[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





        THE EXXONMOBIL-XTO MERGER: IMPACT ON U.S. ENERGY MARKETS

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 20, 2010

                               __________

                           Serial No. 111-91





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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin 
    Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont


                 Subcommittee on Energy and Environment

               EDWARD J. MARKEY, Massachusetts, Chairman
MICHAEL F. DOYLE, Pennsylvania       RALPH M. HALL, Texas
JAY INSLEE, Washington               FRED UPTON, Michigan
G.K. BUTTERFIELD, North Carolina     ED WHITFIELD, Kentucky
CHARLIE MELANCON, Louisiana          JOHN SHIMKUS, Illinois
BARON P. HILL, Indiana               JOHN B. SHADEGG, Arizona
DORIS O. MATSUI, California          STEVE BUYER, Indiana
JERRY McNERNEY, California           GREG WALDEN, Oregon
PETER WELCH, Vermont                 SUE WILKINS MYRICK, North Carolina
JOHN D. DINGELL, Michigan            JOHN SULLIVAN, Oklahoma
RICK BOUCHER, Virginia               MICHAEL C. BURGESS, Texas
FRANK PALLONE, Jr., New Jersey
ELIOT ENGEL, New York
GENE GREEN, Texas
LOIS CAPPS, California
JANE HARMAN, California
CHARLES A. GONZALEZ, Texas
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
JIM MATHESON, Utah
JOHN BARROW, Georgia



















                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachussetts, opening statement..............     1
.................................................................
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     3
Hon. Jay Inslee, a Representative in Congress from the State of 
  Washington, opening statement..................................     4
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     5
Hon. Michael F. Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     5
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     6
    Prepared statement...........................................     8
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................    11
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    11
    Prepared statement...........................................    13
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................    16
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    17
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................    18
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................    18
Hon. John Sullivan, a Representative in Congress from the State 
  of Oklahoma, opening statement.................................    19
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................    20
Hon. Doris O. Matsui, a Representative in Congress from the State 
  of California, opening statement...............................    21
Hon. Steve Scalise, a Representative in Congress from the State 
  of Louisiana, opening statement................................    22
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................    23
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    24

                               Witnesses

Rex Tillerson, Chairman and CEO, ExxonMobil Corporation..........    25
    Prepared statement...........................................    27
    Answers to submitted questions...............................    71
Bob R. Simpson, Chairman of the Board and Founder, XTO Energy, 
  Inc............................................................    31
    Prepared statement...........................................    33
    Answers to submitted questions...............................    78

                           Submitted Material

EPA report, June, 2004...........................................    64
Letter of December 15, 2009, from Members of Congress to the EPA.    66

 
        THE EXXONMOBIL-XTO MERGER: IMPACT ON U.S. ENERGY MARKETS

                              ----------                              


                      WEDNESDAY, JANUARY 20, 2010

                  House of Representatives,
            Subcommittee on Energy and Environment,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:35 a.m., in 
Room 2123, Rayburn House Office Building, Hon. Edward J. Markey 
[chairman of the subcommittee] presiding.
    Present: Representatives Markey, Doyle, Inslee, 
Butterfield, Matsui, McNerney, Welch, Green, Capps, Gonzalez, 
Matheson, Barrow, Upton, Hall, Stearns, Shimkus, Shadegg, 
Pitts, Walden, Sullivan, Burgess, Scalise, and Barton (ex 
officio).
    Also Present: Representative DeGette.
    Staff Present: Bruce Wolpe, Senior Advisor; John Jimison, 
Senior Counsel; Joel Beauvais, Counsel; Jackie Cohen, Counsel; 
Michael Goo, Counsel; Melissa Cheatham, Professional Staff 
Member; Caitlin Haberman, Special Assistant; David Kohn, Press 
Secretary; Lindsay Vidal, Special Assistant; Mitchell Smiley, 
Special Assistant; Matt Eisenberg, Staff Assistant; Andrew 
Spring, Minority Professional Staff; Aaron Cutler, Minority 
Counsel; Mary Neumayr, Minority Counsel; and Garrett Golding, 
Minority Legislative Analyst.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. The Chair will call to order the Subcommittee 
on Energy and the Environment.
    A little over a decade ago, this committee gathered to 
review the largest industrial merger the world had ever seen. 
The product of that merger, ExxonMobil, is now the largest 
company in America, worth $328 billion and raking in $45 
billion in annual profits.
    Last month ExxonMobil announced a $41 billion merger with 
XTO Energy, one of the country's largest natural gas producers 
and a pioneer in the production of natural gas trapped in shale 
rock formations and other unconventional sources. The combined 
entity will be, by far, the country's largest natural gas 
producer and largest holder of natural gas reserves.
    Remember the old commercial, when E.F. Hutton talks, people 
listen? Well, it is no secret that I disagree with ExxonMobil 
on many aspects of energy policy, but when America's biggest 
company makes a big move in the energy sector, policymakers 
need to listen and understand what that means. That is why I 
have called today's hearing.
    This merger heralds a fundamental long-term shift in U.S. 
energy markets and one that deserves our close attention. Over 
the last decade, a small group of companies that most Americans 
have never heard of has been developing huge deposits of 
natural gas in deep shale formations across America. Long 
believed uneconomic to produce, these reserves are now being 
tapped thanks to a revolution in technology.
    Using a technique called hydraulic fracturing, companies 
are now able to extract the natural gas that is locked within 
shales and other rock formations deep under the Earth's 
surface. This involves drilling into these formations and 
breaking them up by injecting a high-pressure stream of fluid 
composed mostly of water and sand, making extraction of the gas 
easier. Horizontal drilling also plays a key role in making 
these reserves economical to produce.
    Companies like XTO are using these complex techniques to 
turn mile-deep shale and other rock formations into producible 
natural gas. XTO has been at the forefront of the shale gas 
boom over the past couple of years, quickly growing into one of 
the largest gas producers and the second largest holder of 
proven gas reserves in the country.
    ExxonMobil is not the only big company getting into this 
space. Today six of the seven largest publicly traded companies 
in the world are oil and gas companies. With this merger and a 
recent joint venture agreement, all six will be significantly 
invested in unconventional natural gas development in the 
United States.
    This transformation in the industry is having a major 
impact on the forecast for U.S. energy supplies. Last year the 
Potential Gas Committee, a group of academics and industry 
experts, increased its estimates of U.S. natural gas reserves 
by 35 percent over the estimate from just 2 years before. That 
increase was due mostly to shale gas, which now accounts for 
one-third of estimated U.S. reserves.
    The brightening outlook for domestic natural gas supplies 
changes the backdrop against which we consider energy policy 
here in America. Natural gas will play a critical role as a 
bridge fuel to the future, a lower-carbon alternative to coal 
and oil that helps America transition from high carbon of the 
past to a clean energy future. An abundant domestic supply of 
natural gas, together with robust investment in efficiency and 
renewables, can help make crossing that bridge to the future 
faster and less costly.
    Natural gas can only play this role if it is produced in a 
safe and sustainable way. Congress recently urged the EPA to 
study the potential impacts of hydraulic fracturing on drinking 
water sources. The results of that study will help to guide 
policy to ensure adequate protection of public health and the 
environment.
    Now, with that introduction, we are here to listen and to 
learn what this ExxonMobil-XTO deal means for U.S. energy 
markets and energy policy. For decades America's energy policy 
has been between a rock and a hard place due to our dependence 
on imported oil from the Middle East, but now we are hearing 
that the natural gas trapped in American rock may provide us a 
pathway away from some of that dependence. I look forward to 
hearing from our distinguished witnesses on this important 
subject. We thank you for being here.
    Let me turn now and recognize the Ranking Member of the 
subcommittee, the gentleman from Michigan, Mr. Upton.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman. I also welcome 
our two distinguished witnesses this morning.
    As you said, the topic of the hearing is the impacts of the 
ExxonMobil-XTO merger. I see this merger as an important step 
forward to protect American jobs and promote domestic energy 
security.
    According to the Mineral Management Service, MMS, annual 
revenues from Federal mineral leases are one of the Federal 
Government's largest sources of nontax income, over $10 billion 
in fiscal year 2007. The figure does not include the nearly 
$100 billion in taxes paid by the industry just last year.
    The oil and natural gas industry supports more than 9 
million American jobs and adds more than $1 trillion to the 
national economy. I hope I don't need to remind our colleagues 
about the state of our economy, that unemployment is still in 
double digits nationally and 15 percent in Michigan. We have to 
support private industry that will continue to invest in our 
economy and keep Americans working.
    We are clearly at a crossroads. The policy decisions that 
this Congress makes will have a lasting impact on our economy 
and energy security. India and China's energy consumption 
continues to grow by more than 10 percent a year. China is 
gobbling up energy resources around the globe, and consumption 
will continue to sharply escalate as one-third of the world's 
population enters the industrial age.
    Energy prices do drive our economy. It is foolish and 
shortsighted to take an adversarial posture against American 
companies that seek to develop American energy resources. We 
should encourage domestic investment and domestic energy 
production, especially as our energy needs are expected to grow 
by nearly 40 to 50 percent over the next couple of decades.
    Oil and natural gas are just a small piece of that overall 
puzzle in meeting the energy needs of future generations. We 
have the capability and technology to responsibly pursue 
American-made energy through domestic exploration. Let us not 
forget that for every barrel of oil that we produce here at 
home, it is a barrel less that we have to import from someplace 
abroad. And every new natural gas field that is discovered and 
becomes technologically possible to explore makes the U.S. more 
secure from both an economic and natural security perspective.
    We owe it to working Americans to put partisan politics 
aside and pursue long-term solutions. It defies common sense 
that some continue to shun coal, nuclear and increased domestic 
exploration as part of the solution. Continued pursuit of such 
shortsighted policies will prove devastating.
    It is well known that natural gas will play a more 
prominent role in a carbon-restrained world. In fact, the 
success of any climate change policy will need to rely heavily 
on natural gas. Yet some Members of Congress are seeking to 
pursue policies that would take a majority of our domestic 
natural gas off the table.
    I strongly oppose those efforts, and it sounds like 
Secretary Chu agrees with that sentiment. Last week when asked 
about hydraulic fracturing, he said, ``If it can be extracted 
in an environmentally safe way, then why would you want to ban 
it? I think it can be done responsibly.''
    We are a Nation of the world's best and brightest minds. 
The success and innovation of the two companies testifying 
today is an important example of that. With a greater emphasis 
on harnessing new technologies and American ingenuity, rather 
than government regulations that block America's resources, we 
can address our expanding energy needs in an environmentally 
and economically sensitive manner. We should support actions 
that reduce America's dependence on energy from unsustainable 
and unstable foreign governments and dictatorships. I see this 
merger as contributing to that end.
    I yield back my time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Washington State 
Mr. Inslee.

   OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Inslee. Thank you. I am very much interested in the 
testimony today. I think this is a good news-bad news and a big 
question here.
    The good news is this would suggest that a major energy 
producer sees the possibilities of natural gas, which is a-- 
cleaner from a carbon dioxide energy source than coal. There is 
good news that a major producer sees that potential.
    There is some potential bad news in the long term view, 
however, which is that while this investment, I am told, is 
somewhere in the range of $40 billion, the Chinese are 
investing in zero CO2 sources of energy while we are 
still seeking fossil fuels, and that is troublesome. China is 
investing $12 billion an hour in renewable energy. They plan on 
having 30 gigawatts of wind in the next two decades. They just 
announced the largest photovoltaic solar energy plant in the 
world in construction in western China.
    We know that in a carbon-constrained world, the good news 
is that natural gas could help us in the short term and 
alleviate some of our CO2 load. The bad news is if 
ExxonMobil and others are not making the investments necessary 
to go to zero and extremely low CO2 levels, then we 
are going to be left in the dust by China and other countries 
that really are making these massive investments. And we have 
to get out of the gates in that race or be left behind. So I 
will be interested in listening to Exxon's plans in that 
regard.
    Lastly, I will be interested in listening to Exxon's plans 
to make sure we are a carbon-constrained world. If ExxonMobil 
is making this investment under the assumption we will be, we 
would like to have a little help in the U.S. Senate to pass an 
energy bill that will, in fact, constrain carbon dioxide. So we 
hope we end up with good news on all of those aspects, and I 
look forward to the testimony. Thank you.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Illinois Mr. 
Shimkus.
    Mr. Shimkus. Mr. Chairman, I wasn't here when the gavel 
dropped.
    Mr. Markey. I am sorry. Then the Chair recognizes the 
gentleman from Pennsylvania Mr. Pitts.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. Thank you, Mr. Chairman. Thank you for holding 
this hearing on this pending ExxonMobil and XTO merger.
    Recently the Wall Street Journal stated that the merger 
``has been widely viewed as the biggest endorsement yet for 
shale gas production, both in the U.S. and abroad, because 
ExxonMobil, the largest U.S. oil company by market value, has 
more wherewithal to develop unconventional natural gas 
resources such as shale.''
    We are excited about the resource potential of natural gas 
in the Commonwealth of Pennsylvania. The Marcellus shale 
formation of the Appalachian Basin potentially represents the 
largest unconventional gas resource in the United States. The 
American Petroleum Institute cites that natural gas already 
meets 24 percent of U.S. energy demand. In addition, it heats 
51 percent of U.S. Households, cools many homes, and provides 
fuel for cooking. There are also over 120,000 natural gas 
vehicles being driven on roads all across the United States. 
Natural gas burns much cleaner than gasoline or diesel, making 
it more environmentally friendly and better for our atmosphere.
    The pending merger of ExxonMobil and XTO would create the 
largest natural gas producer in the United States with the 
largest base of domestic reserves in the industry.
    There is one thing that people across the ideological 
spectrum can agree on: When it comes to the issue of energy, 
the United States needs to produce far more clean energy from a 
source that does not rely on the whims of tyrants in far-off 
parts of the world. I believe that natural gas will help us 
achieve our energy independence and make our environment 
cleaner, and I look forward to hearing from our witnesses today 
on the vision for further exploration and use of natural gas in 
the United States.
    I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Pennsylvania Mr. 
Doyle.

OPENING STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman, for holding this 
important hearing today, and thank you to Mr. Tillerson and Mr. 
Simpson for traveling here to provide testimony on the proposed 
merger.
    If you talk to people in my neck of the words, in 
Pittsburgh, Pennsylvania, about energy issues, there is a lot 
of excitement and optimism. In western Pennsylvania we realize 
you need the whole breadbasket of energy to be successful in 
America. Westinghouse makes the AP-1000 in western 
Pennsylvania. We have the National Energy Technology Lab that 
does research on carbon capture and sequestration so that coal 
has a future in our region. We have been known as a steel city, 
but pretty soon we may be known as the Saudi Arabia of natural 
gas with the Marcellus shale sitting underneath western 
Pennsylvania.
    So, we are excited about what it means for the economic 
future of our State. Last year alone Pennsylvania could 
attribute nearly 50,000 jobs to environmentally safe natural 
gas production. I have long supported the development of 
domestic natural gas resources as one of the solutions to 
meeting the growing energy demands in the United States. This 
proposed merger between ExxonMobil and XTO Energy demonstrates 
the importance of unconventional gas resources for our energy 
portfolio.
    We have had enormous success in my State of Pennsylvania 
with horizontal drilling in natural gas shale plates, and I am 
hopeful that the merger between these two companies will 
produce even better technology and more efficient drilling 
techniques. Many consider the Marcellus shale to be in its 
infancy of development, and while we are all eager to exploit 
the clean energy resources beneath our feet, it is equally 
important to develop these resources in an environmentally 
sound and economically feasible way.
    My State, Pennsylvania, has done a great job in regulating 
the natural gas industry, while allowing it to grow and 
prosper. Both ExxonMobil and XTO Energy have been a part of 
this growth, and I look forward to their continued involvement 
in Pennsylvania.
    Mr. Chairman, thank you. I yield back the remainder of my 
time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the Ranking Member of the full 
committee, the gentleman from Texas Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Well, thank you, Mr. Chairman, and thank you, 
Massachusetts. I know we are here to talk about hydraulic 
fracturing and energy, but I want to say, since this is the 
committee of primary jurisdiction over healthcare, people ought 
to listen to what happened in Massachusetts.
    When a State that hasn't voted for a Republican Senator 
since 1972 when I was a senior in high school, only 2 years 
removed from Joe Namath and the Jets winning the Super Bowl, 
which could happen again this year, by the way, Mr. Chairman, 
although Joe Namath won't be the quarterback, people ought to 
listen. The healthcare bill is dead.
    If my friends on the Majority really want to work together, 
we will work to try to come up with a healthcare reform with 
the accent on reform that works. But who would have ever 
thought that a conservative Texas Congressman would be saying, 
thank you, Massachusetts? But it happened.
    Now, on today's hearing I want to welcome my friends from 
ExxonMobil and XTO. We are here to talk about domestic energy, 
and we are here to talk about our natural gas reserves and the 
issue of hydraulic fracturing.
    I am a small, small, small partner in a natural gas well in 
Johnson County, Texas, in the Barnett Shale, and that is 
probably my 4-year-old son's college education. So I am very 
supportive of the concept of domestic energy production.
    I am very supportive of private ownership and stewardship, 
and I think, Mr. Chairman, you have got two excellent leaders 
in the energy sector here who want to merge their companies to 
be even more efficient and more productive for producing more 
American-made energy. It is a proper role for this subcommittee 
to take a look at that merger and some of the issues that are 
associated with it, but I don't think there needs to be any 
mistake that the more energy we make in America, the better off 
we are going to be.
    Again, Mr. Chairman, thank you for two things: Holding this 
hearing, and not running for the Senate in Massachusetts. I 
think had you run, I think the outcome would have been 
different, and your side would be smiling this morning, and my 
side would not be. We would be smiling for you personally, but 
we wouldn't be smiling that the Ds won. We are glad you decided 
to stay in the House.
    I yield back.
    [The prepared statement of Mr. Barton follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Markey. I thank the gentleman very much. I would say 
that the politics may have changed, but the problems that we 
have to solve have not as we sit here today, whether it be 
energy, health care, Wall Street. The same problems still 
exist, so we will all have to continue to move forward to solve 
those problems. But I thank the gentleman for his personal 
support of my noncandidacy. I thank you.
    Let me now recognize the gentleman from Georgia, Mr. 
Barrow.
    Mr. Barrow. I waive an opening statement.
    Mr. Markey. Great.
    The Chair recognizes the gentlelady from California Mrs. 
Capps.

   OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Capps. Thank you, Mr. Chairman, for calling this 
hearing to review the pending merger between ExxonMobil and XTO 
Energy, and thank you to the CEOs of each of these companies 
for appearing to testify today.
    This merger raises a number of issues with respect to the 
future direction of the U.S. domestic oil and gas industry and 
the potential environmental impact of increased unconventional 
natural gas development. I am eager to learn about it.
    We know that natural gas is the cleanest of the fossil 
fuels. It produces less than half as much carbon pollution as 
coal and one-third of petroleum burned in cars. Gas findings in 
several States have increased the proven reserves and driven 
potential reserves even higher, it is my understanding, and 
recent technological advances have made the development of 
unconventional natural gas resources more affordable. This 
creates an opportunity to use natural gas as a bridge fuel, 
signaling a 21st-century energy economy that relies on 
efficiency, renewable sources and low-carbon fossil fuels such 
as natural gas.
    However, there are legitimate public health and global 
warming concerns about the impact from natural gas production. 
I am eager to learn about these as well. Adjacent communities 
are concerned, as am I, about the public health impacts from 
the use and release of toxic substances that are used in 
natural gas production processes. This is an issue that deeply 
concerns me, and it is an issue our committee should continue 
to look into.
    But, for today, I am looking forward to us taking a closer 
look at this proposed merger. I look forward to the testimony 
that you are about to present, especially regarding investments 
that you are making to serve three paramount national 
priorities: growing our economy, securing our Nation's energy 
supplies, and combating global warming.
    Thank you, Mr. Chairman. I yield back.
    Mr. Markey. The gentlelady's time has expired.
    The Chair recognizes the gentleman from Texas Mr. Burgess.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. I thank the Chairman. I, too, want to welcome 
two friends and two companies who are very important to my 
district in North Texas. I have an opening statement that I 
will submit for the record. I don't know if I will get through 
all the points that I need to make.
    But this merger is an important one. It highlights Exxon's 
commitment to shale production in regions like north Texas, and 
it is important that that development continue to grow and 
provide jobs, and, yes, be developed in an environmentally 
sensitive way. I think we all have an interest in that, 
because, after all, we live in the area where this activity is 
occurring.
    I was heartened to hear from both Mr. Tillerson and Mr. 
Simpson that one of the critical factors in ExxonMobil-XTO's 
merger was XTO's employee knowledge base in shale development.
    Congress does rightly share a great deal of the blame for 
the way things are going in this country right now. We have 
almost single-handedly destroyed every sector of the American 
economy, financial, housing, except for health care and energy, 
and it looked like this year that we were trying to destroy 
those as well. This is an opportunity for us to learn how 
perhaps we might be helpful.
    We have been helpful in the past. Research and development 
dollars provided by this committee in previous energy bills 
allowed for the development of the recovery of gas from the 
tight shale formations, and Congress justifiably should share 
some of that credit.
    But we have also been deleterious towards many of the other 
aspects toward developing energy, American energy from American 
companies, which we have heard over and over again. And Boone 
Pickens has said it so clearly: You can either be for natural 
gas, or you can be for foreign oil, and I will put my lot with 
natural gas.
    We were all heartened a year ago, 2 years ago, to hear the 
Speaker of the House say that natural gas is not a fossil fuel, 
so I think the globe warming issue was taken off the table by 
the Speaker of the House, and I, for one, was grateful for her 
leadership on that.
    I will submit the rest of my statement for the record. I 
thank the witnesses for being here and very much look forward 
to their testimony.
    Mr. Markey. The gentleman's time has expired.
    [The prepared statement of Mr. Burgess follows:]


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    Mr. Markey. The Chair recognizes the gentleman from 
California Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman, for calling this 
hearing. This is a very important merger, so it is good that we 
have you in front of us today. I have been very excited to see 
the effect of horizontal drilling on the natural gas prices 
over the last 5 years. Supplies have become more plentiful. The 
prices have gone down.
    I am also concerned about the environmental impacts on 
drinking water. So I don't know if you are going to address 
that today or not, but it is something that we are concerned 
about.
    I am also concerned about the impact of this big merger on 
our national economy, on jobs. So I look forward to seeing how 
you are going to address that issue. It is something we care 
about deeply in California, since our unemployment is about 18 
percent.
    So I thank you for coming, and I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Illinois Mr. 
Shimkus.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman.
    It is times like this that I miss John Peterson, our former 
colleague from Pennsylvania, who was like the foremost Member 
who really talked about the benefits of natural gas for the 
manufacturing arena, for everyday costs. He would always hold 
up a map--in fact, this is one of his old maps of the world and 
the competitive disadvantage we have because of high natural 
gas prices. As you know, supply and demand, new opportunities 
can help lower costs.
    He would remind us about that natural gas is 70 to 80 
percent of the cost of fertilizer, which is important to the 
agricultural economy. Farmers use it for irrigation, crop 
drying, food processing, crop protection and nitrogen 
fertilizer production. We know about home heating in the 
Midwest. It is all, in essence, natural gas. We know it in the 
manufacturing community. Plastics, it is a key ingredient. We 
just need to have more.
    Now, I am going to continue to reject putting the words 
``carbon'' and ``pollution'' together. I think the failed 
Copenhagen meetings and Climategate and the coverup there, 
along with job losses, is also going to put to rest this whole 
climate issue and that carbon dioxide is a pollutant, and we 
will continue to fight against any move to do that.
    But we can agree on energy security, and that is where more 
supply, a diversified portfolio are so critical. Whether it is 
coal, natural gas, nuclear power, hydroelectric, wind, solar, 
we need that for energy security for this country.
    That is why this is so important. This technology is great. 
It is underneath the water table. There is no fear. We should 
not do any more harm and intervene anymore in the current rules 
and regulations.
    I appreciate this hearing, and I yield back my time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Texas Mr. Green.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman, and it is great that my 
colleague from Pittsburgh is going to have more of my folks 
from Houston coming up there in Pittsburgh. We are going to 
hear from him a lot more, I guess, if it is going to be the 
next energy capital.
    I want to thank you, Mr. Chairman, for holding this timely 
hearing on the ExxonMobil-XTO merger and its impacts on the 
U.S. Energy markets. Financial and energy analysts have touted 
the significance of this merger's potential, the fifth largest 
U.S. energy company acquisition since 1995, and what it may 
forecast for future U.S. and world energy demands.
    There is no doubt that a combined ExxonMobil-XTO entity 
would be a major player in U.S. exploration and production 
activities. XTO, headquartered in Fort Worth, Texas, has 
extensive expertise in tight gas, shale gas, shale oil and 
coalbed methane development, which plays in the most 
unconventional resource basins in the U.S. Combined with 
ExxonMobil's considerable financial capabilities, global 
resource base and advanced R&D capabilities, ExxonMobil-XTO 
would hold almost 10 percent of all proven U.S. Natural gas 
reserves and become the largest U.S. natural gas producer.
    Some analysts have raised questions as to whether the 
merger signals further widespread consolidation in America's 
energy industry or shifts in strategy for the large, integrated 
oil and gas companies. Traditionally onshore unconventional gas 
players have been dominated by smaller independent companies, 
while majors have focused on offshore, where resource bases are 
sufficiently large to justify significant investment required 
for production.
    With decreased U.S. natural gas production last year, and 
with increasing costs for gas producers to acquire new acreage 
and expand production capabilities, new partnerships with 
integrated companies may increase the access to untapped 
resources.
    Most importantly, the proposed merger validates the demand 
for clean-burning natural gas as a fuel source, which will only 
continue to grow. By 2030, natural gas will be the largest 
source of energy globally, and demand could further increase as 
governments consider imposing costs on carbon emissions.
    With half the carbon emissions of coal and 30 percent less 
emissions than oil, natural gas is our most critical transition 
fuel as we move towards cleaner energy. With recent advances in 
technology to extract more natural gas from unconventional gas 
resources, such as extended reach, horizontal drilling or 
hydraulic fracturing, we can unlock America's 100 years' supply 
of natural gas.
    This hydrofracking, U.S.-developed technology, is being 
exported to Europe and China. Due to environmental-economic 
benefits of natural gas production, Congress and the 
administration must be diligent, as we consider policies to 
address global climate change, to utilize our domestic energy 
resources.
    I yield back my time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oregon Mr. Walden.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. I thank you very much, Mr. Chairman.
    I want to welcome our witness here today, our witnesses. 
Thank you for being here.
    I don't have an opening statement per se, but I do have 
some things I hope you will address in your comments and your 
testimony.
    It seems to me two of the biggest issues we face in the 
country today are connected, and those are jobs and energy. I 
grow concerned about the amount of energy potential that we 
have in the United States, and yet the amount that is kept off 
limits for development by the Congress and the Federal 
Government.
    So I would be interested to know both in terms of the sort 
of jobs that are created by your industry, by your company, 
what you see in terms of the opportunity to create new jobs 
going forward through this merger, and also the amount of 
natural gas and all that could be developed and what that could 
mean for America and American jobs.
    I, for one, am eager to get America on a new energy path, 
one that uses our own great resources, invests in our own 
country, rather than send all this money overseas or to foreign 
countries, some of which plot against us, and some of which 
clearly are not our best friends. So I hope you will talk about 
the technologies that are coming forward that your companies 
have been involved in. I hope you will talk to us about how big 
these resources are, and what we need to do to gain access to 
those, and what benefits could be derived from them, and what 
it means in terms of the economy and jobs for America going 
forward.
    It looks to me like if we can invest in our own resources 
using new technologies in environmentally safe ways, we can 
generate revenues to the government and create jobs in our 
hometowns.
    I look forward to your testimony, and with that, Mr. 
Chairman, I yield back my time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Texas Mr. Gonzales.
    Mr. Gonzalez. I waive opening.
    Mr. Markey. The gentleman waives his opening.
    The Chair recognizes the gentleman from North Carolina Mr. 
Butterfield.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Thank you, Mr. Chairman. I, too, want to 
thank you for convening this hearing, and especially to the two 
witnesses. I anticipate very eagerly your testimony today.
    Mr. Chairman, the proposed merger that we are talking about 
today recognizes the energy industry's recognition of natural 
gas as an important bridge fuel for the coming years. The goal 
of curbing carbon emissions while also becoming energy 
independent in this country are captured in the increased use 
of natural gas. So this is a good thing.
    Burning natural gas produces 50 to 70 percent fewer 
greenhouse gas emissions than other fossil fuels and will be 
critical to achieving an 83 percent decrease in greenhouse gas 
emissions by 2050. We can do it, and we are going to do it, 
contrary to what many of my friends on the other side suggest.
    As we continue to develop technology to sequester carbon 
from coal, the demand for natural gas will continue to grow. In 
Wayne County in my North Carolina district, Progress Energy 
announced a decision last August to convert three coal-fired 
powered plants to natural gas. Duke Energy in my State has 
ongoing plans for several natural gas power plants. Energy 
companies across the U.S. are dealing with the future of a 
carbon-constrained environment by moving to natural gas.
    Growth in unconventional natural gas production also 
greatly expands America's reserves and our ability to be energy 
independent. Expansion of exploration and production in the 
Barnett, Marcellus and other unconventional sources has 
increased 65 percent since 1998.
    In 2008, 91 percent of our supply came from domestic 
sources. Continued growth in the domestic natural gas market is 
good for energy independence, so long as there is appropriate 
competition--and I stress that, appropriate competition--to 
ensure fair pricing and commitment to environmental 
stewardship.
    We would be wise to carefully consider the impact, 
economically and environmentally, of this merger. The 
incredible growth of unconventional production must be mirrored 
by regulatory activity that ensures the public trust.
    I have run out of time, Mr. Chairman, but thank you very 
much for recognizing me. I look forward to the testimony of 
these two men.
    I yield back.
    Mr. Markey. We thank the gentleman.
    The Chair recognizes the gentleman from Oklahoma Mr. 
Sullivan.

 OPENING STATEMENT OF HON. JOHN SULLIVAN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF OKLAHOMA

    Mr. Sullivan. Thank you, Mr. Chairman. Thank you for having 
this hearing.
    I want to thank our two witnesses, Mr. Tillerson and Mr. 
Simpson. Thank you so much for what you are doing. I wish the 
Congress would take your lead on this very important issue of 
natural gas in our country.
    When we look at energy policy in this country, long-term 
natural gas supplies should be a big part of it. I am from 
Oklahoma. It is the third largest gas-producing State in the 
United States, so I have a vested interest in this.
    That is why it is so important that we use natural gas for 
the other things, like transportation fuel. That is why I am 
the Republican author of the Natural Gas Act. I think it is 
very important that we use it for transportation fuel. There 
are 10 million natural gas vehicles around the world, and we 
have about 150,000 here in the United States.
    Also, I want to hear more about we do have a large reserve 
of natural gas here in the United States, so it is American 
energy. We lessen our dependence on foreign oil, like others 
have said. But one of the reasons we have gotten so much of 
that is because of the drilling techniques, the horizontal 
drilling and the hydraulic fracking.
    I read a report, and you guys would know more, but I hear 
like 60 to 80 percent of the wells drilled in the next 10 years 
are going to have to use hydraulic fracking, so I think it is 
horrible, it would be detrimental to this country if they 
outlaw that practice.
    Also I am concerned, and I want to hear what you have to 
say later on, about the EPA removing the exemption of hydraulic 
fracking from the Safe Drinking Water Act.
    Also, you know, we hear Barack Obama and others, President 
Obama, talk about all the stimulus spending and the taxing are 
creating all these jobs, yet unemployment has gone up. I just 
want to commend you, because what you are doing right here, 
this is how jobs are created right here. The government doesn't 
do it; the private sector does it. We have about 2 million 
people that work in the energy industry in this country, and 
they are going to lose jobs if these things go into effect. We 
want to create jobs, and I want to commend you for that as well 
and hear more about that as well.
    Thank you very much.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Vermont Mr. Welch.
    Mr. Welch. Thank you very much, Mr. Chairman. I look 
forward to hearing the testimony about this.
    I just want to say on two things: One, obviously natural 
gas is a very important component of energy. Its contribution 
to global warming is a good deal less than other sources of 
fuel.
    Secondly, I just say this to ExxonMobil: As a huge and very 
successful energy company, well run, I would urge you to get 
much more active on bringing attention and bringing solutions 
to the climate change problems that this country faces. 
ExxonMobil does have a history of resistance to acknowledging 
how severe that problem is. It has rhetorically changed its 
ways in some respects recently. It has devoted a substantial 
amount of funds to advertising. But I understand that it still 
is very resistant, or so it said, to playing a much more active 
role that its prominence in the industry would allow it to 
play.
    So this merger has significant questions about competition, 
about energy, about costs, but it also, I think, has 
significant implications as to what role ExxonMobil is going to 
play in assisting this country in addressing the problem of 
climate change.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Florida Mr. 
Stearns.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Thank you, Mr. Chairman. I want to thank you 
for calling this hearing.
    I am very supportive of this proposed merger, but I would 
sidetrack. I just showed you a map of Massachusetts in the red 
and blue, and it appears your congressional district still 
remains under ``Democrat,'' but it looks like most of 
Massachusetts, including all out to Cape Cod, is now in the 
red. I spent 4 years in South Deerfield. That part of the area 
looked like it remained Democrat. But I think you made a wise 
decision, based upon looking at this map.
    Mr. Markey. If nothing else, this election made it possible 
for you to publicly announce that you were in South Deerfield 
for 4 years. Now you feel a little bit more comfortable.
    Mr. Stearns. I understand.
    I think my colleague on that side talked about fracturing 
and how they are concerned about the drinking water, but I 
would say to him that since the 1940s, hydraulic fracturing has 
helped to produce more than 7 billion barrels of oil and 600 
trillion cubic feet of natural gas in the United States. So the 
oil and gas industry strongly believes that the continued use 
of hydraulic fracturing is essential to produce more of the oil 
and natural gas that the U.S. will consume in the next decades 
ahead.
    According to the American Petroleum Institute, up to 80 
percent of natural gas wells drilled in the next decade will 
require, will simply require, hydraulic fracturing, and without 
it most of our country's abundant natural gas resources cannot 
be produced. So I hope my colleagues on that side will not be 
overly concerned about the impact on the drinking water.
    One thing I will say, Mr. Chairman, there was an article 
dealing with this merger in the press. It said XTO has hedged 
more than half of its natural gas production for 2010, or about 
1.25 billion cubic feet per day, with some additional hedges 
already in place in 2011. By contrast, ExxonMobil says it makes 
little use of derivative instruments to hedge oil and gas 
production. So I guess maybe one question that will come out of 
this hearing is what will this deal mean for trading operations 
going forward at XTO?
    Mr. Chairman, with that, I thank you again for the hearing, 
and I look forward to the witnesses' opening statements.
    Mr. Markey. I thank the gentleman very much.
    The Chair recognizes the gentlelady from California Ms. 
Matsui.

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Matsui. Thank you, Mr. Chairman, for calling today's 
hearing.
    I would like to also thank the panelists for appearing 
before us today, and I look forward to hearing your views on 
the recently proposed merger at your companies and the 
ramifications of this agreement for the U.S. oil and gas 
markets.
    As we continue to discuss ways in which to address global 
climate change, it is imperative that the Federal Government 
support approaches that are effective, innovative and 
efficient. It is equally important, however, that we ensure 
that the merger not adversely impact North American oil and 
natural gas markets, and with regard to production, 
competition, prices and consumers.
    The ExxonMobil-XTO deal may prompt its peers to move 
towards similarly and consolidate an already tight oil and gas 
market, creating additional concerns for the regulatory bodies 
that oversee the oil and gas supply. More importantly, studies 
have shown that fewer participants in energy can lead to both 
lower and higher prices for consumers. We cannot allow our best 
intentions to encourage the expansion of natural gas to impair 
our ability to protect the health, safety and welfare of the 
American people.
    While it is also critical that we embrace new technologies, 
we cannot do so at the expense of clean water, clean air or our 
country's security.
    I look forward to working with my colleagues to examine 
these issues and to making certain that the proposed merger is 
in keeping with our efforts to save our environment and 
generate new jobs.
    Mr. Chairman, I thank you for calling today's hearing, and 
I yield back the balance of my time.
    Mr. Markey. We thank the gentlelady.
    The Chair recognizes the gentleman from Louisiana Mr. 
Scalise.

 OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Scalise. Thank you, Mr. Chairman.
    The energy industry is critical in my home State of 
Louisiana, and the Haynesville Shale Play, along with other 
major natural gas finds around the country, have changed the 
landscape of our country's energy outlook. I look forward to 
learning more about this merger and its impact on our Nation's 
energy economy, and I welcome the panelists to our committee.
    As we discuss the issue today, we cannot overlook the fact 
that our country lacks a comprehensive national energy policy 
that will put the U.S. on a path to energy independence. 
Instead of working in a bipartisan manner to help break our 
dependence on Middle Eastern oil and create new jobs, this 
administration and the liberals running Congress are sending 
our country down a path of economic destruction while pursuing 
a radical environmental agenda that will lead to nothing more 
than millions of American jobs being shipped overseas to 
countries like China and India at a time when our American 
families can least afford it.
    The cap-and-trade energy tax, along with the threat of 
heavy-handed EPA regulation of carbon, represent the most 
drastic and dangerous attempts to hijack our country's energy 
sector. In my home State of Louisiana, thousands of jobs will 
be lost under a cap-and-trade energy tax. As a matter of fact, 
there is a company that is currently basing their decision to 
locate in either Brazil or south Louisiana on what Washington 
does on the cap-and-trade energy tax.
    These dangerous proposals, taken together with their 
efforts to create a government takeover of health care, along 
with the reckless spending and borrowing, will destroy the 
fabric of our country, cripple our economy, and place an 
overwhelming burden on our children and grandchildren.
    It seems, Mr. Chairman, that this administration and those 
running Congress will stop at nothing to pursue this liberal 
agenda that is killing our economy, resulting in thousands of 
dollars in higher taxes for American families and small 
businesses, and shipping millions of American jobs overseas.
    Instead of pursuing this radical agenda, it is time for 
this administration and the liberals running Congress to 
finally listen to the American people, and the result of last 
night's election in Massachusetts should serve as a wake-up 
call that the American people have rejected this liberal 
agenda. They want us to focus on jobs, and they deserve better 
than the back-room deals being made on health care.
    Thank you, and I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Arizona Mr. 
Shadegg.

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Shadegg. Thank you, Mr. Chairman. And I want to thank 
our witnesses. I look forward to hearing your testimony.
    It is widely known that the merger between ExxonMobil and 
XTO Energy is conditioned on hydraulic fracturing remaining 
legal and practicable. I think this raises for this Congress 
yet one more occasion to visit the issue of public policy, and 
to do it in a balanced and reasonable way.
    There is virtually no nation, indeed I think no nation in 
the history of mankind, that has locked up more of its natural 
resources and done more damage to its job base than this 
country in the name of protecting its natural resources and its 
environment.
    On the one hand, that is appropriate. We should be careful 
to protect our environment. But on the other hand, I hope we as 
a Nation have begun to learn that that has to be done with 
great balance and care, because irrational restrictions can 
cause us to do what we are doing now, which is to buy our 
energy from foreign sources who have no interest in our 
national security, and indeed are often our enemies, and who 
will not do the job of extracting that energy in as clean a 
fashion as we would.
    In 2007, 77 percent of the natural gas we consumed in the 
United States came from the United States. A vast majority of 
our domestic supply is accessible only through hydraulic 
fracturing, a technique that has been used to extract gasoline 
or oil for more than 50 years. The EPA itself found, quote, 
``no confirmed cases that are linked to fracturing fluid 
injection into CBM wells or subsequent underground movement of 
fracturing.'' Further, although thousands of CBM wells are 
fractured annually, EPA did not find confirmed evidence that 
drinking water wells have been contaminated by hydraulic 
fracturing.
    It is incredibly telling that this kind of merger has to be 
conditioned on the government not pursuing an irrational policy 
which will lock up our own natural resources. I commend the 
people that have put this deal together. I believe it is in our 
Nation's interest, and I think it is time that we focus on 
producing American energy in America, American jobs in America, 
and protecting our own environment, rather than relying on 
foreign resources where they do no better job of protecting 
their environment, which is indeed our environment as well.
    With that, I yield back.
    Mr. Markey. The Chair recognizes the gentleman from Texas 
Mr. Hall.
    Mr. Hall. Mr. Chairman, thank you. I subscribe to 
everything Mr. Shadegg said, and, gosh, are we going to miss 
him.
    Mr. Markey. The gentleman's time will be preserved for 
questions if he would like.
    Now, we have completed all opening statements from members 
of the subcommittee, but we have Ms. DeGette, who is here with 
us, a member of the full committee. By unanimous consent, we 
will grant her 2 minutes, if she would like, to make an opening 
statement.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you so much, Mr. Chairman. I appreciate 
your and Ranking Member Upton's comity for allowing me to 
participate in the hearing.
    Being from Colorado, of course, I am a very strong 
supporter of natural gas development. It is a clean domestic 
energy resource and a big source of jobs in my own State.
    In the merger agreement between ExxonMobil and XTO, there 
is language effectively allowing ExxonMobil to cancel the 
merger if laws are enacted making hydraulic fracturing 
``illegal or commercially impracticable.'' Seeing as I have 
introduced legislation on hydraulic fracturing, this piqued my 
interest.
    Good news. My bill would not make hydraulic fracturing 
illegal, nor would it make it commercially impracticable. I 
support the use of hydraulic fracturing. Please let me say that 
again. I support the use of hydraulic fracturing. But I also 
support it being done in an environmentally responsible way.
    Currently there is no requirement under Federal law to 
disclose the chemicals used in hydraulic fracturing, although 
we know that many of those chemicals may be highly toxic. The 
oil and gas industry is the only industry exempted from one of 
the Nation's landmark drinking water laws, the Safe Drinking 
Water Act, and, frankly, all of our constituents have the right 
to know what chemicals are being used in their community, 
particularly if they are near underground sources of drinking 
water.
    My bill would simply require disclosure of the constituents 
used in fracking fluids, while protecting the proprietary 
formula, much like we require Coca-Cola to list its 
ingredients, but not its secret recipe.
    What my bill would do is simply restore the EPA's authority 
to ensure that hydraulic fracturing does not endanger drinking 
water under the Safe Drinking Water Act. That seems reasonable 
and simple to me. I think that is our job as Congress.
    I look forward to the testimony today, and also to working 
with the industry to make sure we can support hydraulic 
fracturing, while at the same time making sure it remains 
environmentally sound.
    Mr. Markey. The gentlelady's time has expired. We thank her 
for joining us today.
    All time for opening statements by Members has been 
completed, so we will now turn to our panel and welcome them to 
our hearing.
    Our first witness this morning is Mr. Rex Tillerson. He is 
the chairman and the CEO of the ExxonMobil Corporation. Mr. 
Tillerson has held a variety of management positions in 
domestic and foreign operations since joining the Exxon 
organization in 1975.
    We thank you for joining us, Mr. Tillerson. Whenever you 
are ready, please begin.

   STATEMENTS OF REX TILLERSON, CHAIRMAN AND CEO, EXXONMOBIL 
  CORPORATION; AND BOB R. SIMPSON, CHAIRMAN OF THE BOARD AND 
                   FOUNDER, XTO ENERGY, INC.

                   STATEMENT OF REX TILLERSON

    Mr. Tillerson. Chairman Markey, Ranking Member Upton, 
members of the subcommittee, thank you for the opportunity to 
appear here today.
    Americans face a critical challenge: continuing to develop 
affordable, reliable and secure energy supplies needed to grow 
our economy and create jobs, while also continuing to improve 
environmental aspects of energy production and use. The 
combination of ExxonMobil and XTO is an important step towards 
addressing this challenge.
    The development of our combined resources will create the 
opportunity for more jobs and investment in the production of 
cleaner-burning natural gas spread across many parts of the 
United States. It will support our Nation's economic recovery, 
strengthen our Nation's energy security, and help meet our 
Nation's environmental goals.
    At ExxonMobil we focus on the long term. The global scale 
of our industry, the volatility of the world commodity market 
in which we compete, and the decades-long timeframes of our 
projects require us to plan far into the future.
    Our agreement with XTO is consistent with this approach. It 
combines the complementary strengths of our two companies: 
XTO's technical expertise and their substantial unconventional 
natural gas resource base in the United States, and 
ExxonMobil's own global resource base, our advanced research 
and development, proven operational capabilities, our global 
scale, and, importantly, our financial capability. It will 
better position us to meet America's long-term needs for 
affordable, reliable, clean-burning natural gas.
    Enabling a strong and growing U.S. economy requires meeting 
America's total energy needs, including fuels to power their 
businesses, heat their homes and generate electricity. 
Increases in domestic natural gas supplies can meet an 
increasingly important share of these needs. This is due in 
large part to important technologies pioneered by ExxonMobil, 
XTO and others which enable us to unlock enormous supplies of 
unconventional natural gas in the United States.
    With recent advances and extended-reach horizontal 
drilling, combined with the time-tested technology of hydraulic 
fracturing, a process in use for more than 60 years, we can now 
find and produce unconventional natural gas supplies miles 
below the surface in a safe, efficient and environmentally 
responsible manner. Thanks to innovations such as these, 
unconventional natural gas is projected to meet most of 
America's domestic natural gas demand by the year 2030, 
representing a substantial change in the overall energy profile 
of the United States.
    In the 5-year span ending in 2008, the U.S. Energy 
Information Administration estimates that the U.S. Total proven 
natural gas reserves increased by 30 percent to 245 trillion 
cubic feet, or the equivalent of about 41 billion barrels of 
oil. In an 18-month span ending in mid-2008, natural gas 
production in the United States increased 13 percent to 57 
billion cubic feet per day. That is an amount equivalent to all 
of the natural gas production in the entire United Kingdom. And 
total U.S. natural gas resource estimates have increased 35 
percent in the last 2 years. From this, Americans can now count 
on nearly a century of domestic natural gas supply at current 
rates of consumption.
    In addition to its domestic abundance, natural gas holds 
several other advantages for Americans. It is the cleanest 
burning of the fossil fuels, emitting up to 60 percent less 
carbon dioxide than the current leading fuel source used to 
meet America's electricity needs.
    Natural gas production is also responsible for significant 
economic activity, job creation and revenues for local, State 
and Federal Governments in the United States. In 2008, it 
contributed $385 billion to our Nation's economy and supported 
more than 2.8 million American jobs. More than 622,000 of these 
jobs were through direct employment, representing a 20 percent 
increase in job employment since the year 2006. Significant job 
growth occurred in many States, including Arkansas, Colorado, 
North Dakota, South Dakota, Utah and Pennsylvania.
    Discovering, developing and delivering clean-burning 
natural gas is integral to the work of the U.S. oil and gas 
industry, which in 2007 alone contributed more than $1 trillion 
to the Nation's economy and supported more than 9 million 
American jobs.
    The challenge Americans face is significant. To reverse our 
Nation's economic difficulties, meet our energy needs and reach 
our environmental goals, we all must do our part. Governments 
help by upholding stable tax and regulatory policies which 
encourage competition on a level playing field; consumers help 
by using energy efficiently; and industry helps by taking the 
risk to develop new energy technologies and new, cleaner-
burning energy resources, such as unconventional natural gas.
    In my view, the combination of XTO and ExxonMobil will 
enable us to more effectively play our part in addressing the 
challenge our Nation faces and will help create the integrated 
solutions that provide Americans with the energy supplies, the 
energy security, the environmental protection and the economic 
growth they expect and that they deserve.
    Thank you.
    Mr. Markey. Thank you, Mr. Tillerson.
    [The prepared statement of Mr. Tillerson follows:]


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    Mr. Markey. Our next witness is Mr. Bob Simpson, the 
chairman of the board of XTO Energy, Incorporated. Mr. Simpson 
was one of the founders of XTO in 1986 and has been chairman 
and chief executive officer or held similar positions with the 
company ever since.
    We welcome you, sir. Whenever you are ready, please begin.

                  STATEMENT OF BOB R. SIMPSON

    Mr. Simpson. Thank you, Chairman Markey, Ranking Member 
Upton, and members of the subcommittee. Thank you for the 
opportunity to let me appear here today to discuss our merger 
with Exxon.
    Our agreement builds on XTO's nearly quarter century of 
success in developing affordable, reliable, cleaner-burning 
U.S. unconventional natural gas supplies for use by Americans.
    From a humble beginning in west Texas, I learned a lot 
about hard work and long hours with our family farm and my 
family members. I also got smart enough to realize that our 
great American education system could open up far-reaching 
opportunities beyond those of sandy cotton and peanut fields in 
west Texas.
    The government was there to help. With the support of one 
of my heroes, the iconic President John F. Kennedy, a 
generation of kids got the financial assistance to pursue their 
academic dreams during the 1960s. I was one of them. My dreams 
took me to Baylor University, where I learned and also earned 
two degrees with honors. From this strong foundation I am proud 
to have built a career in the exciting and challenging and 
critical industry of energy here in the United States.
    Some of you may not be familiar with XTO, so let me share 
with you a little of our history. I believe it is a great 
American success story.
    We started in 1986 as a company called Cross Timbers Oil 
Company, with a handful of people, as I recall about seven, no 
oil and gas assets, some big aspirations and about $35 million 
of investor money. In the early lean years, the company did not 
make enough for me to justify a salary.
    In 1993, we went public with an initial market cap of about 
$200 million. In 2001, we changed our name to XTO, because too 
many investors thought Cross Timbers was in the timber 
business. XTO had been our ticker symbol on the New York Stock 
Exchange since it went public in 1993.
    We focused on hiring talented people, encouraging 
innovation, and turning low-producing oil and natural gas 
resources into higher-producing ones.
    Later we turned our attention to the U.S. unconventional 
natural gas before many others did. As a relatively abundant, 
cost-effective, cleaner-burning U.S. energy resource, we felt 
unconventional natural gas had enormous potential in supporting 
the United States' growing demand for energy.
    I believe we made the right call. Today, we are one of the 
leading producers of natural gas in America, with a total 
resource base equivalent to 45 trillion cubic feet of natural 
gas. Our shareholder equity has grown from the 35 million in 
1986 to 31 billion in our proposed merger. For the last decade, 
our stock performance was number two for all stocks on the New 
York Stock Exchange, with an average increase of 42 percent per 
year in appreciation. Our production grew by 714 percent in the 
fields during that same time, and we employ today 3,300 men and 
women, virtually all in the United States.
    Throughout our history we have focused on developing 
technology and operating practices that enable us to produce 
energy resources safely, efficiently, and in an environmentally 
responsible manner. Every employee of XTO shares in our 
commitment to operational excellence. This commitment has led 
us to success for our company and our country.
    There is growing evidence that, at current consumption 
rates, America now enjoys a more than 100-year supply of 
natural gas here in the States; and with changes in technology 
and constantly evolving production innovations we may have only 
scratched the surface.
    As we have grown and developed, we have always been mindful 
of the future on how we could continue to best develop the 
opportunities that we have been able to identify. In reviewing 
our future path, we realize that we needed to look at options 
to take what we have achieved and bring it to a new and higher 
level. We recognize that the opportunities before us could best 
be reached, their potential, if we could find an organization 
that could bring additional shale technology and financial 
capacity to the work we have been doing.
    I am pleased to say that we found that organization in 
ExxonMobil. Our proposed merger would enable us to continue to 
apply the technical expertise and operational excellence we are 
known for to a greater number of unconventional natural gas 
opportunities throughout the United States. It will continue 
our strengths, our ExxonMobil strengths, including its R&D, 
project management, operational integrity, and environmental 
performance and financial capacity.
    Moving forward, ExxonMobil intends to establish a new 
upstream organization to manage global development and 
production of unconventional resources, enabling the rapid 
development and deployment of technologies and operating 
practices to increase production. The new organization will be 
located in Forth Worth, Texas, at XTO's current offices.
    Additional production of domestic and unconventional gas 
will result in increased supplies of energy, which will lead to 
expanding markets, all of which significantly enhance our 
energy security.
    I strongly believe this proposed merger is a good deal for 
our shareholders, our employees, and our consumers here in the 
United States. We will support our Nation's economic recovery 
and energy security while also helping meet our Nation's 
environmental goals.
    I am proud of our company's success over the years and look 
forward to continuing that success with ExxonMobil in the years 
to come.
    Thank you.
    [The prepared statement of Mr. Simpson follows:]


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    Mr. Markey. The Chair will now recognize himself for a 
series of questions.
    Mr. Simpson, this revelation that you show that the 
companies were able to make that we have all of this additional 
natural gas is really a credit to your efforts.
    My question to you is this: There is a lot of fuel shifting 
that goes on when natural gas is plentiful, and 2008 is a good 
example where there was 10,000 new megawatts of gas-fired power 
that was installed in America, 8,000 new megawatts of wind but 
only 1,100 new megawatts of coal. In 2009, there wasn't one new 
coal-fire plant ordered in the United States. How do you see 
this going forward, especially because of the profile of where 
the Marcellus shale is and some of these other formations in 
terms of fuel substitution going forward? What is the future of 
coal and electrical generation in your opinion?
    Mr. Simpson. I think in my planning for the company we 
recognized--all the way back to 1996 we shifted our focus from 
balanced oil and gas companies and natural gas, and then our 
growth was based on natural gas. We recognized it as the clean 
burning fuel in America. To be honest about our consumption of 
fuel in America, 90 percent of it is either coal, oil, or gas; 
and, of those three, gas is clearly the superior fuel for the 
future in bridging to a lower carbon environment.
    So I, again, speak for the natural gas industry; and my own 
personal belief that natural gas is the wave of the future and 
the exciting news is it is not academic. We have found enough 
leads to resources in America that we will be able to put fuel 
behind that belief and supply.
    Mr. Markey. So you see it as an ever-increasing use of gas 
in the generation of electricity?
    Mr. Simpson. I do. I think there will be an ever-growing 
need for natural gas, particularly in the area of electrical 
generation, as has been demonstrated over the last few years; 
and the good news is we will be able to supply that. It won't 
just be a need.
    Mr. Markey. Thank you.
    Mr. Tillerson, could you compare the economics of onshore 
and offshore production of natural gas, given the breakthroughs 
that Mr. Simpson and others have made and now your announced 
merger with his company?
    Mr. Tillerson. Well, the relative economics are not that 
different, and the reasons are in order for offshore resources 
to be commercial--in particular in the locations where we are 
discovering large resources offshore, which is in deeper 
water--it takes a very large accumulation, so you have to have 
a very large discovery over which you can then put very 
expensive production and extraction facilities.
    So the total economics of the resource extracted through 
the investment floats on the water against taking a similar 
size resource onshore and developing it with literally 
thousands and thousands of wells and the infrastructure that go 
with that are comparable. So the differences are really 
technical challenges.
    Mr. Markey. Do the comparison then, as well, with the 
importation of liquefied natural gas, if you would, from other 
countries and with bringing down more natural gas from Alaska 
in terms of the economics, given the fact that Marcellus and 
Barnett are indigenous and right there in the region.
    Mr. Tillerson. Well, clearly the emergence of these large, 
now discovered and proven unconditional resources are going to 
act to put pressure on the economics of every other source of 
natural gas, particularly those that either have to come from 
long distances, LNG, or have to come from Arctic regions like 
the Alaska natural gas pipeline simply because the market now 
has greater supply available to it. So that is going to require 
that those other sources are going to have to continue to find 
ways to reduce their cost in order for them to compete at what 
the market prices will likely be in the U.S. It is simply a 
matter of now more supply available here locally more closely 
to the lower 48 markets than we previously would have thought 
even 5 years ago.
    Mr. Markey. So you are projecting lower prices for LNG as a 
result of these discoveries and your merger?
    Mr. Tillerson. Well, the price-setting mechanisms here in 
the United States are going to be unchanged. It is still going 
to be largely supply-demand driven pricing mechanisms. There 
are very, very few long-term natural gas contracts any longer 
in the United States. We long ago through deregulation and the 
restructuring and evolving of natural gas markets have gone to 
much shorter type of sales arrangements. So the supply signals 
are quite immediate in terms of what the demand----
    Mr. Markey. In general, will the domestic supply----
    Mr. Tillerson. More supply is going to put pressure on 
prices.
    Mr. Markey. So you think the longer term trend is lower 
prices for imported gas than otherwise if this supply had not 
been identified here domestically.
    Mr. Tillerson. I think without question, without this 
supply. Because the unconventional supply is going to represent 
an ever-growing component of the total U.S. natural gas supply. 
Over the next 20 years, it is going to be supplying upwards of 
half of our total natural gas supply in the United States. So, 
clearly, you introduce that level of volume into the 
marketplace, it affects every other source of supply.
    Mr. Markey. The gentleman from Michigan, Mr. Upton.
    Mr. Upton. Thank you, Mr. Chairman.
    I would like to start off by saying I think for many 
Americans when they think of discovery of both oil and gas and 
the production of it, they go back to that movie the Beverly 
Hillbillies. The Clampetts put in a pipe, and there it is. They 
don't necessarily understand that you have to have injection to 
get the oil out and you may not have to use the process, the 
fracturing that is prevalent today. And as I look at this map--
which I think you all have it; it was on our chairs here--I 
have actually been and looked at the Barnett operation, hear 
great things from my colleague, Mr. Pitts, about the Marcellus, 
Bakken, and other resources around the country.
    But, really, without that hydraulic fracturing, you 
wouldn't be able to get, what, 20 percent, maybe out of these 
fields?
    Mr. Tillerson. You would get zero, because it would be 
noncommercial to develop those resources.
    Mr. Upton. So it is, as I think most of our--all of the 
colleagues here on the panel, regardless of Republican or 
Democrat, we understand the importance of that.
    In the documents on the merger itself, I think there is 
some language that if, in essence--I am paraphrasing here--that 
Congress takes action to limit or restrict hydraulic 
fracturing, the deal is, in essence, off; is that right?
    Mr. Tillerson. That is correct.
    Mr. Upton. Would you like to elaborate on that at all? Have 
you looked at Ms. DeGette's bill? Does that qualify as one of 
the problem areas?
    Mr. Tillerson. As the language indicates, if it either 
prohibits or no longer makes it commercial. As you have heard 
Mr. Simpson's comment in his remarks in response to the 
questions, what has enabled this new source of natural gas 
supply to the U.S. is a combination of integrated technologies, 
but a key component is hydraulic fracturing. And without 
hydraulic fracturing the gas that is locked in the shale rock 
stays locked. It just stays there.
    The existence of this resource has been known for decades, 
but we did not know or have the techniques to unlock the gas so 
that it would flow from the shale rock into the wellbore. We 
have drilled through these shales for years, and they don't 
flow when we drill through them. So if you remove hydraulic 
fracturing as one of the key enabling technologies, this 
resource can no longer be recovered. So, obviously, our deal 
would make no sense.
    The provision that is in the merger agreement is one that--
these are standard types of provisions you would find when two 
companies talk about mergers and they talk about the risks. And 
so it is in there to protect the ExxonMobil shareholders in the 
event something transpires before this deal would close. And I 
think it is just a recognition that we see a lot of regulation 
that comes out of the Congress and the U.S. Government that 
provides little benefit. But there is an enormous propensity to 
regulate in this country. So it is a recognition that that is a 
risk.
    Mr. Upton. Mr. Simpson, do you want to add to that at all?
    Mr. Simpson. That provision on our side was allowed.
    Our view of it is--going back in my career I remember in 
the late 1970s we viewed in America that we were running out of 
natural gas. We thought it was an 8-to-10-year supply. I built 
a home in Forth Worth, Texas, that I couldn't get natural gas 
to, and I am in Texas. Now that house is sitting on the largest 
natural gas-producing field in America today.
    And so what I would say is that what has allowed us to go 
from a psychology of shortage to one of abundance in essence is 
the technology of hydraulic fracturing. I just don't believe 
that, given that as a consequence, there is any real risk of 
legislation that would prohibit that practice.
    Mr. Upton. So this really is a win-win. I mean, we have got 
these great resources and because of the increased supply it 
will further push downward pressure on the cost as it impacts 
consumers across the country.
    Thank you. I yield back.
    Mr. Markey. The Chair recognizes the gentleman from 
Washington State, Mr. Inslee.
    Mr. Inslee. Mr. Tillerson, our job and Congress' job is job 
one is jobs now, as you know, for obvious reasons.
    I want to ask some questions of this merger as it pertains 
to the ability of the United States to really seize the 
economic opportunities in the new nonfossil fuel-based systems 
in addition to natural gas.
    First, I want to ask, does Exxon believe that human-caused 
emissions of carbon dioxide and some other gasses are changing, 
at least to some degree, the Earth's climate?
    Mr. Tillerson. Well, we have said for some time that there 
is no question climate is changing, that one of the 
contributors to climate change are greenhouse gasses that are a 
result of industrial activities--and there are many greenhouse 
gasses besides CO2, which I know you know that. And 
the real challenge I think for all of us is understanding to 
what extent and therefore what can you do about it. And it is a 
scientific challenge. We view it as a risk management problem. 
There is a risk. The consequences, if those risks play out, are 
pretty dire.
    So our view for some time has been, first and foremost, let 
us continue to support the scientific investigation of what is 
one of the most complicated areas of science that people are 
studying today, and that is the climate, the science around 
climate and what affects the climate. It is extremely 
complicated. And we have supported that work and I know the 
Congress has made funds to support that work and we support the 
scientific advancement of understanding this issue. The better 
we understand that, the better the technology solutions then 
will be provided and will be provided in the most cost-
effective way to consumers the world over.
    So, yes, we acknowledge that it is a contributing factor. 
Where I think we have differences and where we perhaps talk 
past one another from time to time is that, being a science and 
engineering company, we understand the science, we understand 
the difficulties of modeling the science. And there are a 
number of very complicated models that have been developed by 
people who are studying the issue around the world to try and 
first replicate what has happened so we understand the science 
and then predict the future.
    And as we look at the competency of those models, there is 
not a model available today that is competent, and I think all 
of those people who run those models would acknowledge that. So 
we say keep studying it.
    In the meantime, the risks are significant, the 
consequences could be dire so we should take action. And we are 
taking action ourselves, and we are engaged actively in the 
discussion here in the Capitol on both ends of the Congress 
around what various policy options might be sensible.
    Mr. Inslee. The reason I ask you that is that I still get 
letters from some constituents saying humans are not involved 
in changing the climate. It is egocentric to think that humans 
can cause a change in the climate. And I am going to report to 
them that the leader of the largest energy company in the 
United States believes that we are one contributing factor to 
climate change. I am going to report that to them. I hope they 
will listen to that, as a person with tremendous scientific 
background, as your company has, with some of the most 
brilliant engineers in the world working for you believe that 
and now the question is what is the right response.
    Am I correct in assuming that your decision to enter into 
this acquisition in part is induced or motivated at least in 
part in a belief that we will be in some version of a carbon 
constrained world in the future in some sense? Is that one of 
your motivations?
    Mr. Tillerson. Well, every year we undertake our own 
internal energy outlook: What are the demands for all forms of 
energy going to be? What are the supply sources going to be? 
And we have identified now over the last few years the growing 
response of natural gas, much of which we would attribute to 
consumers around the world understanding that there are moves 
under way and already our policies are in place in much of the 
world, in Europe, European countries and elsewhere, that do put 
a price on carbon and that does shift you towards natural gas 
demands.
    Here in the United States we expect natural gas demand to 
grow about 20 percent over the next 20 years. It is going to 
grow in its relative contribution, much of which is due to our 
view that eventually there is already an incentive I think 
among most consumers and companies to lower their carbon 
footprints so there is a natural incentive. Natural gas also 
provides from an energy efficiency standpoint a number of 
favorable attributes as well.
    So it was in a consideration. I wouldn't tell you that we 
priced it in. I would tell you that in all of our investment 
decisions, though, we have, in our economic modeling, we put a 
carbon price in our economic decisions and project something 
for the future so that we at least are considering what the 
effects on our investments might be in the years to come.
    Mr. Inslee. Thank you.
    Mr. Markey. The Chair recognizes the gentleman from Texas, 
Mr. Barton.
    Mr. Barton. Thank you.
    Because of my good friend Mr. Inslee's question about 
climate change, I have to have somewhat of a rebuttal to that.
    Mr. Tillerson, what is ExxonMobil's position on the Markey-
Waxman's bill as it passed the House? Do you all support it or 
oppose it?
    Mr. Tillerson. We oppose the Markey-Waxman bill because we 
are opposed to cap-and-trade systems as policy options. We do 
not feel that they are the most cost-effective way to put in 
place the proper incentives for people to be more efficient.
    Mr. Barton. In your opinion as chairman or CEO of the 
largest privately owned energy company in the world and 
certainly in the United States, if Waxman-Markey were to 
actually be passed--which luckily it is not--but if it were, 
could the United States, in your opinion, in a cost-effective 
way or maybe in any way at all meet the target of reducing 
CO2 emissions 85 percent by the year 2050 from the 
2005 baseline?
    Mr. Tillerson. Well, obviously, you can meet any target if 
you don't care what it costs. So if you are willing to suffer 
enormous job loss and reduced economic activity--because one of 
the ways you achieve those targets is you shut activity down. 
That is the easiest way to reduce emissions, is just don't emit 
them.
    Mr. Barton. So in your role again as CEO of the largest 
privately owned energy company in the world and certainly in 
the United States, you have to minimize risk to your 
stockholders and maximize employment opportunities for the 
employees under your direction. So your acknowledgment to Mr. 
Inslee is simply a prudent business decision that that is the 
real political world that ExxonMobil is in and that you need to 
be prepared to adopt to that reality.
    Mr. Tillerson. As I indicated in our economic price index, 
we have to make some assumption about what the future might be. 
We have to do the same about what we think the price of the 
commodity will be, the price of business will be. So the fact 
that we include a price on carbon is an acknowledgment that 
there is a likelihood that there will be a price. There already 
is in some parts of the world. So it is in our price index.
    Mr. Barton. I have got before me two of the best American 
CEOs of companies, not just energy companies. Mr. XTO has 
already said that he had the greatest rate of return on the New 
York stock market over the last X-number of years. We have all 
seen the stories about ExxonMobil's rate of return. We will 
stipulate that you two gentlemen are pretty good at what you do 
and the country is glad that you are good at what you do.
    Mr. Tillerson, what does ExxonMobil get by merging with 
XTO?
    Mr. Tillerson. As we have studied the unconventional 
resource space globally, we have identified it has enormous 
potential, certainly here in the United States which I know we 
are most interested in today. But I know there are enormous 
unconventional resources globally in many countries that would 
be very important not just to their country but to the global 
energy balance.
    Mr. Barton. Do you classify the tide shale formations that 
XTO has as unconventional?
    Mr. Tillerson. Unconventional would be the shale gas, 
coalbed methane gas, ultra-tight gas. The type of resource 
holdings that XTO has amassed here in the United States, 
ExxonMobil has been taking acreage positions around the world.
    Mr. Barton. What does XTO get by merging with ExxonMobil, 
Mr. Simpson?
    Mr. Simpson. Our main advantage would be, having brought it 
to here, the opportunities we face are so large that we need 
capital to explore those and to tap those successfully.
    Now, we also enjoy joint expertise which we will put 
together. Their advanced R&D and their global scale will bring 
exciting opportunities to the staff.
    Mr. Barton. You will get their expertise in capital.
    Is there any indication from either of your staffs that the 
Justice Department or the SEC is going to be negative on the 
merger?
    Mr. Tillerson. We have only just begun that dialogue with 
them, including answering their questionnaire. So I wouldn't 
want to be so presumptuous as to prejudge.
    Mr. Barton. The press reports indicate that it doesn't 
give--the merged company wouldn't have a corner on the domestic 
energy market, and by all of the standard anti-trust metrics 
this is a merger which appears to fit within those parameters.
    Mr. Tillerson. Under all of those HSR metrics that are 
typically used to judge competitive elements, this merger does 
not give rise to a concern in any of those areas.
    Mr. Barton. So if we can prevent the Congress or the EPA 
from mucking around in hydraulic fracturing, this merger should 
go through. Because you have got a codicil in your pending 
merger agreement that if Congress passes legislation that I 
guess either party has the right to call the merger off; is 
that correct?
    Mr. Tillerson. That would be correct.
    Mr. Barton. My final question is a personal question, Mr. 
Chairman.
    Mr. Simpson, where is Steve Palko these days?
    Mr. Simpson. Palko, one of the founders of XTO----
    Mr. Barton. And an original Barton backer, contributor.
    Mr. Simpson [continuing]. Was always very interested in 
education. In fact, he served on the National Education 
Committee here in Washington, and he went back 5 years ago and 
got his Ph.D. And is teaching at TCU.
    Mr. Barton. So you would indicate when he left the company 
is when it really took off?
    Mr. Simpson. That is what I would tell them.
    Mr. Barton. If you see him, tell him his old friend Joe 
Barton says hello.
    Mr. Simpson. OK. I will tell him.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Markey. And by the way, thank you for letting 
Massachusetts be allowed into the country.
    Mr. Barton. We wouldn't have a country if it weren't for 
Massachusetts.
    Mr. Markey. We like to think we started that whole Tea 
Party thing up in my district.
    Mr. Barton. Massachusetts saved the country last night.
    Mr. Markey. Massachusetts invented a lot of the things the 
country enjoys today.
    The Chair recognizes now the gentleman from Pennsylvania, 
Mr. Doyle.
    Mr. Doyle. Thank you, Mr. Chairman.
    OK. Let us get one thing out of the way. Mr. Tillerson, do 
you have any knowledge of any Member of the House or the Senate 
or the Obama administration that is calling for outlawing 
hydraulic fracturing?
    Mr. Tillerson. No.
    Mr. Doyle. Mr. Simpson?
    Mr. Simpson. No.
    Mr. Doyle. Does anyone on this committee have any knowledge 
of any Member of Congress or the House or the Obama 
administration that is calling for the outlawing of hydraulic 
fracturing? In Congress--House, Senate, Obama administration.
    So the answer is ``no.''
    So now let us talk about half of this bogeyman.
    Mr. Barton, I will get to you later.
    Mr. Barton. I have some knowledge of some Members who would 
like to outlaw it.
    Mr. Doyle. So there is nothing proposed, but in your mind--
--
    Mr. Barton. I have had discussions with Members who would 
like to outlaw it.
    Mr. Doyle. Yielding back my time.
    Let us talk about now whether or not this is commercially 
impracticable. It is not a term we use in Pittsburgh a lot.
    Pennsylvania, we have rules in place to protect our 
underground sources of drinking water. I talked to Mr. Stearns 
and asked if he wanted to be a Pennsylvania water tester so 
that he could drink the water first before the rest of us had 
to do it, but he declined.
    But, in Pennsylvania, in order to obtain a permit, drillers 
must identify any anticipated impacts of water withdrawals on 
water resources. Wells cannot be drilled within 200 feet of 
structures or within a hundred feet of streams or wetlands. 
Pennsylvania law requires drillers to case in grout wells 
through all freshwater aquifers before drilling through deeper 
zones in order to protect ground water from pollutants inside 
wells. DEP inspectors investigate resident complaints about 
water quality. There is a presumption that well operators are 
responsible for any pollution of nearby ground water, and well 
operators are required by law to replace or restore adversely 
affected public or private drinking water supplies.
    There are also rules that require operators to disclose all 
chemicals to be stored and used at a drilling site, including 
chemicals and fracking fluids in order to guard against 
contamination and ensure safe disposal of these chemicals. That 
is Pennsylvania law.
    Now, Mr. Simpson, XTO currently operates natural gas wells 
in Pennsylvania, true or false?
    Mr. Tillerson. That is true.
    Mr. Doyle. Very good. In view of the 181 billion cubic feet 
of natural gas produced in Pennsylvania in 2006 alone, is it 
safe to say that Pennsylvania regulations have not made it 
commercially impracticable to extract Pennsylvania's extensive 
natural gas reserves?
    Mr. Simpson. From our experience--first of all, our 
drilling in Pennsylvania is very limited to a handful of wells. 
So in our experience we have been able to comply in any one 
area we might want to examine to see if it impedes in terms of 
going beyond where we are. But, again, it is not our primary 
focus in terms of where we drill.
    Last year, we drilled about 1,200 wells and, as far as I 
remember, none in Pennsylvania. We have drilled--well, a few in 
Pennsylvania being 2009. So, again, it is not our--where the 
mass of our operations are. And my own personal knowledge is 
limited as to the operations in Pennsylvania.
    Mr. Doyle. But at least when you bought LINN Energy, that 
included about 152,000 net acres of Marcellus shale leasehold. 
So you currently have that and you have no intentions of 
pulling out of Pennsylvania. You want to drill that Marcellus 
shale, do you not?
    Mr. Simpson. We do, and that was primarily in Pennsylvania 
and West Virginia.
    Mr. Doyle. Very good. So I guess since you are not pulling 
out of our State and Marcellus shale is an opportunity for 
you--and, by the way, we love having you in Pennsylvania. We 
want to get that gas out of the ground. We are all for doing 
that. But the regulations that are already in place in 
Pennsylvania don't seem to be stopping you from considering 
Pennsylvania as part of your operation.
    Mr. Simpson. That is correct.
    Mr. Doyle. So my question is, because this Marcellus shale 
formation goes over several States and we have some laws that 
have regulations--some States that have regulations, some 
States that have no regulations and everything in between, 
would a national regulatory framework, would that create 
uniformity and predictability for a company like yours? Do you 
think it makes more sense that you just have one law that 
creates some predictability for you, or do you like this 
patchwork of maybe, you know, 50 different laws if each State 
adopts their own laws?
    Mr. Simpson. Our industry and historically our company is 
built in a variety of States: Texas, Oklahoma, New Mexico, 
primarily, and Louisiana. And what I would say is that we have 
adapted to each individual State's rules and regulations. We 
believe that that has been a successful program and that the 
environment and related industry issues are regulated 
satisfactorily, I believe, for both us and the consumers and 
the citizens through State regulations.
    Mr. Doyle. I see my time has expired. I have lots of 
questions about leasing practices, and I see that we in 
Pennsylvania have a lot to learn from our friends in Texas and 
Louisiana, and I would like to explore that if there is a 
chance for a second round of questions.
    Mr. Markey. The Chair recognizes the gentleman from Texas, 
Mr. Burgess.
    Mr. Burgess. I would like to explore, if possible, that 
horizontal drilling from north Texas up to Pennsylvania.
    It is impossible to overstate the economic value to our 
area that the Barnett shale has brought. The country entered a 
recession in 2007. I don't think we felt it in our area until 
December of 2008, a full year later than the rest of the 
country.
    Mr. Simpson, you talked about the house without the ability 
to heat with natural gas. I remember being in an all-electric 
home in the 1980s as well. We just had a very bad cold snap 
like we just had these back couple of weeks back in the 1980s, 
and the electric bill was $7- or $800 for heating the home in 
1980 dollars.
    These past 2 months in Texas have been brutally cold. Our 
gas bills have in some cases been almost a hundred dollars to 
heat a similar-sized house. So it is a substantial economic 
benefit for jobs and development in our area, and it is a 
substantial economic development in delivering energy at a 
reasonable cost to people who live in north Texas.
    So it is with a great deal of relief that you two are 
sitting together at this table and looking, exploring the 
possibility of linking up the knowledge base with XTO with the 
capital and the ability to scale that ExxonMobil has. I think 
that is likely to be a very rewarding development.
    I think Cliff Stearns asked a very provocative question 
earlier in his opening statement. If I could just ask you to 
address it a little bit.
    Mr. Tillerson, your company does not deal much with 
derivatives and hedging and, Mr. Simpson, your company does 
presumably because of different missions and what have you and 
the size of your two companies. But how will this work going 
forward and what should we look to as what is going to be the 
activity as far as derivatives and hedging?
    Mr. Tillerson. Congressman, I think the use of the hedges 
in the way that XTO has traditionally used them is fairly 
common for companies of their size. They are also growing their 
business at the rate of pace that they are growing as a means 
of just providing for secure cash flow so that they can keep 
their ongoing activities under way with some type of forward 
planning basis.
    As you noted, because of ExxonMobil's size and our global 
scale, our cash flow and our financial structure is quite 
different. So we have never used hedges or derivatives as part 
of our financing structure.
    The reference to the limited use that we have for those are 
on physical contracts to make physical delivery. The crude oil 
primarily--and it is to cover very short periods of time when 
crude is in transit, primarily 30, 60 day kind of contracts, 
and that is just to manage the risk of exposure across a short 
period of time. But they are not used as a financial instrument 
for ExxonMobil because they are not needed for our financing 
structure; and so, in the future, we would not be continuing 
those hedging programs.
    Mr. Burgess. So as far as how that impacts the consumer, 
the ratepayer at the end of the stream, likely to be perhaps 
the opportunities for more stability in pricing and less of the 
wild swings that we saw in the summer of 2008.
    Mr. Tillerson. It is hard to say. Because the hedging of 
activities of XTO, while certainly important to them, on the 
grand scale of the natural gas markets may not be significant. 
So I think that is very hard to say what if any impact the 
removal of that hedging activity from the market is going to 
have.
    Mr. Burgess. On strictly the local scale, the number of 
jobs provided by both companies in the area is significant. The 
location of the corporate headquarters in Fort Worth for XTO 
has been important to areas around my district. What will 
happen with jobs in corporate location?
    Mr. Tillerson. One of the important elements--and as 
Congressman Barton was asking for why the merger was 
important--yes, we get access to XTO's large U.S. Domestic 
resource base, but a very important part of this merger is 
XTO's organization. They have a 20-year track record of having 
invested, taken a lot of risks to understand how the 
unconditional resource base can be profitably commercialized 
and brought to the market and provided to consumers.
    We have built unconventional acreage holdings around the 
world. What we want to do is retain their organization. We want 
to retain their Fort Worth location as the headquarters of what 
will be the new global and conventional gas resource 
organization to use their know-how and their capabilities, 
bring some of our technology and R&D capabilities--because we 
have a significant R&D activity under way around the 
unconditionals--bring some of our project management 
capabilities and our financial stability and put the best of 
all of those together in this new organization in Fort Worth to 
create more opportunity to develop the resource here 
domestically.
    But also we intend to use it as an opportunity to develop 
these resources globally. Because, to the extent we can develop 
more global energy supply, ultimately that is better for the 
U.S. consumer as well. So that is really the compelling part of 
putting the two together.
    As a result, we expect to retain most of the XTO 
organization in Forth Worth, and there would be very limited 
job impacts.
    Mr. Markey. The Chair recognizes the gentleman from Utah, 
Mr. Matheson.
    Mr. Matheson. Thank you, Mr. Chairman.
    I apologize. I haven't been here for the whole hearing. I 
have a hearing taking place in the Science Committee at the 
same time, so I have been moving back and forth between the 
two.
    Mr. Simpson, I know there has been some discussion of 
hydraulic fracturing today, and perhaps some of it has taken 
place when I wasn't in the room. In your experience, have there 
been problems with this technology that Congress needs to 
address?
    Mr. Simpson. In my experience, there has not. The 
technology itself is about 60 years old. The event here is the 
combination of that traditional technology with the horizontal 
drilling techniques that have been developed particularly in 
the last decade; and the two combined have unlocked this 
resource that we are talking about today which I think, between 
tight gas techniques, hydraulic fracturing, it applies not only 
to shale gas but we also use it in virtually every well we 
drill. Our company specializes--and it always has--in long life 
reserves. Long life means generally tight reservoir or 
unconventional reservoir, low decline.
    And while the country had a declined rate of X percent, 
ours was always about half of whatever the country's was so 
that we could more readily grow. So we have relied on that 
fracturing for a long time as a company. We virtually drill no 
wells that don't employ some form of hydraulic fracture.
    Mr. Matheson. Every well your company drills?
    Mr. Simpson. Yes. Virtually every well.
    It may not be used offshore or some more permeable 
reservoirs, but our properties are based on tight gas, and 
unconventional reservoirs are what is included in tight gas.
    And in my experience in the last few years we have gotten 
up to around a thousand-plus wells a year. We have had no 
examples of where we believe or there is evidence that we have 
contaminated a water zone, a freshwater zone, drinking water 
zone with this process. And undoubtedly the country has been 
doing it. There are over a million applications, and I believe 
the process is safe.
    Mr. Matheson. I guess for either witness I would ask, in 
your view, if Congress were to regulate fracking under the Safe 
Drinking Water Act, how would that affect energy production and 
why would it be different from the State regulation of 
fracking?
    Mr. Simpson. Well, again, it would be how you would 
implement it. Is there initially a ban? What is the transition? 
Again, the mechanics of it, and then is it applicable.
    What I would say is that we have comfortably lived in 18 
different States for a good while now subject to State 
regulation and without incident. So I don't believe it is 
necessary. I think the risk is, if we are not careful, we go 
backwards; and, frankly, going from a psychology of shortage 
that I mentioned in the 1970s, we also banned the use of 
putting on new generation fired by natural gas in 1978. Again, 
the shortage crisis mentality. That limits markets. It moves 
fertilizer plants away. It dampens demand, increases more 
dependence on other sources. And so it lessens our energy 
security here in America.
    So I think it is tantamount that we find a way to continue 
that practice, because it is such a valuable thing to this 
country.
    So I personally--we talked about earlier--will believe in 
the wisdom of Congress collectively, the greater wisdom, that 
it is--the practice will continue because it is safe and the 
consequence of not being able to do it for our economy is too 
grave.
    Mr. Matheson. Thanks. I appreciate that.
    Mr. Tillerson. I do think, as Congressman Doyle in great 
detail described, the State regulation of the State of 
Pennsylvania is not unusual. Most States have very detailed 
regulations around our drilling activities and our hydraulic 
fracturing activities that govern the protection of the 
drinking water aquifers in all States. Those I think have been 
tested and they have been proven to be quite adequate. There 
have been over a million wells hydraulically fractured in the 
history of the industry, and there is not one reported case of 
a freshwater aquifer ever having been contaminated from 
hydraulic fracturing. Not one.
    The EPA testified before the Congress last summer that they 
could not document a single case. The New York Water Resources 
Development Board investigated hydraulic fracturing. They could 
not document any threat to safe drinking water.
    So I think the real question is what is the need for 
Federal oversight other than it is going to add another layer 
to the State that will add cost. A uniform regulation, 
Congressman Doyle, would not be preferable, because the water 
aquifers and the geology are different for every State and they 
know their water resources and their requirements better than 
anyone up here is going to know and they are going to protect 
them better.
    So the States are regulating this well, and a uniform rule 
would actually add a layer of complexity I think for the State 
regulator. And any time you add a layer, you add a cost. And 
when you add a cost you just knocked off an increment of 
production. Because somewhere out there is the marginal cost 
well and it doesn't get drilled.
    Mr. Matheson. Thank you. I yield back.
    Mr. Markey. The Chair recognizes the gentleman from 
Illinois, Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I appreciate the testimony here.
    I think, in summation, the response to the last question 
from my friend Mr. Matheson was if the wheel is not broken 
don't try to fix it. Is that an easy way to summarize those 
comments?
    This is just not important for natural gas, and I 
understand the implications here. I represent a large portion 
of the Illinois basin, and we have a lot of--we used to be an 
oil center part of the country. Through new technologies, 
horizontal drilling and fractionation, we are now able to 
recover oil and keep these fields in production a lot longer 
than we ever thought we would have imagined that.
    One of the newest finds a couple of years ago was 
underneath a State wildlife refuge, underneath a lake, and it 
has been operating now for 4 or 5 years. And, of course, if it 
is a State wildlife refuge you know the Illinois Department of 
Natural Resources is on that lake every day and watching it.
    So we are excited about this. And my focus is energy 
security and the ability of the United States to make sure that 
we have the energy we need without being dependent on imported 
crude oil.
    Now, the great thing about what our debates have always 
been is how do we do that or at least be independent using 
North American resources. We have to go in the Outer 
Continental Shelf. We have to take advantage of these new 
natural gas finds. And then we have got to use these new 
commodity products and allow the market to decide how to change 
that.
    The Clean Air Act, which I talked about quite a bit and was 
very successful in cleaning up toxic emittents--that is why I 
had this climate debate, because carbon dioxide is not a toxic 
emittent. I don't care what people try to say here in this 
Chamber. It is not a toxic emittent.
    Now the stuff we cleaned up in the Clean Air Act was toxic. 
But when we did the Clean Air Act it did affect your business 
plan on how do you deploy and what do you use technology for, 
coal or natural gas. You know, natural gas has been 
historically used in home heating, but now we can use it in 
transportation fuels. Now we can use it not just in peaking 
plants but there has been talk about using it for base-load 
generation. I would think my personal opinion is that would be 
a mistake. It is such a great resource to be able to use in a 
variety of proposals.
    This would be the question. Based on the policies that we 
enact here, that does change the business plan for the 
deployment of those commodity products, does it not, Mr. 
Tillerson?
    Mr. Tillerson. Well, clearly, the regulations or mandates 
from time to time that are put in place change the relative 
economic choices that an investor has to develop energy 
resources or a consumer has to buy and consume them. So, 
without question, what is done here moves that needle back and 
forth. That is why we have always been a proponent and a strong 
supporter of keeping the playing field level, not mandating 
solutions but set the framework in place and then let the 
market forces pick the most efficient solutions.
    Whether natural gas belongs as a transportation fuel versus 
electric base load, right now our economic analysis would 
suggest that electricity base load is actually a much more 
efficient use of the gas than to use it in compressed natural 
gas vehicles. And we would be happy to provide you some of the 
work we have done because we study it all the time. We are in 
the transportation fuel business.
    Mr. Shimkus. I appreciate that, because we will accept some 
help in being educated. But all I want is the market to decide 
that versus policy, which pushes commodities into an arena that 
may not be economically feasible and then you really waste a 
valuable resource.
    So mine would always be about having the competitive 
advantage of the economy through competition set the best 
commodity for the best end use in that arena.
    But what you did--if I can restate it, one thing you did 
highlight if you do establish another barrier by oversight and 
Federal regulation, that will affect how we decide to use this 
commodity product, would it not?
    Mr. Tillerson. I have never seen a regulation that has not 
seen a layer of cost.
    Mr. Shimkus. I appreciate the comment.
    I yield back.
    Mr. Markey. The Chair recognizes the gentleman from Texas, 
Mr. Green.
    Mr. Green. Thank you, Mr. Chairman, and a lot of the good 
questions have been asked.
    Mr. Simpson, first of all, I want to congratulate you for 
forming a company in 1986 with our energy situation the way we 
were in the 1980s representing my area in east Houston and 
north Houston. We had a depression in Texas, Louisiana, and 
Oklahoma because of energy prices. The rest of the country was 
coming out of the recession in the early 1980s, but we still 
were in it. So congratulations.
    In fact, I have a joke that I was over in Louisiana one day 
visiting in 1987 and they found out I was from Texas. They 
said, oh, our energy prices are tough but in Texas you all have 
cattle. So that is what is taking care of you. I said, I have a 
rancher in west Texas that said he stole the cattle, stole the 
feed and still lost money. So cattle didn't take us out of our 
problems in the 1980s.
    I have a concern about if fracking and the shale 
discoveries are so important for our country that if there is a 
problem--and I don't think there is because we have had some 
incidents--I know there was a well in Pennsylvania that had 
some problems with the wells from the residents in the area, 
but that was because the supplier of the concrete didn't 
provide the correct amount. There are problems, but it is so 
important, our national interest, that we need to fix it 
because we need that natural gas. We need that long-term, the 
hundred-years-plus viability we had.
    In fact, my colleague and I--our good friend, Congresswoman 
DeGette, actually put some seats between us. We normally sit 
next to each other. Because I heard her statement and I support 
expansion. I just want to make sure we don't throw so many 
regulatory roadblocks that we can't have the shale protection 
not only in Texas, Louisiana, and Arkansas but also in the 
northeast and everywhere else.
    Mr. Tillerson, I have to admit, coming from East Harris 
County, I have represented the ExxonMobil facility for many 
years as the State Senator, now in Congress, and I appreciate 
how ExxonMobil--Exxon originally, but ExxonMobil--treat their 
employees. I have a lot of constituents that are very happy 
retirees, and the support for your employees is really good.
    I have noted in your statements several analyses have 
speculated whether a merger between ExxonMobil and XTO would 
signal further widespread consolidation of America's energy 
industry or a shift in strategy for the large integrated oil 
and gas companies focused back on U.S. Natural gas. In the past 
18 months, BP, Statoil, ENI, and Total have also bought into 
the U.S. gas industry which is primarily developed by small- 
and mid-size gas producers.
    Do you believe that the ExxonMobil-XTO merger is a signal 
that large integrated companies will continue to invest more 
heavily in the U.S. unconventional natural gas fields either 
through acquisitions, mergers, or joint venture? And, if so, 
would market conditions lead to this increase in joint ventures 
and mergers, and what impact do you think it would have on the 
competition within the domestic market?
    Mr. Tillerson. Well, it would be hard for me to comment on 
what others will do. Clearly, this is an enormous resource 
opportunity, and we are all in the resource acquisition 
production business. So the fact, as you have already noted, 
that it has already attracted the attention of other major 
companies as well, both U.S. and foreign companies who are 
investing in the resource.
    With respect to what it does for competition, I think it is 
important to know that one of the attributes of the U.S. oil 
and gas industry is the enormous number of participants. The 
Natural Gas Association documents more than 6,000 gas producers 
in the United States. The EIA documents 13,700 oil and gas 
operators. This is a business that, while it contains a lot of 
risk, the hurdles to entry in this country where a person like 
Mr. Simpson can start on a very tough basis in a very tough 
economy, barriers to entry are fairly low. People who are 
willing and have the courage to take the risk can enter this 
business on a lease-by-lease basis and build a business.
    The history of the energy is littered with riches and 
failures and bankruptcies, and that is just the nature of it. 
But one of the real competitive attributes in this country is 
that it has that characteristic and there are thousands of 
players.
    The fact that this merger occurs still leaves an enormous 
amount of opportunity for others to come in and participate. So 
our participation--or even as it attracts the participation of 
other large companies--is unlikely to change the competitive 
balance which has been a characteristic of this industry for 
decades, and this really doesn't change it.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Markey. If I could, Mr. Sullivan, I would like to 
recognize Mr. Butterfield, because he has to leave. He can't 
avoid it. By unanimous consent I will do that and then come 
back and recognize Mr. Sullivan and then Mr. Scalise in order.
    The Chair recognizes the gentleman from North Carolina.
    Mr. Butterfield. Thank you very much, Mr. Chairman.
    I thank Mr. Sullivan. I was due at a meeting on Haiti over 
in the Capitol about 30 minutes ago. Thank you very much.
    Let me thank the two witnesses for your testimony today.
    I want to particularly thank Mr. Tillerson for the work 
that he does with ExxonMobil. I have two credit cards in my 
pocket: One is American Express and the other is an ExxonMobil 
credit card. They are the only two credit cards that I own. You 
have an employee, Mr. Lonnie Johnson, who moved to Washington 
some months ago, and I shared that with him when he first got 
here. It is a company that I am very fond of. So thank you for 
what you do.
    I have in front of me a quote from Secretary Chu, Nobel 
Peace Prize winner, scientist, that he made several days ago. 
For fear of misquoting him, I want to read it verbatim and 
simply ask you your comments on it.
    He said the following: I think it can be done responsibly. 
And the EPA and other agencies will be looking to ensure that 
it is done safely and responsibly. If it can be extracted in an 
environmentally safe way, then why would you want to ban it? 
The question is, can you do this right so it doesn't leak into 
the water table? I think you can, the Secretary said. But he 
also said that if it's done wrong, that it presents substantial 
risk. Can you do it incorrectly and start to pollute the water 
tables? Yes, he said.
    The Secretary said companies should not use fracking in a 
shale rock that is close to a water table or an unstable fault 
line. You don't want to be monkeying with shale that is very, 
very close to the water table, the Secretary said. There are a 
hundred ways to mess this thing up.
    Do you agree or--each of you, do you agree or disagree with 
the Secretary's assessment?
    Mr. Tillerson. Well, I think, you know, clearly it is a 
risk that we have to manage, and the expectation is that we 
manage it well.
    And I don't know if you were in the room a moment ago or 
not, Congressman, but I commented on testimony that has been 
given to the Congress last June by the EPA, both from the 
results of a 4-year study they did in 2004, where they could 
not find a single documented case of groundwater contamination 
from hydraulic fracturing. To our knowledge, there have been a 
million wells fracked and no documented cases of contamination 
of groundwater from hydraulic fracturing.
    In your places, along with some of these graphics, there is 
a graphic in there that tries to describe why that happens. It 
is not just by happenstance. It is a picture of how wells are 
designed. It looks like this.
    And to Secretary Chu's comment that you don't want to frack 
near a freshwater zone, that is exactly correct. And we 
wouldn't want to fracture near freshwater zones, because if the 
fracture penetrates the freshwater zone, we haven't achieved 
what we spent the millions of dollars to do, which is frack the 
hydrocarbon zone.
    This all starts with the well design. And when these wells 
were first drilled--and it was commented on by Congressman 
Doyle--State agencies already regulate how these wells will be 
drilled. And there are multiple layers of steel casing that 
protect the freshwater zones as the well is being drilled, just 
so we can simply get the well drilled. Those same steel casings 
then protect the freshwater zone during the hydraulic 
fracturing process.
    My second assignment with ExxonMobil in 1976 was to design 
hydraulic fracturing procedures for a new type gas play in East 
Texas. And the number of people that are on the location during 
a fracture procedure, there is a large number. And a lot of 
those people are there to monitor the pressures on the 
formation and the various casing streams to ensure there is no 
failure of the protective structures that have been put in 
place. So it can be done safely; it has been done safely.
    Mr. Butterfield. Well, tell me about diesel fuel. Is diesel 
fuel used in the process?
    Mr. Tillerson. Diesel fuel can be used in some fracturing 
formulations. But, again, it is----
    Mr. Butterfield. Does that enhance the risk of danger?
    Mr. Tillerson. No. The risk would be if you ruptured these 
multiple layers of casing and the fluid went where you didn't 
want it to go. But you have hundreds to thousands of feet of 
rock strata between the freshwater and the hydrocarbon-bearing 
shale, and then you have multiple layers of steel casing as 
well.
    So it is a risk that we know we have to manage, and the 
wells have been designed over the last many decades to do just 
that. And that is why----
    Mr. Butterfield. I am running out of time here. In managing 
that risk then, do you feel that the public has a right to know 
what chemicals are actually being pumped into the ground in 
their communities and whether it is close to a drinking source?
    Mr. Tillerson. Well, we wouldn't object to any disclosure 
on the contents of what is in the frack fluid. And, in fact, 
today, on these locations, in order to comply with other 
regulations, there are material safety data sheets on chemicals 
that are on the location, so that if there is--and that is 
primarily if there is either a surface spill or an exposure to 
a human that could be harmed by the exposure, that those 
material safety data sheets are available so people know 
exactly what is on that site. So there is already some level of 
disclosure.
    We understand the concern of some of the service providers 
who formulate the frack fluids that they are concerned about 
loss of competitive advantage. We would work with them and see 
if we couldn't find a way to accommodate fuller disclosure or 
full disclosure of the contents of the frack fluid. Based on 
our knowledge of what is in those fluids, there is nothing that 
gives us great concern, in the past or today.
    Mr. Butterfield. I have run out of time. Mr. Simpson, we 
will see you next time.
    Mr. Simpson. Thank you.
    Mr. Butterfield. All right. I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oklahoma, Mr. 
Sullivan.
    Mr. Sullivan. Thank you, Mr. Chairman.
    And I appreciate what you are saying, Mr. Tillerson. You 
have hit on everything I wanted to talk about, but I think it 
is so important that I want to discuss it again here real 
quick, if we could.
    In regards to hydraulic fracking, it seems almost ludicrous 
that we are trying to do this. Like you said, over the past 60 
years, not a single documented case of drinking water 
contamination has ever been credibly tied to hydraulic 
fracturing due to engineering or technical safeguards designed 
to protect groundwater. None. It has been going on for, like, 
60 years.
    Also, the energy recovered from hydraulic frack--and this 
just shows you important it is to the Nation's energy supply--
accounts for 30 percent of the U.S. recoverable oil and gas 
reserves and has added more than 7 billion barrels of oil and 
600 trillion cubic feet of natural gas to the U.S. energy 
supply, showing you how important this is.
    Also, like you stated too, Mr. Tillerson, a major EPA 
study--this is the EPA who wants to do this--a major study by 
the EPA completed in June of 2004 concluded that hydraulic 
fracturing does not--does not--pose any significant 
environmental risks. Yet we are trying to do this.
    Also, you are right; you know, the States are the best 
people that are equipped to do this, to regulate this. They are 
the ones that know the players, they know the geology, they 
have been there before, they have seen it. It is the best way, 
instead of having another layer of bureaucracy, again, impeding 
on jobs. This is about jobs.
    Also, I wanted to see if you guys could tell us what growth 
in the natural gas industry, especially in unconventional 
resources, means for jobs in the U.S.; what States and regions 
of the countries will have jobs created through ExxonMobil-XTO 
natural gas development and production. If you both could 
comment on that.
    Mr. Tillerson. I commented earlier on the growth that we 
expect natural gas to take here in the United States, about 20 
percent. Half of power generation, we think, over the next 20 
years is going to be fired by natural gas.
    And if you look at the profile of gas supply that we expect 
to come from the unconventional resources, that could lead to 
jobs. In excess of 300,000 jobs would be created over the next, 
you know, couple of decades to support that activity. And they 
would be created--and you can look at that map, and you can see 
where these basins fall. And so if you are in a State that the 
basin is under, you could expect to see activity in your State.
    And I think it has been commented, in Pennsylvania, 
enormous job creation, 50,000 jobs in the last couple years. 
And we expect that to approach 100,000 jobs because of the 
activity in the Marcellus Shale; and a contribution to 
Pennsylvania's budget of $8 billion out of the Marcellus Shale 
activity.
    So it has both an enormous job-creation benefit as well as 
revenue benefits to local governments, State governments, and 
to the Federal Government.
    Mr. Simpson. Yes, you know, I look at our direct 
employment, going from a handful of employees to 3,300. Our own 
personal growth there in Fort Worth tends to track, you know, 
the volume growth of the company. So our employment has been 
growing at 20 to 30 percent a year, directly of the individuals 
there.
    We also generally run the second most drilling rigs in 
America in exploring and developing this resource, and that is 
many thousands of jobs directly as a result of this activity 
that we cause with our drilling activity, and that is also 
going to be growing. So in quantifying, you know, the job 
growth in the industry, it has been enormous over the years. It 
is going to be more.
    If you look at natural gas production in my career, you go 
back to when I began in 1976, natural gas production then did 
not grow in this country until recently. So the last 30 years, 
mostly it has been a struggle to maintain and offset decline 
and not to grow this resource. During the last 3 or 4 years is 
the first time in my career that I have seen you can actually 
grow this resource tremendously, leading to the benefits of 
both job and price and security for this Nation.
    So, that is the testimony from a guy who lived it. We 
generally lived off the scraps of old fields most of my career. 
And the exciting thing about this development is we now have 
the largest fields in history being found. The Hugenon and San 
Juan were the two largest fields in America ever discovered 
prior to the advent of these shales. To give you an order of 
magnitude, they were discovered in the 1920s. The shale 
discoveries of today probably represents five times the 
resource base that they ever delivered. And they were the two 
largest fields in this Nation.
    So it is not just replicating the past, it is reinventing 
the future. And so, along with that will come, you know, the 
job growth that is corollary to that. It is probably beyond the 
numbers we have talked about today, because they are far-
reaching, including the marketplace, products and simulations 
that will be derived from the growth of this product.
    Mr. Sullivan. And we appreciate the 200 jobs in Oklahoma, 
and hopefully there will be more.
    And, also, I was going to ask both of you, too, what does 
this merger signify, do you think, to the American people about 
natural gas as a fuel for the future? And what do you think the 
takeaway should be on this today that you would like to see the 
American people see? Because I think it is pretty exciting.
    Mr. Markey. If you can both answer very briefly.
    Mr. Tillerson. I would just say it is a signal to the 
American people that we have an enormously valuable natural 
resource that can be delivered and can be delivered to provide 
them a new source of reliable, affordable energy.
    Mr. Simpson. Yes, I would say that, you know, the good news 
for America is we have a more secure energy supply at a lower 
cost for the foreseeable future, and an event in my career that 
hasn't happened before.
    Mr. Markey. Thank you very much.
    The gentleman from Louisiana, Mr. Scalise, is recognized.
    Mr. Scalise. Thank you, Mr. Chairman.
    I have been out to Shreveport, where the Haynesville Shale 
play is really being run out of, and there is a lot of area out 
there; at the time, the largest natural gas find in the history 
of our country. And now we are finding more, as you have talked 
about, more finds in different parts of the country. Just last 
week, there was announced a tract of the Gulf Mexico, just off 
the coast of Louisiana, that they thought was completely dried 
up, where they found massive reserves of natural gas there as 
well.
    So, you know, there are more natural gas and oil finds that 
we are coming up with as the technology advances. And I want to 
ask you both about the technology advancements, because it gets 
lost in the shuffle a lot. People talk as if the technologies 
of 20 years ago were still being employed.
    You know, I like to tell my colleagues that the best place 
to go fishing in the Gulf of Mexico is next to an oil rig 
because, number one, with the environmental safeguards that are 
in place, it is one of the best habitats for fish. They love 
congregating and thriving in that area. And the fishing 
captains know that because that is where they take people to go 
fishing. And you will catch some really good fish and some of 
the best eating you are going to find right there next to the 
oil rig. In fact, a motorboat riding around the Gulf of Mexico 
is going to leak more oil than a large offshore rig. And yet, 
you know, you listen to some of these people that want to limit 
the production of our country's natural resources, and they act 
as if those technological advances never occurred.
    And so I want to get your take, first, on if Congress does 
do what I think would be very bad policy, not just on cap and 
trade but also on limits of fracking, what would that mean to 
the kinds of production that is going on right now in the 
United States? And if both of you can answer.
    Mr. Tillerson. Well, I think as Mr. Simpson has alluded, in 
the unconventional area, if you cannot hydraulically fracture 
these wells, then you wouldn't drill them. So you would just 
stop at that point. Because you cannot commercially recover the 
gas that is trapped there. The same would be true for the 
emerging oil shale plays, like the Bakken in North Dakota, has 
to be fracture-stimulated.
    And even beyond the unconventional plays, a lot of 
conventional wells utilize hydraulic fracturing to get the 
rates up to commercial level. It allows you to produce more 
and, therefore, improve the economics. So if you remove 
hydraulic fracturing as a technique, we don't have an 
alternative technique today that will achieve the same result 
from the wells.
    We have a lot of technology tools, we bring them all 
together; that is what allows us to make these things economic. 
But there is not a replacement for hydraulic fracturing to 
achieve the same result in these types of resources.
    Mr. Scalise. And any idea on the type of job losses our 
country would experience if we weren't able to do that?
    Mr. Tillerson. Well, all of the job growth we have talked 
about would pretty well come to a halt, and then you would just 
allow the wells that are producing to decline and be depleted. 
So you clearly would cease job growth. And then there would be 
some, obviously, immediate effect on job losses, because you 
wouldn't drill the wells anymore if you couldn't fracture them. 
So all the employment that goes with drilling activity and to 
support that would immediately cease.
    Now, you have a graphic in front of you that talks about 
the number of jobs the industry by and large creates, and a lot 
of those jobs would be under risk if there were some provision 
made that we could no longer utilize this technique or made it 
so costly that it didn't give you the economic results you 
needed.
    Mr. Simpson. You know, one of the exciting things about the 
development of technology that you alluded to earlier and one 
of the exciting things about joining forces with Exxon for our 
company is the prospect of further advances.
    We generally only recover 30 or 40 percent of the 
hydrocarbons in place. And so these estimates of a 100-year 
supply are pretty well founded on those types of recoveries in 
the areas we are talking about. I believe in generations to 
come and years to come, that recovery factor will increase, and 
so these reserves will be larger, and that will lead to further 
growth in the security of America.
    And, also, companies such as ExxonMobil, I think, are the 
most likely, with the R&D they do and the resources they devote 
to it. I think that is, again, a partnership that we are 
joining in that is more likely to lead to that kind of 
technology than not. So that is a force they bring to this 
table.
    But, again, it is not widely understood that when you talk 
about recovery of oil and gas, you are only talking about a 
small fraction of what is in place. And that is to come for the 
future.
    I have seen it advance in my career tremendously. We didn't 
know what horizontal drilling was in 1986 and we had never 
heard of it. And then the shales were kind of laughed at over 
the years, like, ``Yes, there may be some gas there, but it is 
not economic.''
    And so the advancement that I have seen in this 30 years is 
tremendous, and there is room for that type of advancement into 
the future should the resources be deployed and you can 
continue to study it with active interest and talented people. 
And I think our organization has very talented and skilled 
people, and I think so does theirs. And the teaming of the two 
will lead to further innovation.
    Mr. Scalise. I know that some of this debate has been 
brought up as a safety issue and trying to be couched in terms 
of water safety. And, of course, as you have pointed out and 
others on the committee have pointed out, there are many 
studies that have been done, and not one has suggested that 
there is any kind of threat to the water safety.
    So this really has nothing to do with safety. It is about a 
policy decision we are going to make, and do we really want to 
utilize the resource that this country has and the ability that 
we have to make our country independent of especially Middle 
Eastern oil, countries that don't necessarily want to do good 
things with the money that they are getting to our country.
    Where would exploration come from? Because our country 
still has a large appetite for energy consumption, and energy 
exploration is an international industry. Where would the 
natural gas come from if we weren't able to get it from the 
United States?
    Mr. Tillerson. Well, the current limited imports that the 
U.S. does have largely come from Canada by way of pipeline, and 
then through LNG imports as we have added capacity, receiving 
capacity, to access more of the LNG markets that are also 
growing globally. So it obviously would come from those two 
sources.
    Mr. Scalise. And, obviously, as we talk about energy 
independence and those of us that want to have a comprehensive 
energy policy that allows us to break that dependence on Middle 
Eastern oil, these kind of radical policies would only increase 
our dependence on foreign oil. At a time when we should be 
doing the opposite and we should be creating jobs, this would 
run jobs off and make our country more dependent on foreign 
oil.
    I will close on that and let you comment if you want.
    Mr. Simpson. Yes, Congressman, I agree that there would be 
a further dependence on international markets. You know, the 
LNG is the competition for its price. It is going to be 
allocated, a lot of it, towards the highest price in the world. 
To attract it here would be price.
    I would submit that, you know, a good example of where we 
are today, in the last decade I have seen natural gas spike to 
$10 or $15 several times, generally in relation to cold 
winters, such as we are having now. I look at gas today, it is 
a little over $5. The energy equivalent on that, you multiply 
it times six, so you get $30-something a barrel versus the 
price of oil. So, clearly, natural gas is a relative bargain.
    I think that bargain is being driven largely by supply, 
because it is a commodity. And, as to the price in the future, 
no one knows. I can just comment on my observation. I know we 
are having a cold winter, and I know I have seen it spike in 
the last decade several times when we had cold weather.
    This time, we had record supply going into this winter, 
almost four CTF. That is almost 20 percent of our demand in the 
ground ready for winter. So between that and the near-record 
production that we are experiencing from our own supply in 
America would be my submission as to why you are enjoying 
natural gas prices that are a fraction of what it would have 
been otherwise.
    Mr. Scalise. Thank you, and I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Arizona, Mr. 
Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman.
    And thank you, gentleman, for being with us. I apologize 
that I wasn't able to stay for all of the answers to the 
questions that you provided. But I want to start, Mr. Simpson, 
by talking to you and asking you a question or at least making 
a comment.
    First of all, I applaud you as an entrepreneur. I think the 
Nation is better off for what you have been able to find and 
do.
    Mr. Simpson. Thank you.
    Mr. Shadegg. But I must tell you that when you told the 
story about the house that you had in Texas where you couldn't 
get natural gas to your home, yet it sits on one of the largest 
natural gas resources or fields we now know of, you then said, 
given that and given the realities of the natural gas we know 
is there and can now get out with today's technology, including 
hydraulic fracturing, you can't imagine--this is your 
statement--you said, ``I can't imagine that the Congress would 
pass laws restricting us from getting to those resources.''
    Trust me, I find that statement stunningly politically 
naive, and I think there is a grave risk that the Congress 
might do that and that you need to be aware of that risk. And 
that is why it is in this agreement.
    I have no problem with the government making rational 
decisions not to go after known resources if, in fact, they 
can't be brought out in an environmentally safe way. But I 
think it is important that that be an informed decision.
    I believe you would tell me that if we ban hydraulic 
fracturing, either outright or through the unintended 
consequences of legislation we pass, then all of these numbers 
that we have been talking about--the 100-year supply, the 
reasonable price that you just talked about--you would tell me 
are gone. Is that correct?
    Mr. Simpson. There is a risk they are gone.
    Mr. Shadegg. Because I guess with all of these fields, the 
Barnett, Haynesville, Fayetteville, Marcellus, West Virginia, 
Ohio, and Woodford, with all of those we are dependent upon 
hydraulic fracturing to get to them, right?
    Mr. Simpson. That is correct, Congressman.
    Mr. Shadegg. So if we suddenly could not get to them, our 
domestic supply would drop precipitously?
    Mr. Simpson. Perhaps a third.
    Mr. Shadegg. And the price would go up accordingly?
    Mr. Simpson. I believe that to be the case.
    Mr. Shadegg. Mr. Tillerson, I want to commend you for the 
thought of putting into the agreement the condition that it 
goes through only if the Congress doesn't specifically or by 
unintended consequences make hydraulic fracturing impossible. 
And the reason I want to commend you for doing that is, again, 
I have no problem with the American people making rational 
policy decisions to protect the environment, but that requires 
an informed electorate. And I think one of the things we have 
done in this country is we have made natural resource decisions 
on oil and gas without the public having any idea.
    For example, I think the American public believes today 
that we are drilling offshore, that we have now opened up some 
of the areas of American offshore for drilling as a result of 
the spike in energy prices roughly 2 years ago. Guess what? 
That is completely false. And I think you know that. You know 
that technically they opened those lands up, but even where 
leases have been issued, lawsuits have been filed and there is 
no exploration or production going on.
    If the American people believe that we are going after our 
resources but, in fact, we are not, they can't make a rational 
decision. And I think when they don't know that the Government 
is adopting policies which are costing them jobs or driving the 
cost of their energy through the roof, then they cannot make a 
rational decision.
    And I would bet that there are thousands of ExxonMobil 
stockholders who, if they study this deal and are aware of it 
and look at it and say, wow, what is that, why did we put that 
in, and you say to them what you said to us, well, we had to 
put it in because the Congress might do something like that, 
the Congress seems to love to regulate just for the fun of 
regulating, often when there is no benefit to the regulation, 
if they figure that out, then maybe they will decide to get 
politically active and at least make the debate on the inside 
here be a rational one based on facts.
    And I guess my question of you is, do you agree that if we 
pursue policies that prohibit hydraulic fracturing, it will 
have a devastating impact on the price of energy and on jobs in 
the U.S.?
    Mr. Tillerson. Yes. If you pursue a hydraulic fracturing 
policy or any policies that restrict access to the natural 
resources of the country, it has a detrimental effect.
    Mr. Shadegg. And you would agree with me, for example, that 
there is no meaningful leasing or no meaningful production 
going on offshore in America today because of either current 
policies or lawsuits in place following the repeal of some of 
those policies?
    Mr. Tillerson. We are approaching what is likely to be the 
lowest level of leasing activity in many, many years.
    Mr. Shadegg. And the Americans are paying a huge price for 
that?
    Mr. Tillerson. Well, we certainly could have a lot more 
domestic resource development activity and production than we 
have today if that access were granted.
    Mr. Shadegg. I will conclude with this. As a general 
proposition, do you think that we do a more environmentally 
sensitive job of removing natural resources from the Earth, or 
at least as sensitive, as the other countries around the world?
    Mr. Tillerson. Well, the U.S., by and large, is the 
standard bearer because of the history of the industry here, 
the evolution of the industry, and the regulatory environment, 
much of which has been very helpful to setting standards 
elsewhere in the world.
    So I think your observation I would agree with, that I 
don't think you will find a more rigorous regulatory 
environment around our industry anywhere else in the world.
    Mr. Shadegg. Thank you.
    Mr. Markey. Great. The gentleman's time has expired.
    All time for questions from subcommittee members has 
expired, which allows us to then recognize the gentlelady from 
Colorado, Ms. DeGette, who, by unanimous consent, has been 
granted 5 minutes to ask questions of the panel.
    Ms. DeGette. Thank you so much, Mr. Chairman.
    Thank you again, both of you gentlemen, for coming today.
    Mr. Tillerson, you testified in response to a couple of 
questions ago that at least ExxonMobil doesn't object to 
disclosing what is in fracking fluid, correct?
    Mr. Tillerson. That is correct.
    Ms. DeGette. Would that be also your position, Mr. Simpson?
    Mr. Simpson. It would be, Congresswoman.
    Ms. DeGette. And recognizing that in my legislation and 
also in my opinion I don't think that the proprietary chemical 
formula should have to be disclosed unless there is some 
emergency, I would assume that would be both of you gentlemen's 
positions as well.
    Mr. Tillerson, you wouldn't want the proprietary 
information disclosed.
    Mr. Tillerson. That is correct.
    Ms. DeGette. And, Mr. Simpson, would that be correct?
    Mr. Simpson. That is correct.
    Ms. DeGette. Now, that is good news to me, because that is 
all my bill does. And I see my friend from Arizona has left, 
but, as I said in my opening statement, I have absolutely no 
intention of outlawing fracking. In fact, I think fracking is 
important to get a lot of these reserves out of the ground.
    And I think, Mr. Tillerson, you testified earlier that 
fracking has been around for 60 years. But I think you would 
agree with me that it has been in about the last 10 years or so 
that it has been used a lot more than it had been because of 
the necessity of getting some difficult natural gas out of the 
ground. Correct?
    Mr. Tillerson. Well, no, I don't--I don't know.
    Ms. DeGette. You don't agree with that?
    Mr. Tillerson. I would have to look, because there were 
periods of times in the 1970s----
    Ms. DeGette. That it was used.
    Mr. Tillerson [continuing]. That hydraulic fracturing was 
used extensively to develop tight gas reservoirs and tight oil 
reservoirs. So there have been periodic times of higher or 
lower activity.
    Ms. DeGette. OK. But it is being used a lot more now, 
correct?
    Mr. Tillerson. It is being used extensively in these 
unconventional plays.
    Ms. DeGette. OK. Now, you testified that it is your 
belief--and I think also, Mr. Simpson, you agreed--that you 
believe State regulations are the best way to monitor fracking 
activities across the 50 States, correct?
    Mr. Tillerson. Correct.
    Ms. DeGette. Are you aware that only four States have laws 
specifically directed at hydraulic fracturing? Yes or no?
    Mr. Tillerson. Some States where these plays are emerging 
are putting in place their regulatory structure.
    Ms. DeGette. OK. But right now only four States have it, 
correct?
    Mr. Tillerson. And they can look to other States for 
guidance.
    Ms. DeGette. Yes or no, sir?
    Mr. Tillerson. Well, I don't--I would have to look----
    Ms. DeGette. You don't know. OK. Is it your position----
    Mr. Tillerson. I acknowledge that some States have a more 
mature regulatory structure around this area than others.
    Ms. DeGette. OK. Thank you. I apologize; I only have a few 
minutes.
    But it would be your position, I would assume then, that 
the rest of the States that don't have specific hydraulic 
fracturing statutes have other laws that might implicate this, 
correct?
    Mr. Tillerson. They have other laws that would govern 
certain aspects of it, yes.
    Ms. DeGette. OK. So my question is, for your company, 
ExxonMobil, how much money does your company spend on complying 
with the regulatory processes of the 50 States every year?
    Mr. Tillerson. I would have to get you that number.
    Ms. DeGette. Would you be willing to do that?
    Mr. Tillerson. I will see if we can get you something.
    Ms. DeGette. Mr. Chairman, I ask unanimous consent that the 
gentleman be allowed to supplement his statement with that 
information.
    Mr. Markey. Without objection.
    Ms. DeGette. And, Mr. Simpson, how much does your company 
spend annually complying with these different 50 State laws on 
disclosure?
    Mr. Simpson. I would need to get that specific number.
    Ms. DeGette. And would you be willing to do that, as well, 
sir?
    Mr. Simpson. I would.
    Ms. DeGette. Thank you very much. I appreciate that.
    And here is my next question. Is it your view then, Mr. 
Tillerson, since you are willing to have the components of 
fracking fluid disclosed, but you do not want to see that 
happen under the Safe Drinking Water Act. Would that be your 
testimony today?
    Mr. Tillerson. That is correct.
    Ms. DeGette. And would it be your view because that would 
be an additional regulatory hurdle that you would have to jump 
through?
    Mr. Tillerson. It is because the devil is always in the 
details. And when you turn this over to the EPA----
    Ms. DeGette. OK. Because it would be an additional 
regulatory hurdle? I mean, what does that mean, the devil is in 
the details?
    Mr. Tillerson. Well, it means I don't know how the EPA is 
going to enact or implement the regulation that you are 
promoting in your bill.
    Ms. DeGette. All it says, sir, is that----
    Mr. Tillerson. I take this, being a very secure person, 
that ``all it says is,'' but I have dealt with the EPA----
    Ms. DeGette. Sir, can I ask the question, please?
    If your company has to report the fracking materials to the 
EPA under the Safe Drinking Water Act, just like every other 
person who puts things into the ground, how much more would it 
cost your company every year in regulatory compliance?
    Mr. Tillerson. I do not know, because I don't know how the 
regulation is going to be written, nor do you.
    Ms. DeGette. OK. And, therefore, can you say today whether 
or not simply reporting the components, which you agree should 
be reported under the Safe Drinking Water Act, would make it 
commercially impracticable?
    Mr. Tillerson. I do not know.
    Ms. DeGette. You do not know.
    And what about you, Mr. Simpson? Do you know?
    Mr. Simpson. I do not know either.
    Ms. DeGette. And has anybody told you how much more it 
would cost to report it under the Safe Drinking Water Act 
versus 50 different State laws?
    Mr. Simpson. No one has told me.
    Ms. DeGette. And have they told you, Mr. Tillerson?
    Mr. Tillerson. No.
    Ms. DeGette. Thank you. I have no further questions.
    Mr. Markey. OK. The gentlelady's time has expired, and all 
time for this hearing has expired as well.
    You know, my favorite show when I was a kid was ``Rocky and 
Bullwinkle.'' And they used to have this segment once a week 
where Mr. Peabody, who was kind of a scientist type, would take 
this little boy, Sherman, into the WABAC Machine to study 
fractured history.
    And that is a little bit like what this hearing is like to 
me. Because, in 1978, we sat in this room, we had a big 
hearing, I was on the subcommittee. America was running out of 
natural gas. We had a natural gas crisis. This is the testimony 
coming from the natural gas industry to the committee. ``It is 
too precious of a resource to actually be used in the 
generation of electricity.'' That is where we were in 1978, 
listening to the natural gas industry.
    So it is a bit of a fractured history here, now that the O. 
Henry ending is that we probably have 2-1/2 to three times more 
natural gas than we have oil, that it has half the carbon 
emissions of coal in electrical generation, and that it is in 
areas of the country where it is going to be most needed. So it 
is very interesting.
    But even as I was listening here over and over again in the 
hearing, it is continually heard that there might be some 
secret conspiracy on this side of the aisle to ban hydraulic 
fracturing. But I just want to say that that would be 
fracturing reality in the same way that Mr. Peabody and Sherman 
used to fracture it by taking Sherman back in the WABAC 
Machine.
    So I just want to again make that clear. There is no secret 
plot to do that. There is a goal, to make sure that it is used 
safely and with sound environmental regulations, but I haven't 
heard from either of the witnesses today that they oppose those 
goals. How we achieve them might be something we continue to 
discuss, and Congresswoman DeGette is raising that. But I just 
want to once again say there is no secret plot here to ban 
hydraulic fracturing, given the fact that there have been 1 
million wells, I heard, that have been drilled using that 
technique.
    I think what we heard here today is that ExxonMobil is 
putting down a $41 billion bet on what America's energy future 
will be and that it is moving in a low-carbon direction. And I 
think that is a smart bet on the part of ExxonMobil. And I 
appreciate Mr. Tillerson's testimony that humans do contribute 
to global warming. He doesn't yet know what percentage, but yet 
it does play a role. And I appreciate that, because that helps 
us in terms of moving forward with policies to that do promote 
low-carbon futures, because I think that helps to push us in 
the correct direction.
    I think, as well, it helps us to invest in America, create 
jobs here in our country, and to create an environment where we 
do develop strategies to back out that imported oil, to back 
out the sources of energy that do pollute more within our 
economy. And I think that if Waxman-Markey is adopted, that it 
will telescope the time frame that it takes for us to move to 
an era where we have exploited all of these opportunities which 
natural gas are presenting to our country. And my hope is that 
we can move in that direction.
    So we thank you for your testimony. We look forward to the 
results of the study of the safety components of the techniques 
that are used in hydraulic fracturing that the Congress has 
urged the EPA to undertake, but that only helps us to better 
put together a comprehensive policy here in our country.
    So, with the thanks of the subcommittee, Mr. Tillerson, Mr. 
Simpson, this hearing is adjourned. Thank you.
    [Whereupon, at 1:05 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]


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