. Boone 
Pickens' wonderful plan, but we sit in the corner of the 
country, and we are not very close to the wind belt that runs 
up and down from Kansas to Texas. So what do we do? And we have 
actually been working very hard on solutions for our State.
    If you look at page 4 of the testimony, according to the 
National Renewable Energy Lab (NREL), the offshore wind 
potential, the offshore wind energy, the energy that blows over 
the oceans, if you wish, is a tremendous natural resource, a 
resource we did not really understand until recently. The 
offshore wind is about equal to the U.S. electric production 
today.
    If you look at other ocean energy resources, we have heard 
about tidal energy. Tidal energy and wave energy are actually a 
fraction, a very small fraction of the offshore wind resource.
    If you take a look at the second sketch on the right-hand 
side, it shows another very powerful point about the offshore 
wind resource. It sits very close where the need is. If you 
look at the U.S. population densities shown in dark red, and if 
you look at the offshore wind resource, it is where the people 
are. So we don't need to build a large transportation 
infrastructure to get the wind energy to the people where they 
need it. That is one major advantage of that resource.
    Maine, of course, has a tremendous offshore wind resource. 
The Gulf of Maine has been called the Saudi Arabia of wind in 
many ways. There is over 100 gigawatts of wind power in the 
Gulf of Maine. That is about 10 percent of the total U.S. 
electric power production.
    So how do we go get it? One major advantage of that 
resource, it is also a seasonal resource. It is actually high 
when we need it. We need to heat ourselves in the State of 
Maine and in the Northeast, and the heating costs are our 
biggest issues. But in the wintertime, the wind blows twice as 
fast as it does in the summertime, and the power generated from 
the wind is the cube of the wind speed. So in the wintertime, 
per month, we can generate 8 times as much power as we do in 
the summertime. You can think of wind off the coast of Maine as 
a seasonal crop right now that can help us heat the State of 
Maine.
    I would like to talk more about what we are proposing for 
the Gulf of Maine and how it fits in with T. Boone Pickens' 
vision. Actually, it fits in very well with his vision. If you 
look at the left-hand drawing here that we have, Mr. Pickens 
essentially is talking about the U.S. wind corridor you see up 
and down from Kansas down to Texas. That is a wonderful 
resource that can generate 200 to 400 gigawatts, depending on 
how much of it you think you could use. We are talking about 
adding three more wind regions to the Pickens Plan, and the 
three wind regions are the Atlantic Ocean wind region that can 
generate between 120 and 240 gigawatts, and then we have the 
Pacific Ocean wind corridor that can generate 75 to 150 
gigawatts, and then the Great Lakes corridor that generates 110 
to 220 gigawatts. So rather than go to 20 percent, as Mr. 
Pickens is saying, maybe we can go to 40 percent with this 
additional resource, and it is very close to where people 
actually need it.
    The other major advantage of having this distributed 
corridor is the fact that the geography allows averaging of the 
uncertainty of the winds and the intermittency of the winds, so 
you have less intermittency as the weather moves from the west 
to the east. There is always some bad weather somewhere. You 
are always going to pick up some wind. And that reduces the 
uncertainty, if you wish, in the wind profiles.
    But it is more than just generating wind. It is how to use 
the wind, how to actually take that wind and make the best use 
out of that electricity. We are proposing very efficient ways 
to store and utilize this electricity that have profound 
effects on efficiencies. We are talking about efficiencies on 
the order of two to four that could be achieved by using 
essentially heat pumps--heat pumps, whether they are ground 
loop heat pumps--as you know, the temperature below the Earth, 
10 feet below the Earth stays close to 45 degrees Fahrenheit. 
It is a wonderful place to go get some calories and bring them 
into the house. You do not have to generate those calories. 
They are there. And that is what we are trying to do here. We 
are trying to use the electricity we generate from wind and 
bring it into the house, shift it into the house, rather than 
generate it using electricity. And that can get you, depending 
on the time of the year and the temperature outside two to four 
times the benefits.
    Another major advantage is storage. If you look at plug-in 
electric vehicles--we have all been talking about them, but one 
thing we have not talked about is that the majority of our 
energy usage actually is in transportation. Fifty percent of 
the energy budget for the family in Maine is in transportation; 
40 percent is in heating. So if we can cut that transportation 
part out by using electric plug-in vehicles, and use them as a 
distributed battery that can store energy at night--when you go 
at night and you plug in your car, the wind can be high, it can 
be low, you can still charge your car. And then you can use it 
the next day. So it is a wonderful distributed battery that 
could be used to even out the intermittency of the wind.
    Are we the only ones who are doing this? Well, if we look 
across the Atlantic, unfortunately the Europeans are way ahead 
of us. Again, they have been scratching their heads long before 
we have. They have been paying $7, $8 a gallon long before we 
have. So they are looking at solutions.
    In Europe, there are plans by 2030 to generate 150 
gigawatts of offshore wind capacity for Europe--150 gigawatts, 
that is number 16 on the chart. They are calling wind energy 
and offshore wind the ``Third Industrial Revolution.'' They 
have created over 300,000 jobs in Europe in wind and wind-
related businesses. We can do the same. We can do the same by 
driving in the direction of renewables as well.
    What is it going to take to go offshore? And if you look at 
going offshore, it is almost like the reverse Darwinian motion 
here. We are actually going from land with wind technology over 
to offshore. And what is it going to require? It is going to 
require developing floating platforms because the Continental 
Shelf in the United States drops off very quickly. Ninety 
percent of that wonderful wind resource sits far offshore and 
in deep water. So we need to develop these tension-leg platform 
type solutions, and you can see some of these structures on 
page 6.
    So we need a research and developement (R&D) program to be 
able to transfer some of that technology from Europe to the 
United States and also transfer decades of deepwater offshore 
drilling experience into the wind energy market.
    We have a detailed $100 million R&D plan that we are 
proposing that is in your sheets, but I would like to summarize 
here very quickly. Offshore wind is a wonderful U.S. natural 
resource. It sits closer to where people need it. If you look 
at where the population centers are, it is very close to them. 
We do not need to build large transmissions to get to those 
locations.
    We need your support to create a national Offshore Wind 
Energy Initiative, a Manhattan Project for offshore wind energy 
that can double the Pickens Plan. We are ready to lead that in 
the State of Maine because, you know what? We are in the eye of 
the heating hurricane. That is where Maine is right now. We are 
prepared to lead the Nation already if a national program is 
created.
    The other thing we would like your help on is to develop 
the financial incentives, the PTCs, make sure those stay in 
place, and also develop a policy framework to allow the 
offshore wind developments to take place. Thank you very much.
    Chairman Lieberman. Thanks very much, Dr. Dagher. That was 
actually very exciting testimony. I appreciate it very much.
    We will do a 6-minute round. There is a vote that has gone 
off on the Senate floor. I think Senator Collins will go first 
and then hopefully be back before long, and then we will go 
from there.
    Dr. Luft, let me take advantage of your presence here to 
just ask you to say a bit more about the Open Fuel Standard 
Act--which Senator Collins and I, with Senator Brownback and 
Senator Salazar, are going to announce the introduction of at 
noon today--and explain specifically how its provisions would 
promote the fuel diversity that you and I and others believe is 
necessary to break the stranglehold that oil has on our 
economy.
    Mr. Luft. Basically what the bill does, it requires that 50 
percent of new cars sold--not produced, sold--in the United 
States must be flex fuel by 2012. That is the first benchmark. 
And the 50-percent figure actually comes from the auto industry 
itself. In multiple meetings of the Big Three with both 
congressional leadership and the President, they themselves 
said that they are willing to make 50 percent of new cars flex 
fuel by 2012. So the bill basically takes their numbers and 
codifies it, makes it into a law.
    It has a second benchmark of 80 percent by 2015, but the 
important thing is that we have the 50-percent commitment today 
and that the fuel flexibility is not only for ethanol, but we 
have also methanol and other alcohols that can play a role in 
the transportation sector, and today they are excluded.
    Now, let me explain. An E85 car, the one that is made today 
by Detroit, can only run on ethanol. It cannot run on methanol 
because methanol is slightly more corrosive. If the cars are 
what we call GEM flex fuel--gasoline, ethanol, methanol--that 
includes all of the alcohols, and that means that you have much 
more fuel choice, and also you can introduce other feedstocks 
that can go into alcohol production, like coal, natural gas, 
garbage, and carbon dioxide, as I said before. So you have a 
much more scalable solution, and that is a good way to 
introduce fuel choice in the transportation sector because 
today we do not have choice. It is gasoline, gasoline, and 
gasoline. That is all that plays.
    We also believe that within 3 years of the introduction of 
the Open Fuel Standard, we will have almost 50 million flex-
fuel cars on the road. At this point it makes perfect sense for 
the distribution system to follow because today gas station 
owners don't want to convert their pumps because there are not 
enough cars on the road. But once every fourth or fifth car on 
the road is a flex-fuel and we have continuously high oil 
prices, it makes perfect sense for them to do it.
    Chairman Lieberman. Where does electricity fit in then, 
electricity-driven cars?
    Mr. Luft. On the electricity front, the energy bill that 
was passed in 2007 had some terrific provisions for plug-in 
hybrids. The only thing that is missing now are the tax 
incentives, and that is part of the tax package that hopefully 
will be resolved one way or another. But I think that we have 
made significant progress on electrification of transportation, 
and now what we need to do is to deal with the liquid fuel 
market by introducing this Open Fuel Standard.
    Chairman Lieberman. Just for the record, can a car be both 
flex-fuel and have the option of being powered by a battery?
    Mr. Luft. It should. Once you have a plug-in hybrid car, 
making it also flex-fuel just means adding $100 to the car. All 
you need is a different fuel line of corrosion-resistant 
materials that enable the car to run also on alcohols. It is 
not one or the other. It should be both.
    Chairman Lieberman. Should our aim be to get to 100 percent 
by a date certain?
    Mr. Luft. Well, I think that it would be nice if we had 100 
percent. I think 100 percent could be difficult. But I think if 
we have the 50 percent going to 80 percent, then you certainly 
create a market, and that will move the whole system forward.
    Chairman Lieberman. OK. Dr. Dagher, you mentioned that 
Europe is ahead of us in the development of offshore wind 
energy. Tell the Committee a little bit more about how you 
would characterize the maturity of offshore wind here in the 
United States. How much electricity is now being produced by 
offshore wind?
    Mr. Dagher. In the U.S.----
    Chairman Lieberman. Yes, that is what I meant.
    Mr. Dagher [continuing]. At this particular time, there is 
no production of electricity.
    Chairman Lieberman. Really it is zero.
    Mr. Dagher. It is zero at this point.
    Chairman Lieberman. So the notorious wind farm off of 
Nantucket, was it, that never--nothing has happened there.
    Mr. Dagher. Certainly it has not materialized yet. There 
are hopes that it would materialize.
    Senator Carper. Would the Chairman yield?
    Chairman Lieberman. Please.
    Senator Carper. Twelve miles off the coast of Rehoboth 
Beach, Delaware, the wind farm is coming.
    Chairman Lieberman. It is coming?
    Senator Carper. Yes, we have worked it out.
    Chairman Lieberman. Really?
    Senator Carper. And we are inviting Maryland and maybe New 
Jersey to consider joining us.
    Chairman Lieberman. That is great.
    Senator Carper. We are excited.
    Chairman Lieberman. Thank you, Senator Carper. Good news.
    Mr. Dagher. Yes.
    Chairman Lieberman. What is the state of the technology? In 
other words, is there a lot of R&D that still has to be done to 
make this work, particularly further offshore?
    Mr. Dagher. That is correct. If you look at further 
offshore right now, there are no commercial installations of 
further offshore wind energy, even though 90 percent, if you 
wish, of the U.S. offshore wind energy is in deep water. So, 
yes, there are major R&D efforts needed. There are currently a 
number of companies worldwide that are pursuing the effort. 
StatoilHydro has recently invested $80 million in their first 
demonstration structure.
    What needs to be done? There needs to be a public-private 
effort, government and industry working together to go in that 
direction. However, we believe in the next 5 years to 7 years, 
if the R&D dollars are in place, we should be able to go deep 
offshore.
    Chairman Lieberman. Thanks. My time is up, and also my time 
will be up over there if I do not move. So I am going to 
temporarily recess the hearing. Don't go very far because I 
expect Senator Collins will come back, and she will begin again 
and then I will return.
    Thank you.
    [Recess.]
    Senator Collins [presiding]. The Committee will come back 
to order. In the Chairman's absence, I am going to proceed with 
his permission to my questioning, and, Dr. Dagher, we will 
start with you.
    First let me say to the entire panel that your testimony is 
very helpful to us. When I look at all the testimony we have 
heard today, I cannot help but think that all of the above are 
part of the answer, that it is not just one piece. We have to 
have a very comprehensive approach.
    Dr. Dagher, as you know, it has been difficult to do siting 
of wind energy, both on land and in the case of Massachusetts, 
offshore as well. Therefore, I want to clarify a point about 
the plan that you have presented.
    As I understand it, these turbines would not be visible 
from the shore. Is that accurate?
    Mr. Dagher. That is accurate, Senator Collins, yes.
    Senator Collins. So how far offshore are you talking about 
locating these turbines?
    Mr. Dagher. We are looking at 20-miles-plus offshore, which 
because of the curvature of the Earth, would make these 
invisible, and specifically to address the issues that you have 
been concerned about is how do we get over the Nantucket 
problem. It is really what we call ``out of sight, out of 
mind'' turbines, in many ways. A lot of people do not want to 
look at these turbines from their land onshore, and by getting 
them out where they are 20 miles off, we avoid some of these 
issues. But also we pick up the wonderful wind resource that 
happens to be at that distance.
    Senator Collins. I am very excited about T. Boone Pickens' 
plan, but I do not think it is the whole answer. It seems to me 
that the plan that you have outlined using offshore wind and 
geothermal are really complementary to his plan. Is that your 
assessment?
    Mr. Dagher. That is correct, Senator Collins, yes. T. Boone 
Pickens' plan utilizes the wind corridor from the Dakotas down 
to Texas to generate anywhere from 200 to 400 gigawatts, 
depending on how much you want to generate. But that leaves us 
out, if you wish, on the east coast and on the west coast 
unless we build very expensive transmission systems. The 
majority of the U.S. population, actually close to 28 States, 
utilize more than 70 percent of the Earth's electricity around 
the coasts of the United States. So the major demand for 
electricity is around the perimeter of the country.
    Senator Collins. So, actually, your plan helps to provide 
increased access to renewable electricity closer to the 
population centers. The Pickens Plan goes through the very 
center of the United States, but as I understand it, 
electricity loses--there are line losses the further away from 
the source of electricity. Is that accurate?
    Mr. Dagher. That is accurate.
    Senator Collins. You are the engineer here.
    Mr. Dagher. That is correct. Yes, there are line losses 
that take place, and, of course, there are transmission costs 
as well that go along with that. And building transmission 
lines in heavily populated areas is very expensive as well from 
a permitting viewpoint and so forth. And if you look at the 
population centers on the east coast, for example, the 
Midatlantic States and up in the New England area, it would be 
very costly to build transmission lines in those areas. 
Therefore, siting some of this renewable resource offshore 
allows us to get directly to where the population centers are 
and avoid the congestion.
    Senator Collins. Thank you.
    Dr. Luft, I want to go to your point about the 
transportation sector because, clearly, converting cars has to 
be an essential component of our energy security policy. And I 
would be interested in your concerns about Mr. Pickens' plan to 
use natural gas. What would you think of the Federal Government 
having a mandate on itself to say that the Federal fleet has to 
be comprised of flex-fuel cars, plug-in hybrids, as well as 
natural gas-fueled cars by a certain date? Let me tell you why 
I am asking you this question.
    Mr. Pickens made the point that in the United States we 
have only a very small percentage of our vehicles using natural 
gas. Well, you could go beyond natural gas and say we have a 
very small percentage of our vehicles that are not dependent on 
gasoline more broadly. If the Federal Government helped to lead 
the way, would it help spur the infrastructure that we need to 
fuel these alternative vehicles? And would it help encourage 
manufacturers to also meet this demand?
    Mr. Luft. Well, first of all, the Federal Government has 
already committed itself years ago, and the problem today is 
with compliance rather than commitment. So let's first of all 
focus on compliance of rules and regulations that have already 
been introduced years ago and make sure that Federal agencies 
are actually in full compliance.
    I think that there are certain limitations to certain 
Federal agencies realistically that need access to the fuel if 
they do not have infrastructure, which is why I think the 
lowest-hanging fruit is the flex-fuel because a flex-fuel 
mandate only adds a small feature to the car. It is very cheap. 
It should be, across the board, not only added to the Federal 
fleet but to every car sold in America.
    Quite frankly, one of the reasons, I think, that methanol 
should be in the picture, if Mr. Pickens is so interested in 
natural gas, you should know that almost all of our methanol 
today is produced from natural gas. So that is a good way to 
use indirectly natural gas in flex-fuel cars by using methanol, 
which can be made from other things but also from natural gas. 
And that is, again, this $100 feature that makes the car 
capable of running on those fuels. That is the very low-hanging 
fruit, and thank you for being part of it.
    Senator Collins. In your testimony, you had a wonderful 
comparison that the Federal Government is subsidizing converter 
boxes so that people do not lose the signal on their television 
sets come next year when the conversion to digital takes place. 
It is ironic that we do not do more to help people convert 
their automobiles to flex-fuels when an investment of just $100 
per vehicle could make such a difference in the energy 
consumption of our country. You did not use that analogy in 
your oral presentation today, so I just wanted to bring it up 
for the record since, arguably, helping to reduce our 
dependence on foreign oil is more important than helping to 
ensure that people can still watch television--or some would 
argue, anyway. So I thought that was a good point.
    Mr. Anderson, your emphasis on community planning and the 
design of our housing and our downtowns is very interesting, 
and I also think it is part of the solution. However, if you 
come from a large rural State like mine, it seems somewhat less 
relevant than it would to a more congested urban area.
    What can a large rural State learn from your findings?
    Mr. Anderson. I think actually there is a lot of 
application. Before this position, I was at the Environmental 
Protection Agency actually running the Smart Growth Program 
there, and a lot of the technical assistance we did there was 
in more rural locations--Laconia, New Hampshire; Pamlico, North 
Carolina; Cheyenne, Wyoming; Victor and Driggs, Idaho. A lot of 
small towns really are looking at how they are growing and 
asking the question--I mean, in many ways it is the suburban 
and rural areas that are most vulnerable to rising gas prices 
because of the lack of options from being able to drive. And 
the most significant change we have seen, I think, in the short 
term has been increases in transit ridership. We are seeing 
transit at 50-year high. We have seen actual drops in vehicle 
miles of travel over the last year. So people are changing 
their behavior, and it is happening in the places you would 
expect, with a lot of transportation choices and a lot of 
public transportation. But it is also happening in smaller 
towns and rural areas. And the kinds of transit options, the 
kinds of public transportation options you would want to look 
at for smaller rural towns and areas are different, but they 
are out there, and the models exist for systems that would be 
applicable to those places.
    And so I think also looking at not only the work trip but 
the non-work trip, there tends to be a great deal of focus on 
the energy and the oil and the gas associated with getting to 
and from work. But when you look at the trip profile, that 
tends to be, depending on how you want to count, only 25 to 35 
percent of all the trips a household takes.
    So just making more complete communities where kids can 
walk to school, where schools are the centers of the community, 
where you can do some of your daily errands with a short car 
trip rather than a long one can make a big difference. If you 
look, for instance, back in 1960, about 50 percent of kids 
walked to school. That number is now down to about 11 percent. 
So just the basic way that we are building and shaping our 
communities is, in fact, locking us into one transportation 
option and essentially locking in oil dependence in the 
transportation sector.
    Senator Collins. Thank you.
    Dr. Dagher, you made a very interesting point that your 
plan could not only help to reduce our dependence of foreign 
oil and bring some stability and lower prices to the citizens 
of our State who are really struggling with the high cost of 
heating oil, but it also could be an economic benefit. Could 
you talk a bit more for the Committee about the possibility of 
what some have been referring to as ``green jobs''?
    Mr. Dagher. Yes, indeed. You are absolutely correct, 
Senator Collins. By solving the heating crisis that we have in 
the State of Maine and the energy crisis, we can also create a 
lot of renewable energy jobs. Now, Europe is a perfect example 
here. We do not need to really look into the future. We just 
need to look across the Atlantic.
    Europe has created over 300,000 jobs over the last 10 years 
in wind and wind-related energies because 70 percent of all 
wind turbines in the world are now produced in Europe. We can 
do the same. But they have put together a policy system that 
allows industry to invest. They have the tax credits in place; 
they are very stable. So putting together the policy framework 
that would allow for these renewables to move forward is 
critical.
    Numbers, in terms of how many jobs are created per gigawatt 
installed, vary quite a bit, but those numbers are anywhere 
from 1,000 jobs to 5,000 jobs per gigawatt of wind energy 
installed.
    Senator Collins. Those jobs would be welcome indeed.
    Senator Lieberman, before you came in, I started my 
questioning by saying that I think we need all elements of the 
plans that we have heard today, and that, in fact, T. Boone 
Pickens' plan for wind energy in the middle of the country fits 
in very well with Dr. Dagher's plan to tap offshore wind, which 
in turn we also need to supplement by Dr. Luft's proposals for 
the transportation sector and Mr. Anderson's suggestion for 
better planning of communities.
    This is going to take the ingenuity and the innovation of 
everyone to achieve the goal of energy security for this 
country, and I for one am very appreciative of the testimony we 
have heard today. I told them if this were a multiple choice 
test, I would be checking ``all of the above.'' And I just want 
to thank you, Mr. Chairman, for holding this very important 
hearing today.
    Chairman Lieberman [presiding]. Thanks very much, Senator 
Collins. Thanks for your inspiration which brought the hearing 
about. And I agree with you, this is not a problem that will be 
solved with a single bullet. I was impressed by that in T. 
Boone Pickens' testimony. He may have some favorites here, as 
you commented on, in terms of natural gas, but I thought in the 
end he was open to the various ways in which we would deal with 
this, if I may say so, so long as they were American--in other 
words, as long as they broke our dependence on foreign oil and 
created bridges to the zero hydrocarbon future. And then the 
three of you have really presented us with a series of, I 
think, very visionary but also practical options, which I 
appreciate.
    I do not have any further questions.
    Senator Collins. I just have one final comment for Dr. 
Dagher, and that is, give us a sense of how far away we are in 
your view from the technology that would make your plan 
feasible from an economic standpoint.
    Mr. Dagher. We are looking at about 5 to 7 years from 
becoming a reality in the United States. I would also like 
along the same lines to really recognize before we go my dear 
colleague, Dr. George Hart, who is sitting here. If you don't 
mind, George, stand up. Dr. Hart is really at the heart of 
developing all of these concepts, so thank you, Dr. Hart.
    Senator Collins. Thank you. Thank you, Mr. Chairman.
    Chairman Lieberman. Thanks, Senator Collins, and we thank 
our witnesses.
    We are going to leave the record of the hearing open for 15 
days if Members of the Committee want to submit questions to 
you in writing or if you would like to add to your testimony in 
any way. But we thank you very much for the work you are doing 
and for the testimony that you offered today.
    The hearing is adjourned.
    [Whereupon, at 12:06 p.m., the Committee was adjourned.]
                            A P P E N D I X

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