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                                 ______

2009


 
    ENERGY OUTLOOKS, AND THE ROLE OF FEDERAL ONSHORE AND OFFSHORE 
               RESOURCES IN MEETING FUTURE ENERGY DEMAND

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                        Thursday, March 5, 2009

                               __________

                            Serial No. 111-8

                               __________

       Printed for the use of the Committee on Natural Resources



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                                   or
         Committee address: http://resourcescommittee.house.gov
                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
          DOC HASTINGS, Washington, Ranking Republican Member

Dale E. Kildee, Michigan             Don Young, Alaska
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Jeff Flake, Arizona
Frank Pallone, Jr., New Jersey       Henry E. Brown, Jr., South 
Grace F. Napolitano, California          Carolina
Rush D. Holt, New Jersey             Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona            Louie Gohmert, Texas
Madeleine Z. Bordallo, Guam          Rob Bishop, Utah
Jim Costa, California                Bill Shuster, Pennsylvania
Dan Boren, Oklahoma                  Doug Lamborn, Colorado
Gregorio Sablan, Northern Marianas   Adrian Smith, Nebraska
Martin T. Heinrich, New Mexico       Robert J. Wittman, Virginia
George Miller, California            Paul C. Broun, Georgia
Edward J. Markey, Massachusetts      John Fleming, Louisiana
Peter A. DeFazio, Oregon             Mike Coffman, Colorado
Maurice D. Hinchey, New York         Jason Chaffetz, Utah
Donna M. Christensen, Virgin         Cynthia M. Lummis, Wyoming
    Islands                          Tom McClintock, California
Diana DeGette, Colorado              Bill Cassidy, Louisiana
Ron Kind, Wisconsin
Lois Capps, California
Jay Inslee, Washington
Joe Baca, California
Stephanie Herseth Sandlin, South 
    Dakota
John P. Sarbanes, Maryland
Carol Shea-Porter, New Hampshire
Niki Tsongas, Massachusetts
Frank Kratovil, Jr., Maryland
Pedro R. Pierluisi, Puerto Rico

                     James H. Zoia, Chief of Staff
                       Rick Healy, Chief Counsel
                 Todd Young, Republican Chief of Staff
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                


              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
           DOUG LAMBORN, Colorado, Ranking Republican Member

Eni F.H. Faleomavaega, American      Don Young, Alaska
    Samoa                            Louie Gohmert, Texas
Rush D. Holt, New Jersey             John Fleming, Louisiana
Dan Boren, Oklahoma                  Jason Chaffetz, Utah
Gregorio Sablan, Northern Marianas   Cynthia M. Lummis, Wyoming
Martin T. Heinrich, New Mexico       Doc Hastings, Washington, ex 
Edward J. Markey, Massachusetts          officio
Maurice D. Hinchey, New York
John P. Sarbanes, Maryland
Niki Tsongas, Massachusetts
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, March 5, 2009..........................     1

Statement of Members:
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     1
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     6
        Prepared statement of....................................     7
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     3
        Prepared statement of....................................     5

Statement of Witnesses:
    Birol, Dr. Fatih, Chief Economist, International Energy 
      Agency.....................................................     8
        Prepared statement of....................................    11
        Response to questions submitted for the record...........    13
    Gruenspecht, Dr. Howard K., Acting Administrator, Energy 
      Information Administration.................................    18
        Prepared statement of....................................    21
        Response to questions submitted for the record...........    25
    Pierce, Brenda S., Program Coordinator, Energy Resources 
      Program, U.S. Geological Survey, U.S. Department of the 
      Interior...................................................    36
        Prepared statement of....................................    39
        Map of Undiscovered Technically Recoverable Oil and Gas 
          Resources on Federal Lands.............................    44
        Map of Total Mean Undiscovered Gas Resources.............    44
        Map of Total Mean Undiscovered Oil Resources.............    45

Additional materials supplied:
    Briggs, Don G., President, Louisiana Oil and Gas Association, 
      Letter submitted for the record by The Honorable John 
      Fleming....................................................    65
                                     


 
OVERSIGHT HEARING ON ``ENERGY OUTLOOKS, AND THE ROLE OF FEDERAL ONSHORE 
       AND OFFSHORE RESOURCES IN MEETING FUTURE ENERGY DEMAND.''

                              ----------                              


                        Thursday, March 5, 2009

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 2:00 p.m., in 
Room 1324, Longworth House Office Building, Hon. Jim Costa 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Costa, Holt, Sablan, Heinrich, 
Sarbanes, Lamborn, Gohmert, Fleming, Chaffetz, Lummis, and 
Hastings.

 STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Costa. The Subcommittee on Energy and Mineral Resources 
will now come to order.
    For this afternoon's hearing, we are meeting today with 
regard to energy outlooks and the role that Federal onshore and 
offshore resources play in meeting future energy demands.
    Under Committee Rule 4(g), the Chair and the Ranking Member 
may make an opening statement. And then, if any other Members 
have statements, they can be included in the hearing record 
under unanimous consent.
    I will allow the Ranking Member of the Full Committee, Doc 
Hastings, who is also with us today, to provide some thoughts. 
And we appreciate your participation.
    Additionally, under Committee Rule 4(h), any material 
submitted for inclusion in the hearing record must be submitted 
no later than 10 days following this hearing.
    Members of the Subcommittee, our witnesses, and those of 
you in the audience, this is the first energy hearing for the 
Energy and Mineral Resources Subcommittee in this Congress 
dealing with the big picture. I always try to refer to that, in 
previous hearings that were held by the Full Committee and in 
the last Congress, because I think, to really talk about 
developing a new energy policy in this country, we have to look 
at, as I have said before, the big picture and utilizing all 
the energy tools in our energy toolbox.
    We have three distinguished witnesses today, the leading 
international and United States sources of energy statistics 
and forecasts, who are well-respected throughout the country 
and throughout the world, I might add.
    Dr. Fatih Birol is the Chief Economist of the International 
Energy Agency. They are responsible for writing the 
organization's annual ``World Energy Outlook,'' which looks at 
energy trends throughout the world to the year 2030. I don't 
know if we can accurately predict that, but obviously we have 
to try. The outlook also focuses on some topics that are of 
particular interest to the Subcommittee that we will discuss 
this afternoon as it relates to oil and gas production.
    Dr. Howard Gruenspecht--did I pronounce that properly? Dr. 
Gruenspecht is the Acting Administrator of the U.S. Energy 
Information Administration, which puts out a continuous wealth 
of energy analysis and forecasts, for both short-term and long-
term forecasts, that include the ``Annual Energy Outlook,'' 
which focuses on trends in America, again, to the year 2030.
    Last, but certainly not least, is Ms. Brenda Pierce. She 
heads the Energy Resources Division of the United States 
Geological Survey, which is the world's leading source on oil 
and gas resources.
    And we are glad that you are here.
    Members of the Subcommittee and those of you in the 
audience, I hope the discussion today is on how we can figure 
out ways in which we can come together to achieve clean and 
sustainable domestic energy that will address our Nation's 
short-term and long-term needs. I think that is everyone's 
goal.
    As I said in a hearing we had last month, while we can 
agree on the goal, we have a number of different views on how 
we reach those goals. Obviously, we want to reduce the 
dependency on foreign sources of energy that we import, reduce 
it significantly, so that we are not held hostage and so that 
America's economy can remain stable. We also want to reduce our 
dependency, as we move into the 21st century, on fossil fuels. 
We want to be able to have a greater reliance on renewable 
sources of energy.
    But that is what we have to focus on, in terms of how we 
use all the energy tools in our energy toolbox, knowing that 
both our petroleum and our fossil fuels will continue to play a 
very important role as we deal with our long-term energy needs 
in the 21st century and as we transition.
    So I am hopeful that today's hearing will set the 
discussion in what we need to do in terms of the short term in 
using all these energy tools in our energy toolbox; in the near 
term, by that I mean the next 5 to 10 years; and then the long 
term, and by that I mean 20 years and beyond.
    I am a strong believer that we can be successful in 
achieving these goals. We know that oil and gas and coal are 
absolutely essential today, and they will be for a long time. 
But that should not allow us to rest at ease or to take any 
comfort in the fact that, if we don't lead the world in clean, 
renewable energy or energy efficiency, because conservation is 
an ethic that I think we all embrace--and so, therefore, we 
need to also look at other sources that have been successful. 
For me, that includes nuclear energy, coal to liquids, advanced 
biofuels and, in short, all the tools, again, in our toolbox.
    The jurisdiction, of course, of this Subcommittee on how 
energy can be produced on public lands, both traditional and 
alternative forms of energy, we must keep in mind what the 
jurisdiction of this Subcommittee is.
    But, also, I think it is timely, as this hearing will 
certainly play out. And every day, every Member of Congress is 
mindful of the fact that our economic recovery is dependent 
upon putting together a comprehensive energy plan. I think 
everyone feels that is incumbent and, therefore, we have to 
focus on that today. We need, when we discuss energy 
legislation in the coming year, to think about how this best 
invests in future jobs in America, builds on new markets, 
promotes new technologies, as it relates to our energy long-
term needs.
    Another pressing need in this country is obviously a lower-
carbon economy. This week, the United Nations' top climate 
officials are in Washington. In China, Secretary of State 
Clinton has engaged China, the world's biggest emitter, along 
with ourselves, in regard to energy and the impacts that the 
carbon emissions have with regard to the energy that we 
consume.
    The President has signaled that he is placing the United 
States at the forefront of the international effort to deal 
with these climate issues. And his chief climate negotiator 
said last week, according to a report in the New York Times on 
Sunday, that the United States would be involved in the 
negotiations of a new international climate change treaty, 
hopefully to be signed in Copenhagen in December of this year. 
We hope that that is successful.
    The hearing today focuses on those areas that we know 
relate to our choices, the choices we have to make as it 
relates to the impacts on our climate. So I look forward to 
hearing from our witnesses not only about their long-term 
visions of the big picture of energy production, on public 
lands, but both how we ensure that onshore and on the Outer 
Continental Shelf we can do everything possible to provide a 
balanced energy future that I think we all strive for.
    With that, I would like to now recognize my colleague and 
Ranking Member of the Subcommittee, Congressman Doug Lamborn of 
Colorado.

    STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Lamborn. Thank you, Mr. Chairman. And I want to thank 
you also for calling today's hearing.
    This hearing will continue our focus on the Nation's Outer 
Continental Shelf, as well as onshore oil and gas resources. 
Our witnesses today will share with us the energy outlook for 
the United States and the world through 2030, based on the best 
information they have.
    Their testimony, while tremendously helpful, is still only 
a projection and not the reality that we may face. No one could 
have predicted $150-a-barrel oil last year or 30-some-dollar-a-
barrel of oil today. Such tremendous swings in prices have 
dramatic impact upon our economy, as the current recession has 
shown. Professor James Hamilton from UCSD has written that, 
quote, ``Nine out of 10 of the last U.S. recessions since World 
War II were preceded by a spike up in oil prices.''
    As we work to get our economy moving again, we must be 
prepared to face rising energy prices. The President's budget 
recently proposed massive tax increases on the oil and gas 
industry of America starting in 2011, and upon electricity from 
cap-and-trade in 2012. These massive tax increases coincide 
with the projections by EIA of a return to $100-a-barrel oil.
    If energy price spikes are what got us into this recession 
and nine out of 10 recessions since World War II, what will 
happen if we face another price spike, as well, when we begin 
to pull ourselves out of this recession? Couldn't that have a 
similar negative impact?
    This hearing will focus, again, on what resources may be 
available in the OCS. While I believe we can all agree that the 
OCS moratoria areas are a fairly unknown commodity, the truth 
is that we have companies willing to gamble billions of their 
own dollars to explore these unknown areas at no risk and no 
cost to the taxpayer.
    It was stated at a previous hearing that, if the estimates 
in the Atlantic--currently 3.8 billion barrels of oil and 37 
trillion cubic feet of natural gas--which were last surveyed in 
the 1970s, were to expand in the same fashion that Gulf of 
Mexico resources have expanded since the 1970s, we will have 
more than 18 billion barrels of oil and 89 trillion cubic feet 
of gas in the Atlantic alone.
    More importantly is the fact that the resources off the 
coast of California are probably some of the most accessible in 
the world. In many places on the California coast, we have 
leases which could be slant-drilled from shore from existing 
coastal infrastructure. In addition, the resources off the 
coast of California are fairly well-known, and we could develop 
much of that area within just a few years, creating American 
jobs and reducing our dependence on foreign energy, not to 
mention having more accessible energy for America's working 
families.
    Our dependence on foreign energy, sadly, is not something 
that we will reduce any time soon. Based on current law, the 
projections in the EIA outlook show that we will still be 
importing a tremendous amount of oil in 2030. Reducing our 
dependence on these imports should be a major focus of this 
committee.
    An increase of 1 million barrels per day of domestic 
production would reduce our imports by a million barrels a day. 
In today's economy, that means adding nearly $13 billion per 
year to the American economy that we currently ship overseas to 
foreign governments. So, as we talk about potential oil and gas 
resources in the U.S. as a few million barrels here and a few 
million barrels there, let's remember that those barrels add up 
to billions of dollars for the U.S. economy, for U.S. jobs, and 
for the U.S. Treasury.
    EIA's analysis also shows that, while we close our import 
dependence on natural gas, we will remain dependent on foreign 
gas to meet our demands. Developing the Atlantic OCS region 
will help to further shrink that gap, as it is primarily 
believed to be a gas-rich area rather than an oil-rich area.
    Finally, I am concerned that the EIA outlook presented here 
today projects that we will become dependent on imported 
biofuels, such as from Brazil, to meet the renewable fuel 
mandate passed last year. One of the goals of biofuels 
development was to reduce our dependence on foreign energy. If 
that mandate will suddenly make us more dependent on foreign 
energy by simply changing our dependence from oil to more 
costly biofuels, then we will need to re-examine this issue 
much more closely.
    Finally, Mr. Chairman, we must remember throughout our 
focus on the OCS development that this just isn't about 
drilling or pumping oil and gas. Opening the OCS is about 
retooling our energy economy to focus on creating American 
manufacturing jobs, and good-paying jobs at that, and building 
the infrastructure to harness our domestic energy.
    We all agree that America is too dependent on foreign 
governments for our energy supply. We can and should determine 
the most responsible way to develop our OCS resources. However, 
in the end, finding solutions to developing these resources 
should be our ultimate goal. America is a nation rich in 
resources. Developing these resources will free us from our 
dependence on foreign oil.
    I look forward to hearing from our witnesses. And I yield 
back, Mr. Chairman.
    [The prepared statement of Mr. Lamborn follows:]

        Statement of The Honorable Doug Lamborn, Ranking Mmber, 
              Subcommittee on Energy and Mineral Resources

    Mr. Chairman, I want to thank you for calling today's hearing. This 
hearing will continue our focus on the nation's Outer Continental Shelf 
(OCS) as well as onshore oil and gas resources. Our witnesses today 
will share with us the energy outlook for the United States and the 
world through 2030, based on the best information they have. Their 
testimony, while helpful, is still only a projection and may or may not 
be the reality that we will face. No one could have predicted $150 oil 
last year, or $30 oil today. Such tremendous swings in prices have 
dramatic impact upon our economy as the current recession has shown.
Economy
    Professor James Hamilton from the University of California San 
Diego (UCSD) has written that ``nine out of ten of the U.S. recessions 
since World War II were preceded by a spike up in oil prices.'' The 
President's budget recently proposed massive tax increases on various 
sources of energy in America starting in 2011. These massive tax hikes 
coincide with projections by the Energy Information Administration 
(EIA) of a return to $100 oil. If energy price spikes are what got us 
into this recession, and 9 out of 10 recessions since World War II, 
what will happen if we face major tax hikes as we begin to pull 
ourselves out of this recession? Couldn't that have a similar negative 
impact?
Resources
    This hearing will focus again on what resources may be available in 
the OCS. The bottom line is that we have companies willing to commit 
billions of their own dollars to explore these unknown areas, at no 
cost to the taxpayer.
    It was stated at a previous hearing that surveys from the 1970's 
revealed 3.8 billion barrels of oil and 37 trillion cubic feet of 
natural gas in the Atlantic Ocean. If Atlantic supply estimates were to 
expand in the same fashion that Gulf of Mexico resource estimates have 
expanded since the 1970's, America would have more than 18 billion 
barrels of oil and 89 trillion cubic feet of natural gas in the 
Atlantic alone.
    Resources off the coast of California are probably some of the most 
accessible in the world. In many places on the California coast we have 
areas which could be slant drilled from shore using existing coastal 
infrastructure. In addition, the resources off the coast of California 
are fairly well known. They could be developed within just a few years, 
creating American jobs and reducing our dependence on foreign energy.
Projections
    Based on current law, the projections in the EIA outlook show that 
we will still be importing a tremendous amount of oil in 2030. Reducing 
our dependence on these imports should be a major focus of this 
committee. An increase of one million barrels per day of domestic 
production would reduce our imports by a million barrels a day. In 
today's economy, that means adding nearly $13 billion per year to the 
American economy that we currently ship overseas to foreign 
governments. So as we talk about potential oil and gas resources in the 
U.S. as a few million barrels here and a few million barrels there, let 
us remember that those barrels add up to billions of dollars for the 
American economy and the U.S. Treasury.
    EIA's analysis also shows that while we reduce our import 
dependence on natural gas from an estimated 54% of total U.S. domestic 
demand down to 41% of total U.S. domestic demand, we will remain 
dependent on foreign gas to meet our needs. Developing the Atlantic OCS 
region will help to further promote U.S. energy self sufficiency, as 
the Atlantic OCS region is primarily believed to be rich in gas rather 
than oil.
    Finally, I am concerned that the EIA outlook presented today 
projects that we will become dependent on imported biofuels to meet the 
renewable fuel mandate passed last year. One of the stated goals of 
biofuels development was to reduce our dependence on foreign energy. If 
that mandate will suddenly make us more dependent on foreign energy by 
simply changing our dependence from oil to more costly biofuels, then 
we may need to reexamine the issue of biofuels much more closely.
Closing
    Finally, Mr. Chairman, we must remember throughout our focus on OCS 
development that this isn't just about drilling or pumping oil and gas. 
Opening the OCS is also about retooling our energy economy to focus on 
creating good-paying American manufacturing jobs and building the 
infrastructure to harness our domestic energy.
    We all agree that America is too dependent on foreign governments 
for our energy supply. We can and should determine the most responsible 
way to develop our OCS resources. Finding solutions to developing those 
resources should be our ultimate goal.
    America is a nation rich in energy resources. There's absolutely no 
question that developing those resources will help free us from our 
dependence on foreign oil.
    I look forward to hearing from our witnesses.
                                 ______
                                 
    Mr. Costa. I thank the gentleman from Colorado.
    It is the intention of the Chair to recognize the Ranking 
Member of the Full Committee, the gentleman from Washington 
State. But before I do, I want to suggest to Members that, 
following his statement, we will then defer to our witnesses. 
We are going to make an exception and allow each of the 
witnesses 10 minutes in their presentation because of the 
detail and depth of their subject matter and their 
presentation. And I think we obviously want to get to our 
witnesses.
    I might also add, with votes sometime after 4 o'clock, the 
Chair will certainly try to ensure that everyone has 5 minutes 
for comments or questions. And whether or not we are able to 
achieve a second round will be dependent upon our time.
    The gentleman from Washington State, the Ranking Member of 
the Full Committee, Doc Hastings.

    STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Hastings. Thank you, Mr. Chairman. And I appreciate the 
courtesy you have given me to make a statement. And let me just 
add parenthetically, sometimes 5 minutes is too short. I think 
this is probably a good idea, to allow the witnesses to go on 
longer, because there is a lot of information to digest.
    Mr. Chairman, I just want to say there are certainly two 
front-page issues that have a significant impact on our 
Nation's energy outlook. One is the production of more 
American-made energy, both offshore and on Federal lands. There 
is no question that the creation of more energy in our Nation 
will help create new jobs and make us more secure by lowering 
our dependence on foreign oil.
    The development of our OCS resources is critically 
important to both our energy future and our economic future. 
While we are discussing possible future development, later this 
month the Department of the Interior will conduct a lease sale 
in what is believed to be one of America's best untapped areas, 
the 181 South Area of the Gulf of Mexico.
    Today, I and a number of my colleagues are sending a letter 
to Secretary Salazar stressing the importance of moving forward 
with this critical lease sale. And I say that for this reason: 
because of the Secretary's recent actions by revoking leases in 
Utah, reinstituting the moratoria on the OCS by delaying the 5-
year plan, and stopping oil shale research in its tracks in the 
mountain West, to me that shows a clear trend against oil and 
gas development and job creation.
    So my colleagues and I are concerned that, should the 
Department act to delay the Central Gulf Oil and Gas Lease Sale 
208, it will further establish a dangerous trend of blocking 
new American-made energy and the creation of new American jobs. 
Additionally, a delay of this sale would throw obstacles in the 
way of providing Americans oil and gas that the Energy 
Information Administration says that the Nation will need well 
past 2030 and also discourage energy companies from pursuing 
new opportunities in our country.
    And the other front-page issue affecting our Nation's 
energy outlook is the cap-and-trade tax plan--the Chairman 
alluded to that briefly in his opening remarks, regarding the 
carbon releasing--but that cap-and-trade plan that was proposed 
by President Obama in his budget last Thursday.
    As a conservative estimate in that budget, this is a $646 
billion cost that is being imposed on our economy. And anyone 
who uses energy--families, schools, factories, farms and so 
forth--will be affected.
    When you boil it right down, what a cap-and-trade tax means 
is that the Federal Government is going to purposely increase 
energy prices. In these difficult times, we need to keep a 
focus on growing our economy, not imposing additional taxes 
that will drive up the cost of energy for all Americans and 
potentially further push our economy in the wrong direction.
    I know that EIA has extensively examined the impacts of 
cap-and-trade programs that they will have on our economy, and 
I look forward to listening and learning from these witnesses 
and the other witnesses.
    So, Mr. Chairman, once again, thank you very much for your 
consideration. And I yield back my time.
    [The prepared statement of Mr. Hastings follows:]

       Statement of The Honorable Doc Hastings, Ranking Member, 
                     Committee on Natural Resources

    I want to thank the Chairman for holding this hearing so we can 
examine the energy outlook for our nation. There are certainly two 
front-page issues that have a significant impact on our nation's energy 
outlook. One is the production of more American-made energy both 
offshore and on federal lands. There's no question that the creation of 
more energy in our nation will help create new jobs and make us more 
secure by lowering our dependence on foreign oil.
    The development of our OCS resources is critically important to 
both our energy future and our economic future. While we are discussing 
possible future development, later this month the Department of 
Interior will conduct a lease sale in what is believed to be one of 
America's best untapped areas, the 181 South Area of the Gulf of 
Mexico.
    Today, I lead a number of my colleagues in sending a letter to 
Secretary Salazar stressing the importance of moving forward with this 
critical lease sale. The Secretary's recent actions: revoking leases in 
Utah, reinstituting the moratoria on the OCS by delaying the 5-year 
plan, and stopping oil shale research in its tracks, show a clear trend 
against oil and gas development and job creation. My colleagues and I 
are concerned that should the Department act to delay the Central Gulf 
Oil and Gas Lease Sale 208, it will further establish a dangerous trend 
of blocking new American-made energy and the creation of new American 
jobs. Additionally, a delay of this sale would throw obstacles in the 
way of providing American oil and gas that the Energy Information 
Administration says the Nation will need well past 2030 and also 
discourage energy companies from pursuing new opportunities in our 
country.
    And the other front-page issue affecting our nation's energy 
outlook is the cap-and-trade tax plan proposed by President Obama in 
his budget from last Thursday. At the conservative estimate included in 
the budget, this is a 646 billion dollar cost being imposed on our 
economy and on anyone who uses energy, from families to schools to 
hospitals to factories to farmers.
    When you boil it right down, what a cap-and-trade tax means is that 
the federal government is going to purposefully increase energy prices.
    In these difficult economic times, we need to keep a focus on 
growing our economy, not imposing tax schemes that will drive up the 
cost of energy for all Americans and push our economy further in the 
wrong direction.
    I know that EIA has extensively examined the impacts that cap-and-
trade programs will have on our economy and I look forward to listening 
and learning from the Administrator and the other witnesses.
    Thank you.
                                 ______
                                 
    Mr. Costa. I thank the gentleman from Washington State very 
much for your comments.
    Now we will begin with recognizing our witnesses, who we 
appreciate very much, first Dr. Fatih Birol.
    Did I pronounce that properly? Thank you.
    He is the Chief Economist for the International Energy 
Agency.
    And we look forward to your testimony. You probably know 
the system here. A green light will be on, and that will remain 
green for 9 minutes and then, at the 9th minute, it will turn 
yellow. When it turns red, you are in real trouble if you are 
still speaking. No, you have an easy Chair here; I will cut you 
a little slack--if I find it interesting.
    Please begin.

          STATEMENT OF FATIH BIROL, CHIEF ECONOMIST, 
                  INTERNATIONAL ENERGY AGENCY

    Mr. Birol. Chairman Costa, members of the Committee, thank 
you for the opportunity to appear before you today to discuss 
the views of the International Energy Agency, IEA, on the 
outlook for global energy markets over the medium and longer 
term.
    By way of background, the IEA is an intergovernmental 
organization based in Paris which acts as an advisor to 28 
member countries, including the United States, in their effort 
to ensure reliable, affordable, and clean energy for their 
citizens.
    We were founded during the oil crisis of 1973-1974, and our 
initial role was to coordinate measures in times of oil supply 
emergencies. However, as energy markets have changed, so has 
the IEA. Our mandate now incorporates work on climate change 
policies, market reform, energy technological collaboration, 
and outreach to the rest of the world, especially major 
consumers and producers of energy, including China, India, 
Russia, and key OPEC countries.
    As you said, Mr. Chairman, last November the IEA released 
the 2008 edition of its ``World Energy Outlook,'' the WEO 2008. 
Our report concludes that it is not an exaggeration to claim 
that the future of human prosperity depends on how successfully 
we tackle the twin energy challenges facing us today--twin 
energy challenges.
    The first one of these challenges is securing the supply of 
reliable and affordable energy, the first challenge; and 
second, effecting a rapid transformation to a low-carbon, 
efficient, and environmentally benign system of energy supply.
    The current trends point to rising imports of oil and gas 
into all OECD regions and developing Asia while the growing 
concentration of production in an ever-smaller number of 
countries threatens to increase our vulnerability to supply 
disruptions and sharp price hikes.
    On the climate change front, in the absence of stronger 
policy action, rising consumption of fossil fuels will drive up 
emissions and atmospheric concentration of greenhouse gases, 
putting the world on the perfect track for an eventual global 
temperature increase of up to 6 degrees Celsius, which will 
have, as we all know, dramatic effects on our planet and on 
human beings.
    Let me turn to oil. Our report provides a more detailed 
assessment of oil supply prospects than has ever been before 
released by the IEA. In our reference scenario, the base 
scenario, in which we assume the government policies do not 
change, oil demand continues to grow, mainly coming from China, 
India, and Middle East countries.
    And the fundamentals are there. Today in China, 18 persons 
out of 1,000 persons own a car. And in the United States, 850 
persons out of 1,000 persons own a car. In Europe, 680 persons 
out of 1,000 persons own a car. So, with the increasing income 
levels in China, India, and other countries, oil demands will 
grow, and this will put pressure on the demand side.
    On the supply side, the bulk of the increase we expect to 
come from in the future from key OPEC countries. The share of 
OPEC, which is about 40 percent today, will increase over 50 
percent in 2030. And the bad news for the non-OPEC countries is 
that oil production has peaked in most of the non-OPEC 
countries and it will peak in most others before long.
    Coming back to the United States, in the absence of new 
policies, we see that the U.S. oil imports will be around 12 
million barrels per day in 2030, very similar to what we have 
today.
    These are not the only changes that we see in the future. 
Perhaps the most crucial change is that there will be a sea 
change in how the oil industry is being formed. If I may say 
so, the time of the Big Oil, international oil companies are 
passe, because the reserves, what they have today are 
declining, and they have major difficulties in access to new 
reserves, mainly in the hands of the national oil companies. 
And we expect the bulk of the growth of the production of oil 
and gas in the future, if it comes, it will come mainly from 
the national oil companies under different rules, what we have 
seen in the past when the international oil companies were 
dominating the game.
    Based on our field-by-field analysis of the 800 top fields 
of the world--we analyzed 800 top fields of the world, which 
make more than three-fourths of the global reserves--we see 
that the existing fields are declining in the world 
significantly. And this decline will accelerate in the future, 
especially in the non-OPEC countries, including Mexico, a key 
supplier of crude oil to the United States.
    Let me give you an example, ladies and gentlemen, of how 
important it is to understand the issue of declining oil 
fields. We do not know, as one of the members of the Committee 
said, how much oil demand will grow exactly in the next years 
to come. But even if we assume that global oil demand, which is 
about 85 million barrels per day today, will stay like this in 
the next 20 years, even then there will be no growth in the 
global oil demand. In order to compensate the decline in the 
existing fields, just to compensate the decline, we have to 
bring four new Saudi Arabias in the next 20 years just to 
compensate the decline. And I can tell you that this is a major 
challenge.
    Here, I would like to highlight, in addition to this 
geological challenge, another challenge which is a key one, 
namely the challenge of investments, especially nowadays. The 
credit crisis and deepening economic downturn is leading to a 
scaling back of all types of investment in most countries along 
the oil supply chain. While demand is also falling with the 
economic slump, there is a danger that the investment in the 
coming months and years is reduced too much, leading to a 
shortage of capacity and another spike in prices several years 
later when the economy is on the road to recovery, due to the 
long lead times in completing large upstream and refining 
projects.
    These trends I told you about, the declining security of 
supply and climate change, are definitely sobering and alarming 
trends. However, I can tell you that they are not set in stone. 
Indeed, there is much that can and is being done in many parts 
of the world to address these twin energy-related threats.
    In the past, the IEA has noted that very significant room 
remains to increase fuel-efficiency standards for trucks and 
cars in the United States, which would immediately contribute 
to energy and environmental security. In that respect, we 
commend the new American Recovery and Reinvestment Act.
    We believe consideration could also now be given to taking 
advantage of the recent slide in the world oil price to review 
the gasoline and diesel taxes and thereby lock in the 
efficiency gains that resulted from last year's price surge.
    Similarly, I believe efforts to maximize the production of 
U.S. domestic oil and natural gas resource, including through 
an expansion of drilling on the Offshore Continental Shelf, 
could form a crucial part of a comprehensive strategy to 
enhance the Nation's energy security.
    To finish, looking at the global picture, the only possible 
solution to a long-term sustainable future is to strive for an 
energy mix that uses all options simultaneously. We need to 
combine greater energy efficiency improvements with more 
renewables and more nuclear power. We must seek to minimize our 
dependence on fossil fuels while recognizing that they will 
need to continue to make a significant contribution for meeting 
our energy needs for several years to come. And I want to 
emphasize this, Mr. Chairman: It is not realistic to expect 
low-carbon technologies to replace fossil energies overnight.
    Finally, it is also imperative that international 
collaboration on energy policy is enhanced. Perhaps the best 
demonstration of this is on the climate change front. Many 
countries, such as the United States or the European Union, 
make suggestions to reduce CO2 emissions 20 percent, 
15 percent. However, even if we assume that, as of tomorrow, 
U.S. emissions--forget the reduction in the emissions, but 
would go to zero, completely zero, and stay like that for the 
next 25 years, European emissions will go to zero and stay like 
that 25 years, Japan and the others, and if China and India 
would continue with their existing policies, we would be still 
perfectly in line with a 6-degrees increase in temperature. So 
there is a need for cooperation in getting China, India, and 
Russia on the books.
    And even if the U.S. were to succeed in lowering its oil 
imports in the coming years, increasing import dependency in 
other major consuming regions, mainly in China and India, would 
still mean that any oil supply disruption anywhere in the world 
would result in severe knock-on effects for the U.S. market.
    Mr. Chairman and members of the Subcommittee, this 
completes my statement. I would be happy to take any questions 
you may have. Thank you.
    [The prepared statement of Mr. Birol follows:]

            Statement of Dr. Fatih Birol, Chief Economist, 
                      International Energy Agency

    Chairman Costa, members of the committee, thank you for the 
opportunity to appear before you today to discuss the views of the 
International Energy Agency (IEA) on the outlook for global energy 
markets over the medium and longer-term. My name is Fatih Birol and I 
am the Chief Economist and the Director of the office responsible for 
the economic analysis of energy policy at the IEA.
    By way of background, the IEA is an intergovernmental organisation 
which acts as an advisor to 28 member countries including the United 
States in their effort to ensure reliable, affordable and clean energy 
for their citizens. Founded during the oil crisis of 1973-74, the IEA's 
initial role was to co-ordinate measures in times of oil supply 
emergencies. As energy markets have changed, so has the IEA. Its 
mandate now incorporates work on climate change-policies, market 
reform, energy-technology collaboration and outreach to the rest of the 
world, especially major consumers and producers of energy including 
China, India, Russia and the OPEC countries.
    Last November, the IEA released the 2008 edition of its World 
Energy Outlook (WEO-2008). The report concludes that it is not an 
exaggeration to claim that the future of human prosperity depends on 
how successfully we tackle the twin energy challenges facing us today: 
securing the supply of reliable and affordable energy; and effecting a 
rapid transformation to a low-carbon, efficient and environmentally 
benign system of energy supply. Current trends in energy supply and 
consumption point to rising imports of oil and gas into OECD regions 
and developing Asia while the growing concentration of production in an 
ever smaller number of countries threatens to increase our 
vulnerability to supply disruptions and sharp price hikes. And, in the 
absence of stronger policy action, rising consumption of fossil energy 
will drive up inexorably emissions and atmospheric concentrations of 
greenhouse gases, putting the world on track for an eventual global 
temperature increase of up to 6+C.
    The report provides a more detailed assessment of oil-supply 
prospects than has ever before been released by the IEA. In a Reference 
Scenario, in which government policies are assumed to be unchanged, oil 
demand continues to grow strongly over the medium and longer-term. All 
of the projected increase is expected to come from non-OECD countries, 
led by China, India and the Middle East. The bulk of the increase in 
supply is expected to come from OPEC countries, their collective share 
rising from 41% today to 51% in 2030. Production has already peaked in 
most non-OPEC countries and will peak in most of the others before 
long. With respect to the United States, in the absence of a change in 
policy, we expect it to be importing around 12 mb/d of oil by 2030, 
only slightly down on current levels.
    These trends point to a sea change in the structure of the upstream 
oil and gas industry. The international oil companies, which have 
traditionally dominated the sector, will be increasingly squeezed by 
the growing power of the national companies and by dwindling reserves 
and production in accessible mature basins outside OPEC countries. The 
challenges confronting the oil sector will be further exacerbated by 
the prospect of accelerating declines in production at individual 
oilfields. Based on the WEO-2008's detailed field-by-field analysis of 
the historical production trends of almost 800 of the world's 
oilfields--the most comprehensive study of its kind ever made public--
we expect decline rates to accelerate significantly. Declines are 
fastest at oilfields in non-OPEC countries, including Mexico--a key 
supplier of crude oil to the United States.
    Our analysis demonstrates that projections of oil supply are far 
more sensitive to assumptions about decline rates than to the rate of 
growth in oil demand. For instance, even if global oil demand was to 
remain flat until 2030, some 45 mb/d of additional gross capacity--the 
equivalent of over four times the current capacity of Saudi Arabia--
would need to be brought on stream simply to offset declining 
production at existing fields.
    The world's total endowment of oil is large enough to support the 
projected growth in output. The immediate risk to supply, however, is a 
lack of investment where it is needed. There remains a real possibility 
that under-investment will cause an oil-supply crunch in the medium 
term. More immediately, the credit crisis and deepening economic 
downturn is leading to a scaling back of all types of investment in 
most countries along the oil supply chain. While demand is also falling 
with the economic slump, there is a danger that investment in the 
coming months and years is reduced too much, leading to a shortage of 
capacity and another spike in prices several years later when the 
economy is on the road to recovery, due to the long lead times in 
completing large upstream and refining projects.
    Although the trends that I have outlined are a cause for serious 
concern, they are not written in stone. Indeed there is much that can 
and is being done in many parts of the world to address the twin 
energy-related threats. In the past, the IEA has noted that very 
significant room remains to increase fuel-efficiency standards for 
trucks and cars in the United States, which would immediately 
contribute to energy and environmental security. In this respect, the 
new American Recovery and Reinvestment Act, with its strong focus on 
reducing fossil fuel dependence and greenhouse gas emissions by 
pursuing more aggressive demand-side and clean energy policies, is to 
be commended. Indeed we believe it makes good sense to exploit the 
opportunity of the financial and economic crisis to effect a shift in 
investment to low-carbon technologies. For example, the $95 billion 
that the IEA estimates the United States must invest each year in the 
power sector to move onto a pathway consistent with limiting the 
increase in the average global temperature to 2+C would also create 
jobs and enhance energy security.
    Consideration could also now be given to taking advantage of the 
recent slide in the world oil price to review gasoline and diesel taxes 
and thereby ``lock-in'' the efficiency gains that resulted from last 
year's price surge. Similarly, I believe efforts to maximize the 
production of the United State's domestic oil and natural gas 
resource--including through an expansion of drilling on the Offshore 
Continental Shelf which is thought to contain significant amounts of 
recoverable resources--could form a crucial part of a comprehensive 
strategy to enhance the nation's energy security.
    However, at the global level, the only possible solution to a long-
term sustainable future is to strive for an energy mix that uses all 
options simultaneously. We need to combine greater energy efficiency 
improvements with more renewables and more nuclear. We must seek to 
minimise our dependence on fossil fuels while recognising that they 
will need to continue to make a significant contribution to meeting our 
energy needs for several decades to come: it is not realistic to expect 
low-carbon technologies to replace fossil energy overnight.
    It is also imperative that international collaboration on energy 
policy is enhanced. Perhaps the best demonstration of this on the 
climate change front is that even if all OECD Member countries were to 
immediately reduce their CO2 emissions to zero, we would 
still not be on a sustainable path unless non-OECD countries such as 
China, India and Russia were also to curb their emissions. IEA 
countries must also work with non-Members to address energy security, 
because all countries trade oil in an interconnected global market. 
Even if the United States were to succeed in lowering it oil imports in 
the coming years, increasing import dependency in other major consuming 
regions--notably China and India--would still mean that any oil supply 
disruption anywhere in the world would result in severe knock-on 
effects for the U.S. market.
    Mr. Chairman, and members of the Subcommittee, this completes my 
statement. I would be happy to take any questions you may have.
                                 ______
                                 

   Response to questions submitted for the record by Dr. Fatih Birol

Questions from Chairman Jim Costa, from the State of California

1.  Dr. Birol, we hear a lot about the impact, or lack thereof, of 
additional drilling on oil prices. However, we hear less about the 
potential impact of drilling on natural gas prices. Does increased 
drilling in the former moratoria areas of the OCS have the potential to 
significantly impact natural gas prices, and if so, on what sort of 
timeframe?
    The potential impact on natural gas prices would depend on the 
quantities of additional gas supply that these areas were able to 
produce and the supply-demand balance of the market at the time. 
Offshore exploration and development of both oil and gas resources 
typically takes several years before production can be marketed, so it 
is unlikely that there would be a substantial effect felt during the 
next few years.

2.  Dr. Birol, the New York Times reported on March 15 about the steep 
decline in U.S. drilling activity, caused by the equally steep 
reduction in oil and natural gas prices since last summer. During last 
summer's high prices, a common argument was that increasing drilling in 
the U.S. Outer Continental Shelf and on federal lands out west would 
result in lower prices for consumers. However, it appears that instead 
of the amount of drilling being a determining factor on the price of 
oil and natural gas, in fact the price of oil and natural gas is the 
determining factor on the amount of drilling activity. In simpler 
terms: drilling doesn't drive prices, but prices do drive drilling. Are 
these accurate statements?
    Prices are driven by the supply-demand balance of the market. The 
effect of drilling is to maintain and increase the supply, but the 
investment needed for drilling is funded (over a period of time) from 
the sale of oil and gas, hence prices and drilling are linked via the 
market.

3.  Dr. Birol, we would like your thoughts on what our definition and 
goals should be for energy security, as this Committee works on energy 
policy this Congress. Sometimes we talk about energy security as 
meaning freedom from foreign oil. But there are broader ways to think 
about the term, and the World Energy Outlook puts it very well in the 
first sentence in the Executive Summary: ``Current global trends in 
energy supply and consumption are patently unsustainable--
environmentally, economically, socially.'' So can I ask you to give us 
your thoughts on what a ``secure'' energy future means? Should it be 
independence from foreign oil, or should it be something more?
    I believe the concept of energy security is much broader than just 
reducing dependence on foreign oil. There are essentially five steps 
that need to be taken. Firstly, we need to create an investment 
environment where the private sector is willing and able to do its job 
of providing secure, affordable, clean energy. Secondly, we need to 
continue efforts to diversify our fuel mix, including the geographic 
sources of those fuels. Thirdly, we need to peruse stronger 
conservation and efficiency policies. Fourthly, we need to improve 
energy market transparency. And finally, we must ensure that we have 
appropriate emergency preparedness measures in place.

4.  Dr. Birol, one of the issues this Committee has been trying to get 
a handle on is how much it costs oil and gas companies to do business 
here in the United States, and if that is significantly cheaper or more 
expensive elsewhere in the world. The GAO has put out a couple of 
reports saying that the amount of revenue the government brings in, as 
a percentage of the total revenue from the oil and gas, is one of the 
lowest percentages in the world. But on the other hand, some Members of 
Congress have said that it has to be that way because the costs of 
finding oil in the United States are so much higher than they are in 
other countries. Is it significantly more expensive to produce a barrel 
of oil in the United States, onshore and/or offshore, than it is in 
other countries?
    Excluding fiscal burdens, the cost of production per barrel of oil 
depends on multiple factors including geology, location (onshore/
offshore, water depth, type of terrain, climate, accessibility, etc.), 
infrastructure, distance to market and others. There is limited data 
that could be used to provide a truly representative comparison, 
however overall production cost indices in the U.S. are higher than the 
worldwide averages.

5.  Is there an estimate of the additional cost incurred by production 
companies as a result of complying with federal regulations?
    I am not aware of an independent estimate, but no doubt some 
production companies have quantified the magnitude of various 
regulatory expenses.

6.  Dr. Birol, USGS has noted in recent assessments that about 60% of 
the world's known oil shale is in Utah, Wyoming, and Colorado. And the 
figure ``1 trillion barrels'' is often used to discuss the amount of 
the oil shale resource. In addition, the U.S. has significant resources 
of tar sands, another unconventional resource. lEA stresses the need to 
undertake a major decarbonization of the world's energy systems; to 
what extent does it makes sense, relative to other energy options, for 
the U.S. to be pursuing oil shale beyond Research and Development 
leases right now?
    It does make sense to pursue the development of non-conventional 
oil resources--including the vast deposits of oil shale in the United 
States--as they have the potential to make a significant contribution 
to energy security in the decades ahead. However, it is important to 
recognise that the production of non-conventional resources leaves a 
large environmental footprint, including significant carbon dioxide 
emissions. Therefore we must also support the research and development 
of technologies such as carbon capture and storage which offer the 
opportunity to continue using fossil fuels while still decarbonising 
the world's energy system.

7.  Dr. Birol, in the 2009 Annual Energy Outlook, EIA points out that 
the oil fields in the areas formerly under moratoria are expected to be 
much smaller than the average undiscovered field size in the Gulf of 
Mexico. And the 2008 World Energy Outlook states that small fields 
decline at a much more rapid rate than large fields. So does this mean 
if we started drilling in frontier areas, companies would have to drill 
considerably more wells, over wider geographic areas, than they would 
in the Gulf of Mexico?
    Yes. It is likely that more exploration wells would need to be 
drilled per barrel of oil found and more wells would need to be drilled 
for a given volume of oil produced. Or, put the other way round, well 
productivity--barrels produced per well--would be expected to be lower 
than in the Gulf of Mexico. As you point out, smaller fields tend to 
decline faster once peak is reached; they also peak sooner and have a 
higher peak relative to reserves than larger fields.

8.  Dr. Birol, the World Energy Outlook says that the role of 
speculation on oil prices ``remains unclear'', but that was written 
last fall, before oil prices completed their spectacular fall to where 
they are today. Is there a better idea now on what role speculation 
played in these wild price swings?
    It will never be possible to prove one way of another the precise 
impact of speculation on the historical movements in the price of any 
commodity. That said, we remain of the view that speculation may well 
have amplified the effect of market fundamentals in driving prices up 
but was not the principal cause of the price rise. Data that has become 
available in recent months provides strong support for the argument 
that we advanced last year in the World Energy Outlook and in the 
monthly Oil Market report that tight distillate markets--caused by a 
lack of refining capacity and exceptionally strong demand--were a major 
factor behind the surge in prices.

9.  Dr. Birol, from an efficiency standpoint, how much sense does a 
hydrogen economy make? Particularly if you use electricity to create 
the hydrogen, it appears that the various steps of hydrogen formation, 
transportation, and recombination creates a number of opportunities for 
power loss in each of the steps, while direct electricity use just 
incurs transmission losses. So, energetically, does it make more sense 
to try to get cars that run on hydrogen, or to focus on plug-in 
hybrids, or purely electric cars?
    Each conversion step has losses, and therefore the typical 
hydrogen-fuelled vehicle is disadvantaged in this respect to an 
electricity-fuelled vehicle. However a hydrogen fuelled vehicle could 
overcome the limited driving ranges of current pure electric vehicles, 
and would have lower CO2 emissions than plug-in hybrids 
which run on petroleum fuels for some part of their driving (assuming 
the hydrogen was produced using low CO2 emission sources). 
Widespread penetration of hydrogen as a fuel has other challenges such 
as infrastructure and technology development of fuel cells, however 
some vehicle manufactures are putting much effort into RD&D of hydrogen 
vehicles.

10.  Dr. Birol, the 2008 World Energy Outlook projects considerably 
higher levels of needed investment than the 2007 World Energy Outlook--
over $4 trillion more, which is nearly a 20% increase. Why is that? 
What changed in that year to indicate that such higher investment 
levels would be needed?
    The cost of bringing on new supply in the energy sector surged in 
2007 and 2008, leading to the upward revision of $4.4 trillion for 
energy sector investment needs to 2030. However, as a consequence of 
the downturn in the global economy, there are signs that unit costs, 
including labour, concrete, steel and drilling rig day-rates, are now 
starting to fall back.

11.  Dr. Birol, has your organization modelled the impact of the 
proposed Alaska Natural Gas Pipeline, if and when it gets built? Is 
there a sense of the impact that might have on U.S. natural gas 
supplies or prices?
    We have not modelled in detail the impact of the pipeline as such, 
though our projections assume that a pipeline from Alaska to the lower-
48 states is built and commissioned after 2015 and before 2030. We 
assumed the capacity would be around 4 billion cubic feet per day 
(roughly 40 billion cubic metres/year). Were such a pipeline to be 
built, the incremental supplies would certainly have some impact on gas 
prices, as it would relieve the pressure to either develop indigenous 
resources in the lower-48 states or import liquefied natural gas. 
Putting a precise figure on the price impact is very hard, as drilling 
costs and LNG prices are likely to continue to change over time.

12.  Dr. Birol, the World Energy Outlook projects a major contribution 
from carbon capture and sequestration in order to meet lower carbon 
targets. The reference case of the outlook only has a minor 
contribution from CCS, but indicates that stronger policies, such as a 
carbon cap, would be needed to get significant amounts of CCS by 2030. 
Are there any other policies that could or should be adopted by the 
U.S., or other nations, besides a carbon cap, to accelerate the wide 
scale deployment of CCS? How quickly should we be doing those?
    CCS is a technology that is very promising but there remains some 
uncertainty as to whether it will be viable on a cost-effective basis. 
While a carbon cap may play a central role in incentivising its 
deployment, there are research and development issues to be addressed 
before deployment can ever happen on the scale set out in our Climate 
Policy Scenarios. Consequently, there is an important role for the U.S. 
and other major economies to play in investing in CCS pilot projects in 
order to assess and develop the technology's potential. It is important 
that development of CCS technologies takes into account the likely 
future uses for the technologies, in the U.S. but also in key countries 
such as China and India, and across both power generation and 
industrial uses. Given the cost involved, a co-ordinated, international 
approach to CCS research, development and deployment may be most 
effective.

13.  Dr. Birol, the World Energy Outlook projects that $1.1 trillion 
that would be needed in transmission and distribution investment in 
North America through 2030. How much of that would be needed 
specifically in the United States? Is that investment necessary to 
support additional capacity, or to provide access to new sources of 
renewable energy, or to replace aging transmission lines, or is it a 
combination of all of those?
    About 80% of this amount (or $900 billion) is what the United 
States will need to invest in transmission and distribution networks 
through 2030. This investment is necessary to support additional 
capacity, to replace aging transmission lines and to integrate 
renewables. Please note that this is the investment needed in our 
Reference Scenario, which takes into account current policies only. Our 
low carbon scenarios show that this investment can in fact be lower 
because of lower electricity demand (as a result of greater energy 
efficiency in buildings and in industry), which results in fewer power 
stations being built. For example, in our 450 ppm Policy Scenario 
(which assumes stabilisation of greenhouse gas emissions at 450 parts 
per million in the long run) we estimate that the investment needed in 
networks is $530 billion.

14.  Dr. Birol, in the low carbon projections of the World Energy 
Outlook, there are significant cost savings to making the necessary 
investments. For the 550 parts per million scenario, the additional 
investment in the world is $4.1 trillion, while the fuel savings from 
those investments and new policies end up saving the world over $7 
trillion. Does this mean that instead of being a crushing blow to the 
world's, or the United States', economy, a carbon cap could actually 
end up making us money? Are there additional costs that the world, and 
the United States, would be expected to incur if no action was taken to 
address climate change?
    There are indeed many investments in our Climate Policy Scenarios, 
which effectively pay for themselves, or generate net savings, as a 
result of energy efficiency improvements. These include more fuel-
efficient vehicles, building insulation and more efficient appliances. 
Although in most cases, up-front costs will take several years to 
recover, savings globally in the 550 Policy Scenario do exceed 
additional investments.
    For other investments, particularly in power generation and 
industry and those needed to achieve the 450 Policy Scenario will incur 
net financial costs. Certainly, no envisaged carbon cap looks like 
being a ``crushing blow'' to either the world's or the United States 
economy, particularly given the importance and benefit of taking early 
steps to transform the energy sector. The precise costs and benefits to 
the economy will ultimately depend on the level of the carbon cap and 
the effectiveness of policies to underpin it.

15.  Dr. Birol, could you provide your thoughts about our ability to 
harness some of the potential of enhanced geothermal systems? Is 
enhanced geothermal likely to be feasible in the near future? How long 
would it take before people could start building EGS power plants?
    While this technology has a great potential to provide cheap 
baseload electricity, I do not expect that it will make a major 
contribution in the short to medium-term as significantly more R&D is 
needed to bring costs down and to improve performance. Drilling 
represents a significant portion of the total cost; the technology 
could benefit from improvements in drilling in the oil and gas 
industry.

16.  Dr. Birol, in the World Energy Outlook, there is a very 
comprehensive review of the potential for various ocean renewable 
energy technologies, including tidal and wave power. However, I don't 
believe there was anything on ocean thermal energy conversion or deep 
seawater air conditioning. These are both technologies that might be 
very useful for tropical islands, such as the U.S. territories that are 
under the jurisdiction of this committee. Do you have any thoughts 
about the potential of these technologies?
    Ocean thermal energy conversion is a technology with a large 
potential, but for the longer term. I do not expect any major 
deployment before 2030, as it is still in its infancy and needs R&D 
support. Deep seawater air conditioning is already being used, although 
in just a few locations around the world. It can be a solution for 
small islands.

17.  Dr. Birol, during the hearing, you indicated that there might be 
some countries that placed some restrictions on where oil and gas 
companies were allowed to drill offshore, but you were unable to name 
them at the time. Could you provide the Committee with a list of 
countries that do not provide complete and unfettered access to the 
entirety of their extended continental shelves for the purposes of oil 
and gas leasing, and describe the nature of whatever geographical 
restrictions or limitations are in place?
    The IEA does not maintain a database on geographical restrictions 
on drilling. In many cases, restrictions exist in order to slow the 
pace of development of hydrocarbon resources. It is not always clear to 
what extent the limitations on drilling are the result of concerns 
about the environmental impact rather than a general goal of limiting 
the overall pace of development.
Questions from the Ranking Member Doug Lamborn, from the State of 
        Colorado

1.  In your own testimony you state that no global warming program can 
succeed without cooperation of China and India. Do you have any 
information on the number of coal plants that China and India have 
built and are planning to build?
    Collectively China and India have about twice as many coal plants 
as the United States. Both countries plan to build many more. Without 
any additional efforts to reduce GHG emissions, they could build over a 
thousand new coal plants by 2030, which is about three times more than 
the present number of coal plants in the United States. These new 
plants are expected to use more advanced technology than what they use 
now. China is already building more efficient (and therefore less 
polluting) power plants using the same technology as OECD countries and 
India is catching up. Moreover, both countries are participating in 
international programs to develop carbon capture and storage.

2.  What kind of environmental standards does China impose on coal-
fired or other power plants? Would these plants meet U.S. environmental 
standards for SOX and NOX?
    China has introduced legislation to control air pollutants from 
power plants. The most important piece of legislation was introduced in 
2003 and sets emission standards for power plants. Others concern 
incentives to operate flue gas desulphurisation (FGD), costs of 
installing and operating FGD, outdated equipment that is not to be 
used, and a trial scheme that introduces penalties for failing to 
operate FGD plant. Moreover, China plans to shut down older polluting 
plants. We expect sulphur emissions in China to rise only modestly in 
the future as a result of greater efficiency in electricity production 
and greater use of FGD. In contrast, we expect the absolute level of 
NOX emissions to continue to rise, although NOX emission per plant will 
decline.

3.  What would happen to American jobs if the U.S. increased domestic 
energy costs by 100% as a result of restricting carbon emissions while 
the developing nations continue business as usual with no carbon 
controls?
    There are many possible variations to such a scenario, so we are 
unable to quantify the employment impact. However, our analysis 
indicates that the transition to a low-carbon energy sector in the U.S. 
would be likely to result in a strong positive impact on employment. 
Such a scenario would operate as a demand stimulus, with positive 
impacts on a number of sectors--particularly construction, automobiles 
and high value-added technology.

4.  The world leader in car purchases in January of this year was 
China. What sort of ``CAFE'' or mileage standards does China have? Does 
India have something similar to the U.S. CAFE standards? In addition, 
can you describe the modem pollution control requirements for these 
countries?
    China has enacted fuel economy standards which are based on the 
weight of the vehicle split into 16 different weight classes. For 
example, Chinese fuel efficiency standards for passenger vehicles are 
currently around 30% more efficient than those of the United States. 
China also has emissions standards based on the EURO standards used in 
the European Union. India does not currently have mandatory fuel 
economy standards, however they have mandatory standards for pollutant 
emissions similar to those adopted in the European Union, which may 
also have the effect of improving fuel economy. For example EURO II 
standards were introduced nationwide in India in 2005, they were 
introduced in Europe in 1995. Also several of the largest cities in 
India have regulations regarding CNG vehicles due to local pollution 
concerns.

5.  The development of the recent Nano by India's Tata motors means 
that the developing world intends for every family to have a car. What 
impact will this have on gasoline prices, green house gas emissions, 
and climate change going forward?
    Increasing mobilisation helps to drive a countries economy and also 
improve the quality of life for its inhabitants. The introduction of 
low-price vehicles provides access to motorised mobility to more of the 
world's inhabitants, but it should be noted that it is increasing 
incomes in developing countries that also has a large effect on vehicle 
ownership, and that these low cost vehicles are often small and 
relatively efficient. The majority of the global oil demand growth in 
the mid- to long-term will come from the transport sector in developing 
countries. This demand growth will put upward pressure on oil prices, 
and we may see oil prices return to their highs of last summer over the 
mid-term.

6.  What impact will a cap and trade system have on the domestic 
agriculture sector, particularly on those sectors which are heavily 
dependent on fertilizer? How about the domestic cement industry?
    The impacts of a cap and trade system will depend on which sectors 
are included, which gases are included and how the system is designed, 
including how it links with international trade and other countries' 
cap-and-trade systems. Given these variables, it is not possible to go 
into specifics. However, as a general rule, cap-and-trade will provide 
incentives for businesses in high-emitting industries to adopt more 
efficient, and less polluting, processes and technologies. At the same 
time, the price mechanism should create greater allocative efficiency, 
to allow those sectors that most need to pollute (due to a lack of 
viable alternatives) to continue to do so, while securing emissions 
reductions from those parts of the economy where it is more cost-
effective to achieve them.
                                 ______
                                 
    Mr. Costa. Thank you very much, Doctor. You did go over 
time a little bit, but we found you interesting. So I 
appreciate that. And I do agree that we obviously have to 
cooperate and collaborate both at home and abroad.
    Which brings us to our next witness, Dr. Howard 
Gruenspecht, to testify.
    Mr. Gruenspecht?

   STATEMENT OF HOWARD K. GRUENSPECHT, ACTING ADMINISTRATOR, 
               ENERGY INFORMATION ADMINISTRATION

    Mr. Gruenspecht. Mr. Chairman and members of the 
Subcommittee, I appreciate the opportunity to appear before you 
today to discuss the U.S. energy outlook to 2030 and energy 
resources on Federal onshore and offshore lands, focusing on 
the role of the Outer Continental Shelf, or OCS.
    The Energy Information Administration is the independent 
statistical and analytical agency within the Department of 
Energy that produces data projections and analyses to assist 
policymakers, help markets function efficiently, and inform the 
public. We do not promote, formulate, or take positions on 
policy issues, unlike my colleague Mr. Birol, and our views 
should not be construed as representing those of the Department 
of Energy or the Administration.
    Later this month, EIA will release the complete 2009 
edition of our ``Annual Energy Outlook.'' Notably, our 
reference case projects no growth in U.S. oil consumption, 
reflecting the combined effect of recently enacted corporate 
average fuel economy standards and requirements for increased 
use of renewable fuels, as well as a rebound in oil prices as 
the world economy recovers. That affects both domestic oil 
consumption and domestic oil production.
    The net import share of total liquid supply, including 
biofuels, declines from 58 percent in 2007 to about 40 percent 
between 2025 and 2030. The world's crude oil price is projected 
again to rise as the global economy rebounds and global demand 
once again grows more rapidly than liquids production outside 
of the OPEC area. In 2030, the average real price of crude oil 
is about $130 a barrel in 2007 dollars, which is actually quite 
similar to the projection that the International Energy Agency 
has.
    I should say that, unlike the International Energy Agency, 
we also prepare low- and high-oil-price cases because--and I 
think they would share this view--we are very uncertain about 
what oil prices will actually be, as recent history suggests.
    Turning to natural gas, EIA has raised its projection for 
both U.S. production and consumption, reflecting increased 
availability of gas shale resources and higher demand for 
natural gas use in electric power generation, due in part to 
the apparent impact of concerns related to greenhouse gas 
emissions on power plant investment decisions.
    With growing projected production of natural gas from gas 
shale and other unconventional onshore resources, the OCS and 
Alaska, the net import share of total natural gas use also 
declines from 16 percent in 2007, most of which comes from 
Canada, to less than 3 percent in 2030.
    Total consumption of marketed renewable fuels grows by 3.3 
percent per year in our reference case. This rapid growth 
reflects the renewable fuel standard provisions included in the 
Energy Independence and Security Act of 2007 and strong growth 
in the use of renewables for electricity generation that is 
spurred by renewable portfolio standards for electricity 
generators in many States. I think it is 28 States and the 
District of Columbia that have those policies.
    Resources on Federal lands, both onshore and offshore, are 
important to U.S. oil and natural gas production. In 2007, 
roughly 32 percent of U.S. oil production and 29 percent of 
U.S. natural gas production were from Federal lands. Looking 
forward, which is always more uncertain, production from 
Federal lands is projected to reach 47 percent of total 
production for oil and 36 percent of total production for 
natural gas by 2030.
    The rest of my testimony offers additional detail on 
current and projected OCS production, which provides a 
preponderant share of oil from Federal lands and, over time, a 
growing majority share of natural gas from Federal lands. I 
will also discuss some of the factors, including access 
conditions and prices that drive our estimates.
    In 2007, the OCS areas produced 1.3 million barrels per day 
of crude oil, amounting to about 25 percent of total U.S. crude 
oil production, down from peak OCS production of 1.6 million 
barrels per day in 2003. Natural gas production in the OCS in 
2007 was 2.8 trillion cubic feet, down from a peak of 5.1 
trillion cubic feet in 1997. Although OCS production has fallen 
off in recent years, in the near term we expect OCS production 
of both oil and natural gas to rise, as new projects begin 
operation in OCS areas that have long been open.
    Consistent with our practice at EIA of reflecting existing 
laws and regulations, our reference case that I have discussed 
reflects removal in 2008 of the moratoria for drilling in the 
Atlantic, Pacific, and parts of the eastern Gulf OCS areas.
    Based on the average Minerals Management Service estimates 
for undiscovered resources and our own information on crude 
reserves and reserves appreciation, these areas held about 20 
percent of the total OCS technically recoverable oil resource, 
exclusive of past production, as in the beginning of 2007, 18 
billion barrels out of a total of more than 93 billion barrels.
    For natural gas, the corresponding estimate of unproduced 
but technically recoverable OCS resources at the beginning of 
2007 is 456 trillion cubic feet. Roughly 76 trillion cubic feet 
is estimated to be in areas under moratoria prior to 2008.
    Assumptions about exploration, development, and production 
of fields such as growing schedules, costs, the type of 
platform you select, reserves-to-production ratios in the 
Pacific, Atlantic and eastern Gulf of Mexico, in the EIA's work 
are generally based on data for fields in the central gulf that 
are of similar water depth and size. In addition, when we did 
our work, we assume that local infrastructure issues and other 
potential non-Federal impediments are resolved. Lack of 
resolution of those issues would, of course, affect our 
projections.
    By 2030, total lower-48 offshore crude oil production, 
including very small amounts in State waters, is projected to 
nearly double from the current level to nearly 2.7 million 
barrels per day, while lower-48 offshore natural gas production 
is projected to rise by nearly two-thirds, to 4.9 trillion 
cubic feet a year.
    Production from OCS leases in the Pacific begins in the 
next decade, with total crude oil production reaching nearly 
500,000 barrels per day in 2030. And some of the opening 
statements have already referred to the oil-prone nature of the 
Pacific resource. Crude oil production from the Atlantic region 
begins somewhat later, reaching 200,000 barrels per day by 
2030.
    As part of this year's long-term outlook, which again will 
be released later this month, EIA also prepared a restored 
moratoria sensitivity case. OCS crude production in 2030, in 
that case, is about 565,000 barrels per day less than in the 
reference case. And cumulative domestic production of crude oil 
from all U.S. Federal and non-Federal sources between 2010 and 
2030 is 4.2 percent lower than in the reference case.
    Estimates of production from the OCS areas previously under 
moratoria are higher than in EIA's previous analysis that was 
presented in our 2007 energy outlook, primarily because the 
2009 outlook has significantly higher oil and natural gas 
prices. Also, in this year's outlook, the assumed initial flow 
rates in the Pacific OCS fields in shallow waters were adjusted 
to better reflect the production potential from these oil-prone 
fields compared to the more natural-gas-prone fields in the 
central Gulf of Mexico that were used as the basis of earlier 
estimates.
    Restoration of the previous OCS moratoria also affects the 
supply of natural gas but to a lesser extent. With the restored 
moratoria, production lower-48 offshore is 800 billion cubic 
feet lower in 2030 than it is in the reference case, but the 
resulting higher natural gas prices increase the projection for 
onshore natural gas production by 200 billion cubic feet in 
2030. Overall, the difference, the cumulative natural gas 
production between 2010 and 2030, including both Federal and 
non-Federal, is about 1.3 percent lower in the moratoria-
restored case than in the reference case.
    Again, prices, as well as access, affect the reproduction 
from the OCS. In the oil price case--where oil prices remain 
about $50 in real terms, close to where it is today--projected 
OCS crude production under full access is 2.1 million barrels 
per day, slightly below the projected production under 
reference case prices in the restored moratoria case. So, 
again, access matters, but prices also matter. That is an 
important point.
    In sum, the OCS is expected to remain a substantial 
contributor to domestic crude oil and natural gas supply under 
a range of access and price assumptions.
    That concludes my statement, Mr. Chairman. I would be happy 
to answer any questions you or the other Members may have.
    [The prepared statement of Mr. Gruenspecht follows:]

      Statement of Dr. Howard Gruenspecht, Acting Administrator, 
                   Energy Information Administration

    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to appear before you today to discuss the U.S. energy 
outlook to 2030, focusing on the role of the Outer Continental Shelf 
(OCS) in current and projected energy production.
    The Energy Information Administration (EIA) is the independent 
statistical and analytical agency within the Department of Energy that 
produces objective, timely, and relevant data, projections, and 
analyses to assist policymakers, help markets function efficiently, and 
inform the public. We do not promote, formulate, or take positions on 
policy issues, and our views should not be construed as representing 
those of the Department of Energy or the Administration.
The Energy Outlook: The Big Picture
    The full Annual Energy Outlook 2009 (AEO2009), which will be issued 
later this month, includes over 35 cases. The reference case and other 
AEO2009 cases provide the results discussed in this testimony.
    Liquid Fuels Consumption and Import Dependence. For the first time 
in more than 20 years, the AEO2009 reference case projects no growth in 
U.S. oil consumption, reflecting the combined effect of recently 
enacted Corporate Average Fuel Economy standards, requirements for 
increased use of renewable fuels, and an assumed rebound in oil prices 
as the world economy recovers. With overall liquid fuel demand in the 
AEO2009 reference case growing by only 1 million barrels per day 
between 2007 and 2030, plus increased use of domestically-produced 
biofuels and rising domestic oil production spurred by higher prices, 
the net import share of total liquids supplied, including biofuels, 
declines from 58 percent in 2007 to less than 40 percent in 2025 before 
increasing to 41 percent in 2030.
    Natural Gas Consumption and Import Dependence. The reference case 
raises EIA's projection for U.S. production and consumption of natural 
gas compared to the previous Annual Energy Outlook (AEO), reflecting 
increased availability of resources and higher demand for electric 
power generation, due in part to the apparent impact of concerns 
related to greenhouse gas emissions on power plant investment 
decisions. With growing production of natural gas from unconventional 
onshore sources, the OCS, and Alaska, the net import share of total 
natural gas use also declines, from 16 percent in 2007 to less than 3 
percent in 2030.
    Total Primary Energy Use and Energy-Related Carbon Dioxide 
Emissions. Recently-enacted efficiency regulations and higher energy 
prices in the AEO2009 reference case, compared to the last AEO, slow 
the rise in U.S. energy use, which is projected to grow from 101.9 
quadrillion Btu in 2007 to 113.6 quadrillion Btu in 2030. When combined 
with the increased use of renewables and a reduction in projected 
additions of new coal-fired conventional power plants, this slows the 
growth in energy-related greenhouse gas emissions. Energy-related 
carbon dioxide emissions grow at 0.3 percent per year from 2007 to 2030 
in the AEO2009 reference case, reaching a level of 6,414 million metric 
tons in 2030, compared with 6,851 million metric tons in the Annual 
Energy Outlook 2008 reference case.
    Oil Prices. The assumption of a higher world oil price path in the 
AEO2009 reference case reflects tighter constraints on access to low-
cost oil supplies in a setting where the forces driving growth in long-
term demand in countries outside of the Organization for Economic 
Cooperation and Development remain as strong as previously expected. 
The world crude oil price is projected to rise as the global economy 
rebounds and global demand once again grows more rapidly than non-
Organization of Petroleum Exporting Countries liquids supply. In 2030, 
the average real price of crude oil is $130 per barrel in 2007 dollars 
($189 per barrel in nominal dollars).
    Renewable Energy Use. Total consumption of marketed renewable 
fuels--including wood, municipal waste, and biomass in the end-use 
sectors; hydroelectricity, geothermal, municipal waste, biomass, solar, 
and wind for electric power generation; ethanol for gasoline blending; 
and biomass-based diesel--grows by 3.3 percent per year in the AEO2009 
reference case. This rapid growth reflects the renewable fuel standard 
provisions included in the Energy Independence and Security Act of 2007 
and strong growth in the use of renewables for electricity generation 
that is spurred by renewable portfolio standards for electricity 
generators in many States.
    As requested by the Committee, the remainder of my testimony 
focuses more specifically on projections for oil and natural gas 
production from onshore and offshore resources, the factors that drive 
the projections, and sensitivity analyses under alternative access and 
price assumptions.
Federal Offshore and Onshore Resources in Context
    Resources on Federal lands, both offshore and onshore, are 
important to U.S. energy production. Table 1 places onshore and 
offshore oil and natural gas production for 2007 in the context of 
total U.S. production and consumption. In 2007, roughly 32 percent of 
U.S. oil production and 29 percent of domestic natural gas production 
were from Federal lands.
[GRAPHIC] [TIFF OMITTED] T7755.001

    .epsLooking forward, production from Federal lands is expected to 
play an increasingly important role in total U.S. oil and natural gas 
production. Through 2030 the share of production from Federal lands is 
projected to increase to 47 percent for oil and 36 percent for natural 
gas (Table 2).
[GRAPHIC] [TIFF OMITTED] T7755.002

.epsOCS Production: Historical Data and Near-Term Forecast
    OCS areas in the Western and Central portions of the Gulf of Mexico 
(GOM) are an important source of oil and natural gas production. In 
2007, the GOM OCS areas, which have been producing substantial volumes 
of oil since the 1970s, produced 1.3 million barrels per day, amounting 
to about 25 percent of total U.S. crude oil production and down from 
peak OCS production of 1.6 million barrels per day in 2003. There are 
small amounts (less than 70 thousand barrels per day) of additional 
production from the Pacific OCS. Dry natural gas production in the GOM 
OCS in 2007 was 2.8 trillion cubic feet, down from peak production of 
5.1 trillion cubic feet in 1997.
    In the near term, OCS production is expected to rise as projects 
already under development come into operation. By 2012, projected GOM 
OCS oil production is 2.1 million barrels per day of oil and 3.4 
trillion cubic feet of natural gas. As discussed below, forward-looking 
OCS production estimates to 2015 and later years, beyond the 
commissioning of projects already under development, are necessarily 
less certain since they are sensitive to the actual resource available, 
future prices, and future access to resources. However, using 
information from the Department of Interior's Minerals Management 
Service (MMS) regarding undiscovered technically recoverable resources, 
EIA data and MMS estimates regarding known reserves (proved reserves 
and projected reserve appreciation in known deposits), and assumptions 
regarding access policies, EIA develops projections of offshore oil and 
natural gas production through 2030.
    Consistent with the AEO practice of reflecting existing laws and 
regulations, the AEO2009 reference case reflects the removal in 2008 of 
the moratoria for drilling in the Atlantic, Pacific, and parts of the 
Eastern GOM OCS areas. Timing issues constrain the impacts of increased 
access in the near term. The MMS began the process of developing a 
leasing program that includes selected tracts from these areas after 
the moratoria were removed, with a timeline calling for the first 
leases to be offered in 2010. Once offered, leases must be bid on and 
awarded, and the wining bidders must develop and get approved 
exploration and development plans before any wells can be drilled. 
Thus, even if leasing were to begin next year, conversion of these 
newly-available resources to production would require some time. The 
AEO2009 reference case assumes that the Pacific and Atlantic OCS 
regions are open for leasing starting in 2010 and that leasing begins 
in the Eastern GOM in 2022.
    Based on the mean (50-percent probability) MMS estimate of 
undiscovered technically recoverable resources and estimates of known 
reserves and resources, the OCS areas that were until recently under 
moratoria in the Atlantic, Pacific, and Eastern GOM are estimated to 
hold about 20 percent of the total OCS technically recoverable oil 
resource (TROR)--18 billion barrels out of a total of more than 93 
billion barrels, exclusive of past production as of January 1, 2007. 
The estimates of TROR in the GOM OCS areas open to leasing prior to 
2008 and the Alaska OCS are 47 billion barrels and 27 billion barrels, 
respectively. According to MMS estimates, there is only a 5-percent 
chance that OCS areas formerly under moratoria have more than 27 
billion barrels of TROR.
    Based on the MMS mean estimate of undiscovered technically 
recoverable natural gas resources and estimates of known reserves and 
resources, total technically recoverable natural gas resources in the 
OCS are estimated at 456 trillion cubic feet as of January 1, 2007. 
Roughly 76 trillion cubic feet (or 17 percent) are estimated to be in 
areas formerly under moratoria in the Atlantic, Pacific and Eastern 
GOM--nearly half or 37 trillion cubic feet in the Atlantic, 18 trillion 
cubic feet in the Pacific, and 21 trillion cubic feet in the Eastern 
GOM.
    Assumptions about exploration, development, and production of 
economical fields, such as drilling schedules, costs, platform 
selection, reserves-to-production ratios, etc., in the Pacific, 
Atlantic, and Eastern GOM are generally based on data for fields in the 
Central GOM that are of similar water depth and size. In addition, it 
is assumed that local infrastructure issues and other potential non-
Federal impediments are resolved. Lack of resolution of these issues 
would, of course, affect the projections.
    Lower-48 offshore crude oil production is projected to increase 
from 1.4 million barrels per day in 2007 to 2.7 million barrels per day 
in 2030. Production from new OCS leases in the Pacific is projected to 
begin in 2015, with total Pacific production reaching nearly 0.5 
million barrels per day in 2030. Crude oil production from the Atlantic 
region is projected to begin in 2019, reaching 0.2 million barrels per 
day by 2030. Crude oil production in all areas of the GOM rises from 
1.3 million barrels per day to 2.1 million barrels per day between 2007 
and 2030.
    Estimates of production from the OCS areas previously under 
moratoria are higher than in a previous analysis presented in the 
Annual Energy Outlook 2007 primarily because the AEO2009 has 
significantly higher oil and natural gas prices and because the assumed 
initial flow rate of Pacific OCS fields in shallow waters was adjusted 
to better reflect the production potential from these oil-prone fields 
compared to more natural-gas-prone fields in similar water depth and 
size in the Central GOM.
    Lower-48 offshore natural gas production is projected to increase 
from 3.0 trillion cubic feet in 2007 to 4.9 trillion cubic feet in 
2030. By 2030, Pacific natural gas production is projected to reach 
nearly 0.3 trillion cubic feet and production from the Atlantic region 
is projected to reach 0.5 trillion cubic feet.
EIA's OCS Estimates: Discussion and Comparison with Historical 
        Experience
    One way to gain perspective on EIA's estimates of production in OCS 
areas formerly under moratoria is to consider how the relationship 
between projected production and MMS indicators of resource levels and 
characteristics in those areas compares to that for the GOM OCS area 
that was open prior to 2008.
    TROR Comparisons. Oil reserves in the GOM OCS area open before 
2008, which has already been leased and developed extensively, are 
about 4 billion barrels, with an additional 9 billion barrels of 
expected reserve appreciation in discovered fields. Adding the estimate 
of 34 billion barrels of undiscovered TROR, the mean estimate of total 
TROR in the GOM area open before 2008 is 47 billion barrels, which is 
more than 2.5 times the MMS mean estimate of 18 billion barrels of TROR 
in OCS areas formerly under moratoria.
    Average Field Size Comparisons. Field size matters because larger 
fields are more attractive development targets than smaller ones. The 
average size across all existing GOM OCS oil and natural gas fields is 
43 million barrels of oil equivalent. MMS has also developed field size 
distributions for undiscovered OCS fields that it used to prepare 
reports mandated under the Energy Policy Act of 2005. The MMS estimate 
of the average undiscovered field size in GOM OCS areas open to 
drilling prior to 2008 is 59 million barrels of oil equivalent, which 
is significantly greater than the average field size of 15 million 
barrels of oil equivalent for OCS areas formerly under moratoria.
    Other Project Development Factors. Project development time frames 
and expected returns vary substantially across offshore projects 
depending upon such factors as: 1) size of the field; 2) relative 
proportion of oil, natural gas, and condensates in the field; 3) 
reservoir and oil characteristics,;4) water depth; 5) distance to 
nearest oil and/or natural gas pipelines; 6) whether there are other 
nearby fields to share in the expense of building new pipelines; and 7) 
the type of production system chosen for field development, e.g., 
anchored platform, tension-leg platform, tethered spar, or floating 
production storage, and offloading ship.
    To the extent that information is available, the indicators of 
resource levels and characteristics for the OCS areas previously under 
moratoria are generally inferior to those for the GOM OCS open prior to 
2008, as discussed above. This is reflected in EIA's view that, through 
2030, access to the OCS areas formerly under moratoria adds only a 
fraction of the daily production volume provided by the GOM OCS area 
open prior to 2008.
    EIA recognizes that all forward-looking production estimates are 
inherently uncertain. Some factors that could lead to higher daily 
production estimates for the OCS areas formerly under moratoria include 
the use of the 5-percent, or 1-in-20, probability estimate of TROR and 
the assumption of a more favorable field size distribution than that 
used by MMS in its recently published reports. Consideration of any 
long-term constraints on rig availability that reflect the 
prioritization of alternative offshore projects or the possibility that 
non-Federal impediments to production would persist over time could 
result in lower daily production estimates.
AEO2009 Access Sensitivity Case
    As part of the AEO2009, EIA prepared a restored moratoria 
sensitivity case. U.S. OCS crude oil production in 2030 is projected to 
be 565,000 barrels per day lower in the restored moratoria case than in 
the reference case--2.2 million barrels per day compared to 2.7 million 
barrels per day. Cumulative domestic production of crude oil from both 
onshore and offshore sources between 2010 and 2030 in the restored 
moratoria case is projected to be 2.1 billion barrels, or 4.2 percent, 
lower than in the AEO2009 reference case.
    As with oil, access to OCS resources affects the domestic supply of 
natural gas. However, because the volume of technically recoverable 
natural gas in the OCS areas previously under moratoria accounts for 
less than 5 percent of the total U.S. technically recoverable natural 
gas resource base, the volume impacts are smaller relative to the 
baseline supply level. Cumulatively, domestic natural gas production 
from both onshore and offshore sources between 2010 through 2030 is 
projected to be 1.3 percent lower in the restored moratoria case than 
in the AEO2009 reference case. Natural gas production from the Lower-48 
offshore in 2030 is projected to be 4.1 trillion cubic feet in the 
restored moratoria case compared to 4.9 trillion cubic feet in the 
AEO2009 reference case. In contrast to the situation in oil, the 
reduction in offshore supply of natural gas in the restored moratoria 
case is partially offset by an increase in onshore production. Reduced 
OCS access in the restored moratoria case results in higher natural gas 
prices, which increase the projection for U.S. onshore gas production 
by 0.2 trillion cubic feet in 2030 compared to the level in the 
reference case.
AEO2009 Low Price Sensitivity Case
    The impact of access to OCS resources on domestic production is 
lessened in the low price case, where oil prices are assumed to remain 
near $50 per barrel (2007 dollars) through 2030, rather than rising to 
$110 per barrel by 2015 and $130 per barrel (2007 dollars) by 2030 as 
assumed in the reference case. In 2030, total OCS crude oil production 
is projected to be 440,000 barrels per day higher in the low world oil 
price case than in the low oil price case with the OCS moratoria 
reinstated--2.1 million barrels per day compared with 1.7 million 
barrels per day. The observation that U.S. OCS production in 2030 under 
reference case prices with full restoration of the OCS moratoria, at 
2.2 million barrels per day, is projected to be higher than U.S. OCS 
production in the low price case with no moratoria underlines the 
importance of prices as a determinant of future production.
    The OCS is expected to remain a major contributor to domestic crude 
oil and natural gas supply under a variety of price and access 
assumptions. Although a significant volume of undiscovered technically 
recoverable oil and natural gas resources has been added with access to 
the Pacific, Atlantic, and parts of the Eastern GOM OCS, there is a 
great deal of uncertainty surrounding the resource estimates as well as 
the timing and cost to explore and develop these resources.
    This concludes my statement, Mr. Chairman. I will be happy to 
answer any questions you and the other Members may have.
                                 ______
                                 

           Response to questions submitted for the record by 
                       Dr. Howard K. Gruenspecht

QUESTIONS FROM CHAIRMAN COSTA

Q1  Dr. Gruenspecht, we hear a lot about the impact, or lack thereof, 
of additional drilling on oil prices. However, we hear less about the 
potential impact of drilling on natural gas prices. Does increased 
drilling in the former moratoria areas of the OCS have the potential to 
significantly impact natural gas prices, and if so, on what sort of 
timeframe?
    A1 Increased drilling in the former moratoria areas of the OCS is 
not expected to significantly impact natural gas prices between now and 
2030. As part of the Annual Energy Outlook 2009 (AEO2009), the Energy 
Information Administration prepared a restored moratoria sensitivity 
case. Because the volume of technically recoverable natural gas in the 
OCS areas previously under moratoria accounts for less than 5 percent 
of the total U.S. technically recoverable natural gas resource base, 
results show that access does not significantly impact natural gas 
production or price levels.
    Cumulatively, domestic natural gas production from both onshore and 
offshore sources between 2010 and 2030 is projected to be 1.3 percent 
lower in the restored moratoria case than in the AEO2009 reference 
case. Total U.S. production of dry natural gas is 210 billion cubic 
feet less in 2020 and 600 billion cubic feet less in 2030 in the 
restored moratoria case than projected in the reference case. The 
reduction in offshore supply of natural gas in the restored moratoria 
case is partially offset by an increase in onshore production of 170 
billion cubic feet and a decrease in consumption of 360 billion cubic 
feet in 2030 compared to the levels in the reference case. The average 
U.S. wellhead price of natural gas in 2030 (per thousand cubic feet, in 
2007 dollars) is 8 cents higher in 2020 and 21 cents higher in 2030 in 
the restored moratoria case, representing price increases of 1 percent 
and 3 percent, respectively. The increased onshore production and 
decreased consumption result from higher natural gas prices, which are 
seen mainly in the later years of the projection.

Q2  Dr. Gruenspecht, the New York Times reported on March 15th about 
the steep decline in U.S. drilling activity, caused by the equally 
steep reduction in oil and natural gas prices since last summer. During 
last summer's high prices, a common argument was that increased 
drilling in the U.S. Outer Continental Shelf and on federal lands out 
west would result in lower prices for consumers. However, it appears 
that instead of the amount of drilling being a determining factor on 
the price of oil and natural gas, in fact the price of oil and natural 
gas is the determining factor on the amount of drilling activity. In 
simpler terms: drilling doesn't drive prices, but prices do drive 
drilling. Are these accurate statements?
    A2 Prices definitely drive drilling, but drilling can also drive 
prices. The processes involved in the formation of prices and the 
collective decisions to drill are interrelated and complex.
    Prices respond not only to actual supplies made available by 
drilling, but to expectations of supplies that will or even that can be 
brought to market. In that sense, the first potential effect on crude 
oil prices of changing expectations about access to supply from the 
U.S. Outer Continental Shelf and on Federal lands would be a signal to 
raise expectations of global supply in the future. While the exact 
response of the market would be difficult to predict, an increase in 
expected future global supply availability could be expected to result 
in somewhat lower prices.
    On the other hand, the drilling response to price declines in oil 
and natural gas we are seeing now is part of a business cycle that has 
occurred several times in the past few decades. Lower price 
expectations make investments more difficult to justify on their own 
merits, thus leading to the cancellation of less profitable drilling 
prospects. In addition, when crude oil and natural gas prices fall, 
companies' cash flows decline. We are seeing a slowing of some capital 
projects in exploration and production as well as in other areas, 
including refinery investments.
    A notable result of the drilling response to price is that by 
eliminating more marginal investment opportunities, the efficiency of 
the market increases. As a result, though drilling is dropping steeply, 
new production is falling less quickly. In effect, the best prospects 
are getting drilled and the less attractive are not. The same goes for 
the drilling equipment and crews. As the number of rigs running drops, 
only the most effective and efficient continue to work. Also, the base 
of production from already-drilled wells is large compared to the 
total. As a result, the drop in drilling does imply a proportional drop 
in production. Longer-term effects could be significant if the capacity 
of the industry to respond to stronger price signals in the future is 
reduced. This lagged market/investment response is what drives some of 
the price cycles in the oil and natural gas supply.

Q4  Dr. Gruenspecht, one of the issues this Committee has been trying 
to get a handle on is how much it costs oil and gas companies to do 
business here in the United States, and if that is significantly 
cheaper or more expensive elsewhere in the world. The GAO has put out a 
couple of reports saying that the amount of revenue the government 
brings in, as a percentage of the total revenue from the oil and gas, 
is one of the lowest percentages in the world. But on the other hand, 
some Members of Congress have said that it has to be that way because 
the costs of finding oil in the United States are so much higher than 
they are in other countries. Is it significantly more expensive to 
produce a barrel of oil in the United States, onshore and/or offshore, 
than it is in other countries? Is there an estimate of the additional 
costs incurred by production companies as a result of complying with 
federal regulations?
    A4 The costs of finding and producing oil and natural gas vary 
considerably across world regions and can be quite volatile, but they 
tend to be higher in more mature producing areas such as the United 
States. The combined cost of finding and producing oil and natural gas 
also tends to be greater in the U.S. offshore areas than in the U.S. 
onshore. Costs have risen sharply and have been more volatile in recent 
years because of substantial increases in expenditures for property 
acquisition, exploration, and development of oil and natural gas 
resources. We do not have an estimate of the additional costs incurred 
by production companies as a result of complying with Federal 
regulations.
    EIA collects data on the costs of finding and producing oil and 
natural gas in its Financial Reporting System (FRS) survey. EIA 
publishes finding costs (which include the costs of unproved property 
acquisition, exploration, and development of the oil and natural gas) 
and production costs (which include the costs of extracting or lifting 
the oil and natural gas). Finding costs are usually larger than 
production costs and tend to be more volatile.
    The finding cost calculation is a ratio of expenditures for 
exploration and development to proved reserves found. The difference in 
timing between the expenditure of funds and the booking of proved 
reserves is one important reason for the volatility in finding costs. 
This is especially evident when changes occur rapidly, as has been the 
case in recent years. The large and rapid increase in oil prices since 
2002 resulted in large increases in expenditures for exploration and 
development. Proved reserves have not increased to the same extent as 
yet, resulting in higher finding costs. Increased acquisition activity, 
which results in unusually large acquisition expenditures in the year 
the acquisition takes place, also causes volatility in finding costs.
    One way to smooth this volatility is to average the data over 
several years. The figure below shows the costs of finding and 
producing oil and natural gas in the U.S. onshore and U.S. offshore 
regions and three international regions over the ten-year period from 
1998 to 2007. Canada and Europe are more mature producing areas like 
the United States. Their combined finding and production costs were 
higher than the U.S. onshore but lower than the U.S. offshore. The 
``Rest of World'' region, an average of the other regions of the world, 
had the lowest total finding-plus-production costs.
[GRAPHIC] [TIFF OMITTED] T7755.007


.epsQ5  Dr. Gruenspecht, there were a lot of energy provisions in the 
recent stimulus bill (H.R. 1) that Congress passed and the President 
signed--this was a major commitment to developing new, cleaner forms of 
energy. Has EIA analyzed the bill and determined if it will have any 
effect on your short- or long-term projections? If there has not been a 
formal EIA analysis, are there any general expectations that EIA would 
have about some of the energy-related provisions in that legislation?
    A5 EIA has prepared an updated Annual Energy Outlook 2009 reference 
case reflecting provisions of the American Recovery and Reinvestment 
Act (HR.1) and recent changes in the economic outlook. A copy of the 
paper, which is also available on EIA's website, is attached.

Q6a  Dr. Gruenspecht, has EIA looked at the potential of federal lands 
to provide renewable energy?
    A6a In 2001, EIA prepared maps showing Federal lands and total 
lands (lower-48 States) with renewable resources with high potential 
for generating electric energy. EIA has used the information in its 
analysis and forecasting products. The maps are based on resource data 
prepared by the National Renewable Energy Laboratory (NREL), the 
Pacific Northwest National Laboratory, and Southern Methodist 
University, collated with Geographic Information Systems (GIS) analysis 
by EIA. More recent data are now available from NREL, which could alter 
the assessment. Five renewable resources were mapped: wind, biomass, 
geothermal, concentrated solar power, and photovoltaic solar energy. 
The data showed that Federal lands contain almost half of the national 
endowment for geothermal resources (46 percent). In contrast, Federal 
lands contain only 38 percent of concentrating solar, 29 percent of 
wind, 27 percent of solar photovoltaic, and 13 percent of biomass 
resources.

Q7  Dr. Gruenspecht, in the Annual Energy Outlook reference case in 
2008, EIA projected that carbon dioxide emissions from energy would 
grow at an average annual rate of 0.9 percent. In the 2009 Outlook, EIA 
projects that energy related CO2 emissions grow by 0.3 
percent per year. What are some of the reasons for that change, and do 
those reasons give us any direction as to how we could lower that even 
more?
    A7 The projected slowdown in the growth in U.S. energy-related 
carbon dioxide emissions that occurred between the 2008 and 2009 
versions of the AEO was driven by numerous factors including: higher 
energy prices that reduced growth in energy consumption, the growing 
use of renewable fuels in the transportation and electricity sectors, 
and growing concerns about greenhouse gas emissions that dampen the 
projected additions of new coal power plants.
    For example, in the AEO2008 reference case, world oil prices were 
projected to rise to $72 per barrel (2006 dollars) in 2030 while in the 
AEO2009 reference case they are expected to rise to $130 per barrel 
(2007 dollars), more in line with the high price projections from the 
AEO2008. This change was driven by the belief that oil demand in 
developing countries would continue to grow rapidly while oil-rich 
countries would seek to control access to their low-cost resources and 
develop them more slowly than anticipated in the AEO2008. These higher 
oil prices lead to reduced transportation energy use and lower carbon 
dioxide emissions as consumers drive less and purchase more fuel 
efficient cars.
    Carbon dioxide emission projections are also lower because of the 
expected reduced dependence on new coal plants. In the AEO2008 
reference case, over 100,000 megawatts of new coal capacity was 
projected to be added to meet the growing demand for electricity, while 
in the AEO2009 reference case this projection was reduced by more than 
half because growing concerns about greenhouse gas emissions have 
dampened the interest of developers, regulators and the financial 
community in new coal plants. Over the past few years, as oil and 
natural gas prices rose, a large number of new coal plant projects were 
announced. However, while some new coal plants are under construction, 
many of the projects that had been announced have already been 
cancelled. This led to a reassessment of potential new coal plant 
additions in the AEO2009 and increased dependence on new natural gas 
and renewable plants.

Q8  Dr. Gruenspecht, the 2009 Annual Energy Outlook points out that oil 
imports are projected to fall, apparently by quite a bit, by 2025. This 
appears to be the result of increased production, some of which is on 
the OCS, and decreased consumption, partially through new car fuel 
economy standards. Which one of those has a bigger impact on the drop 
in imports: increased production from the OCS or increases in fuel 
economy standards?
    A8 The new car fuel economy standards account for the larger 
portion of the impact on oil import reduction. Depending on the method 
used to calculate the energy savings from the new Corporate Average 
Fuel Economy (CAFE) standard, between 72 percent and 81 percent of the 
reduction in oil imports would be due to the new CAFE standard.
    The U.S. offshore is estimated to contain substantial resources of 
both crude oil and natural gas, but there are uncertainties regarding 
potential leasing and development of the Outer Continental Shelf (OCS). 
Assuming that leasing goes forward as previously leasing programs have, 
conversion of available OCS resources will require considerable time 
and financial resources to develop. The Annual Energy Outlook 2009 
(AEO2009) reference case projects that significant increases in OCS 
production occur after 2020. By 2030, EIA projects that lifting the ban 
on OCS drilling will increase domestic crude oil production by 8 
percent (0.5 million barrels per day) and will increase domestic 
natural gas production by 3 percent (0.6 trillion cubic feet per year).
    An evaluation of the energy impacts with and without the new CAFE 
standards was not included as part of the AEO2009. However, the AEO2008 
did examine the energy impacts with and without the 35-mpg CAFE 
standard required under EISA. Although the AEO2008 estimates might not 
be directly comparable to a similar analysis using the AEO2009, they 
provide a reasonable expectation of the impacts of the new CAFE.
    In the AEO2008 Early Release reference case (December 2007), which 
did not include the new CAFE standard in EISA, light-duty vehicle 
average fuel efficiency was projected to be 30.0 miles per gallon, 
significantly above the floor of approximately 26.4 miles per gallon 
set by the pre-EISA CAFE standard. Consumer behavior coupled with 
technology improvements resulted in vehicle owners choosing more 
efficient vehicles than those required by the CAFE standard of the 
time. In the full AEO2008 reference case (June 2008), which included 
the new CAFE standard, consumers do not purchase vehicles significantly 
more fuel efficient than the new CAFE standard of 35 miles per gallon.
    With the new CAFE standard, light-duty vehicle consumption is 1.2 
to 1.4 million gasoline-equivalent barrels per day (12.1 to 12.9 
percent) less than in the case with the previous CAFE standard. 
Measured against a case where vehicle efficiency does not improve above 
the floor set by the previous CAFE standard (a frozen-efficiency case) 
the new CAFE standard reduces light-duty vehicle gasoline-equivalent 
barrels per day by between 2.1 and 2.2 million barrels per day (17.9 to 
18.2 percent).
    As a result, depending on the method used to calculate the energy 
savings from the new CAFE standard, a low estimate of the reduction of 
oil imports would be between 1.7 and 1.9 million barrels per day, with 
new CAFE standards accounting for approximately 72 percent of the 
reduction. A high estimate of the reduction in oil import would be 
between 2.6 and 2.7 million barrels per day, with CAFE standards 
accounting for approximately 81 percent of the projected reduction.

Q9  Dr. Gruenspecht, in your testimony you mention that there are local 
infrastructure issues regarding production from the former moratorium 
areas, and that your projections assume they are resolved. Could you 
give us a little more detail on what these issues are, and what their 
potential for impacting your projections would be?
    A9 To produce oil and gas from former moratoria areas that have 
been closed to exploration and production for decades, considerable 
infrastructure will need to be built. Major infrastructure categories 
include platform fabrication yards, port facilities, shipyards and 
shipbuilding yards, support and transport facilities, waste management 
facilities, pipelines, pipe coating yards, natural gas processing 
facilities, natural gas storage facilities, and petrochemical 
facilities. States and local areas affected by offshore development 
activities have a say in the approval process and could hold up 
development. EIA assumes in the Annual Energy Outlook 2009 analysis 
that issues regarding local siting and permitting will be resolved by 
the producers and the State and local governments in an expeditious 
manner. Protracted permitting processes could add significantly to the 
time and/or cost to develop offshore resources in affected regions and 
possibly discourage development of associated offshore areas, resulting 
in less and/or more costly production from portions of the OCS.

Q10  Dr. Gruenspecht, in the 2009 Annual Energy Outlook, EIA points out 
that the oil fields in the area formerly under moratoria are expected 
to be small--much smaller than the average undiscovered field size in 
the Gulf of Mexico. And the 2008 World Energy Outlook states that small 
fields decline at a much more rapid rate than large fields. So does 
this mean if we started drilling in frontier areas, companies would 
have to drill considerably more wells, over wider geographic areas, 
than they would in the Gulf of Mexico?
    A10 Yes. The Minerals Management Service estimates that the average 
field size in the Gulf of Mexico is almost 3 times greater than the 
average field size in the Outer Continental Shelf areas formerly under 
moratoria (43 million barrels of oil equivalent compared to 15 million 
barrels of oil equivalent). Because of the smaller size of the fields 
in the areas formerly under moratoria, in areas deemed profitable 
companies will need to drill more wells over a wider geographic area to 
achieve the same output as in the Gulf of Mexico where the average 
field size is considerably larger.

Q11  Dr. Gruenspecht, you mentioned in your testimony that various 
characteristics of the new OCS areas are generally inferior to those 
areas currently open. There are three separate areas that need to be 
considered, though: the Atlantic, the Pacific, and the Eastern Gulf of 
Mexico. Could you put those in order--which has the least inferior 
characteristics and which has the most inferior characteristics?
    A11 While it is difficult to rank the areas of the Atlantic, 
Pacific, and Eastern/Central Gulf of Mexico (GOM) that were previously 
under moratoria based on their inferiority relative to those areas that 
were already open, certain generalizations can be made considering 
resource level, average field size, and proximity to existing 
infrastructure. The areas previously under moratoria rank differently 
depending on whether the emphasis is on oil or gas production.
    Resources: The EIA relies on estimates of technically recoverable 
resources provided by the Minerals Management Service (MMS). The 
Pacific resource estimate for undiscovered oil (10.5 billion barrels) 
is almost three times as much as the estimate for either the Atlantic 
(3.9 billion barrels) or the Eastern/Central GOM (3.7 billion barrels), 
compared to 47 billion barrels of technically recoverable resources in 
the Central/Western GOM. The Atlantic resource estimate for 
undiscovered natural gas (36.5 trillion cubic feet or Tcf) is almost 
double that of the Eastern/Central GOM (21.5 Tcf) and the Pacific (18.4 
Tcf), compared to 247 Tcf of technically recoverable resources in the 
Central/Western GOM.
    Average Field Size: The MMS estimates of the average undiscovered 
field size in GOM Outer Continental Shelf (OCS) areas open to drilling 
prior to 2008 (59 million barrels of oil equivalent (mmBOE)) and in the 
Eastern GOM (43 mmBOE) are significantly greater than the average field 
size for the Pacific (11 mmBOE) and Atlantic (16 mmBOE) OCS areas 
formerly under moratoria.
    Infrastructure: The Eastern/Central GOM has the advantage of being 
closer to extensive existing infrastructure in the Central and Western 
GOM areas that have been open to exploration and development. Some 
infrastructure exists in the Pacific near currently producing leases. 
This suggests an assignment of the highest ranking to the Central/
Western GOM, followed by the Pacific, then the Eastern/Central GOM, and 
last the Atlantic.

Q12  Dr. Gruenspecht, has EIA modeled the impact of the proposed Alaska 
Natural Gas Pipeline, if and when it gets built? Is there a sense of 
the impact that might have on U.S. natural gas supplies or prices?
    A12 In the Annual Energy Outlook 2009 (AEO2009) reference case, an 
Alaska gas pipeline to the lower-48 States is projected to begin 
operation in 2020. The 2020 date is largely dictated by the 9 years 
required to design, permit, and construct this pipeline. Once 
completed, an Alaska gas pipeline is expected to take 2 years to 
achieve full operation, delivering 1.4 trillion cubic feet (Tcf) per 
year to the lower-48 States by the end of the second year.
    The AEO2009 also includes a scenario entitled the ``no Alaska 
pipeline case'' in which an Alaska gas pipeline is precluded from going 
into operation. The no Alaska pipeline case projections of U.S. natural 
gas production, consumption, imports, and prices can be compared to 
those projected in the reference case to ascertain the impact of the 
pipeline.
    After 2020, Alaska natural gas production is 1.6 Tcf per year lower 
in the no Alaska pipeline case than in the reference case. The lower 
Alaska production includes both the pipeline throughput to the lower-48 
States and the natural gas consumed in the production, processing, and 
compression of the pipeline gas.
    In the no Alaska pipeline case, later-period Henry Hub spot natural 
gas prices are higher than in the reference case. Regional prices may 
differ to greater or lesser extents. The greatest Henry Hub price 
difference occurs in 2022 at $0.69 per million Btu (2007 dollars), 
which is 9.5 percent higher than the reference case price. After 2022, 
the magnitude of the natural gas price impact gradually diminishes, as 
lower-48 natural gas supply grows and consumption declines. By 2030, 
Henry Hub gas prices are only $0.15 per million Btu or 1.6 percent 
higher in the no Alaska pipeline case relative to the reference case.
    As a result of the higher natural gas prices projected in the no 
Alaska pipeline case, lower-48 natural gas production and imports are 
higher, while natural gas consumption is lower.
    In the no Alaska pipeline case, the higher natural gas prices cause 
lower-48 production to increase by 800 billion cubic feet (Bcf) in 
2021, and then level off to around 600 Bcf per year for the remainder 
of the projection. Of the lower-48 natural gas production categories, 
unconventional natural gas production posts the greatest increase, 
adding about 500 Bcf per year from 2022 through 2030.
    Net natural gas pipeline imports are about 525 Bcf higher in the no 
Alaska pipeline case in 2028. LNG imports increase only slightly in the 
no Alaska pipeline case due to the high LNG prices relative to the less 
expensive U.S. and Canadian natural gas production.
    The greatest impact on natural gas consumption occurs in 2026, when 
total natural gas consumption is about 760 Bcf lower than in the 
reference case, with the largest share of the decline--290 Bcf--
occurring in the electric power sector.

Q14  Dr. Gruenspecht, could you provide your thoughts about our ability 
to harness some of the potential of enhanced geothermal systems? Is 
enhanced geothermal likely to be feasible in the near future? How long 
would it take before people could start building EGS power plants?
    A14 It is EIA's understanding that current efforts related to 
enhanced geothermal systems (EGS, also known as ``hot dry rock'' 
systems) are limited to pre-commercial research and development 
efforts, with a few proof-of-concept projects and limited government-
funded research efforts in several countries (including the U.S.). 
Given the lack of current commercial-scale experience with this 
technology, EIA does not believe that EGS technology is likely to 
contribute significantly to U.S. electricity production in the near 
future. The timing of its ultimate introduction to commercial service 
will largely depend on the ability of researchers and private investors 
to develop a cost-competitive product, and may also depend on future 
policies to support this technology specifically or to support 
renewable or carbon-free technologies in general.
    EIA does not currently include projections for enhanced geothermal 
systems in our Annual Energy Outlook 2009. This is, in large part, 
because the technology is not sufficiently well developed to establish 
reasonable estimates of cost and characterization of the resource base 
that could be used in our National Energy Modeling System. EIA expects 
that these data should develop in advance of significant commercial 
deployment.

Q15  Dr. Gruenspecht, in her testimony, Ms. Pierce states that ``the 
EIA's 2009 forecast of significant increases in domestic oil production 
is partly owing to advances in enhanced oil recovery technologies.'' 
Could you provide additional detail regarding this statement? What is 
the growth of enhanced oil recovery (EOR) that EIA projects to 2030? Do 
these projections assume existing EOR technology or ``next-generation'' 
EOR? How much of the growth in EOR is driven by carbon dioxide-EOR, and 
how much is from other injectants? Does EIA project how much carbon 
dioxide used for EOR would be coming from anthropogenic sources versus 
natural sources?
    A15 In the Annual Energy Outlook 2009 (AEO2009), EIA projects that 
oil production from enhanced oil recovery (EOR) will increase more than 
fivefold between 2007 and 2030, growing from 0.3 million barrels per 
day in 2007 to 1.7 million barrels per day in 2030. The projections 
assume some improvement in carbon dioxide (CO2) EOR 
technology over existing technology, but not what might be considered 
``next generation'' technology. The current National Energy Modeling 
System (NEMS) used for the AEO2009 only includes CO2 
flooding; other injectants were not competed in the model. The new Oil 
and Gas Supply Module of NEMS currently under development includes 4 
EOR processes: CO2 flooding, steam flooding, polymer 
flooding, and profile modification. Roughly 37 percent of the projected 
CO2 used for EOR production in the AEO2009 is from 
anthropogenic sources versus natural sources.

Q16  Dr. Gruenspecht, please provide an update to the Committee on 
EIA's efforts to provide additional energy data for the U.S. insular 
areas (in particular the Commonwealth of the Northern Mariana Islands, 
Guam, American Samoa, and the U.S. Virgin Islands). When does EIA 
expect to be able to provide State Energy Profile pages for each of 
those territories?
    A16 EIA plans to publish State Energy Profiles for the five U.S. 
insular areas (American Samoa, the Commonwealth of the Northern Mariana 
Islands, Guam, Puerto Rico and the U.S. Virgin Islands) on the EIA web 
site by June 12, 2009. Each Profile consists of a map, a narrative 
section, and a data table. There are very limited EIA and other data 
available on the U.S. territories. Options to expand territory data 
collection are outlined in EIA's January 2009 report to Congress, State 
Energy Data Needs Assessment, prepared in response to the direction in 
section 805(d) of the Energy Independence and Security Act of 2007, 
P.L. 110-140. This report is on our website at http://www.eia.doe.gov/
oiaf/service_rpts.htm.
QUESTIONS FROM RANKING MEMBER LAMBORN

Q1  UCSD Economics Professor James Hamilton has written that ``nine out 
of ten of the U.S. recessions since World War II were preceded by a 
spike up in oil prices.'' Has the EIA examined the impact of the high 
energy prices Americans faced last year on our GDP and the recession?
    A1 EIA has not formally examined the impact of the high energy 
prices on the recession. However, the most widely-cited reasons for the 
current recession include the inflated housing market and its impacts 
on financial institutions, and financial institutions' treatment of 
risk. The higher energy prices impacted the economy, although the 
impacts of housing price inflation, wealth deflation, global recession 
and the credit crunch probably outweigh impacts of high energy prices 
alone.

Q2  In your various studies and the Annual Outlook you address the 
impact high energy prices will have on our economy correct? Do these 
findings uniformly show that high energy prices are a drag on our 
economy?
    A2 The results from EIA's analysis of the impacts of higher energy 
prices depend on the supply and demand responses to increased energy 
prices as well as the trajectory of higher prices. Initially, when 
faced with higher prices, the economy will experience a reduction in 
gross domestic product (GDP), a broad measure of economic output; 
however, if prices begin to stabilize the economy will begin to 
recover. With respect to higher oil prices, other important factors 
include to what extent domestic producers can increase their production 
and how much oil imports will fall. Typically, the economy will 
experience an early reduction in growth and, depending on the oil price 
trajectory and supply response, may return to the reference case growth 
trajectory over time.

Q3  Is it safe to say that a majority of the studies you have done on 
congressional proposals like Renewable standards and cap and trade 
proposals have shown that increases in the cost of energy result in a 
lower GDP going forward?
    A3 Most of the past EIA studies on renewable energy standards have 
found very modest impacts on energy prices and the economy. However, 
EIA has found that under some circumstances, a greenhouse gas cap and 
trade policy could lead to significant energy price increases and a 
reduction in economic output. In an analysis of S. 2191, the Lieberman-
Warner Climate Security Act, EIA found that total discounted gross 
domestic product (GDP) losses over the 2009 to 2030 time period range 
from $444 billion (-0.2 percent) to $1,308 billion (-0.6 percent) 
across the cases considered. Similarly, the cumulative discounted 
losses for personal consumption range from $546 billion (-0.2 percent) 
to $1,425 billion (-0.6 percent). GDP losses in 2030, the last year 
explicitly modeled in the analysis, range from $27 billion to $163 
billion (-0.1 to -0.8 percent) while consumption losses in that year 
range from $58 billion to $149 billion (-0.4 to -1.1 percent). Economic 
impacts were largest when it was assumed that key low-emissions 
technologies including nuclear, fossil with carbon capture and 
sequestration, and various renewables are not developed and deployed in 
a timeframe consistent with the emissions reduction requirements, and 
international offsets are not available. Generally higher energy prices 
represent higher costs to the economy and the magnitude of the impacts 
depends on price impacts of the policies analyzed.

Q4  In January 2007, EIA was asked to analyze a generic cap and trade 
program by Sen. Bingaman and others, and in that analysis you were 
asked to consider options for both a partial auction and a full 
auction. A brief excerpt from that report, ``GDP and consumption 
impacts in the Full Auction case are substantially larger than those in 
the Phased Auction case. Relative to the reference case discounted 
total GDP (in 2000 dollars) over the 2009-2030 time period in the Full 
Auction case is almost twice the estimated consumption loss in the 
Phased Auction case.''

Q5  Can we assume based on this study that in most cap and trade 
schemes a full auction of carbon allowances will have a higher cost to 
the economy than a partial auction? Do you think, as analyzed in the 
January 2007 study, the costs of a full auction plan might be double a 
quarter auction plan? Could those costs be triple?
    A4-5 The economic impacts of a greenhouse gas cap and trade policy 
will depend on many factors, including the stringency of the emissions 
cap, the speed of implementation, and the use of carbon allowance 
revenue. The January 2007 EIA analysis did show larger gross domestic 
product (GDP) and consumption losses in the full auction case compared 
to the partial auction case; however, it also stated that the economic 
impacts would be different if alternative revenue recycling assumptions 
were made, so a general conclusion that a full auction case would 
always have worse economic impacts than a partial auction case is not 
warranted. Likewise, a general conclusion that a full auction would 
have double or triple the negative economic impact of a quarter auction 
is not warranted.

Q6  In the EIA analysis of the Lieberman Warner Cap and Trade proposal 
the EIA findings say that energy costs will rise. Specifically, the 
report states that ``The Consumer Price Index (CPI) for energy, a 
summary measure of energy prices facing households at the retail level, 
increases by approximately 18 percent above the Reference Case level by 
2030. Industrial energy prices increase 10 percentage points more, at 
29 percent above Reference Case levels.''

Q7  So this finding says that consumers will see a nearly 20% rise in 
costs and industry, nearly a 30% rise in costs under the basic case 
presented by EIA of the Lieberman Warner bill. In addition, the EIA 
report states that in what it views as essentially the most restricted 
case ``consumer energy prices increase as much as 62 percent and 
industrial energy prices by 100 percent.''

Q8  What would be the impact on American industry if we increased our 
energy prices by 100% and other nations, without restrictions on carbon 
emissions, continued to reduce their energy costs?
    A6-8 We have not estimated the impact on American industry if we 
increased our energy prices by 100 percent and other nations, without 
restrictions on carbon emissions, continued to reduce their energy 
costs. The April 2008 EIA analysis of the Lieberman-Warner Climate 
Security Act (S. 2191) showed a range of industrial shipment impacts 
consistent with the projected increase in energy costs.
    In the April 2008 analysis, the industrial shipment impacts ranged 
from 2.9 to 7.4 percent below reference case levels by 2030, depending 
on the assumptions used. Over the period of 2009 to 2030, industrial 
impacts in the analysis ranged from 1.3 to 3.6 percent below reference 
case levels. 1 The industrial impacts presented in the April 
2008 report only included the manufacturing, construction, mining and 
agriculture sectors of the economy. It did not include the service 
sector, which is an increasingly important part of the U.S. economy.
---------------------------------------------------------------------------
    \1\ Cumulative impacts, present value calculated using a 4 percent 
discount rate

 Q9  In EIA's analysis of the Lieberman-Warner Climate Security bill 
last year, some of the key findings pointed out that ``The electric 
power sector accounts for the vast majority of the emissions 
reductions, with new nuclear, renewable, and fossil plants with CCS 
[Carbon Capture and Sequestration] serving as the key compliance 
technologies in most cases. [And] Many existing coal plants without CCS 
are projected to be retired early because retrofitting with CCS 
---------------------------------------------------------------------------
technology is generally impractical.''

Q10  This was in a bill which had only a ``share of the 
allowances...auctioned, while the remainder would be distributed for 
transition assistance to covered entities, energy consumers, and 
manufacturers as incentives for carbon sequestration''. Can you 
estimate for the Committee how much higher the costs might be under a 
similar regulatory scheme where 100% of the credits are auctioned at 
the beginning of the program?
    A9-10 Since the EIA analysis of the Lieberman-Warner Climate 
Security Act used the allowance distribution called for in the bill, a 
100-percent auction case was not prepared. A 100-percent auction case 
would lead to higher energy price impacts but the economic impacts 
could not be determined without knowing how the auction revenue was to 
be used.

Q11  In the assessment of Lieberman-Warner, EIA says ``As energy prices 
increase, the energy-intensive sectors, including food, paper, bulk 
chemicals, petroleum refining, glass, cement, steel and aluminum, show 
greater losses compared to the rest of the industrial sectors, reaching 
between 5 and 10.2 percent'' in most projections.

Q12  Do you believe these projections to be on the low side if we 
adopted a 100% auction of carbon allowances as proposed in President 
Obama's Budget?

Q13  Would we see a doubling of those projections? Meaning could we see 
20%, 30% or 40% job losses in our industrial sector as a result of the 
Presidential proposal with 100% auctions?
    A11-13 As noted in the previous answer, a 100 percent auction would 
lead to somewhat higher energy price impacts than what we estimated in 
our analysis of the Lieberman-Warner legislation, but the economic 
impacts could not be determined without knowing how the auction revenue 
would be used. The overall impacts on energy intensive industries would 
vary depending on how the overall economy reacts to the distribution of 
the carbon allowance revenue as well as the technologies used by firms 
to substitute away from or reduce their use of fossil fuels. However, 
larger impacts on energy-intensive industries in response to a carbon 
allowance price do not translate into the same impacts experienced by 
the U.S. industrial sector as a whole, since energy-intensive 
industries comprised approximately 20 percent of industrial (non-
service) gross output from 2003 to 2007.

Q14  Can you elaborate on the subsidies for energy creation. It's a bit 
dated but EIA data shows that solar energy was subsidized at $24.34 per 
megawatt hour and wind at $23.37 per megawatt hour for electricity 
generated in 2007. By contrast, coal received 44 cents, natural gas and 
petroleum received 25 cents, hydroelectric power 67 cents, and nuclear 
power $1.59 per megawatthour.
    A14 In 2008, EIA's most recent report on energy subsidies (Federal 
Financial Interventions and Subsidies in Energy Markets 2007) developed 
estimates of electricity subsidies by fuel, and then compared those 
subsidies to actual electricity output in Fiscal Year 2007. This 
approach yields a wide range of estimates when subsidies are expressed 
in proportion to the overall level of electric output. Technologies 
like solar and wind have relatively large subsidies per unit of output 
for two reasons. First, subsidies are often motivated by a policy goal 
of making new technologies more competitive, so subsidies may be 
directed disproportionately to these emerging technologies, rather than 
to more mature forms of production. Second, there are substantial 
differences in generation between established base-load generating 
technologies (primarily coal and nuclear), which account for 70 percent 
of all generation, and relatively new renewable technologies like wind 
and solar, which together accounted for 1.3 percent of total net 
generation in 2008. The per-unit measure of electricity production 
subsidies used in EIA's report may provide a better indicator of 
certain market impacts than the dollar amount of the subsidy. For 
example, even though coal receives higher subsidies in absolute terms 
than wind power, the use of wind is likely to be more dependent on the 
availability of subsidies than the use of coal. Other factors can also 
play an important role in determining the market impact of a particular 
production subsidy. For example, credits claimed by refined coal 
producers have lapsed since EIA's 2008 report, and the small amount of 
generation using refined coal as fuel has probably been replaced by 
steam coal. In contrast, generation from wind power, supported by 
renewable production tax credits, would likely be replaced with 
generation from a broad mix of fuels if that credit were unavailable.

Q15  The 2007 energy bill, the 2009 stimulus package, and the FY09 
omnibus appropriations all included increased funding for renewable 
energy we [sic] would expect those numbers to be slightly higher than 
the 2007 data correct? Do you have any idea how much higher those 
numbers might be? Would you be willing to update those figures for this 
committee?
    A15 EIA is able to provide an updated comparison to some of the 
programs itemized in EIA's report Federal Financial Interventions and 
Subsidies in Energy Markets 2007 by using the Treasury Department's tax 
expenditure estimates for Fiscal Year 2009 (FY09). These estimates are 
itemized in the Office of Management and Budget's (OMB) Analytical 
Perspectives, Budget of the United States Government--Fiscal Year 2009. 
The latest Treasury Department estimates also include revisions to FY07 
and FY08 data contained in EIA's report. However, EIA cannot update the 
Joint Committee on Taxation (JCT) estimates of tax expenditures enacted 
in the Energy Policy Act of 2005 because they are not itemized by the 
Treasury Department. EIA is able to update its FY07 tax expenditures 
and provide a comparison of FY08 and FY09 estimated tax expenditures, 
but no updates are available at this time for direct expenditure 
programs, research and development programs, or Federal electricity 
programs.
    Table 1 shows FY07 estimated tax expenditures contained in EIA's 
report, along with revised FY07 tax expenditures and FY08 and FY09 
estimates reported in the FY09 budget documents. For these items, EIA 
previously reported $10.1 billion of tax expenditures (excluding tax 
expenditures scored by the JCT) for FY07, while the revised FY07 
expenditures from the Treasury Department are about $300 million 
higher. The latest Treasury Department estimates show these energy-
related tax expenditures declining approximately $700 million in FY08 
and $1 billion in FY09.
[GRAPHIC] [TIFF OMITTED] T7755.008

    .epsThe decline reflects the expiration of certain tax expenditures 
and changes in the tax credit rates applied in certain other programs 
based on the tax law as it existed at the time the FY09 budget was 
submitted to Congress in February 2008. The Energy Independence and 
Security Act of 2007 (EISA), although it had been signed by that time, 
did not contain energy production-related tax expenditures. While Table 
1 shows tax expenditures declining, energy legislation passed 
subsequent to the submission of the FY09 budget expanded and extended 
existing tax expenditures. The Energy Improvement and Extension Act of 
2008 (EIEA), and the American Recovery and Reinvestment Act (ARRA) 
extended and expanded existing energy production tax credit and 
investment tax credit provisions, and appropriated significant funds 
for direct expenditures associated with the development of new energy 
infrastructure and end use energy efficiency.
    The extended and expanded energy tax expenditures include:
      Long-term extension and modification of the renewable 
energy production tax credit. The credit is now available through 2012 
for wind projects and through 2013 for other forms of renewable energy. 
It has been expanded to include marine and tidal projects.
      Allowing renewable energy producers to take the 
investment tax credit in lieu of production tax credits for those 
facilities placed in service in 2009 and 2010.
      Creation of a new tax credit for combined heat and power 
systems.
      Extension of the expiration date for solar energy, fuel 
cell and microturbine property tax credits through the end of 2016.
      Repeal of the double-dipping limitation to allow energy 
projects receiving subsidized financing to realize the full benefit of 
investment tax credits; and
      Authorizing an additional $1.6 billion of Clean Renewable 
Energy Bonds.
    These items have not yet been quantified by the Treasury Department 
in terms of their estimated losses to the Treasury.

Q17  In your studies you say that many of our current coal fired power 
plants will be phased out as a result of their inability to meet carbon 
control requirements. What percentage of current plants do you estimate 
would be candidates for CCS technology?
    A17 EIA has not performed a study of the potential to retrofit 
existing coal plants with Carbon Capture and Sequestration (CCS), 
rather than retiring and replacing them to meet carbon control 
requirements. Numerous factors would influence such a decision 
including the age and vintage of the plant, the technology employed at 
the plant, the plant's efficiency, the availability of space to install 
capture equipment and the proximity of suitable sequestration 
locations. The Department of Energy's National Energy Technology 
Laboratory (NETL) found in a recent study (see http://www.netl.doe.gov/
energy-analyses/pubs/CO2%20Retrofit%20From%20Existing
%20Plants%20Revised%20November%202007.pdf) that, while it was 
technically feasible to retrofit existing coal plants with CCS, it 
could be economically challenging.

Q20  What impact will a cap and trade system have on the domestic 
agriculture sector, particularly on those sectors which are heavily 
dependent on fertilizer?

Q21  How about the domestic cement industry?
    A20-21 The impact of a cap-and-trade program on agriculture and 
other sectors will depend on the details of the program that is 
implemented. The allocation of allowances is a critical factor for all 
sectors, but agriculture will also be impacted by provisions that may 
allow farmers to receive offset credits for practices that reduce or 
sequester carbon dioxide and other greenhouse gases. The fertilizer and 
domestic cement industries are both classified as energy-intensive 
industries. Therefore, to the extent that a cap-and-trade program 
raises the cost of using fossil fuels, there industries would be 
expected to experience higher product costs.
QUESTION FROM REPRESENTATIVE BOREN

Q1  The Obama Administration proposes to increase taxes on the nation's 
oil and natural gas industry by 34 billion dollars. Most of the burden 
will fall on independent producers. Given that these independent 
producers currently drill 90% of new natural gas wells and produce more 
than 80% of the nation's natural gas, can you estimate the impact on 
domestic natural gas production that will result from the taking of so 
much capital from these producers?
    A1 EIA has not done an analysis of this issue, so we cannot 
quantify the impacts. In December 2007, EIA produced a service report 
``Oil and Natural Gas Market Supply and Renewable Portfolio Standard 
Impacts of Selected Provisions of HR. 3221.'' That legislation also 
included some proposals impacting the taxation of the oil and gas 
industry. While EIA was not able to analyze those provisions, which are 
not the same as those presently proposed by the Obama Administration, 
our December 2007 report does provide some context on oil and gas 
industry cash flows that may be helpful.
    [NOTE: The attachment, "An Updated Annual Energy Outlook 2009 
Reference Case Reflecting Provisions of the American Recovery and 
Reinvestment Act and Recent Changes in the Economic Outlook," April 
2009 Report by Energy Information Administration, U.S. Department of 
Energy, has been retained in the Committee's official files.]
                                 ______
                                 
    Mr. Costa. We look forward to asking you questions when 
that time arrives, Dr. Gruenspecht. We do appreciate that. I am 
not sure I made it clear during your introduction that you are 
the acting administrator for the Energy Information 
Administration office at this time.
    Our next witness is to present as the program coordinator 
on the Energy Resources Program for the U.S. Geological Survey 
within the U.S. Department of the Interior. We would very much 
welcome the testimony of Brenda Pierce.
    Brenda, please present.

  STATEMENT OF BRENDA S. PIERCE, PROGRAM COORDINATOR, ENERGY 
           RESOURCES PROGRAM, U.S. GEOLOGICAL SURVEY

    Ms. Pierce. Mr. Chairman and members of the Subcommittee, 
thank you for the opportunity to appear here today to discuss 
with you the U.S. Geological Survey's role in studying, 
understanding, and assessing the undiscovered geologically 
based energy resources of U.S. onshore and State waters and the 
world and the Minerals Management Service's role in providing 
information on Federal resources of the Outer Continental 
Shelf.
    Adequate, reliable, and affordable energy supplies obtained 
using environmentally sustainable practices are essential to 
economic prosperity, environmental and human health, and 
political stability. National and global energy demand and 
resource consumption are projected to increase over the next 
several decades, as you have heard. Thus, the volumes, quality, 
and availability of domestic and foreign energy resources are 
of critical importance to the United States.
    The Nation continues to face important decisions regarding 
the competing uses of public lands and offshore waters, the 
supply of energy to sustain development and enable growth, and 
the environmental effects of energy resource development. The 
USGS provides the research and information needed to address 
these challenges by conducting scientific investigations of 
geologically based energy resources, such as oil, gas, and 
coal; emerging resources, such as gas hydrates; underutilized 
resources, such as geothermal; and unconventional resources, 
such as oil shale; and research on the effects associated with 
energy resource occurrence, production, and utilization.
    The results from these geoscientific studies are used to 
evaluate the quality and distribution of energy resource 
accumulations and to assess the energy resource potential of 
the Nation and the world. As one example, the USGS recently 
produced the first-ever estimate of undiscovered, technically 
recoverable gas from natural gas hydrates. Although these 
resources have not yet been proven economic, this USGS 
assessment estimates a mean of 85.4 trillion cubic feet of 
technically recoverable gas from gas hydrates from the Alaskan 
North Slope.
    USGS assessments focus on undiscovered, technically 
recoverable oil and natural gas resources of the United States, 
exclusive of the Federal OCS, which is assessed by the MMS. 
Undiscovered, technically recoverable resources are resources 
that have yet to be found or drilled but, if found, could be 
recovered using currently available technology and industry 
practice. Economic factors are not always considered. For 
example, it may not be economically feasible to exploit those 
gas hydrate resources on the Alaskan North Slope, but they are 
technically recoverable.
    The purpose of USGS and MMS assessments are to develop 
robust, geologically based and statistically sound and well-
documented estimates of quantities of energy resources that 
have the potential to be added to reserves and, thus, 
contribute to the overall energy supply. The USGS and MMS 
resource assessment methodologies are thoroughly reviewed and 
externally vetted so as to maintain the transparency and 
robustness of the assessment results.
    The assessment of undiscovered, technically recoverable 
resources do change over time. There are several reasons for 
this, including scientific and technological developments 
regarding petroleum resources as well as improvements to the 
geologic understanding in numerous settings.
    One example of this is the change in the recently updated 
USGS assessment of the Bakken Formation of the U.S. portion of 
the Williston Basin. This assessment, released just last year 
in 2008, shows an estimated 3 billion to 4.3 billion barrels of 
undiscovered, technically recoverable oil, to compare to our 
1995 mean estimate of 151 million barrels of oil.
    Oil and natural gas produced offshore on the Outer 
Continental Shelf is a major supply source of energy for the 
domestic market. About 17 billion barrels of oil and 174 
trillion cubic feet of natural gas have been produced from the 
OCS since 1954. Current production levels are about 1.4 million 
barrels of oil and about 8 billion cubic feet of natural gas 
per day. This represents approximately 27 percent of domestic 
oil production and 14 percent of natural gas production. These 
shares are expected to grow over the next 7 years, as new deep-
water production in the Gulf of Mexico comes on.
    OCS oil and gas resource assessments are completed as part 
of the Secretary's responsibilities for managing OCS energy and 
mineral resources and their requirement to assure fair-market 
value for OCS lands to be leased. The MMS conducts resource 
assessments for the OCS at various scales and for many 
purposes, such as evaluating future supply options, analyzing 
the relative merits of oil and gas development proposals, and 
providing critical input to decision-makers regarding various 
policy alternatives, and providing data essential for valuing 
Federal lands prior to leasing.
    MMS assessments estimate the undiscovered, technically 
recoverable resources of oil and gas for individual plays. 
Estimates of the quantities of historical production reserves 
and future reserves appreciation are presented to provide a 
frame of reference for analyzing the estimates of undiscovered, 
technically recoverable resources.
    Reserve growth is a well-documented phenomenon in the 
United States and is a major component of the Nation's 
remaining oil and natural gas resources. In fact, most 
additions to the world oil reserves in recent years are from 
growth of reserves in existing fields rather than new 
discoveries.
    Given this context, it is important to note the important 
distinction between the terms ``resource'' and ``reserves.'' 
``Resource'' is a concentration of naturally occurring 
hydrocarbons in or on the Earth's crust, some of which is, or 
potentially is, economically extractable. ``Reserves'' 
specifically refer to the estimated quantities of identified, 
discovered petroleum resources that, as of the specified date, 
are expected to be commercially recovered from known 
cumulations under prevailing economic conditions, operating 
practices, and government regulations.
    The assessment of both undiscovered resources and of 
additions to reserves from discovered fields and reservoirs 
requires estimation of reserve growth. The USGS has an active 
research effort to develop a methodology approach for better 
quantifying domestic and global contributions of reserve growth 
to the petroleum resource endowment.
    U.S. undiscovered, technically recoverable mean oil 
resources total 48 billion barrels of oil onshore and in State 
waters and 86 billion barrels of oil for OCS. Undiscovered, 
technically recoverable mean natural gas resources total 743 
trillion cubic feet onshore and in State waters and 420 
trillion cubic feet for the OCS.
    These resources have the potential to be added to reserves 
but are not yet proven and may or may not be economic at 
current or future prices. For example, the 86 billion barrels 
of undiscovered, technically recoverable oil resources in the 
OCS--of that, 54 billion barrels of that is estimated to be 
economically recoverable at about $46 per barrel.
    Turning to other energy sources, coal accounts for 48 
percent of domestic electricity generation. USGS has recently 
completed an assessment of coal resources and reserves in 
Wyoming's Gillette coalfield. The Gillette area accounts for 
nearly 40 percent of the Nation's current coal production, 
making it the single most important coalfield in the United 
States.
    A total of 164 billion tons of original coal resources was 
found in the six beds included in the evaluation. Of that 
original resource, 10 billion tons, or about 6 percent, can be 
classified as reserves at the current average estimated sales 
price. So USGS studies will determine what portion of the 
resource base are technically and economically recoverable.
    The USGS also evaluates renewable resources, such as 
geothermal energy. We recently completed a national geothermal 
resource assessment, the first one in more than 30 years. 
Results indicate that full development of the conventional, 
identified systems could expand geothermal power production by 
approximately 6,500 megawatts of electricity, or about 260 
percent of the currently installed geothermal total of more 
than 2,500 megawatts electric.
    The resource estimate for unconventional, enhanced 
geothermal systems is more than an order of magnitude larger 
than the combined estimates of both identified and undiscovered 
conventional geothermal resources, and, if successfully 
developed, could provide an installed geothermal electric power 
generation capacity equivalent to about half of the currently 
installed electric power generating capacity of this country.
    America's oceans may also provide potential new renewable 
energy sources to support our Nation's growing energy needs, 
and MMS is developing a program for managing their uses. To 
date, there is no comprehensive evaluation for the available 
renewable energy potential in our offshore waters, but 
researchers have begun to examine the resource potential in 
specific areas of interest.
    Although significant wave, wind, tidal, and current 
resources exist in close proximity to coastal population 
centers, areas that consume the majority of the Nation's 
electricity generation, the technologies used to generate this 
energy are relatively new and untested so far in the offshore 
environment of the U.S. OCS.
    And, briefly, USGS international resource assessments. Our 
Nation depends heavily on imported energy resources. About 58 
percent of the oil and 16 percent of the natural gas consumed 
in the U.S. come from imports. Given the significance of 
imported oil and gas in the U.S. energy mix, scientifically 
robust, unbiased assessments of the world's remaining endowment 
of petroleum accumulations are very important.
    And a major focus of USGS research recently has been the 
Circum-Arctic petroleum assessment, which is the first estimate 
of the entire area north of the Arctic Circle. Results from 
that, released last July, indicate that there are 90 billion 
barrels of undiscovered, technically recoverable oil north of 
the arctic and 1,670 trillion cubic feet of technically 
recoverable natural gas. This accounts for about 22 percent of 
the undiscovered, technically recoverable resources in the 
world, 13 percent of that oil and 30 percent of that gas.
    So, in conclusion, during the next decade, the Federal 
Government, industry, and other groups will need to better 
understand the domestic and global distribution of, genesis of, 
use of, and consequences of using geologically based energy 
resources to address national security issues, manage the 
Nation's domestic supplies, predict future needs, anticipate as 
well as guide changing patterns in use, and facilitate creation 
of new industries.
    As the Nation's energy mix evolves, the USGS and MMS will 
work to ensure that our research and assessment portfolio ties 
into a comprehensive suite of assessments to inform 
policymakers about the energy choices. USGS and MMS stand ready 
to assist Congress as it examines these challenges and 
opportunities.
    Thank you for the opportunity to provide an overview of our 
work, and we would welcome to answer questions.
    [The prepared statement of Ms. Pierce follows:]

 Statement of Brenda S. Pierce, Program Coordinator, Energy Resources 
    Program, U.S. Geological Survey, U.S. Department of the Interior

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to appear here today to discuss with you the U.S. 
Geological Survey's role in studying, understanding, and assessing the 
undiscovered, geologically based, energy resources of the Nation 
(exclusive of the Federal offshore) and World and the Minerals 
Management Service's (MMS) role in providing information on Federal 
resources of the Outer Continental Shelf (OCS).
Introduction
    Adequate, reliable, and affordable energy supplies obtained using 
environmentally sustainable practices are essential to economic 
prosperity, environmental and human health, and political stability. 
National and global energy demand and resource consumption are 
projected to increase over the next several decades, though at a slower 
rate than in recent years. The United States currently consumes 21 
percent of the total world primary energy consumption and produces 15 
percent of the total world primary energy production. Thus, the 
volumes, quality, and availability of domestic and foreign energy 
resources are of critical importance to the United States. The Nation 
continues to face important decisions regarding the competing uses of 
public lands and offshore waters, the supply of energy to sustain 
development and enable growth, and the environmental effects of energy 
resource development.
Role of the U.S. Geological Survey
    The U.S. Geological Survey (USGS) provides the research and 
information needed to address these challenges by conducting scientific 
investigations of geologically based energy resources, such as research 
and assessment on the geology of oil, gas, and coal resources, emerging 
resources such as gas hydrates, underutilized resources such as 
geothermal, and unconventional resources such as oil shale, and 
research on the effects associated with energy resource occurrence, 
production, and (or) utilization. Our goal is: (1) to understand the 
processes critical to the formation, accumulation, occurrence, and 
alteration of geologically based energy resources; (2) to conduct 
scientifically robust assessments of those resources; and (3) to study 
the impact of energy resource occurrence and (or) production and use on 
both environmental and human health. The results from these 
geoscientific studies are used to evaluate the quality and distribution 
of energy resource accumulations, and to assess the energy resource 
potential of the Nation (exclusive of the Federal OCS)) and the World. 
As one example, the USGS recently produced the first-ever estimate of 
undiscovered, technically recoverable gas from natural gas hydrates. 
Although these resources have not yet been proven economic, this USGS 
assessment estimates a mean of 85.4 trillion cubic feet of technically 
recoverable gas from gas hydrates on the Alaska North Slope.
    The results from this and other USGS research provide impartial, 
robust scientific information about energy resources that directly 
supports the U.S. Department of the Interior's mission of protecting 
and responsibly managing the Nation's natural resources. The USGS and 
MMS information is used by policy and decision makers, land and 
resource managers, other Federal and State agencies, the domestic 
energy industry, foreign governments, nongovernmental groups, academia, 
other scientists, and the public. The USGS works with the MMS, which 
has responsibility for energy and minerals management in Federal 
offshore waters, to provide an integrated evaluation of the Nation as a 
whole. Collectively, information from USGS research advances the 
scientific understanding of energy resources, contributes to plans for 
a balanced and secure energy future, and facilitates the strategic use 
and evaluation of resources.
USGS and MMS National Oil and Gas Resources qResearch and Assessment 
        Activities
    The overall goal of USGS domestic energy activities is to conduct 
research and assessments of all geologically based energy resources. 
This includes undiscovered, technically recoverable oil and natural gas 
resources, both conventional and unconventional of the United States 
(exclusive of the Federal OCS, which is assessed by the MMS). These are 
resources that have yet to be found (drilled), but if found, could be 
recovered using currently available technology and industry practice. 
Economic factors are not always considered; for example, it may not be 
economically feasible to exploit gas hydrate resources on the Alaska 
North Slope and both conventional and unconventional Alaskan gas 
resources are currently considered stranded without the means of 
transporting gas from the region. The purpose of USGS and MMS 
assessments are to develop robust, geologically based, statistically 
sound, well-documented estimates of quantities of energy resources 
having the potential to be added to reserves, and thus contribute to 
the overall energy supply. The USGS and MMS resource assessment 
methodologies are thoroughly reviewed and externally vetted so as to 
maintain the transparency and robustness of the assessment results.
    The current USGS effort to update national (onshore and State 
waters) assessments of oil and gas resources is done in support of the 
Energy Policy and Conservation Act (EPCA) Amendments of 2000 (P.L. 106-
469 Sec. 604). Through a collaborative, multi-agency effort involving 
the Bureau of Land Management, the USGS, the U.S. Forest Service, the 
Department of Energy, and the EIA, the USGS provides the oil and gas 
resource estimates as the basis for the EPCA inventory. The USGS role 
is to assess the potential volumes of conventional and continuous 
(unconventional) resources (e.g., coalbed gas, shale gas, tight gas 
sands) in each priority province using established, externally reviewed 
and vetted methodologies and provide this information to the 
appropriate land and resource management agencies for subsequent 
analysis. The Energy Policy Act of 2005 (P.L. 109-58) re-authorized 
EPCA 2000 assessment activities by the USGS, emphasizing the unique and 
critical role of the USGS and specifically mandated that ``the same 
assessment methodology across all geological provinces, areas, and 
regions [be used] in preparing and issuing national geological 
assessments to ensure accurate comparisons of geological resources.''
    The estimate of undiscovered, technically recoverable resources 
changes over time. There are several reasons for this, including 
scientific and technological developments regarding petroleum resources 
in general and improvements to the geologic understanding in numerous 
settings. These advances in geologic understanding, as well as changes 
in technology and industry practices, necessitate that resource 
assessments be periodically updated to take into account such advances. 
One example of this change is the recently updated USGS assessment of 
the Bakken Formation in the U.S. portion of the Williston Basin. This 
assessment, released in 2008, shows an estimated 3.0 to 4.3 billion 
barrels of undiscovered, technically recoverable oil compared to USGS's 
1995 mean estimate of 151 million barrels of oil. Another example is 
the USGS assessment of gas hydrates on the Alaskan North Slope. 
Substantial investments in gas hydrate research now support 
categorizing some accumulations of gas hydrates as technically 
recoverable. Research challenges remain in order to determine if this 
technically recoverable resource will be economically recoverable, but 
current multi-organizational (including USGS) and multi-disciplinary 
efforts are focused on overcoming these obstacles.
    The passage of the OCS Lands Act in 1953 established Federal 
jurisdiction over the mineral resources of the OCS and authorized the 
Secretary of the Interior to manage oil and natural gas and other 
marine minerals activity seaward of state submerged lands. Oil and 
natural gas produced offshore on the OCS is a major supply source of 
energy for the domestic market. About 17 billion barrels of oil and 174 
trillion cubic feet of natural gas have been produced from the OCS 
since 1954. Current production levels are about 1.4 million barrels of 
oil and about 8 billion cubic feet of natural gas per day. This 
represents approximately 27 percent of domestic oil production and 14 
percent of natural gas production. But these shares are expected to 
grow over the next 7 years as new deepwater production in the Gulf of 
Mexico comes on line (Gulf of Mexico Oil and Gas Production Forecast: 
2007-2016, May 2007). Recent discoveries in the deep and ultra-deep 
waters of the Gulf of Mexico could help provide a significant source of 
oil and gas supplies for decades to come.
    OCS oil and gas resource assessments are completed as part of the 
Secretary's responsibilities for managing OCS energy and mineral 
resources and the requirement to assure fair market value for OCS lands 
to be leased. The MMS conducts resource assessments for the OCS at 
various scales and for many purposes. Regional assessments may be 
prepared simply to develop an inventory of potential oil and natural 
gas resources as part of an evaluation of future supply options. 
Assessments may be undertaken to analyze the relative merits of oil and 
gas development proposals and alternatives versus other competing uses. 
Resource estimates also provide critical input to decision makers 
regarding the virtues of various policy alternatives, and provide data 
essential for valuing Federal lands prior to leasing or analyzing 
industry exploration or development proposals. The MMS conducts 
periodic national assessments of the oil and natural gas resource 
potential of the Nation's Outer Continental Shelf; and in 2005, 
Congress directed (in Section 357 of the Energy Policy Act of 2005) 
that the Secretary conduct a comprehensive inventory and analysis of 
oil and natural gas resources of the U.S. OCS. This MMS assessment, 
which was completed in 2006, considers recent geophysical, geological, 
technological, and economic information and utilizes a probabilistic 
play based approach to estimate the undiscovered technically 
recoverable resources (UTRR) of oil and gas for individual plays. This 
methodology is suitable for both conceptual plays where there is little 
or no specific information available, and for developed plays where 
there are discovered oil and gas fields and considerable information is 
available. After estimation, individual play results are aggregated to 
larger areas such as basins and regions. Estimates of the quantities of 
historical production, reserves, and future reserves appreciation are 
presented to provide a frame of reference for analyzing the estimates 
of UTRR.
    Reserve growth is well documented in the United States and is a 
major component of the Nation's remaining oil and natural gas 
resources. In fact, most additions to world oil reserves in recent 
years are from growth of reserves in existing fields rather than new 
discoveries. The EIA's 2009 forecast of significant increases in 
domestic oil production is partly owing to advances in enhanced oil 
recovery technologies. Given this context, it is important to note the 
important distinction between the terms ``resource'' and ``reserves.'' 
Resource is a concentration of naturally occurring solid, liquid, or 
gaseous hydrocarbons in or on the Earth's crust, some of which is, or 
potentially is, economically extractable. Reserves specifically refer 
to the estimated quantities of identified (discovered) petroleum 
resources that as of a specified date, are expected to be commercially 
recovered from known accumulations under prevailing economic 
conditions, operating practices, and government regulations.
    Reserve growth occurs for a variety of reasons, including: (1) 
extensions of existing fields, infill drilling and new pool 
discoveries, (2) application of new recovery technologies and improved 
efficiency, and (3) revisions resulting from recalculation of viable 
reserves in dynamically changing economic and operating conditions. The 
assessment of both undiscovered resources and of additions to reserves 
from discovered fields and reservoirs requires estimation of reserve 
growth. The USGS has an active research effort to develop a methodology 
and approach for better quantifying domestic and global contributions 
of reserve growth to the petroleum resource endowment.
    Undiscovered, technically recoverable mean oil resources total 48 
billion barrels of oil onshore and in State waters and 86 billion 
barrels of oil for the OCS. Undiscovered, technically recoverable mean 
natural gas resources total 743 trillion cubic feet onshore and in 
State waters (or 657 trillion cubic feet, exclusive of the recent 
natural gas hydrates assessment), and 420 trillion cubic feet for the 
OCS. These resources have the potential to be added to reserves, but 
are not yet proven and may or may not be economic at current or future 
prices. For example, according to the 2006 MMS national assessment 
(http://www.mms.gov/revaldiv/PDFs/NA2006
BrochurePlanningAreaInsert.pdf), of the 86 billion barrels of 
undiscovered, technically recoverable oil resources in the OCS, 54 
billion barrels of that is estimated to be economically recoverable at 
$46/barrel. Of the 420 trillion cubic feet of undiscovered, technically 
recoverable natural gas resources in the OCS, 215 trillion cubic feet 
is estimated to be economically recoverable at $6.96/million cubic 
foot.''
    These numbers can be compared to proved reserves numbers (EIA): 
proved U.S. petroleum reserves (for 2007) are 22 billion barrels of oil 
and proved world petroleum reserves are 1,317 billion barrels; proved 
natural gas reserves for the U.S. are 204 trillion cubic feet and for 
the world are 6,124 trillion cubic feet.
Unconventional Oil and Gas Resources
    In April 2007, the USGS received funding for a two-year project to 
reassess oil shale deposits of the Eocene Green River Formation of 
Colorado, Utah, and Wyoming. The new assessment will incorporate 
considerable data acquired by the USGS following the collapse of the 
oil shale industry in the 1980's. It will subdivide the oil shale 
section into various subunits that will be assessed separately and the 
data will be made available on-line in a manner that can be easily 
utilized by modern computer models. This will allow simulations of 
various development scenarios for open pit mining, underground mining, 
and in-situ retorting, should oil shale development ever get underway.
Coal
    Coal dominates the U.S. fossil energy endowment and accounts for 
48% of domestic electricity generation. The USGS has recently completed 
an assessment of coal resources and reserves in Wyoming's Gillette 
coalfield, the most prolific coalfield in the country. This assessment 
is part of the National Coal Resource and Reserve Assessment, which is 
systematically evaluating the domestic coal resource and reserve base. 
By utilizing an abundance of new data from coalbed methane development 
in the region, the USGS was able to produce the most comprehensive 
assessment to date. The Gillette area accounts for nearly 40 percent of 
the Nation's current coal production making it the single most 
important coalfield in the United States. A total of 164 billion tons 
of original coal resources was found in the six coal beds included in 
the evaluation. Of that original resource, 10.1 billion tons (6 
percent) can be classified as reserves at the current average estimated 
sales price. Substantial additional resources could be recoverable 
assuming increased market prices will support the higher costs needed 
to recover deeper coal. Coal is currently the most important fuel for 
electricity generation and the USGS studies will determine what portion 
of the resource base is technically and economically recoverable.
Renewable Energy
    In addition to petroleum and coal resources, the USGS also 
evaluates renewable resources such as geothermal energy. The USGS 
recently completed a national geothermal resource assessment, the first 
one in more than 30 years. The USGS evaluated 241 moderate- and high-
temperature geothermal resources capable of producing electricity. The 
USGS assessment estimates (1) 9,057 Megawatts-electric (MWe) of power 
potential from conventional, identified geothermal systems, (2) 30,033 
MWe of power generation potential from conventional, undiscovered 
geothermal resources, and (3) 517,800 MWe of power generation potential 
from unconventional Enhanced Geothermal Systems (EGS) resources. The 
results indicate that full development of the conventional, identified 
systems could expand geothermal power production by approximately 6,500 
MWe, or about 260 percent of the currently installed geothermal total 
of more than 2,500 MWe. The resource estimate for unconventional EGS is 
more than an order of magnitude larger than the combined estimates of 
both identified and undiscovered conventional geothermal resources and, 
if successfully developed, could provide an installed geothermal 
electric power generation capacity equivalent to about half of the 
currently installed electric power generating capacity of the United 
States.
    America's oceans may also provide potential new renewable energy 
sources to support our Nation's growing energy needs, and MMS is 
developing a program for managing their uses. Resources on the OCS can 
be used to generate electricity in a variety of ways. To date there is 
no comprehensive evaluation for the available renewable energy 
potential in all offshore waters, but researchers have begun to examine 
the resource potential in specific areas of interest. DOE's National 
Renewable Energy Laboratory has a program to produce validated wind 
resource maps for priority offshore areas, and the results show that 
the offshore wind resource potential is vast and has the potential to 
meet a significant amount of the Nation's future energy needs. Although 
significant wind, wave, tidal and current resources exist in close 
proximity to coastal population centers--areas that consume the 
majority of the Nation's electricity generation--the technologies used 
to generate this energy are relatively new and untested in the offshore 
environment of the U.S. OCS. Wind, wave and ocean current technologies 
have been demonstrated at the pilot scale, and wind has been developed 
at the commercial scale outside the United States--e.g., offshore 
Denmark, the United Kingdom and Germany.
U.S. Geological Survey International Energy Studies
    Our Nation depends heavily on imported energy resources: about 58 
percent of the oil and 16 percent of the natural gas consumed in the 
U.S. come from imports. Given the significance of imported oil and gas 
to the U.S. energy mix, scientifically robust, unbiased assessments of 
the world's remaining endowment of petroleum accumulations are of the 
utmost importance. For this reason, global petroleum resource 
assessments are a core USGS research activity and have significant 
global visibility. The USGS world oil and gas resource estimates are 
used as a standard reference by many organizations including the EIA 
and the International Energy Agency (IEA).
    The overall objectives of USGS studies of international petroleum 
resources are to continue providing high-quality, comprehensive 
petroleum assessments and to update previous assessments as needed. A 
major focus of recent USGS research in this area is the Circum-Arctic 
Resource Appraisal (or CARA), the primary emphasis of which is to 
provide a comprehensive, unbiased probabilistic estimate of potential 
future additions to conventional oil and gas reserves in the high 
northern latitudes. The Arctic is an area of high petroleum resource 
potential, low data density, high geologic uncertainty and sensitive 
environmental conditions. The assessment is the first publicly 
available petroleum resource estimate of the entire area north of the 
Arctic Circle.
    The results of the assessment, released last July, estimate that 
the area north of the Arctic Circle has 90 billion barrels of 
undiscovered, technically recoverable oil, 1,670 trillion cubic feet of 
technically recoverable natural gas, and 44 billion barrels of 
technically recoverable natural gas liquids in 25 geologically defined 
areas thought to have potential for petroleum. These resources account 
for about 22 percent of the undiscovered, technically recoverable 
resources in the world. The Arctic accounts for about 13 percent of the 
undiscovered oil, 30 percent of the undiscovered natural gas, and 20 
percent of the undiscovered natural gas liquids in the world. About 84 
percent of the estimated resources are expected to occur offshore.
Conclusion
    During the next decade, the Federal government, industry, and other 
groups will need to better understand the domestic and global 
distribution of, genesis of, use of and consequences of using 
geologically based energy resources to address pressing environmental 
problems such as climate change, national security issues, manage the 
Nation's domestic supplies wisely, predict future needs, anticipate as 
well as guide changing patterns in use, and facilitate creation of new 
industries. Energy resources research and assessments are a traditional 
strength of the USGS and the MMS, and these activities provide 
impartial, robust information necessary for the many needs just 
outlined. As the Nation's energy mix evolves, the USGS and MMS will 
continue to work with other Federal agencies such as DOE to ensure that 
our research and assessment portfolio ties into a comprehensive suite 
of assessments to inform policymakers about energy choices. Future USGS 
and MMS assessments are anticipated to include hydrocarbon-based (for 
example, unconventional gas from coal and shale, gas hydrates, oil 
shale) and nonhydrocarbon-based sources (for example, geothermal 
resources and uranium) and address the effects of such resource use on 
land use, ecosystem health, and human welfare. USGS resource 
assessments and research play an important role in the public and 
government discourse about the energy resource future of the Nation so 
that science can inform, advise, and engage decision makers. The USGS 
and MMS stand ready to assist Congress as it examines these challenges 
and opportunities.
    Thank you for this opportunity to provide an overview of USGS and 
MMS research and assessments of geologically based energy resources. I 
would be happy to answer your questions.
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    Mr. Costa. Thank you very much, Brenda.
    Now we will get to the part of the questions.
    I would like to ask you at U.S. Geological Survey and the 
gentleman from EIA, given the changes that have occurred in 
recent decades--I mean, just think about in the last 10 years, 
the last 20 years--in our ability to determine carbon deposits, 
either oil or gas, with the seismology technology and others, 
how good the estimates are that both of you have just made your 
comments on.
    Mr. Gruenspecht. Well, for the undiscovered, we really rely 
on USGS and MMS for the reserves part--the part that the 
operators have already identified and booked and report to the 
Securities and Exchange Commission if they are public 
companies--that we collect directly. The bigger part of the 
resource is the undiscovered resource, so maybe----
    Mr. Costa. So how good do you think your numbers are on the 
undiscovered, based upon current technology?
    Ms. Pierce. It is a very good question. It does depend on 
the amount of data and what that technology will help us 
understand. So areas that we have seismic or drill-hole data, I 
think our estimates are fairly good because we understand that. 
In areas that there are very little data, like parts of the 
Arctic, it is less certain.
    And that is why we do probabilistic estimates; we give a 
range. And so the uncertainty is reflected in that range, so 
some of the estimates are quite uncertain and are reflected. So 
these numbers I shared are only mean numbers. So it is a mixed 
bag. Some areas we are pretty certain; some not so.
    Mr. Costa. I think you gave a good big picture for us to 
begin to try to draw a road map for our policy.
    I question, as we ponder the issue of providing more 
availability of OCS leases, many of my colleagues question 
whether or not we are realizing the full potential of those 
leases that are already available.
    Do you understand what I am saying, Mr. Gruenspecht?
    Is it your determination, as that discussion--I mean, I 
made the comment last week that I thought part of the debate or 
discussion last year was somewhat, in my view, mindlessness, 
but maybe that is my own view, about ``use it or lose it'' or 
``drill, baby, drill.''
    But having said that, is, to your knowledge, every carbon 
footprint on lease that is currently available for utilization 
retain that same carbon footprint, whether it be oil or gas, as 
you make these estimations? Do you understand my question?
    Mr. Gruenspecht. I am not sure I do, sir.
    Mr. Costa. Well, if the idea is that all we really need to 
do is to exercise all of those lands that are currently 
available for lease, and if you were to assume that they all 
have the same carbon footprint, i.e. The same amount of oil and 
gas, or gas, than each lease lot that now is available for 
drill purposes, then logically you would assume that you would 
take, really, a usage of all that resource that is available in 
that area that is already available for lease.
    Mr. Gruenspecht. You know, my understanding of the 
situation is that again we are projecting growing production 
from the OCS that at least we are pretty certain about, because 
close in, you know, between now and 2015, we know what projects 
are underway in the deepwater Gulf in particular. And we do see 
rising oil production coming out of that and rising natural gas 
production coming out of that.
    But part of the development decision, as I understand it, 
there are multiple stages, there are issues about the 
connection to existing----
    Mr. Costa. Let me ask the question. To your understanding 
is there a lease available for utilization purposes containing 
the same amount of carbon in that lease, whether it be oil or 
gas? In terms of the value of the production?
    Mr. Gruenspecht. No, that is not my understanding.
    Mr. Costa. You would concur, U.S. Geological Survey, why 
different leases are priced differently when they go to bid?
    Ms. Pierce. No, that's right. I do have a colleague from 
MMS here if you have specific questions for MMS. And 
geologically I would concur, yes. They are not all created 
equal.
    Mr. Costa. Dr. Birol, I talked in my opening statement 
about the near term, the interim and the long term. What should 
we be doing to utilize these resources for sustainable energy 
policy for a comprehensive energy policy today? What should we 
be doing in the next 5 to 10 years and beyond?
    I am going to take the privilege of the Chair because my 
time has just run out, but please answer the question.
    Mr. Birol. OK, I think short term there are low hanging 
fruits in the United States which are the most important way to 
improving energy efficiency, using energy much more 
efficiently, the energy from transportation, cars, trucks, jets 
to electrical appliances. There is huge room to improve energy 
efficiency there, and we can save energy in the short term.
    Second is the current Administration is very much 
determined to make more user renewable energy with solar and 
biomass. But at the same time it will not be a bad idea to look 
at the option of nuclear power as it provides energy, 
particular energy, without emitting carbon emissions and 
without creating problems for security of supply.
    In the longer term we all know that coal is the backbone of 
electric generation in the United States and will remain so for 
many years. So to look at the possibilities of using coal in a 
cleaner way may be a very good option.
    To sum up, more energy efficiency, more renewables, more 
nuclear power and in the longer term clean coal technologies.
    Mr. Costa. My final question, if we were to take advantage 
in the short term of that low hanging fruit that you described, 
what are the best examples around either here in the United 
States or elsewhere of that low hanging fruit for us to pattern 
after?
    Mr. Birol. I think the most important ones today are energy 
efficiency improvements, renewables and nuclear power, sir.
    Mr. Costa. In what places are those most exhibited?
    Mr. Birol. Energy efficiency--almost throughout the world, 
but in the United States especially in the transportation 
sector--cars, trucks--there is huge room for improvement. But 
also in China, India, Middle East countries, there is strong 
room for improvement and nuclear power. We have the chance to 
increase the share of nuclear energy, which is good for the 
twin challenges I described here--to address the climate change 
issue and the security of supply issue.
    Mr. Costa. That good old-fashioned ethic of conservation?
    Mr. Birol. Yes, it is. That is right.
    Mr. Costa. Sir, my friend from Colorado. Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman. Mr. Gruenspecht, you 
did some analysis last year for the Senate Lieberman bill, 
Lieberman-Warner bill on cap and trade, your organization. I 
would like to ask you a couple questions about that. The report 
that EIA put out said, ``The consumer price index for energy, a 
summary measure of energy prices facing households at the 
retail level, increases by approximately 18 percent above the 
reference case level by 2030. Industrial energy prices increase 
10 percentage points more at 29 percent above reference case 
levels.''
    So by my reading of this report consumers will see a nearly 
20 percent rise in cost in the industry, nearly 30 percent rise 
in cost under essentially the basic case presented by EIA of 
the Lieberman-Warner bill; is that correct?
    Mr. Gruenspecht. I am trying to remember back exactly what 
we had. I remember that we did several different cases in part 
because of the issue of it is very difficult to know will 
nuclear power really be available, will coal carbon capture and 
sequestration really be available. I do recall we did a range 
of cases. But certainly not surprisingly coal is some of the 
cheapest--the electricity sector is where a lot of the 
reductions occur. It comes from backing out the current coal 
technology. So one needs to build a lot of new capacity of 
other types if one is subject to these caps and it does have 
significant impacts on energy prices, particularly electricity 
prices, and there are some impacts on gasoline prices and other 
fuel prices.
    Mr. Lamborn. Now did your analysis go on to analyze what 
would happen with these kinds of price increases, depending on 
the scenario and I know that that varies to the economy and to 
economic growth and jobs?
    Mr. Gruenspecht. I am sure we did. I am trying to again 
think back to that, but I know there was a range of economic 
impacts on both the overall size of the economy and level of 
consumption, which is another measure of welfare, clearly 
depending on what technologies at what costs were soon to be 
available.
    One thing to keep in mind, I think, is the EIA has sort of 
a funny mission--we try to present information. There is 
certainly uncertainty in all projections, but we don't do a lot 
of framing of that information. A good example would be the 
economic effects of a climate change policy. You could either 
measure it in how many billions or hundreds of billions or 
maybe even trillions, a number that we use more and more 
frequently in Washington these days, of dollars you get 
comparing one case to another.
    On the other hand, you could say, you know, how big is the 
economy in 2030 if we did this and if we didn't do it. And the 
economy is very big, you know. So a difference of a few hundred 
billion or a trillion, which is certainly a lot of money to me, 
if you put those two bars next to each other in a 20 or 30 
trillion dollar economy out into the future it doesn't look 
like that much. All I am saying is you can take the same 
results and depending on how they are framed you can say gee, 
this is a tremendous----
    Mr. Lamborn. Thank you.
    If we are going to do cap and trade, knowing that it would 
raise energy prices, would you have a recommendation on the 
timing for instituting that? In other words, during a time of 
growth or during a time of recession if that was the two 
choices that we had?
    Mr. Gruenspecht. That probably strays into the policy area 
where EIA does not play.
    Mr. Lamborn. OK.
    Mr. Gruenspecht. But I think you could imagine what an 
answer might be.
    Mr. Lamborn. On carbon capture and sequestration am I 
correct in assuming that there is absolutely no proven 
technology for that today?
    Mr. Gruenspecht. I think that is not--certainly in the 
power sector there is no carbon capture and sequestration 
operating on a full scale power plant. That would be correct. 
But there is carbon capture and sequestration going on in oil 
production and in some other areas.
    Mr. Lamborn. OK, thank you for that clarification.
    So as far as the cost that that would add to energy and so 
on or even if it is feasible on a commercially scalable and 
viable level, we don't even know--really know--that for sure, 
do we?
    Mr. Gruenspecht. It is pretty significant. The issue of 
baseload power generation, I think my colleague Dr. Birol 
raised, you can think of nuclear as one carbon free option and 
coal with carbon capture and sequestration as another. We 
probably have a lot more experience with nuclear. In EIA's 
analyses, the cost of those tends to be actually pretty close 
to each other. So coal with carbon capture and sequestration in 
addition to the extra kit that you need, you also use a lot of 
the energy that you generate in the plant to run that extra kit 
to capture and handle the carbon. So it is pretty expensive.
    Mr. Lamborn. Thank you, I see my time is up. Thank you, Mr. 
Chairman.
    Mr. Costa. Thank the gentleman from Colorado. We now will 
give 5 minutes to the gentleman from the Northern Mariana 
Islands, Mr. Sablan.
    Mr. Sablan. Thank you, Mr. Chairman. I have one question, 
Ms. Pierce. I would like to thank you USGS for some of the 
recent activities you had in the Northern Mariana Islands. I 
come from the Mariana Arc in the Pacific Ring of Fire. I have 
no idea if we have oil in the Marianas, I don't know if you do, 
but I know we don't. But it seems that we have other kind of 
energy that is actually clean that no one has thought of--well, 
they have thought about using it but not in a commercial way. 
Do you have any efforts to update the national assessments of 
oil and gas resources on offshore and state waters? It does not 
appear that you have those assessments completed for the 
Northern Mariana Islands. Is USGS planning to perform an 
assessment some time?
    Ms. Pierce. Recently we have been very focused on domestic 
oil and gas resources in our state waters and onshore. And our 
international assessment has been focused solely on the Arctic 
because that was such a large piece missing. Now that the 
Arctic is done we need another year to integrate those efforts. 
But as that year goes on we are going to reprioritize the rest 
of the world, where there are holes and where there is missing 
information where we need to focus on next.
    So certainly in that time frame we would be looking at 
potential and what we might do, and so we would be developing 
those plans.
    Mr. Sablan. Thank you.
    Mr. Costa. If the gentleman from the Northern Marianas 
would like to try to get some direction for the U.S. Geological 
Survey to focus in your area, I would be pleased as the 
Subcommittee Chairman to put together a letter to ask that when 
the resources become available that they do so if that is your 
intent.
    Mr. Sablan. Well, actually yes, Mr. Chairman. And actually 
I would also ask one of the other witnesses. In your last 
hearing in the Virgin Islands you actually asked, I think it 
was Energy Information Administration, to put some information 
for the territories, and I don't think it has been done yet. So 
I would also ask for that. You had a hearing in the Virgin 
Islands.
    Mr. Costa. No, we did. And part of it was done with our 
colleague.
    You have just gotten some new information?
    Mr. Gruenspecht. I am informed that there is work underway 
on that request. It has not been forgotten.
    Mr. Sablan. So they do listen.
    Mr. Costa. Does that include, besides the U.S. Virgin 
Islands, the Northern Mariana Islands as well?
    Mr. Gruenspecht. I thought it was all of the territories.
    Mr. Costa. I thought it was, too. I want to get 
clarification since we have a Representative here who obviously 
needs to be clear as to what he understands is taking place.
    Mr. Gruenspecht. How about if it doesn't, it will?
    Mr. Costa. I think it would be appropriate if your agency 
would provide a letter to the Subcommittee and to the 
Representative indicating what is taking place and on what time 
line. And then if we need to follow up with further response we 
can do so.
    Mr. Gruenspecht. I think that is very reasonable, sir.
    Mr. Sablan. Thank you, Mr. Chairman. I yield the rest of my 
time.
    Mr. Costa. The gentleman always appreciates when Members 
are judicious with their time, which brings me to the gentleman 
from Utah, Mr. Chaffetz.
    Mr. Chaffetz. Thank you, Mr. Chairman.
    Mr. Gruenspecht, I appreciate all three of you being here, 
but my questions are primarily directed to you. It is not a 
trick question. What percentage of Americans consume energy?
    Mr. Gruenspecht. All of them.
    Mr. Chaffetz. And so if we had a tax, a cap and trade tax, 
what percentage of Americans would be affected by that tax?
    Mr. Gruenspecht. Probably all of them.
    Mr. Chaffetz. One hundred percent of Americans.
    One of the things that is interesting here is that what I 
have read, and correct me if I am wrong, is that it assumes the 
current laws and regulations are in place. And one of my 
concerns is the disruption that we have, the lack of regulatory 
certainty that those companies that may be manufacturing and 
extracting these resources are dealing with.
    Can you try to help me quantify or understand what the 
impact is when there is a lack of regulatory certainty? We are 
dealing with an issue, for instance, in Utah after a multi-year 
process where unilaterally we were no longer allowed to proceed 
with some leases on public lands. What sort of impact do you 
think that that lack of regulatory certainty has in the market?
    Mr. Gruenspecht. It is actually a very tough question. It 
is not a trick question.
    Mr. Chaffetz. In about 20 seconds.
    Mr. Gruenspecht. Twenty seconds. There is an impact. If one 
knew what the ultimate decisions were going to be policy wise, 
I think everyone would agree that you would rather they know 
about them now than be uncertain about them. But on the other 
hand, there is a lot of disagreement about what the policy 
decisions are going to be. I think the parties also care about 
how the program comes out and how the decisions come out.
    Mr. Chaffetz. Certainly you wouldn't disagree with the fact 
that, given the lack of regulatory certainty, there are real 
expenses that are ultimately passed on in the consumption of 
energy?
    Mr. Gruenspecht. Uncertainty has a cost, but certainly 
people would rather be uncertain and not have the outcome they 
don't want than be certain that they have the outcome that they 
don't want. That is what I would say, and that is really the 
truth. That is an honest answer.
    Mr. Chaffetz. And over the course of time, at least until 
2030, you do see an increase in the consumption or extraction 
of resources in all areas, including those resources that are 
extracted from public lands?
    Mr. Gruenspecht. We do and we see energy demand growing, 
but not growing that fast, in part because of some efficiency 
options that we think are really coming into play and in part 
because of some of the legislation that you all have enacted. 
You enacted fuel economy standards in 2007 and other things.
    Mr. Chaffetz. Now, there has been a lot of discussion about 
increasing wind and solar development to reduce our dependence 
on foreign energy. Can you help quantify how many imported 
barrels of oil will be reduced by generating more electricity 
from renewable sources?
    Mr. Gruenspecht. Well, I would say that very little oil is 
used to generate electricity right now. So while certainly 
using more renewable energy to generate electricity would 
affect the use of fossil fuels, probably since little oil is 
used to generate electricity, it would not affect----
    Mr. Chaffetz. So if we don't generate much electricity from 
oil, how much electricity do we import from foreign nations?
    Mr. Gruenspecht. I think we have net importers from Canada, 
but not much.
    Mr. Chaffetz. So clearly when we talk about reducing our 
dependence on foreign energy it is not about creating more wind 
and solar power or about generating electricity, it is about 
the combination of producing more oil and gas here at home and 
consuming less. If that is clearly the case, since we have put 
in place many of the standards to begin to control the 
consumption of oil, shouldn't our focus be on increasing 
domestic production to reduce our import dependency?
    Mr. Gruenspecht. Again, I think people would argue that 
there is--again EIA would not take a policy position. People 
would argue that there is still more room for increased 
efficiency. Certainly it is a combination of less demand and 
more domestic supply that reduce imports. So if your focus is 
on reducing imports both demand and supply matter.
    Mr. Chaffetz. My last question, Mr. Chairman. My 
understanding is that by 2030 the United States will still need 
to rely on oil for more than 80 percent of its transportation 
fuels, is that correct?
    Mr. Gruenspecht. I think our reference case projection 
would have something like that.
    Mr. Chaffetz. We still are going to have more than 80 
percent.
    Mr. Gruenspecht. That would be down from a current 96 
percent, yes.
    Mr. Chaffetz. But still a huge 80 percent.
    Mr. Gruenspecht. A lot, yeah.
    Mr. Chaffetz. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Costa. Thank you. We appreciate that.
    The next gentleman on the Subcommittee that the Chair will 
recognize, Mr. Sarbanes from Maryland. Good to have you here.
    Mr. Sarbanes. Thank you. I am glad to be here. Thank you 
for holding the hearing. I have an assortment of seemingly 
random questions, so bear with me.
    First one is just definitional. Undiscovered but 
technically recoverable means what?
    Ms. Pierce. We produce resource estimates on those that are 
not currently reserved, so not booked by the SEC, not currently 
in production. They are undiscovered so they have not been 
drilled yet.
    Mr. Sarbanes. So would there be three categories or would 
there be in production and then there would be reserve, a class 
of reserve items, and then there would be this undiscovered, 
but technically recoverable.
    Ms. Pierce. And there is yet a bigger one of all 
undiscovered, like all molecules in the ground.
    Mr. Sarbanes. So, there are like four categories?
    Ms. Pierce. There are many, but in general, in general.
    Mr. Sarbanes. The OCS discussion is one that we have been 
having for the last couple of weeks and, of course, we are 
operating now in an environment where the moratorium has been 
lifted so the discussion is over. Re-imposing it or not having 
it at all, and so forth.
    Describe, if you will, what you view as the practical 
impact of reimposing the moratorium, recognizing that when it 
was in place there was a fair amount of the OCS what, 15 or 16 
percent or something like that, that was available for 
exploration and production, because what I am trying to get a 
handle on is until that was lifted presumably people were 
projecting models on how they were going to make this 
transition and where our resources were going to come from that 
assume the moratorium would stay in place.
    And maybe Ms. Pierce, you could speak to the question. You 
mentioned the Gulf of Mexico, there is going to be new 
deepwater production there in the next few years or something?
    Ms. Pierce. Yes.
    Mr. Sarbanes. Is that in the place exempt from the 
moratorium when it was in place?
    Ms. Pierce. Yes. And I would like to have MMS answer that 
question.
    Mr. Costa. State your name for the record.
    Mr. Syms. I have a cold. Harold Syms.
    Could you ask that again, please? I am not quite sure.
    Mr. Sarbanes. The specific question was the Gulf of Mexico 
anticipated increased production that was referenced was 
something that was exempt from the prior moratorium that was in 
place?
    Mr. Syms. It was.
    Mr. Sarbanes. And so I guess my point is we are still in 
that time period where we are referencing things that we could 
have explored and produced, notwithstanding the existence of 
the moratorium because people haven't yet built all the new 
models that would assume the moratorium was gone. And the old 
models seemed to make it sound like there was a significant 
amount of resources that could come, energy resources that 
could come, even though the moratorium was going to be in 
place, and that you would be able to make this transition that 
we all talk about making from our current portfolio of energy 
resources to a new one that is less dependent on oil and all 
the rest of it.
    And so what I am asking, and maybe, Dr. Gruenspecht, you 
could speak to this, when the moratorium was in place we still 
saw our way clear to a decent transition, notwithstanding the 
new needs that we project, right?
    Mr. Gruenspecht. As I discussed in the testimony, we expect 
total OCS production to increase whether or not the moratoria 
are restored. In one case to about total lower 48 offshore 
would be something like 2.2 million barrels a day and in the 
other case it is something like 2.8 million barrels a day, but 
they are both higher than today's 1.3 million barrels a day in 
the OCS.
    The other thing to keep in mind, the open--there is Alaska, 
Atlantic, and Gulf of Mexico that were open prior to 2008. 
There is the eastern Gulf of Mexico that was off limits and the 
Pacific that was off limits. The Gulf of Mexico that was open 
actually, and again MMS could speak for the undiscovered part, 
but I think those resources were something like 40 billion 
barrels. And the total OCS undiscovered is something on the 
order of 100. So actually the open part by the estimate of oil 
that it contains is actually more than the 17 or 18 percent 
that you referenced in your question. That might be the square 
miles or something.
    Mr. Sarbanes. OK.
    Mr. Gruenspecht. That is a very rich part, but the Atlantic 
and Pacific together has been discussed as being 18 billion 
barrels of oil, and then you have the Alaska OCS which is open, 
was not subject to the moratoria, although there has not really 
been significant development there.
    Mr. Sarbanes. My time has expired, but I think you have 
helped make the point I am trying to make, which is that there 
is all this alarm about how we would be tying our hands if we 
went back to the moratoria that were in place when in fact we 
could argue we were in pretty decent shape with making the 
transition we need to make.
    Now I myself argue that we should put more off limits than 
even the moratoria required, but at the very least it seems 
that going back to the moratoria isn't going to put us in a 
highly compromised position in terms of getting the energy that 
we need.
    Thank you, Mr. Chairman.
    Mr. Costa. I thank the gentleman from Maryland. That just 
goes to prove that we all have different perspectives on this.
    The gentleman from Texas, Mr. Gohmert. Would you yield?
    I thought the questioning was very good between you and the 
gentleman from Maryland. My understanding is and I asked you 
how good your determination on these numbers. Haven't most of 
the fields once we have determined been lower than the 
projections? I mean higher once they have gone into production, 
the initial projections?
    Mr. Gruenspecht. Sure. I know USGS has done studies on 
this, but there have been fantastic studies of some of the 
California fields and some of the Texas fields. I don't have 
the picture in front of me. I would need the picture. Maybe 
Brenda----
    Mr. Costa. You might provide that information.
    Mr. Gruenspecht. I would be glad to provide that for the 
record.
    Mr. Costa. Thank you.
    The gentleman from Texas. Thank you for yielding.
    Mr. Gohmert. Absolutely. Thanks for having the hearing. I 
mean you called the hearing, why wouldn't I yield?
    So I would like to ask Dr. Birol, the UCSD economics 
professor James Hamilton had written ``Nine out of 10 of the 
U.S. recessions since World War II were preceded by a spike up 
in oil prices.''
    Has EIA examined how much high energy prices Americans 
faced last summer may have contributed to reducing our GDP and 
pushing us into a recession at the end of the summer?
    Mr. Birol. We looked into that and it would be definitely 
an exaggeration to claim that the current recession is because 
of the high energy prices, but we do believe that high energy 
prices did make the economy much more vulnerable through higher 
budget deficits and provide a fertile ground for higher impact 
of the financial crisis on the economy.
    Mr. Gohmert. Thank you. There are people around Capitol 
Hill today who are concerned because they have been notified it 
looks like there will be additional taxes on the manner of 
producing oil and gas. And I am from east Texas where 
apparently we produce more natural gas in east Texas than 
anywhere else in the State of Texas. And people are concerned 
obviously that if this taxation goes into place, as was 
established earlier, it means every American will pay higher 
prices for everything at the worst possible time.
    And so anybody can answer, but if we raise taxes on U.S. 
production, doesn't it mean that the marketplace will go 
outside the U.S., the Americans will end up buying more foreign 
oil if we tax more of our own production. Don't we normally see 
that? Anybody?
    Mr. Birol. I am not an American. I can better understand 
question.
    Mr. Gohmert. I enjoy your accent. You may enjoy talking to 
me since I don't have one.
    Mr. Costa. I was wondering when we were going to go there. 
Would you like me to translate for each other?
    Mr. Gohmert. You may need to translate for him. I can 
understand him.
    Mr. Birol. Let me just put the big picture. I tried to say 
in my testimony that the good times for the international oil 
companies will be soon over, mainly because of the fact that 
the reserves of the big oil companies are declining on the one 
hand. Second, there are enough reserves somewhere in the world, 
especially in the Middle East and elsewhere, but the big oil 
companies have difficulties to access those reserves because 
they are under the control of the national oil companies and 
they do not allow these international oil companies to go and 
invest and increase production.
    So what happens is that the international oil companies now 
have to turn to perhaps less profitable fields to increase the 
production. And anywhere in the U.S. and elsewhere, if there is 
a tax, additional tax on production, this would definitely 
discourage those companies to increase the production and this 
would definitely have implications for the U.S. oil production 
prospects in a negative sense.
    But, of course, this picture needs to be put in a broader 
context. What are the macroeconomic and political implications 
of it? But, just looking at it from oil production prospects, 
it will definitely have a negative implication for U.S. 
production prospects.
    Mr. Gohmert. Thank you. That means less jobs and it means 
less American energy that will be produced and apparently 
higher prices for what is.
    But we keep talking about the carbon footprint, cap and 
trade, and I had some very good teachers growing up and they 
were basically all Democrats and they were brilliant. And they 
taught me that if you don't have carbon dioxide plants die, 
that you have to have carbon dioxide or plants die. Obviously 
there is concern on Capitol Hill that we produce too much 
carbon dioxide up here, especially on the Floor. But the 
problem is if we are going to put caps on carbon, it looks like 
we are going to have to cap what some people--some people are 
breathing too much apparently. But now there is a disagreement 
over global warming, and now I think that is why people are 
starting to call it climate changes because they are not sure 
that maybe we are cooling instead of warming and they don't 
want their contributions to slack off. So we need to go calling 
it climate change.
    But this last question, do you know how many countries with 
coastlines besides the U.S. have historically placed their 
offshore oil and gas resources off limits, besides the United 
States? Does anybody know, because I don't know. I am curious 
if anybody knows. Are there other countries?
    Mr. Birol. I would say very few, sir.
    Mr. Gohmert. Do you know of any personally?
    Mr. Birol. No.
    Mr. Gohmert. You can't name any countries that do?
    Mr. Birol. I don't know how many.
    Mr. Gohmert. Either they are all really, really stupid or 
draw your own conclusion. Thank you very much.
    Mr. Costa. I thank the gentleman from Texas. I am glad that 
we are not determining that there is a lot of carbon problems 
with the Subcommittee here today. So that we are keeping that 
under control. And then I do want for the record it to be 
stated that the gentleman from Texas has acknowledged that 
there are smart Democratic teachers.
    Mr. Gohmert. Very smart.
    Mr. Costa. I always enjoy our exchange.
    I think the next Committee member who is up is Mr. Heinrich 
from New Mexico. The gentleman from New Mexico for 5 minutes.
    Mr. Heinrich. Thank you, Mr. Chair.
    Dr. Birol, in your testimony you stated that you believed 
that expanded drilling in the OCS could form ``a crucial part 
of a comprehensive strategy to enhance the Nation's energy 
security.'' I don't think that anyone can disagree with the 
idea that oil production from the OCS is critical to our energy 
security and will be for some time to come.
    The question that a number of us are wrestling with as a 
Nation and on this Committee is where should that expanded 
production take place from in the near term before the long 
term. And should it be those areas where drilling has already 
been allowed before the moratorium expired or should we be 
focusing on these new areas that seem to be the focus of 
renewed interest?
    Now we heard the statistic today that the MMS provides that 
says that roughly 80 percent of the oil and gas on the OCS is 
in those parts of the Gulf of Mexico and Alaska that are open 
for leasing. But another statistic that I find interesting from 
the MMS is that just in the central and western Gulf, where 
almost all of our offshore oil currently comes from, 60 percent 
of undiscovered oil is in the areas that have not been leased. 
That's about 24 billion barrels in the Gulf of Mexico available 
for leasing but not yet leased. That is more than the total, 
which I believe we mentioned about 18 billion, available in MMS 
estimates under the previous moratorium areas.
    So when you say that drilling on the OCS should be 
expanded, should we be prioritizing basically the western-
central Gulf region or should we be looking immediately to 
those new areas such as the Atlantic and the Pacific?
    Mr. Birol. I think, first of all, we should see that the 
U.S., as in many countries, is facing two major challenges. We 
cannot disconnect these two challenges, the energy security 
mainly on the oil side, and the second one is climate change. 
And in many cases the policies which are good for the climate 
change are at the same time good for the energy security. I 
wanted to make this point here that this is a win-win solution.
    The question you raised, Mr. Chairman, which policies 
energy efficiency, renewables, nuclear power, they are good for 
the climate change but at the same time for energy security 
this is a win-win station here. I think there is no 
contradiction between pushing energy security or the climate 
change agenda. So I wanted to make this point that there are 
many synergies there.
    In terms of energy security, I think a major problem for 
the United States which is going to come is the increasing 
risks with oil import dependency. 12 million barrels per day of 
oil import is very high in 2030, essentially if we see that one 
of the major suppliers such as Mexico, the production is going 
to decline, so U.S. has to import oil from longer distances and 
from countries which are far from the United States and very 
few number of countries. And two countries which are very 
important in this context are Saudi Arabia and Iraq, which will 
be the major exporting countries in the next years to come.
    In this context I think there are two areas which are key 
to address this oil import dependency issue. One is using less 
oil, the question of oil import dependency, and because of 
increasing efficiency especially in the transportation sector. 
It is an old concept but it is a very important concept, and 
there is a lot of room still to apply this old but not yet 
fully implemented concept to two different channels. One 
standards and regulations and, second, perhaps it is not very 
politically correct here, but perhaps you can get the prices of 
gasoline and diesel in the United States and bring it to a 
level which would discourage the wasteful use of oil. So this 
on the efficiency side and which will bring the demand growth 
slower, which would make U.S. import less oil.
    And the second issue you mentioned, distinguished member, 
it is increasing production from the offshore. These reserves 
offshore will be very important. If you look at the last 20 
years, almost all the growth including what came from the 
offshore fields, no onshore growth, almost all the growth came 
from offshore fields. And when you get to the reserves two-
thirds of the global reserves are under the water. So there is 
no way of escaping this. This is under the water, otherwise we 
will lose that domain. In the context of the prioritization I 
would think that the Gulf of Mexico and Alaska these are the 
areas that we have to look at carefully, but this shouldn't 
exclude to get to other parts the offshore especially in terms 
of having much more realistic assessments in terms of having 
more drilling.
    Thank you.
    Mr. Heinrich. Mr. Chair, do I have more time for another 
question or am I out?
    Mr. Costa. If it is a quick one.
    Mr. Heinrich. Real quick question. We heard about the risk 
of addressing pollution from carbon. Do you see an economic 
risk in not addressing pollution from carbon as the temperature 
rises?
    Mr. Birol. That may be long-term implications in terms of 
the climate change would have an effect on many areas of the 
world, including United States, ranging from the productivity 
in the agriculture sector, to the availability of water, 
changing the landscape of the plants and others. That may have 
such implications.
    But second, I think more importantly, the later we address 
the climate change issue, the more costly it will be in the 
future. Because there are a lot of investments being done, not 
everywhere in the world, especially in China and India and also 
in those countries which do not take into account the climate 
change issue, and those investments once they are done, for 
example, building a coal-fired power plant, it will be with us 
50, 60 years. So the earlier, if you want to give a signal to 
the investors we give, the better and less costly it is in the 
next years to come.
    Mr. Costa. We thank the gentleman for his response. It may 
have been a quick question, but it wasn't a quick answer.
    Mr. Heinrich. I thought it was a yes or no. I apologize.
    Mr. Costa. I think he tried to respond in a complete 
fashion.
    The Chairman is pleased to recognize the gentlewoman from 
Wyoming, Ms. Lummis.
    Mrs. Lummis. Thank you, Mr. Chairman. My first question is 
for Dr.--is it Gruenspecht. Would you pronounce it for me?
    Mr. Gruenspecht. Gruenspecht.
    Mrs. Lummis. Gruenspecht. Thank you.
    Mr. Gruenspecht. Gruen means ``green,'' so you are pretty 
close.
    Mrs. Lummis. There is a great town in Texas called Gruen 
and they pronounce ``green,'' but it is pronounced like your 
name. It is really neat. You ought to go down there some time.
    What percentage of our domestic energy use is renewables 
right now?
    Mr. Gruenspecht. I would say probably close to 10. And the 
biomass industry and the wind and the solar all together will 
probably be close to maybe 9 or 10.
    Mrs. Lummis. And what do you predict that percentage will 
increase to by 2030?
    Mr. Gruenspecht. I don't have the renewable all together, 
but I have the fossil part, is like 85 percent now, and we see 
that dropping to about 79 percent. So the other 15 percent 
would be renewables and nuclear now and then that renewables 
and nuclear would grow to about 21 percent by 2030. I can get 
you the breakdown if you want. I just don't have it in my head.
    Mrs. Lummis. Thank you, Mr. Chairman, I would love to have 
that. So thanks.
    Mrs. Lummis. The President's budget, I am on the Budget 
Committee and I was over there this morning, his budget 
proposes to repeal the intangible drilling cost deduction for 
oil and gas producers. And that would prevent people who are 
drilling for oil and gas to deduct some of their business costs 
up front like other industrial sectors do. I have been informed 
that eliminating the IDC deduction will increase the cost 
associated with domestic natural gas production to such a 
degree that it will single-handedly reduce the number of 
natural gas wells in the U.S. by one-fourth.
    How would such a decrease affect your analysis that net 
imports of natural gas will decline to less than 3 percent by 
2030?
    Mr. Gruenspecht. Clearly in our projection we do have an 
increase in natural gas drilling in the unconventional areas. A 
lot of that it would be sensitive to--tax provisions definitely 
matter, although I can't agree or disagree with the specific 
estimate you cited. The other thing that matters a whole lot is 
the price of natural gas. And as a person from an energy 
producing state, you and I know that drilling right now is--
natural gas prices have come down quite a bit, as have oil 
prices come down and drilling activity is down dramatically. So 
I would say that certainly tax provisions matter and certainly 
the wellhead prices available matter.
    Mrs. Lummis. Thank you. My next question, Mr. Chairman, is 
for Dr.--and once again is it Birol?
    Mr. Birol. Birol.
    Mrs. Lummis. Thank you for joining us. The whole panel has 
done a great job. You state in your testimony that even if 
global oil demand remained flat until 2030 the equivalent of 
over four times of the current capacity of Saudi Arabia would 
be needed to offset declining production at existing fields. 
How much of that global oil demand do you associate with the 
United States?
    Mr. Birol. I think for the United States likely we expected 
that the oil demand in the U.S. in 2030 will be less than 
today. But still a significant portion of the oil demand would 
come from the United States but less than today. And the bulk 
of the growth would come from China, India, and the Middle East 
countries.
    Mrs. Lummis. OK. And is there an analysis that you know of 
regarding how much of that demand could be met if the OCS areas 
that were formerly under a moratorium were actively developed?
    Mr. Birol. It would depend on how much of the OCS will be 
utilized. But I wouldn't say that OCS will be a big part.
    Mrs. Lummis. Thank you. One more question, Mr. Chairman, 
this one for Mrs. Pierce. You made a key point in your 
testimony that the estimate of technically recoverable 
resources changes dramatically over time. It is based on 
geologic understanding and developing technology.
    One of the technologies that has really improved production 
in recent years and has the potential for doing so into the 
future years is that of a fracking technology. And that has 
allowed us to recover from tight sands, and so forth.
    There is concern here in Congress, on my part certainly, 
that if fracking technology is not allowed to be used and it is 
brought under the Safe Drinking Water Act and basically 
regulated out of existence, that even more resources that we 
could recover with nonconventional fracking technologies would 
be lost. Do you think that is a fair statement?
    Ms. Pierce. It probably is a fair statement. I mean part of 
the reason the Bakken Formation grew exponentially in terms of 
resources, and the Barnett Shale and the Marcellus Shale, is 
the technology you are talking about and the horizontal 
drilling.
    Our assessments are technically recoverable and they are 
based upon what technology is used today. If any technology 
isn't used today, we don't use that in our technically 
recoverable resource estimate. So regardless of the type, 
whichever one is there or not, it will effect the resource 
estimates and what is usable and what is not, what is 
economically recoverable.
    Mrs. Lummis. Thank you, Mr. Chairman. This has been a very 
informative panel, and I am deeply grateful to all of you for 
attending today. Thank you.
    Mr. Costa. Thank you. And the Chair stands corrected. I 
believe I mispronounced the gentlewoman's name, it is Lummis?
    Mrs. Lummis. Lummis, yes, thanks.
    Mr. Costa. I know a Lummis in my district and so I 
mispronounced it, obviously not intentionally. Lummis.
    Mrs. Lummis. Thank you very much.
    Mr. Costa. You are welcome. It is the Chair's intention to 
recognize both the two remaining members of the Subcommittee 
who have not had a chance to ask questions yet, the gentleman 
from New Jersey and the gentleman from Louisiana, and at that 
time I think we are going to be having votes. So we will close 
the testimony. So Members who have additional questions, I 
don't think we are going to get to a second round is my point.
    Anyway, the gentleman from New Jersey, who has a deep 
interest and his own research on this subject, Mr. Holt.
    Mr. Holt. Thank you. I take that to mean I have only 5 
minutes.
    Mr. Costa. Well, the Chair has been somewhat generous with 
the time.
    Mr. Holt. I would gladly spend all afternoon talking with 
the witnesses. It is an excellent panel.
    Mr. Costa. It has been a good panel.
    Mr. Holt. I apologize for my absence earlier in the 
hearing.
    Mr. Costa. We missed you.
    Mr. Holt. Let me ask a general question that is, I guess, a 
request for your help in answering what we all hear from our 
constituents, and I suppose this would be directed to Dr. Birol 
and Dr. Gruenspecht. We have heard drill here, drill now, pay 
less. Last summer we got a lot of mail from constituents on 
both sides of that, but they said, gasoline is at $4 a gallon, 
you have to start drilling off the Jersey shore or off the 
Virginia shore or wherever else. What would you say to the 
people who write us Members of Congress and ask that? I think 
it is worth noting that the price has dropped from $4 a gallon 
to considerably less than that and this drilling didn't take 
place. And that during the early part of the 21st century for 
the first half dozen years there was quite a bit of drilling 
and prices went up.
    So let me ask you to help us answer those constituents.
    Mr. Birol. I guess our answers would be a bit different, 
because I don't have the concern to be elected or reelected. So 
I will tell you what I believe.
    Mr. Costa. That is why he is asking you the question.
    Mr. Birol. So I would say even if it is $4 per gallon, it 
is cheap. It is still half of the money that the people pay in 
Europe or even less than they pay in Japan.
    Mr. Holt. But putting that aside, and I take your point.
    Mr. Birol. Yes.
    Holt. But really what I wanted to get at is the effect of 
drilling here, drilling now on gasoline prices for the 
commuter, for the local businesses.
    Mr. Birol. I wouldn't say that even drilling here or there 
will have major impact to bring the price down. It may have 
some impact by increasing the production, but I would be 
surprised if it would change a lot. Because why the prices so 
increased was the result of what happened in the entire 
nation's oil markets. And the drilling and getting more oil 
from here and there wouldn't have a major impact on the 
international oil markets and wouldn't unfortunately bring the 
prices significantly down, is my answer.
    Mr. Holt. Mr. Gruenspecht.
    Mr. Gruenspecht. I think that all else being equal, which 
is an important thing, because all else is not always equal, I 
think more production has some impact on prices but a pretty 
small impact on prices. When we have done analyses of 
increased--either it is opening ANWR, which we have been asked 
to look at that by various folks over the years, or the OCS. 
Again in our OCS case without the moratoria restored, we get 
about 600,000 barrels a day more production in the U.S. That is 
in the long-run setting. It isn't like you added 600,000 
barrels a day to the market today. In the short run that could 
make a very big difference, but over time there is both supply 
response from other suppliers and there is also a demand 
response to prices and the effect of adding 600,000 a barrels a 
day is probably $1 or $2 a barrel, which translates into the 
$0.02, $0.03, $0.04 or $0.03 to $0.05 a gallon.
    Mr. Costa. Will the gentleman yield for a second? I will 
give you the extra time. Could you define for the Subcommittee 
what you mean by in the short time and the long term, years, 5 
years, 10 years?
    Mr. Gruenspecht. Let's say if you are looking--when the oil 
markets were extremely tight, let's say before last summer when 
you were getting all your fan mail, adding a million barrels of 
demand to that market where there was no spare capacity or 
removing a million barrels of supply or adding a million 
barrels of supply could immediately make a difference. Over 
time people can make different decisions in terms of the 
vehicles they buy, in terms of the fueling decisions they make. 
So over a 10-year or 20-year period, we often talk about 2030, 
both the IEA and EIA, there are both responses from other 
suppliers and responses in demand that tend to attenuate the 
price effects.
    So I don't know if I have answered your question. But I 
would say less than a year for a short run--10 years or longer 
for a long run--would be a fair way to look at it. But again 
the drilling takes time. So all these issues is that if one 
would start leasing or if one would--I know ANWR isn't on the 
agenda today, or open ANWR, it takes a long time for that 
production to occur, so one thinks that the long run responses 
where other suppliers adjust and other people take account of 
that in the equipment they buy is probably valid.
    Mr. Holt. If the Chair will allow me to reclaim my time?
    Mr. Costa. No, no, go ahead.
    Mr. Holt. Your report and it is well-known that energy--and 
this is getting at the demand question. You report and it is 
well-known that energy intensity has decreased continually and 
actually quite in an almost a straight line, whether you are 
talking about energy per capita or energy per dollar of 
economy, economic activity, for now 30 years.
    Do you see any reason for that to be leveling off any time 
soon?
    Mr. Gruenspecht. We actually have had energy per dollar GDP 
has been falling off. Historically, energy per capita in the 
U.S. over the last 20 years has actually been pretty flat, but 
we do see it falling off going forward somewhat because--in 
part because of the things--again, what you folks do up here 
have consequences. So things like the Energy Independence and 
Security Act, which had the fuel economy standards, which has 
the appliance standards and lighting standards, we do see--and 
also our projection of prices with real energy prices in our 
reference case rising. We see per capita, which has been 
relatively flat since 1990, falling a little bit. We do see a 
continued decline, and you are exactly right, per dollar of 
GDP, it has been falling steadily and we see that continually. 
So we do see some growth in energy demand.
    One of the differences between the U.S. and maybe Europe is 
that there is still population growth in the U.S. So, even with 
per capita declining a little bit, our overall energy use is 
growing a little bit, where in Western Europe, population is 
relatively flat or declining in many countries. And there are a 
lot of details, but I think that is the answer to your 
question.
    Mr. Holt. I think my time has expired.
    Mr. Costa. Thank you. I think we have all enjoyed the 
testimony here this afternoon. We may want to look for an 
opportunity to revisit this, because I think this is the 
thoughtful way we try to formulate policy, and I appreciate 
everybody's efforts.
    Our last questioner is the gentleman from Louisiana. Am I 
to determine that your answer to the question--is long term by 
your definition as 10 years?
    Mr. Gruenspecht. Oh. I am an economist, I have two hands. 
But I think 1 year is short term in the oil market, I think 20 
years is long term, and somewhere between 1 year and 20 years, 
which I have arbitrarily defined as 10 years, is a good way to 
think about it.
    Mr. Costa. OK. Gentleman from Louisiana, Mr. Fleming.
    Mr. Fleming. Thank you, Mr. Chairman. Am I to understand 
that I hear today that there is perhaps a consensus emerging 
that we need to move more toward nuclear energy which will help 
us out in the long run. Am I correct on that?
    Mr. Birol. I think this will be a very good choice for both 
of the challenges we are facing, both security of supply and 
climate change. I look at the countries outside the United 
States. There is a change of wind, direction of wind. In last 3 
or 4 years, mainly for two reasons, many countries in Europe 
are changing their nuclear policy. Italy, for example, which 
banned nuclear power in 1992, is going back to nuclear power. 
Finland is building a new nuclear power plant. U.K. is changing 
its nuclear policy. And many developing countries want nuclear 
power because it produces electricity cheap without having 
security of supply problems and they deduct emitting in the 
carbon dioxide emissions.
    Mr. Fleming. Do other panelists agree with that?
    Mr. Gruenspecht. Well, I am not really in a position to 
agree with it. All I would say is that certainly if you are 
interested in reducing greenhouse gas emissions and baseload 
power generation, your two kinds of options are nuclear and 
coal with carbon capture and sequestration, if that comes into 
being. Whether nuclear is cheap or not, I think people would 
have--it is compared to what else you could do if you weren't 
worried about greenhouse gas emissions. It is probably less 
economic. But that is a policy call, not my call.
    Ms. Pierce. And policy aside, all those factors are very 
true. I would just ask people to keep in mind it is still a 
resource. You still have to have the basic resources to run 
these nuclear power plants. And so again we need to understand 
where they are, at what cost they are provided, do we need to 
import those, do we have those resources. It is another thing 
to keep in mind.
    Mr. Fleming. Well, it kind of gets back to the cost of 
energy. So I am very concerned we have got--as my friend from 
Wyoming just mentioned, we have this idea in the Fiscal Year 
2010 budget to remove incentives for drilling, which is going 
to add cost to oil and gas companies, which is going to hurt 
jobs. Then we are talking about $646 billion impact which 
regard to cap and trade, which is going to impact cost to the 
consumers and it could well hurt the poorest or working poor 
more because a higher percentage of their budget is going to be 
fuel oil and electricity warming their homes.
    Mr. Fleming. So I am very concerned about some moves that 
we're making here. I believe that the more we replace coal with 
things like nuclear energy and also the more we produce oil and 
gas, and also, Ms. Pierce, you mentioned that there is actually 
more and more stores of natural gas being found. We have the 
Haynesville Shale in our area, and apparently they have 
underestimated what that can produce.
    With all of that, it seems to me that if we provide 
increase in supply and reduction in demand by moving into more 
efficiency and more alternatives like nuclear energy, that the 
costs will come down. It seems like to me--I worry some that 
there seems to be a goal to increase the cost. And I think our 
constituents, particularly the working poor and the poor are 
going to be the ones to hurt the most.
    So, and also, it is kind of a second unrelated question but 
I will let you all address both of these, is what are other 
countries doing? I see us potentially doing a whole lot but, of 
course, we are not producing all of the CO2 going 
into the atmosphere. So we can do a lot. But is that really 
going to have a big impact when other countries aren't?
    I would love to have a response from any of the panel on 
these.
    Mr. Birol. In terms of cost, it is too general to say that 
it depends on what we understand about the cost. But if we just 
look at the electricity generation cost, and natural gas and 
nuclear, if you compare this, too, if the oil prices were about 
$60 and above, nuclear power seems to be an economic choice. 
And in the absence of any carbon tax or anything. But if you 
have a carbon tax this would definitely favor, or any cap-and-
trade whatever the system, this would definitely favor nuclear 
power or other carbon free sources.
    But another thing for nuclear--we shouldn't think of 
nuclear only as a source of electricity generation. Today 
almost all the oil in the world, in the U.S. and other 
countries are used in the transportation system, cars, trucks. 
If you want to in the future move toward plug-in hybrids at 
electrical vehicles, we need electricity in order to feed those 
cars. And nuclear can also play a crucial role in that respect 
if we are forward looking in energy policy.
    In terms of the carbon dioxide emissions initiatives, you 
are perfectly right, sir. As I tried to say, if the U.S. 
emissions tomorrow would be zero, European emissions would be 
zero, Japanese emissions would be zero and if it was to remain 
zero 20 years, no economic activity in the U.S., Europe or 
Japan, therefore no carbon dioxide emissions, if China, India, 
and Russia would continue with their policies we cannot make 
any significant improvement in the climate change. This is the 
point, unfortunately.
    Mr. Fleming. Any other comments?
    Mr. Gruenspecht. A short comment. You know, the relevant 
position of natural gas versus nuclear, I think there is a 
difference from looking at things from a world perspective or a 
U.S. perspective. In the U.S.-North American market we would 
expect the price of natural gas to be separated significantly 
from the price of oil in energy terms in part because of the 
unconventional resource that we have, which I don't think is 
fully reflected in the IEA's analysis. And certainly with oil 
at $60 a barrel we do not think nuclear would be competitive 
with natural gas.
    And I guess this other point I would make is I agree with 
Fatih in many respects. There are synergies between these goals 
of energy security and climate change in some respects. But 
let's be serious. There are also conflicts as well. Something 
like coal to liquids in a country like the United States, very 
attractive for energy security given our coal resource, a 
disaster perhaps--I don't want to get carried away because you 
could have sequestration, but it could help you on one issue 
and hurt you on another issue. Something like biomass, do we 
use it as a source of a substitute for oil, which helps us 
maybe on energy security, or you could take the same biomass 
and use it to back out coal, which actually gives you a bigger 
carbon dioxide bang for the buck.
    So I think you do have to--you know, sometimes there are 
synergies, sometimes there are conflicts. And we have to be 
kind of honest about what issues we care about. And again, the 
EIA doesn't have a position in how we prioritize those various 
concerns because it isn't like we are all going to hold hands 
and go down the street and everything will be a win-win because 
life is not really that way, as we all know.
    Mr. Costa. We are trying.
    Mr. Gruenspecht. Whatever.
    Mr. Fleming. Mr. Chairman, I know I am out of time. I would 
like if it's OK----
    Mr. Costa. You are out of time. What would you like to do?
    Mr. Fleming. I want to enter into the record a letter from 
the Louisiana Oil and Gas Association President regarding this 
issue of the lack of incentives.
    Mr. Costa. Without objection.
    Mr. Fleming. Thank you.
    Mr. Costa. Gentleman from Colorado, wind up here.
    Mr. Lamborn. With leave of you as the Chairman, I would 
like to just ask just one very quick question of Ms. Pierce.
    Mr. Costa. If she can give us a quick answer.
    Mr. Lamborn. We have talked about other sources of energy, 
nuclear has come up briefly. What kind of supply does the U.S. 
have domestically for uranium?
    Ms. Pierce. That is a good question, I don't think there 
has been a recent assessment. We are gearing up to look at 
doing a resource assessment. But there is not a current 
assessment on uranium.
    Mr. Costa. Good question, gentleman from Colorado. If you 
could respond to the Subcommittee as to how that assessment is 
going to take place and what timeline we can determine the 
proven reserves, I don't know if that is a term of art or not, 
proven reserves of uranium that would be available for what 
type of nuclear expansion might be contemplated, that would be 
helpful. We would like you to do that.
    Mr. Costa. We are going to close here. I just want to 
mention to members of the Subcommittee that you have not seen. 
Dr. Birol, who has done such a good job, produces this World 
Energy Outlook every year, the international consortium that he 
is a part of, and so I would urge members of the Subcommittee 
to get this in your office. It is, I think, a helpful resource 
material. I am not plugging it for any reason. Dr. Birol and I 
don't have anything going. But I do find this helpful, and we 
do appreciate the good work you do, the good work that all the 
witnesses who testified here this afternoon do.
    I want to thank the members of the Subcommittee for your 
focus, your attention, and your interest. We will continue to 
try to work on this effort so that, as Dr. Gruenspecht 
referenced, that maybe we can somehow find a way, all going 
down merrily that same road. Because certainly our Nation 
depends upon it.
    Thank you very much. This hearing is adjourned.
    [Whereupon, at 4:05 p.m., the Subcommittee was adjourned.]


    [Additional material submitted for the record follows:]
    [The letter submitted for the record by Mr. Don G. Briggs, 
President, Louisiana Oil and Gas Association, follows:]

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