[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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____
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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
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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
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.]
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