[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                          HARNESSING AMERICAN


                          RESOURCES TO CREATE


                           JOBS AND ADDRESS


                        RISING GASOLINE PRICES:


                         IMPACTS ON BUSINESSES


                             AND FAMILIES

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


                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                        Thursday, March 31, 2011

                               __________

                           Serial No. 112-14

                               __________

       Printed for the use of the Committee on Natural Resources



         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov



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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel


                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, March 31, 2011.........................     1

Statement of Members:
    Duncan, Hon. John J., Jr., a Representative in Congress from 
      the State of Tennessee, Prepared statement of..............    62
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     1
        Prepared statement of....................................     2
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................     3
        Prepared statement of....................................     5

Statement of Witnesses:
    Fox, Michael J., Executive Director, Gasoline & Automotive 
      Service Dealers of America, Inc............................    26
        Prepared statement of....................................    28
    Graves, Hon. William P., President & CEO, American Trucking 
      Association, Inc...........................................     6
        Prepared statement of....................................     7
    Harbert, Karen A., President and Chief Executive Officer, 
      Institute for 21st Century Energy, U.S. Chamber of Commerce    15
        Prepared statement of....................................    17
    Shawcroft, Don, President, Colorado Farm Bureau, Testifying 
      on behalf of the American Farm Bureau Federation...........    22
        Prepared statement of....................................    23


OVERSIGHT HEARING ON ``HARNESSING AMERICAN RESOURCES TO CREATE JOBS AND 
 ADDRESS RISING GASOLINE PRICES: IMPACTS ON BUSINESSES AND FAMILIES.''

                              ----------                              


                        Thursday, March 31, 2011

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 10:02 a.m. in Room 
1324, Longworth House Office Building, Hon. Doc Hastings 
[Chairman of the Committee] presiding.
    Present: Representatives Hastings, Duncan of Tennessee, 
Bishop, Lamborn, Wittman, McClintock, Thompson, Denham, Tipton, 
Gosar, Southerland, Landry, Fleischmann, Markey, Kildee, 
DeFazio, Napolitano, Holt, Grijalva, Costa, Lujan, and Sutton.

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

    The Chairman. We will come to order. The Chairman notes the 
presence of a quorum. The Committee on Natural Resources is 
meeting today to hear testimony on Harnessing American 
Resources to Create Jobs and Address Rising Gas Prices: Impacts 
on Businesses and Families. Under Rule 4[f], opening statements 
are limited to the Chairman and Ranking Member of the Committee 
so that we can hear from our witnesses more quickly.
    However, I ask unanimous consent to include all Members' 
opening statements if they desire to have them submitted by the 
close of business today. Without objection, so ordered. The 
Chair will now recognize himself for his opening statement.
    Similar to the Summer of 2008, today's escalating gas 
prices are affecting the way American families budget and the 
way small businesses operate across this country. The Energy 
Information Agency (EIA), an agency within the Department of 
Energy, already projects that the national average price of 
gasoline will be $3.56 this year. This is over a 90 percent 
increase from the $1.85 per gallon in January 2009. Any 
increase in gas prices impacts our economy.
    According to a study by Cameron Hanover, every penny 
increase in the price of gasoline costs consumers a cumulative 
$4 million per day. This means that the 60-cent increase in gas 
prices since the beginning of the year has cost American 
families a total of approximately $7.3 million. Higher gasoline 
prices have always had a ripple effect through our economy. For 
example, high gasoline prices cause family vacations to be 
canceled. That impacts tourism and the restaurant and 
hospitality industries that are vital to local economies. These 
businesses, in turn, reduce their hiring and their purchases.
    Our government should take steps to address rising gasoline 
prices by developing our own American energy resources. 
Unfortunately, since taking office, President Obama and his 
Administration have done exactly the opposite and have 
repeatedly blocked access to American energy. I wish the 
President would show the same enthusiasm for U.S. energy 
production as he has shown for foreign energy production in 
countries such as Brazil. While speaking in Brazil about their 
recent oil discoveries, President Obama said, and I quote, 
``When you are ready to start selling, we want to be one of 
your best customers.''
    The President should instead focus on creating American 
energy and American jobs. Republicans, meanwhile, are actively 
moving forward with solutions to expand American energy 
production. As part of the House Republicans' American Energy 
Initiative, I recently introduced three bills aimed at 
increasing offshore energy production. Reversing President 
Obama's Offshore Moratorium Act requires the Administration to 
lease in areas containing the most oil and natural gas and a 
goal of producing 3 million barrels of oil by 2027. This would 
reduce imports by one-third.
    Yesterday, the President also announced the goal of cutting 
imports by one-third. We share this goal, but we clearly have 
different ways of getting there. President Obama has a ``drill 
nowhere new'' plan. Republicans have a ``drill smart'' plan. 
The second bill, Putting the Gulf Back to Work Act, would end 
the de facto moratorium in the Gulf by setting a firm timeline 
for the Secretary to act on permits, and my third bill, The 
Restart the American Leasing Act Now, would require that lease 
sales be held on offshore Virginia and the Gulf of Mexico that 
were canceled or delayed by the Obama Administration. Because 
of the Administration's action, 2011 will be the first year 
without an offshore lease since 1958.
    As we learned at a recent hearing in this Committee, the 
Congressional Research Service calculates that the U.S. has the 
most potential natural gas, oil and coal reserves in the world. 
It is imperative that America starts developing more of these 
energy resources to create jobs and to help jumpstart our 
struggling economy. Ultimately, America has a choice to either 
develop our own energy resources, or allow our economy to be 
subject to the whims of unfriendly foreign sources of energy.
    It is unfortunate that the threat of $4 or $5 gasoline has 
to be the impetus for this conversation. But if nothing is 
done, eventually, $5-a-gallon gasoline won't be a threat, it 
will be a reality. With that, I yield back my time and 
recognize the gentleman from Massachusetts, Mr. Markey.
    [The prepared statement of Chairman Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                     Committee on Natural Resources

    Similar to the summer of 2008, today's escalating gasoline prices 
are affecting the way American families' budget and the way small 
businesses operate across the country. The Energy Information 
Administration (EIA)--an agency within the Department of Energy--
already projects that the national average price of gasoline will be 
$3.56 per gallon in 2011. This is over a 90 percent increase from $1.85 
per gallon gasoline in January 2009. Any increase in gasoline prices 
impacts our economy. According to a study by Cameron Hanover, every 
penny the price of gasoline increases, it costs consumers a cumulative 
$4 million per day. This means that the 60 cent increase in gas prices 
since the beginning of the year has cost American families a total of 
approximately $7.3 billion.
    Higher gasoline prices also have a ripple effect on our economy. 
For example, when high gasoline prices cause family vacations to get 
canceled, that impacts the tourism, restaurant and hospitality 
industries that are vital to local economies. These businesses in turn 
reduce their hiring and purchases. Our government should take steps to 
address rising gasoline prices by developing our own American energy 
resources. Unfortunately, since taking office, President Obama and his 
Administration have done exactly the opposite and have repeatedly 
blocked access to American energy.
    I wish the President would show the same enthusiasm for U.S. energy 
production as he has shown for foreign energy production in countries 
such as Brazil. While speaking in Brazil about their recent oil 
discoveries, President Obama said, ``When you're ready to start 
selling, we want to be one of your best customers.''
    The President should instead focus on creating American energy and 
American jobs.
    Republicans meanwhile are actively moving forward with solutions to 
expand American energy production.
    As part of House Republican's American Energy Initiative, I 
recently introduced three bills aimed at increasing offshore energy 
production.
    The Reversing President Obama's Offshore Moratorium Act requires 
the Administration to lease in areas containing the most oil and 
natural gas and sets a goal of producing 3 million barrels of oil per 
day by 2027. This would reduce foreign imports by nearly one-third.
    Yesterday, the President also announced a goal of cutting imports 
by one-third. We share this goal, but we clearly have very different 
ways of getting there. President Obama has a drill nowhere new plan. 
Republicans have a drill smart plan.
    My second bill, the Putting the Gulf Back to Work Act, would end 
the de facto moratorium in the Gulf of Mexico by setting a firm 
timeline for the Secretary to act on permits.
    My third bill, the Restarting American Offshore Leasing Now Act 
would require that lease sales be held in offshore Virginia and the 
Gulf of Mexico that were canceled or delayed by the Obama 
Administration. Because of the Administration's actions, 2011 will be 
the first year without an offshore lease sale since 1958.
    As we learned at a recent hearing in this Committee, the 
Congressional Research Service calculates that the U.S. has the most 
potential natural gas, oil and coal resources in the world.
    It's imperative that America starts developing more of these energy 
resources to create jobs, help jump start the struggling economy and 
strengthen our national security.
     Ultimately, America has a choice to either develop our own energy 
resources or allow our economy to be subject to the whims of unfriendly 
foreign sources of energy. It is unfortunate that the threat of $4 or 
$5 gasoline has to be the impetus for this conversation but if nothing 
is done, eventually $5 gasoline won't be a threat--it will be the 
reality.
                                 ______
                                 

 STATEMENT OF HON. EDWARD MARKEY, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, very much. When John 
Lennon penned the song ``Imagine'' in 1971, it was an anthem 
for dreamers in search of a Utopia here on Earth. Forty years 
later, we will hear today about the pursuit of another 
imaginary Utopia with the majority and the oil industry 
harmonizing on the same refrain, imagine. Imagine a world where 
the price of oil is determined by a free market and where an 
increase in domestic drilling might lower the price for 
consumers. Imagine a world where President Obama is locking up 
our domestic resources and preventing American oil production.
    Imagine there was no BP oil spill, and that isn't easy even 
if you try, and imagine that the majority is truly for an ``all 
of the above'' energy strategy and that they are serious about 
developing renewable energy on public lands. Unfortunately, 
these are all dreams. The oil market isn't free. It is a rigged 
monopoly, manipulated by a cartel that is draining the wealth 
out of the American economy. Any increase in the domestic 
production of oil can simply be offset by cuts in OPEC 
production so that the price remains as high as possible.
    The Administration is not locking up public lands and 
preventing energy production. Forty percent of all public lands 
and 60 percent of the public lands in the lower 48 are 
currently open to energy development. Roughly 80 percent of all 
oil and gas resources on the Outer Continental Shelf are in 
areas where drilling is allowed. Our domestic oil production is 
at its highest level in nearly a decade. As a result, the five 
largest oil companies made nearly $1 trillion in profits over 
the last decade while consumers paid record prices at the pump.
    With oil prices sky high and with 61 million acres of 
public land under lease on which they have not yet even started 
producing oil, the coming decade is looking to be just as 
profitable for big oil and just as painful for the American 
people. There is no de facto moratorium. The temporary pause on 
new deepwater wells in the Gulf occurred in the wake of the 
worst environmental disaster in American history. Once industry 
finally demonstrated that it had the capacity to actually cap a 
deepwater blowout, the Interior Department issued the first 
deepwater permit within 11 days. In the last month, the 
Department has issued seven deepwater permits, exceeding the 
monthly average from 2009, before the BP spill.
    The majority is not supporting an energy policy that would 
move us toward renewable energy. In reality, the majority's 
plan could be called ``Oil Above All.'' Thus far, this 
Committee has held seven hearings on oil, and none on renewable 
energy. This comes on the heels of the Bush-Cheney renewable 
energy moratorium on public lands that led to zero permits for 
solar development and only four permits for wind projects being 
issued over an eight-year period.
    Yesterday, President Obama laid out a path to reduce our 
foreign oil imports by a third and lay the foundation for a 
transition to clean energy. In the short term, we should 
release oil from the Strategic Petroleum Reserve, which has a 
proven record of lowering prices and helping consumers, and is 
the one weapon we possess against OPEC. And we should increase, 
not cut, funding for the Commodities Futures Trading Commission 
so that it can implement the law and rein in excessive 
speculation in energy markets, which will also help consumers.
    In imaginary land, it may be possible to base our nation's 
energy policies on bumper sticker slogans. In the real world, 
we need responsible energy policies that respond to the great 
economic national security and environmental threats rather 
than a one-dimensional oil-above-all strategy that has been 
given to us. It is time to move away from an imagined drilling 
Utopia and work cooperatively on real solutions to the real 
energy problems that we face. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, Ranking Member, 
                     Committee on Natural Resources

    When John Lennon penned the song ``Imagine'' in 1971, it was an 
anthem for dreamers in search of a utopia here on Earth.
    Forty years later, we will hear today about the pursuit of another 
imaginary utopia with the majority and the oil industry harmonizing on 
the same refrain: ``Imagine.''
    Imagine a world where the price of oil is determined by a free 
market and where an increase in domestic drilling might lower the price 
for consumers.
    Imagine a world where President Obama is locking up our domestic 
resources and preventing American oil production.
    Imagine there was no BP oil spill. And that isn't easy, even if you 
try.
    And imagine that the majority is truly for an ``all of the above'' 
energy strategy, and that they are serious about developing renewable 
energy on public lands.
    Unfortunately, these are all dreams.
    The oil market isn't free. It is a rigged monopoly, manipulated by 
a cartel that is draining the wealth out of the American economy. Any 
increase in the domestic production of oil can simply be offset by cuts 
in OPEC production so that the price remains as high as possible.
    The Administration is not locking up public land and preventing 
energy production. 40 percent of all public lands, and 60 percent of 
the public lands in the lower 48, are currently open to energy 
development. Roughly 80 percent of all oil and gas resources on the 
Outer Continental Shelf are in areas where drilling is allowed. Our 
domestic oil production is at its highest level in nearly a decade.
    As a result, the 5 largest oil companies made nearly $1 trillion in 
profits over the last decade while consumers paid record prices at the 
pump. With oil prices sky high and with 61 million acres of public land 
under lease on which they have not yet even started producing oil, the 
coming decade is looking to be just as profitable for Big Oil and just 
as painful for the American people.
    There is no de facto moratorium. The temporary pause on new 
deepwater wells in the Gulf occurred in the wake of the worst 
environmental disaster in American history. Once industry finally 
demonstrated that it had the capacity to actually cap a deepwater 
blowout, the Interior Department issued the first deepwater permit 
within 11 days. In the last month, the Department has issued 7 
deepwater permits, exceeding the monthly average from 2009, before the 
BP spill.
    And the majority is not supporting an energy policy that would move 
us toward renewable energy. In reality, the majority's plan could be 
called ``Oil Above All.'' Thus far, this committee has held 7 hearings 
on oil and none on renewable energy. This comes on the heels of the 
Bush-Cheney ``renewable energy moratorium'' on public land that led to 
zero permits for solar development and 4 permits for wind projects 
being issued over 8 years.
    Yesterday, President Obama laid out a path to reduce our foreign 
oil imports by a third and lay the foundation for a transition to clean 
energy. In the short term, we should release oil from the Strategic 
Petroleum Reserve, which has a proven record of lowering prices and 
helping consumers and is the one weapon we posses against OPEC. We 
should increase, not cut, funding for the Commodity Futures Trading 
Commission so that it can implement the law and rein in excessive 
speculation in energy markets, which will also help consumers.
    In imaginary land it may be possible to base our nation's energy 
policies on bumper-sticker slogans. In the real world, we need 
responsible energy policies that respond to the great economic, 
national security, and environmental threats that a one-dimensional 
``Oil Above All'' strategy has given us. It is time to move away from 
an imagined drilling utopia, and work cooperatively on real solutions 
to the real energy problems we face.
                                 ______
                                 
    The Chairman. I thank the gentleman from Massachusetts, and 
now we will hear from our witnesses. We have with us The 
Honorable Bill Graves, President and CEO of the American 
Trucking Association and former Governor of the Sunflower 
State, I might add; Ms. Karen Alderman Harbert, CEO of the 
Institute for 21st Century Energy, U.S. Chamber of Commerce; 
Mr. Don Shawcroft, President of the Colorado Farm Bureau 
representing the American Farm Bureau; and Mr. Michael J. Fox, 
Executive Director of Gasoline and Automotive Service Dealers 
of America.
    Like all of our witnesses, you have written testimony, and 
that will be included in the record, but we ask that you keep 
your oral remarks to five minutes. Talking about the five-
minute lights, that little mechanism in front of you has a 
green light, a yellow light and a red light. When the green 
light is on, that means your five minutes has started. When the 
yellow light comes on, that means there is one minute left, and 
when the red light comes on, that means that the five minutes 
have expired. I just ask that you keep to that time if you can, 
and you do have to press the button on the mics, so with that, 
Governor Graves, you may begin.

  STATEMENT OF HON. WILLIAM GRAVES, PRESIDENT & CEO, AMERICAN 
                      TRUCKING ASSOCIATION

    Mr. Graves. Chairman Hastings, Congressman Markey, members 
of the Committee, thanks for the opportunity to testify this 
morning. The trucking industry is essential to freight 
transportation and the nation's economy. We deliver virtually 
all the consumer goods in the United States. We employ nearly 7 
million Americans in trucking-related jobs. It is an extremely 
competitive industry comprised largely of small businesses. The 
hearing title focuses on gasoline, but I am going to direct my 
remarks to the price of diesel fuel, which of course is the 
lifeblood of trucking.
    This year, trucking will consume over 35 billion gallons of 
diesel fuel and is on page to spend $135.8 billion, which is 
about $35 billion more than was spent in 2010. Each penny 
increase in the price of diesel costs the trucking industry an 
additional $356 million a year. High fuel prices impact 
trucking companies both directly and indirectly. Many companies 
have difficulty recovering the full cost of rapid diesel price 
increases. However, eventually these higher costs are passed on 
to consumers.
    In addition, as consumers are forced to spend more money on 
energy and their every essentials, they have less money to 
spend on consumer goods, which translates to a reduction in the 
demand for freight transportation services and reduces trucking 
company revenues. The impact high fuel prices have on the 
trucking industry is depicted on a chart that is, I think, 
displayed overhead and perhaps is in the packet as well, which 
shows the close correlation between diesel price increases and 
trucking company bankruptcies. The bottom line is that as a 
result of this dramatic increase in the price of diesel we do 
expect an increasing number of trucking companies to fail.
    There is no single solution to high oil prices. We are not 
going to be able to either simply conserve or to drill our way 
out of this crisis. We are going to have to do both. My written 
testimony advances several recommendations to incentivize 
conservation. Demand reduction is a very important part of a 
comprehensive energy strategy. These policy initiatives include 
a national maximum speed limit of 65 miles per hour allowing 
safe and more productive trucks, investing in highway 
infrastructure to reduce congestion and supporting research for 
new fuel efficient truck technologies. Recognizing Committee 
jurisdiction, I am going to focus the remainder of my remarks 
on the supply side.
    The dramatic increase in the price of oil is fed by the 
perception that over the next few years there will be a 
shortage of oil. For this reason, in addition to investing 
alternative fuels and reducing the demand for petroleum, 
Congress and the Administrative should embrace measures to 
increase our domestic production of crude oil. We produce 30 
percent of our oil from the Gulf of Mexico. We believe Congress 
should urge the Department of the Interior to issue both 
shallow-and deepwater drilling permits in the Gulf. We also 
believe Congress should direct the Administration to include 
the Atlantic and Eastern Gulf in the environmental impact study 
for the upcoming leasing program.
    We need to fully develop our oil shale resources in 
Colorado, Utah and Wyoming. We should invest in coal-to-liquid 
and gas-to-liquid technologies to take advantage of our vast 
domestic coal and natural gas resources. We also need to 
promote the use of natural gas, but LNG-powered trucks cost 
almost twice as much, so a financial incentive, such as a tax 
credit, may be needed to encourage the purchase of these 
vehicles. In addition, we would encourage Congress to 
incentivize the construction of standardized LNG refueling 
stations and provide a weight variance from the Federal gross 
vehicle weight limits for trucks to accommodate the increase in 
weight associated with LNG technology.
    ATA appreciates this opportunity to be present, and I am 
going to be pleased to answer any questions that you may have, 
and I will yield back the balance of my time, Mr. Chairman.
    [The prepared statement of Mr. Graves follows:]

Statement of William P. Graves, President and Chief Executive Officer, 
               American Trucking Associations, Inc. (ATA)

    Chairman Hastings, Congressman Markey and Members of the Committee:
    My name is Bill Graves, and I am the President and Chief Executive 
Officer of the American Trucking Associations. Prior to joining ATA, I 
spent 22 years in Public service in the State of Kansas, highlighted by 
two terms as Governor. However, it's my trucking heritage, and not my 
political history, that I am representing today. My father, and his 
father, started Graves Truck Lines in 1935 at the height of the Great 
Depression. I was fortunate to have been raised in the industry and I 
attribute much of the success I've had in my professional and political 
careers to the ``trucking'' values I've learned along the way: the 
importance of safety, the value of customer service, the essentiality 
of trucking, and the value of being involved in an Association at both 
the state and national levels.
    The American Trucking Associations (ATA) is the national trade 
association of the trucking industry. Through its affiliated state 
trucking associations, affiliated conferences and other organizations, 
ATA represents more than 37,000 trucking companies throughout the 
United States.
    The trucking industry is the backbone of this nation's economy with 
nearly 7 million Americans working in trucking-related jobs. Trucks 
move 70% of our Nation's freight tonnage and earn 82% of the nation's 
freight revenue. The trucking industry delivers virtually all of the 
consumer goods in the United States. We are an extremely competitive 
industry comprised largely of small businesses. Roughly 96% of all 
interstate motor carriers operate 20 or fewer trucks.
    The hearing title focuses on gasoline, but I will direct my remarks 
to the price of diesel fuel, which is the lifeblood of the trucking 
industry. This year, the trucking industry will consume over 35 billion 
gallons of diesel fuel. This means that a one-cent increase in the 
average price of diesel costs the trucking industry an additional $356 
million a year in fuel expenses. The national average price of diesel 
fuel is currently over $3.90 per gallon, which is nearly $1.00 more 
than just one year ago.

[GRAPHIC] [TIFF OMITTED] 65461.001


    .epsThe trucking industry is on pace to spend $135.8 billion on 
fuel this year. This is $34.3 billion more than we spent in 2010 and 
$56.3 billion more than in 2009.

[GRAPHIC] [TIFF OMITTED] T5461.002


    .epsToday it costs approximately $1,200 to refuel a long-haul, 
over-the-road truck. As a result of this dramatic increase in the price 
of diesel, we expect an increasing number of trucking companies to 
fail. Despite the widespread use of fuel surcharges, the price of 
diesel fuel and motor carrier failures are highly correlated.
[GRAPHIC] [TIFF OMITTED] T5461.003


    .epsThis hardship surprises few in the industry. For many truckers, 
fuel has surpassed labor as their largest operating expense. Trucking 
is a highly competitive industry with very low profit margins. Our 
industry cannot simply absorb these rapid increases in fuel costs and 
eventually these costs must be passed through to our customers. So not 
only do high fuel prices devastate truckers, but they harm consumers 
who are forced to pay higher prices for food, clothing and other basic 
necessities.
A. Why has the Price of Diesel Increased?
    Diesel fuel is a commodity that is refined from petroleum. Like 
most commodities in a competitive marketplace, its price is determined 
by supply and demand. The following chart demonstrates the close 
correlation between the price of petroleum and the prices of gasoline 
and diesel fuel.
[GRAPHIC] [TIFF OMITTED] T5461.004


    .epsWith the exception of a brief period following Hurricanes 
Katrina and Rita in 2005, the prices of gasoline and diesel have 
paralleled the price of petroleum.
    The recent run-up in petroleum product prices, including gasoline 
and diesel, is the result of a confluence of factors.
    First, domestic oil production is under siege. The U.S. is the 
third largest oil producer in the world; however, our production of 
domestically produced oil from Alaska and the Gulf of Mexico is 
declining and new sources of production have been placed off limits for 
environmental reasons. Drilling moratoria, the refusal by the 
Department of the Interior (DOI) to process drilling permits, multi-
year environmental impact studies, and political decisions that declare 
vast amounts of American energy resources on federal lands off limits 
to energy production have all taken their toll on U.S. petroleum 
production and--will have an even greater impact on future production. 
Each year our existing wells yield less oil. This natural depletion 
reduces domestic production by 3% annually. Without a concerted effort 
to drill more wells, domestic oil production will continue to fall and 
the U.S. will have to import an increasing percentage of its crude oil. 
Indeed, this year, as a result of aggressive government intervention, 
domestic oil production in the Gulf of Mexico is expected to fall by 
16%.\1\ Current U.S. regulatory policy has put the country on a path 
towards declining domestic supplies and has led speculators to conclude 
that crude oil will soon be in short supply. This has resulted in an 
unnecessary increase in the current price of oil at a time when the 
supply of oil is adequate to meet current demand.
---------------------------------------------------------------------------
    \1\ Source: American Petroleum Institute, citing Energy Information 
Administration, Short-Term Energy Outlook (March 8, 2011)
---------------------------------------------------------------------------
    Second, recent events in North Africa and the Middle East have 
reminded us of how vulnerable our energy supply is to geo-political 
events beyond our control. While current supplies appear to be adequate 
to satisfy global demand, the fear that revolution will spread to other 
oil producing nations in the region has contributed to a spike in crude 
oil prices. This recent geo-political instability and its impact upon 
petroleum prices should serve as a wake-up call to reduce our 
dependence on foreign oil.
    Third, there has been a dramatic decline in the value of the 
dollar. Since oil is denominated in dollars, a portion of the increase 
in the price of oil can be attributed to the fall in the value of the 
dollar relative to other world currencies.
    Fourth, there has been a significant increase in investments 
petroleum futures by non-commercial participants. This increased 
speculation may be partially responsible for the increase in 
commodities prices. We note that the last Congress passed financial 
reform legislation and that Commodity Futures Trading Commission (CFTC) 
is in the process of drafting regulations to implement new authority to 
curb excessive speculation.
    Lastly, federal and state biodiesel mandates have contributed to 
higher diesel prices. This year, the federal Renewable Fuel Standard 
(RFS) mandates that 800 million gallons of biomass-based diesel fuel be 
blended into the diesel fuel pool. Because biodiesel costs 
significantly more than Ultra Low Sulfur Diesel (ULSD) fuel, this 
federal mandate increases the country's diesel fuel bill by more than a 
billion dollars annually. In addition to the federal RFS requirements, 
diesel consumers are forced to pay higher prices due to state biodiesel 
consumption mandates that distort fuel distribution efficiencies and 
disadvantage consumers that refuel in those states.
    It is clear that our energy crisis is a complicated problem that 
requires a comprehensive solution. Against this backdrop, we greatly 
appreciate the opportunity to discuss actions that Congress can take to 
help address the soaring price of diesel fuel.
B. A Comprehensive Solution
    The fuel crisis we face today is severe. There is no single 
solution to high oil prices and Congress must embrace a multifaceted 
approach to resolving this problem. We are not going to be able to 
either simply conserve or drill our way out of this crisis. Instead, we 
must embrace a ``we need it all'' approach that focuses on the 
following recommendations to increase our domestic crude oil supplies 
and incentivize conservation measures.
1. Recommendations to Increase Supply
    For the foreseeable future, the trucking industry will continue to 
depend upon the diesel engine and an adequate supply of diesel fuel to 
deliver America's freight. Presently, there is no affordable technology 
that is capable of replacing the efficiency of the diesel engine for 
heavy duty trucks. As our population continues to grow and other 
nations continue to industrialize, the global demand for diesel fuel 
will continue to increase.
    The dramatic increase in the price of oil is fed by the perception 
that over the next few years there will be a shortage of oil. For this 
reason, in addition to investing in alternative fuels and reducing the 
demand for petroleum, Congress and the administration must both embrace 
measures to increase our domestic production of crude oil.
    Increasing access to--and production of--American crude oil 
supplies will help lower diesel fuel prices. To achieve this goal we 
need to begin environmentally responsible exploration for crude oil in 
the Arctic National Wildlife Reserve and Outer Continental Shelf. We 
also must begin developing the oil shale resources in Colorado, Utah 
and Wyoming and eliminating the barriers to utilizing coal-to-liquid 
technologies to take advantage of our vast domestic coal resources. The 
technology exists to ensure that these resources are developed in a 
manner that protects the environment.
    Drilling for oil in Alaska and the Gulf of Mexico, or mining oil 
shale in Colorado, Wyoming and Utah requires multiple government 
approvals and permits. The fact that the Bureau of Land Management, 
Bureau of Ocean Energy Management Regulation and Enforcement, EPA, the 
Fish and Wildlife Service, National Oceanic and Atmospheric 
Administration, and the Army Corps of Engineers (just to name a few) 
each have the ability to unilaterally stop energy development projects 
is a very large reason for declining U.S. production and the diesel and 
gasoline price surges that we are experiencing today. These redundant 
processes present multiple opportunities for special interest groups to 
derail energy development projects.
    The debate over whether to drill in these areas of the United 
States has been ongoing for decades. In light of geopolitical 
instability, the growing demand for energy in Asia and Europe, as well 
as the development of new drilling techniques and more robust 
environmental safeguards, it is time to change these policies and 
develop these critical domestic resources. As Congress considers 
reforming our domestic energy policy, we should keep in mind that Clean 
Air Act permits, Clean Water Act permits and land use development 
permits, all of which contain a host of environmental protections, are 
preferable to importing oil from Venezuela or off the coast of Cuba 
with virtually no environmental protections and adverse implications 
for U.S. energy security.
    Congress and the administration must reverse the current policies 
that have declared vast areas of American energy resources off-limits 
and have led to the perception that the U.S. will begin to produce even 
less oil and become increasingly dependent on imports to satisfy the 
demand for transportation fuels.
    a. Develop U.S. Offshore Petroleum Resources. Notwithstanding the 
Administration's stated intent to encourage the development of 
additional domestic petroleum resources, DOI has taken numerous actions 
that will impede our ability to maintain (and grow) our domestic 
production of crude oil.
    Twenty-nine percent of our domestically produced oil comes from the 
Gulf of Mexico. As we approach the one-year anniversary of the Macondo 
blowout, it is important that we analyze the steps that have been taken 
to minimize the already small risk that a similar event could occur in 
the future. The federal government has stepped up its regulatory 
oversight of Gulf drilling operations and implemented new regulations 
and safety requirements. Simultaneously, the petroleum industry has 
invested over a billion dollars in new technologies to enhance its oil 
spill response capabilities and ensure that oil from a future spill can 
be captured to avoid significant environmental damage.\2\ As this was 
occurring, the administration imposed a moratorium on drilling in the 
Gulf of Mexico. When a federal court overturned the moratorium, the 
administration ignored the court's decision and unilaterally decided to 
stop issuing drilling permits. As a result, U.S. oil production in the 
Gulf of Mexico is expected to decline by 16% this year. DOI recently 
issued five deepwater drilling permits and we hope that this signals 
the administration's intent to reverse course and permit the continued 
development of this critical domestic energy resource. Congress should 
require DOI to issue both shallow and deepwater drilling permits in the 
Gulf of Mexico.
---------------------------------------------------------------------------
    \2\ New York Times, http://www.nytimes.com/2010/07/22/business/
energy-environment/22
response.html?_r=1 (July 2010)
---------------------------------------------------------------------------
    In March 2010, the administration canceled lease sales in the 
Beaufort and Chukchi Seas and withdrew Bristol Bay from the existing 
offshore leasing program. Two months later, the administration canceled 
a Virginia offshore lease sale and the remaining 2010 Gulf of Mexico 
lease sales. These areas were previously studied and determined to be 
viable areas for the safe and environmentally responsible production of 
crude oil.
    The administration recently narrowed the scope of the areas to be 
studied in connection with the 2012-2017 Outer Continental Shelf (OCS) 
leasing program to remove large areas in the Atlantic and the eastern 
Gulf of Mexico from the scope of the environmental analysis. DOI's 
declaration that it will not even study these areas amounts to willful 
blindness and risks great harm to the fragile U.S. economic recovery. 
Studying these areas is not a decision to develop them; it simply 
ensures we understand the environmental implications of drilling there. 
Ultimately, DOI and the affected states may determine not to develop 
certain areas, but that determination must be an informed decision, 
which will not happen if politics displaces science and areas are 
declared off limits before they are even studied. Congress should 
require the administration to include these OCS regions in the 
environmental impact study underlying the 2012-2017 OCS leasing 
program.
    b. Develop U.S. Onshore Petroleum Resources. To improve our 
domestic energy security and lower diesel fuel prices, onshore energy 
production also must be encouraged.
    Oil shale deposits in the Rocky Mountains are estimated to contain 
800 billion barrels of oil and there are vast conventional oil and 
natural gas resources on federal lands in the West. Yet these resources 
are being systematically removed from the nation's energy portfolio. 
The administration reduced the size of commercial oil-shale leases by 
87% and cancelled oil and gas leases on 77 parcels in Utah, even though 
these parcels had already been subjected to the required environmental 
analysis.\3\ The administration also suspended 61 leases in Montana. 
Congress should require the administration to proceed with the 
development of these domestic energy resources.
---------------------------------------------------------------------------
    \3\ Source: American Petroleum Institute (March 2011).
---------------------------------------------------------------------------
    Three months ago, the administration designated nearly 200,000 
square miles of Alaska as critical habitat for the polar bear. The 
breadth of this designation is unprecedented and will preclude the 
development of our on-shore oil and gas resources in Alaska. In 
addition, the Arctic National Wildlife Refuge (ANWR) remains off limits 
to oil and gas development. Allowing the development of 2,000 out of 
almost 20 million acres is necessary to balance environmental interests 
with our need to enhance domestic energy security. Moreover, the 
failure to move forward with energy projects in Alaska exposes the 
Trans-Alaska Pipeline System to supply shortages that create 
operational challenges. Congress should require the administration to 
embrace a sensible approach to oil and gas development in Alaska that 
balances energy and environmental interests and takes into 
consideration the desires of the citizens of Alaska.
    c. Canadian Oil Sands. Although located outside U.S. borders, the 
Canadian oil sands represent a secure source of oil that currently 
accounts for 9% of the oil we consume. To ensure our continued access 
to this strategic resource, Congress should require the administration 
to approve the permit for the Keystone XL pipeline. The development of 
Keystone XL will provide a stable, long-term supply of crude oil from 
Canada--one of our strongest and most loyal allies--to refineries in 
the United States. Upon completion of Keystone XL, it is estimated that 
the Canadian crude being transported to the United States through the 
pipeline system will approach 1.1 million barrels per day. This is 
equal to roughly half the crude oil we import from the Middle East. 
Keystone XL would create jobs and increase tax revenue for state and 
local governments along the pipeline route.
    d. Renewable Fuels. The trucking industry supports the development 
of alternatives to diesel fuel, including the voluntary use of 
renewable diesel that meets the ASTM D975 diesel standard--the fuel 
that trucks were engineered to operate on. Biofuels represent a 
potential fuel source that could increase the domestic supply of diesel 
fuel; however, they are significantly more expensive than petroleum-
derived diesel fuel and present several operational challenges for the 
trucking industry. Even if the price were equivalent, first generation 
biodiesel yields a ten percent energy penalty compared to ULSD, gels in 
cold weather, and requires increased truck maintenance obligations. As 
such, federal and state mandates to use biodiesel disadvantage diesel 
fuel consumers.
    There is a significant difference between first generation 
biodiesel and renewable diesel. Renewable diesel uses renewable 
feedstock to produce a biofuel that is substantially similar to 
petroleum-derived ULSD fuel. It has equivalent energy content to ULSD, 
better cold weather performance than biodiesel, and can be transported 
through our existing pipeline system, which lowers its distribution 
costs. Today, the most cost effective way to produce renewable diesel 
is to co-process it in a modern petroleum refinery. Yet, the first 
generation biodiesel producers have successfully lobbied to create 
economic barriers to the development of this high quality next 
generation renewable fuel by denying this fuel equivalent treatment 
under the tax code. These economic disincentives built into the tax 
code also discourage the development of new processes (e.g., algae-
based bio oil) to make renewable diesel. Congress should remove the 
barriers to co-processed renewable diesel (and other middle 
distillates) and embrace a technology neutral approach to biofuel 
production. To ensure that trucking companies are insulated from poor 
performing alternative fuels, Congress should require all on-road 
diesel fuel to meet the ASTM D-975 standard.
    While on the subject of biodiesel and renewable diesel, we support 
a tax credit that helps narrow the cost differential between ULSD and 
renewable diesel; however, Congress should eliminate this credit for 
renewable fuel that is produced in the U.S., and subsequently exported 
for consumption outside the U.S. While the last Congress eliminated the 
``splash and dash'' loophole on foreign produced biodiesel, the 
American public would be outraged if they knew that their tax dollars 
were still being spent to subsidize biodiesel that is ultimately 
exported for foreign consumption. Biodiesel blending tax credits should 
be contingent upon the fuel being consumed in the U.S.
    e. Natural Gas. Another alternative fuel of interest to the 
trucking industry is natural gas. While compressed natural gas (CNG) is 
being used for light and medium trucks on relatively short routes, CNG 
does not appear to provide sufficient range for the long-haul, heavy 
truck. There are, however, a very limited number of centrally refueled 
long-haul trucks operating successfully on liquid natural gas (LNG). 
This fuel may not be appropriate for trucks engaged in long-haul, 
irregular routes, which would require a robust LNG refueling 
infrastructure.
    While there are numerous challenges associated with a switch to 
natural gas, there are three significant hurdles that must be overcome 
to increase the penetration of this alternative fuel. First is the 
significant price premium for natural gas vehicles. Currently, a truck 
that runs on LNG costs almost twice that of a comparably equipped 
diesel truck. Second, is the need for financial assistance in building 
out a robust, competitive, standardized refueling infrastructure. LNG 
refueling stations can cost a million dollars or more to construct. 
Third, there is a significant weight penalty associated with this 
technology, which can reduce payload and affect productivity in weight 
sensitive applications. To address these hurdles, Congress should enact 
natural gas vehicle tax credits to offset the significant cost 
differential between diesel trucks and trucks that operate on LNG. This 
could facilitate the economies of scale in production of these heavy 
trucks to bring the initial costs down. Congress also should 
incentivize the construction of LNG refueling stations and ensure that 
the industry embraces a single refueling standard to overcome refueling 
compatibility issues. Congress should provide a weight variance from 
the federal gross vehicle weight limits to accommodate the increase in 
weight associated with LNG technology. These measures could reduce our 
reliance on petroleum, enhance our energy security, and reduce long-
term operating costs of some trucking sectors.
    f. One National Diesel Fuel Standard. While gasoline moves people, 
diesel fuel moves our economy. Due to the uniquely interstate nature of 
diesel fuel, Congress should take extraordinary steps to ensure that no 
state enacts a boutique diesel fuel mandate. Today, California and 
Texas require special boutique diesel fuel blends. These unique blends 
cost more to produce and prevent diesel fuel from simply being 
transported from one jurisdiction to another in times of shortage. In 
addition, boutique fuels are typically produced by only a handful of 
refineries, which results in less competition, higher refining margins, 
and ultimately higher fuel prices.
    While Congress took steps to curb the proliferation of boutique 
fuels as part of the Energy Policy Act of 2005, the Act created a 
loophole for states seeking to enact renewable fuel mandates. To date, 
seven states have enacted biodiesel mandates and several others are 
considering this course of action. In light of the biomass-based diesel 
mandate included as part of the expanded federal renewable fuel 
standard (RFS), Congress should preempt state biodiesel mandates. These 
duplicative state mandates are not needed to ensure a strong domestic 
biodiesel industry and will simply create an economic environment where 
biodiesel producers can charge extraordinarily high prices for their 
product--insulated from the checks and balances of a competitive 
market. The federal RFS guarantees that 1 billion gallons of biodiesel 
will be consumed domestically--the free market must be allowed to 
operate to ensure that this mandate is achieved in the most cost 
effective manner possible. State biodiesel mandates will distort the 
free market and prevent biodiesel from being consumed in those parts of 
the country where it is most economical to do so. Congress must preempt 
state biodiesel mandates as inconsistent with our national interest and 
efforts to promote the cost effective production and use of biofuels.
2. Recommendations to Reduce Demand
    Reducing the nation's consumption of diesel fuel will reduce the 
overall demand for petroleum and should result in lower prices for 
petroleum products.
    a. Control Speed. The typical heavy-duty diesel truck travels 
between 5 and 7 miles on a gallon of diesel, depending upon load, 
route, equipment and drivers' skill. Speed has a direct correlation to 
fuel consumption. In fact, for each mile per hour that a truck travels 
above its optimal fuel efficiency point, its fuel economy decreases by 
1/10 of a mile per gallon. For example, a truck traveling at 65 mph 
that is capable of achieving 6 miles per gallon, will achieve only 5 
miles per gallon when traveling at 75 mph. Reducing speed has a 
positive impact on fuel consumption in both cars and trucks. For this 
reason, Congress should establish a national speed limit of 65 mph for 
all vehicles.
    ATA also has petitioned the Administration to require that all new 
trucks be equipped with factory-installed devices that electronically 
limit the truck's maximum speed to 65 mph. The National Highway Traffic 
Safety Administration has agreed to begin a rulemaking in 2012. Given 
the significant benefits, we believe action should be taken sooner. In 
addition to the fuel conservation benefit from ensuring that trucks do 
not exceed this speed, we are confident that this measure will further 
reduce the number of truck-related fatalities that occur on our 
nation's roadways.
    b. Address Congestion and Highway Infrastructure. Americans waste a 
tremendous amount of fuel sitting in traffic. According to the most 
recent report on congestion from the Texas Transportation Institute, in 
2009, drivers in metropolitan areas wasted 4.8 billion hours sitting in 
traffic, and burning 3.9 billion gallons of excess fuel at a cost of 
$115 billion. The cost to the trucking industry was $33 billion. ATA 
estimates that if congestion in these areas was eliminated, nearly 32 
billion gallons of fuel would be saved and carbon emissions would be 
reduced by 314 million tons over a 10-year period. Congress should 
invest in highway infrastructure improvements that eliminate major 
traffic bottlenecks, with a specific focus on bottlenecks that have the 
greatest impact on truck traffic.
    c. Enhance Truck Productivity. By reducing the number of trucks 
needed to move the nation's freight, the trucking industry can reduce 
fuel consumption, which would produce significant environmental 
benefits. More productive equipment--where it is consistent with 
highway and bridge design and maintenance of safety standards--is an 
additional tool that should be available to states. A recent study by 
the American Transportation Research Institute found that use of these 
vehicles could reduce fuel usage by up to 39%, with similar reductions 
in criteria and greenhouse gas emissions. The reduction in truck 
vehicle miles traveled on highways such as the New York Thruway, 
Massachusetts Turnpike, Florida Turnpike, and on roads throughout the 
Western United States, has lowered the amount of fuel burned in these 
states. Congress should provide flexibility to the states, with federal 
oversight, to allow the use of more productive trucks.
    d. Support Truck Fuel Economy Standards. The Energy Information and 
Security Act of 2007 requires EPA and NHTSA to promulgate fuel economy 
standards for commercial medium- and heavy-duty trucks. This 
congressional mandate is being implemented through the rulemaking 
process. ATA supports truck fuel economy standards as the preferred 
method of controlling greenhouse gas emissions from our industry, 
provided that the standards set are technologically and economically 
feasible, do not compromise truck performance, and provide 
manufacturers sufficient stability and lead time for production.
    e. Reduce Main Engine Idling. The Federal Motor Carrier Safety 
Administration (FMCSA) Hours-of-Service regulations require mandatory 
off duty rest periods. Many over-the-road drivers rest in the sleeper 
berth compartment in their truck cabs and need to cool or heat the cab 
to rest comfortably. In extremely cold weather, truck drivers also will 
idle their engines to prevent the engine block from freezing. Argonne 
National Laboratory estimates that the average long-haul truck idles 
for 1,830 hours per year. With hundreds of thousands of these trucks on 
the road, idling has a significant impact on fuel consumption and the 
environment. The U.S. Environmental Protection Agency (EPA) estimates 
that idling trucks consume approximately 1.1 billion gallons of diesel 
fuel annually.
    Several options are currently available to reduce engine idling. 
Auxiliary power units (APUs) are among the most popular choices in 
anti-idling equipment providing climate control (heating and cooling), 
engine preheating, battery charging, and power for household 
accessories without use of the truck's main engine. APUs have been 
proven by the Federal Highway Administration to save up to one gallon 
of fuel per hour of idling and to substantially reduce emissions and 
greenhouse gases.
    While reducing main engine idling is a laudable goal, three major 
barriers stand in the way of trucking companies purchasing such 
equipment for their daily use: (1) the failure to grant exceptions for 
the additional weight associated with anti-idling equipment, (2) the 
imposition of a federal excise tax on the purchase of such devices, and 
(3) the actual cost of the devices themselves.
    Since idling reduction equipment will add weight to a truck, many 
fleets cannot afford to reduce their cargo capacity to compensate for 
the installation of idle reduction equipment on a truck. To address 
this concern, Congress authorized a 400-pound weight exemption for 
trucks equipped with idle reduction equipment under Section 756 of the 
Energy Policy Act of 2005. While Congress' intent was to mandate this 
exemption, the Federal Highway Administration (FHWA) has determined 
that states ``may'' adopt the exemption on a voluntary basis. FHWA's 
interpretation of the weight exemption gives states the option of 
whether to allow the exemption or not. To date, 32 states have passed 
legislation recognizing the 400-pound weight tolerance and a handful of 
states are exercising enforcement discretion. Congress should clarify 
that the 400-pound weight exemption is applicable to idling reduction 
equipment nationwide.
    While APUs are a proven alternative to main engine idling, most 
trucking companies just cannot afford purchasing devices that can cost 
up to $10,000 per unit. Congress should provide tax credits or grants 
to expedite the introduction of idling reduction equipment.
    f. Fully Fund EPA's SmartWay Program. In February 2004, the freight 
industry and EPA jointly unveiled the SmartWay Transport Partnership, a 
collaborative voluntary program designed to increase the energy 
efficiency and energy security of our country while significantly 
reducing air pollution and greenhouse gases. The program, patterned 
after the highly-successful Energy Star program developed by EPA and 
DOE, creates strong market-based incentives that challenge companies 
shipping products and freight operations to improve their environmental 
performance and improve their fuel efficiencies. To become a partner a 
fleet must commit to reduce fuel consumption through the use of EPA-
verified equipment, low-viscosity lubricants, or other measures. 
Participation in the program doubles each year and by 2012, the 
SmartWay program aims to save between 3.3 and 6.6 billion gallons of 
diesel fuel per year. EPA predicts SmartWay participants will also 
reduce their annual greenhouse gas emissions by 48 million tons of 
CO2 equivalents.
    SmartWay is a unique resource that reviews the use of new 
technologies that are proven to reduce fuel consumption and then uses 
market incentives to promote their deployment. Although the program is 
a demonstrated success story, its future funding remains uncertain. 
Congress should add a specific line item appropriation for SmartWay and 
increase our investment in this program to facilitate its expansion.
    g. Support Research and Development of New Technologies. As we look 
toward the future, the trucking industry will be pressured to further 
conserve fuel. The industry will find it difficult to do this without 
new affordable technologies. Technology advancements have stalled for 
many years and an infusion of funding into an organized research 
program will be critical to developing the next generation of more 
efficient and lower carbon-emitting trucks. To address this issue, 
Congress should fund research and development in the areas of new 
engine technologies, aerodynamics, tires, batteries, hybrids, cab 
insulation, anti-idling equipment, and alternative fuels.

                               * * * * *

    ATA appreciates this opportunity to offer our insight into measures 
that the country should take to help address high diesel fuel prices.
                                 ______
                                 
    The Chairman. Governor, thank you very much. You set a 
very, very high standard on brevity, but we appreciate that. 
Ms. Harbert, you are recognized.

 STATEMENT OF KAREN ALDERMAN HARBERT, CHIEF EXECUTIVE OFFICER, 
  INSTITUTE FOR 21ST CENTURY ENERGY, U.S. CHAMBER OF COMMERCE

    Ms. Harbert. Thank you, Chairman Hastings and Ranking 
Member Markey and members of the Committee for this 
opportunity. Oil is the lifeblood of the global economy 
produced in over 70 countries and 31 states. The International 
Energy Agency projects that fossil fuels will still account for 
80 percent of the world's energy supply in 2035. The EIA has 
just upped its average price for gasoline this year to $3.70. 
Every one-cent increase in the price of gasoline costs 
Americans roughly a billion dollars a year. The average 
American household is expected to spend $2,800 on gasoline this 
year, $850 more than in 2009.
    Additionally, each $10 increase in oil prices can knock a 
few tenths of a percent off any increase in GDP. Today, about 
97 percent of the Federal offshore lands and 94 percent of 
Federal onshore lands are not leased. As a result, our net 
imports of petroleum and of related products rose to $265 
billion in 2010. That is about half of the U.S. trade deficit. 
There are some good policy options. The current price 
escalation is distinctly different from the previous price 
increases in two ways. First, we now understand the abundance 
of our domestic resources.
    The Congressional Research Service says the proven 
recoverable reserves of American oil, natural gas and coal 
combined are the world's largest, and the U.S. Geological 
Survey estimates that our oil shale reserves could be five 
times as large as Saudi Arabia's proven reserves. Second, our 
larger share of the burgeoning energy crisis is the direct 
result of Federal policies. From the earliest days, the Obama 
Administration has continually taken land and water off the 
table for oil and gas production, canceling leases in Utah and 
Montana and Wyoming, imposing a moratorium in the Gulf of 
Mexico and proposing a leasing plan out to 2017 that takes more 
resources off the table in the Atlantic, the Gulf and Alaska.
    A Wood Mackenzie study released in January estimates that 
increasing the access to these reserves would actually create 
500,000 jobs and $150 billion in revenue. Reversing these 
policies presents a ready-made solution to this Congress and 
the Administration. In the Gulf of Mexico, the Administration 
has said it has lifted the moratorium in the Gulf, but has done 
it in word and not in deed. The EIA projects a 30-percent 
decrease in production in the Gulf by 2012. We have only 
witnessed seven deepwater rigs set sail for other countries 
just recently, and they have only issued seven deepwater 
permits.
    Recently, the Department of Justice filed a brief which 
stipulated that 270 permits were pending for shallow-water 
drilling and 52 for deepwater. This validates the EIA's 
projections. The Gulf of Mexico was a tragedy, and industry has 
stepped us, has invested billions of dollars to create rapid 
response systems. Mr. Chairman, the Putting the Gulf Back to 
Work Act that you recently drafted, which ensures the 
Department of the Interior can no longer sit on permit 
applications indefinitely, will prevent those jobs from being 
lost and more foreign barrels from being imported.
    Alaska. The areas north of Alaska contain upwards of 30 
billion barrels of oil. However, leases that have already been 
paid for and issued remain idle while they await an air quality 
permit from the EPA. This is a perfect example of the 
regulatory uncertainty facing our domestic producers. Canada, 
our most reliable and largest supplier of imported oil, the 
President recognized that yesterday and its huge potential, yet 
we have Section 526 on the books which can prohibit the U.S. 
Government and specifically the Department of Defense from 
using this valuable resource. We should repeal that provision 
immediately.
    Additionally, the Keystone Pipeline, which would bring 
significant quantities of Canadian oil to our market and create 
jobs immediately is being held up at the Department of State. 
We urge the Congress to encourage the Department of State to 
permit this project. On oil shale, we potentially hold half of 
the global oil shale reserves in the world. Yet, 70 percent of 
these reserves are located on Federal lands. The government 
should be directed to allow access to these reserves and to 
better understand them and to better support the additional 
work to extract them safely and environmentally sustainably.
    However, there are three bad ideas that we should not 
pursue, and if pursued would have negative impacts on our 
economy and our economic security. One we have heard from the 
Administration and the Congress which is use it or lose it, in 
fact imposing penalties on companies that are not actively 
producing. A leaseholder is classified as non-producing while 
it is undertaking government-required seismic and environmental 
review. Penalizing companies for being responsible seems to be 
egregious and will only push them overseas. Another proposal is 
releasing oil from the Strategic Petroleum Reserve. This will 
do nothing to reduce prices and will leave us vulnerable to 
future disruptions.
    Last, the Administration has proposed to levy almost $90 
billion of new taxes on America's oil industry. We have tried 
this before in 1980, and what did it do? It reduced domestic 
production. It increased our imports and reduced Federal 
revenues, so in conclusion, today, America's unemployment rate 
rests at 8.9. With energy prices on the rise, businesses and 
consumers have less spending flexibility. We cannot let these 
rising prices and a lack of a coherent energy policy to imperil 
our economic recovery. We need common-sense policies, and 
Congress should ensure that the industry has access, regulatory 
certainty and a fiscal policy to transform these resources to 
power our economic recovery. Thank you.
    [The prepared statement of Ms. Harbert follows:]

  Statement of Karen A. Harbert, President & Chief Executive Officer, 
      Institute for 21st Century Energy, U.S. Chamber of Commerce

    Thank you, Chairman Hastings, Ranking Member Markey, and members of 
the Committee. I am Karen Harbert, President and CEO of the Institute 
for 21st Century Energy (Institute), an affiliate of the U.S. Chamber 
of Commerce. The U.S. Chamber of Commerce is the world's largest 
business federation, representing the interests of more than three 
million businesses and organizations of every size, sector and region.
    The mission of Institute is to unify policymakers, regulators, 
business leaders, and the American public behind common sense energy 
strategy to help keep America secure, prosperous, and clean. In that 
regard we hope to be of service to this Committee, this Congress as a 
whole, and the Administration.
What's the Problem?
    The U.S. government has a long history of sporadic attempts to 
respond to oil and gasoline price spikes, and frankly, has missed the 
mark nearly every time. Much of the lack of success can be attributed 
to misunderstanding of petroleum market fundamentals. Oil is the 
lifeblood of the global economy. As such, it is produced in over 70 
countries and in 31 states here at home. Oil is largely fungible and 
essentially traded as a global commodity. As we have all seen recently, 
what happens on the other side of the world can have a profound impact 
on the price paid at home. This is not only true for supply 
disruptions, or threats of supply disruptions, it is also true for 
changes in demand.
    After oil prices climbed to a record-high $143 per barrel in July 
2008, the U.S. and the world entered an economic recession that 
significantly curbed demand, causing oil prices to plummet 60% over the 
next seven months. Since then, much of the world began positive 
economic growth again, led by developing economies like China and 
India, resulting in a gradual increase in oil prices. Over the past two 
years, we have seen prices climb almost 90%. However, because demand 
was down in the U.S. and the increase was gradual, most Americans did 
not really notice it. The recent political turmoil in North Africa and 
the Persian Gulf created fears of further instability and supply 
disruptions, and prices climbed precipitously. It is important to 
understand that even if the political unrest subsides and global 
supplies are unaffected, increased global demand has essentially set a 
new price floor. Given today's market fundamentals, it is difficult to 
see prices returning to their 2009 levels.
    While the drama of political struggle has been unfolding overseas, 
the U.S. has been experiencing its own energy security struggle at 
home, fueled by regulatory uncertainty. The past two years have seen 
the first upturn in U.S. crude oil production in over 25 years of 
decline. This increase is evidence of the significant lag time to bring 
new production to market. For offshore production increases, much of it 
is due to production incentives created in the latter 1990s through the 
Deepwater Royalty Relief Act. The increased production is also a 
testament to technological advances in the oil and natural gas 
industry. A tremendous amount of increased production has come from 
unconventional formations in the inner-mountain west that were 
previously too expensive to produce with existing technology. Also 
production on private lands has greatly increased. Increased oil 
production coupled with decreased demand has nearly eliminated the gap 
between domestically produced and imported oil for the first time in 15 
years. However, if we look to the future, it is not so bright.
    Even while production has increased on private land, federal 
government actions have reduced the country's ability to produce energy 
resources on federal lands. From its earliest days, the Obama 
administration has continually taken land off the table for oil 
production, most notably the Gulf of Mexico. The de facto moratorium 
that has been put in place to prevent new oil (and natural gas) 
exploration and production has put the country back on a declining 
production trend. The Energy Information Administration (EIA) recently 
projected that by 2012 U.S. crude oil production will decrease by more 
than 90 million barrels, almost all of which is directly attributable 
to an expected 30% decrease from the Gulf of Mexico.
    There has been much discussion of how many permits are being issued 
and how many more are pending. Recently, the Department of Justice 
filed such a brief which stipulated that 270 permits were pending for 
shallow water drilling and 52 permits in deep water. These numbers are 
significantly larger than numbers discussed by the Department of 
Interior, and they demonstrate the true nature and extent of the de 
facto moratorium in the Gulf and explain EIA's declining projections.
    The administration has continually promised that the spigot will 
open soon for new exploration and production. However, there is no 
time-table much less a commitment to begin issuing permits at a 
sufficient rate again, leaving domestic producers in limbo and costing 
them millions of dollars in idled equipment and declining revenues. We 
have already witnessed seven deepwater rigs set sail for more 
hospitable climes in other countries taking jobs and tax revenue with 
them.
    Yes, oil prices are largely set by the global market, but like all 
commodities, they are influenced by price signals. Turmoil in oil 
producing countries and regulatory uncertainty in the U.S. has forced 
the market to build in additional risk premiums to the price even as 
production has changed little. Similarly, political stability in the 
Middle East and greater regulatory certainty in the U.S. will signal to 
the oil markets that risk has decreased and prices can decline.
Competitiveness
    Federal policies that are hampering production are not only 
threatening our energy security, but also severely harming our 
competitiveness. The International Energy Agency (IEA) projects that 
global energy demand could increase by nearly 50% by 2035. It also 
projects that fossil fuels will account for 80% of the world's energy 
supply, only slightly down from today's 86%. Fossil fuels, and oil 
specifically, will continue to fuel the world's economies, and 
countries that are realizing the most economic growth are thinking and 
acting strategically to ensure future supplies will be available to 
maintain economic growth and competitiveness.
    In 1970, investor-owned companies controlled 85% of the world's oil 
reserves. Today, it has shrunk to only 6%, with National Oil Companies 
and other governmental entities controlling more than 90% of the 
world's oil reserves. Our international strategic competitors are not 
only increasing their own production, but they are exploiting the tie 
between their governments and their oil companies to invest in new oil 
reserves in other countries. It is very difficult for a private 
corporation, no matter how large it may be, to compete against central 
governments. These other countries are taking positive steps to ensure 
they have the energy resources to fuel economic growth well into the 
future. We are not.
    Indeed, the United States is set an opposite course. About 97% of 
the federal off-shore lands and 94% of federal on-shore lands are not 
leased. Not only has the federal government been reducing access to the 
country's energy resources, but it has also been making it more 
difficult and expensive to produce on the few areas that remain 
available. New and proposed regulations will add to the cost of 
production, making it even less competitive to produce oil and natural 
gas in the U.S. Even areas that are not under specific moratoria have 
proven to be equally inaccessible. The United States Geological Survey 
estimates that 30 billion barrels of oil lie off the north coast of 
Alaska. Even after billions of dollars have been invested in leases to 
explore in this area, the administration continues to erect barriers 
that prevent access to this tremendous resource.
    The largest publicly traded oil companies are increasingly looking 
overseas to the remaining areas that have not already been locked up by 
other countries' national oil companies. Demand for oil will continue 
to increase as the economy recovers. Since access to federal resources 
is declining, more of our demand will be met by imports. Our net 
imports of petroleum and related products rose to $265 billion in 
2010--a sum equivalent to more than half the U.S. trade deficit.
    In short, America's access to oil, our predominant source of 
energy, is declining at home and abroad. The same cannot be said for 
our global competitors, and our ability to compete, generate investment 
and revenue and foster economic growth is tremendously diminished as a 
result.
Good Ideas
    This is not the first time that rising gasoline prices have turned 
America's attention to energy policy. The cycle is nearly as 
predictable as the swallows returning to San Juan Capistrano. We often 
hear the same solutions proposed, some helpful and some not so. 
However, the situation is distinctly different this time. A larger 
share of the burgeoning energy crisis is the direct result of federal 
policies. Reversing these policies presents a ready-made solution for 
the administration and Congress to make a positive contribution, both 
in the near-term and the long-term. If we had fully implemented 
policies proposed in the past when prices have risen, we would find 
ourselves in a much different situation than we do now. Congress does 
deserve credit for not reauthorizing its moratorium on off-shore oil 
and natural gas production in 2008, even if the administration has 
failed to capitalize on the opportunity to improve our future.
    Today many of the same options would significantly benefit the 
country, but addressing the administration's recent actions presents a 
real near-term path for improving the country's situation. A Wood 
McKenzie study released in January emphasizes this point. It estimates 
that increasing access to federal energy resources would create more 
than 500,000 jobs, increase domestic production by 35%, and provide an 
additional $150 billion in government revenue.
Gulf of Mexico
    Before the de facto moratorium, about one-third of domestic oil 
came from the Gulf of Mexico. Almost a full year after the Obama 
administration implemented a de facto moratorium on new exploration, 
this vital resource base remains in flux. Less than half the normal 
rate of shallow water permits has been issued even while acknowledging 
shallow-water operations are distinctly different from the 
administration's deep-water risk assessment. The administration 
estimated that its official moratorium would result in some 12,000 jobs 
being lost. A subsequent study performed by Dr. Joseph Mason, Chair of 
Banking at Louisiana State University, concluded that the de facto 
moratorium could ultimately cost nearly 25,000 jobs in the region and 
35,000 nation-wide.
    Mr. Chairman, the ``Putting the Gulf Back to Work Act'' that you 
recently drafted is precisely the type of proposal that can improve our 
energy future almost overnight. By removing many of the obstacles 
preventing exploration and production in the Gulf of Mexico and 
ensuring the Department of Interior can no longer sit on permit 
applications indefinitely, we can prevent those jobs from being lost, 
those foreign barrels of oil being imported, and provide the first 
glimpse of certainty the energy industry needs to increase investments 
in America.
Alaska
    The areas of the north coast of Alaska represent a tremendous 
resource, containing upwards of 30 billion barrels of oil. The 
University of Alaska Anchorage estimates that developing these 
resources will create 35,000 new jobs. Moreover, as production on 
Alaska's North Slope continues to decline, this new source of product 
will ensure the Trans-Alaska Pipeline will continue to run for decades 
to come, bringing even more oil to the rest of the country.
    However, leases that have already been paid for and issued remain 
idle awaiting air-quality permit that has been pending at the 
Environmental Protection Agency (EPA) for four years. This is a perfect 
example of the regulatory uncertainty facing domestic producers. When 
leases lay idle six years after being issued, one can understand why 
corporations would think twice about investing the millions of dollars 
in projects on federal lands.
Canada
    We have heard much about the need for energy independence over the 
years, yet we hear little of reliable trading partners whose energy 
resources secure our energy future just as much as domestic production. 
More than one-third of our imported oil comes from Canada and Mexico. 
The proximity of these supplies and the security of our relationships 
with our neighbors make these imports a vital prong to our energy 
security. Canadian imports specifically have become an increasingly 
large component of our oil supply. However, we have policies in place 
that deter additional use of Canadian crude. Section 526 of the Energy 
Independence and Security Act of 2007 can prohibits the U.S. 
government, specifically the Department of Defense, from using oil from 
the largest and most stable source of U.S. import, the Albertan oil 
sands.
    This policy hinders the military's readiness, threatens our energy 
security, and increases greenhouse gas emissions the exact opposite the 
policy is intended to prevent. Make no mistake the oils sands will be 
developed, the question is where will the product be used. If this fuel 
is not imported to the United States via pipeline, it is most likely to 
be exported to Asia via tanker and refined under weaker emissions 
standards. This provision must be repealed--our national security and 
energy security depend on it.
    Additionally, the proposed Keystone XL pipeline would bring 
significant quantities of Canadian crude oil to U.S. refineries, 
displacing imports from other, less-secure trading partners. 
Construction of this strategic asset will create an estimated 15,000 
direct jobs immediately and ultimately foster the creation of some 
250,000 more jobs. Additionally, a recent study conducted by the 
Perryman Group found that bringing the additional crude to the U.S. 
that would be carried by this pipeline would reduce non-Canadian 
imports, from the Middle East or Venezuela by 40%. However, the project 
is in limbo awaiting a Presidential Permit by the Department of State. 
We encourage the Congress to urge Secretary of State Clinton to issue 
the permit without further delay.
Oil Shale
    Recent technological advances have lead to large increases in 
domestic production of unconventional oil from shale formations, 
especially on privately-owned lands. The advent of these technologies 
has helped displace oil imports, and it will significantly improve our 
energy security in coming years. However, the oil shale itself truly 
has the potential to completely turn the global oil market on it head. 
Oil shale is a sedimentary rock that is not a widely distributed as 
conventional oil-bearing formations, but it is a tremendous potential 
resource. The World Energy Council conservatively estimates that global 
reserves of oil shale amount to 2.8 trillion barrels of oil, and more 
than half of that (about 1.5 trillion barrels) is estimated to be in 
the Western United States. To put this in perspective, the world's 
proven conventional oil reserves are estimated at 1.3 trillion barrels. 
If these estimates are correct, we not only have more oil shale than 
all of OPEC's proved conventional oil reserves, but more than the 
entire world's. But it will not mean anything if we cannot get access 
to it.
    The production of oil shale is energy intensive and has 
traditionally required mining techniques. This not only makes it 
expensive to produce, but it also has engendered opposition from 
special interests. With about 70% of the U.S. reserves located on 
federal lands, the federal government has prohibited production, and 
even most research, on the country's--and perhaps the world's--largest 
oil resource. However, as conventional oil reserves have declined or 
become less accessible, more research and development has been 
conducted to make oil shale production more efficient and with a 
smaller environmental footprint. Given the magnitude of this resource, 
it is more than prudent for the federal government to allow access to 
our reserves and to support additional work on improving the production 
process.
Industry Investment
    The Gulf of Mexico oil spill was a human, environmental, and 
economic tragedy. The administration has only acerbated the impact by 
its continued de facto moratorium on off-shore exploration and 
production. It has done this in spite of the proactive efforts the 
industry has made in addressing concerns that it was not prepared to 
contain and mitigate future spills. The off-shore industry has invested 
billions of dollars in the creation of the Marine Well Containment 
Company and the Helix Energy Solutions Group, two interim rapid 
response systems that separately provide capabilities to contain up to 
60,000 barrels of oil per day at up to an 8,000 foot depth. These 
companies have applied the lessons learned from the Gulf of Mexico oil 
spill last year to develop and pre-stage equipment throughout the Gulf 
to quickly contain any future spill. Regardless of an exemplary record 
and very low probabilities, we now know a significant spill can happen 
and a response capability exists. The country can be assured that the 
offshore industry is prepared to start producing domestic energy and 
jobs again with the highest degree of safety precautions, exceeding 
even the government's standards.
Bad Ideas: Use it or Lose it, Tap the SPR, Raise Taxes
    It seems that for every idea that would create jobs, increase our 
energy security, and increase federal revenues, there is one that will 
do the exact opposite. Every time prices increase, many of the same 
ideas are offered up as short-term solutions. One proposal we just 
heard President Obama recycle yesterday is imposing penalties on 
companies that are not ``actively producing'' on federal leases. 
Proposals based on this ``use it or lose it'' theory are just as 
fallacious and damaging to our competitiveness now as they have been 
when rejected in the past. However, this current iteration is perhaps 
more egregious as the administration is threatening to penalize ``non-
producing'' leaseholders when the administration itself is refusing to 
issue permits to produce. Producing from new areas is very time and 
cost-intensive. Reducing the time period a leaseholder has to begin 
production adds to the risk of the investment and further discourages 
domestic production.
    Another proposal rearing its head once again is to sell oil stocks 
from the Strategic Petroleum Reserve. The reserve, which was 
established on the heels of the 1973 Arab oil embargo, is suppose to 
act as a hedge against supply disruptions. It is debatable how much 
prices would decline if the 727 million barrels were released, but it 
is certain that prices would increase as soon as the releases subsided 
and the U.S. would be more vulnerable to the impacts of actual supply 
disruption.
    Additionally, the Administration's has proposed to levy almost $90 
billion of dollars of new taxes on America's oil industry. Many in 
Congress also use the event of price increases to call for increased 
taxes on oil companies. A Wood McKenzie study released in January 
estimated that the proposed tax increases would lead to as many as 
170,000 jobs being lost through 2014. While it is difficult to mitigate 
higher gasoline prices immediately, it is not difficult at all to 
reject tax increases that would cost so many their jobs.
    Unfortunately, we have a good example of the negative consequences 
of such actions. The creation of a ``Windfall Profits Tax'' in 1980 
caused domestic production to decrease and imports to increase. Prices 
consumers paid were relatively unaffected, but jobs were lost in the 
oil industry and federal royalty revenues declined. With such a great 
example of the impacts of these proposals, it is negligent to pursue 
them again.
What is at stake?
    If the administration and Congress do not both embrace these 
positive steps and reject the negative steps, Americans will pay a 
heavy price, not only economically but also a with greater risk to our 
energy security. Every one cent increase in the price of gasoline costs 
Americans roughly an additional $1 billion per annum. The average 
American household is expected to spend $2,800 on gasoline this year, 
$850 more than 2009. Additionally, each $10 increase in oil prices can 
knock a few tenths of a percent off any increase in GDP. The quicker 
the increase, the more pronounced the impact on economic growth. 
Because of the global recession, the cumulative amount of money spent 
on oil has become a larger share of global GDP since most other areas 
of economic output have remained constant or declined. At current 
prices, oil accounts for nearly 5% of global GDP, a level not seen 
since 2008 when oil was selling at $150.
    Higher energy prices erode expendable income for America's families 
and marginal profits for America's businesses. At a time where we are 
just beginning to realize positive economic growth again, these price 
increases can have a profoundly negative impact. U.S. policy alone 
cannot recalibrate global oil markets on its own. However, U.S. policy 
can absolutely have a positive impact on U.S. prices just as it has had 
a negative impact.
    As energy costs increase, businesses have less money to pay 
employees, new or existing. If prices remain elevated long enough, the 
unemployment rate can be expected to rise. This of course would be on 
top of the current historically high unemployment rate. As the 
administration and some in Congress have made calls to raise taxes on 
the oil and gas industry, it is also important to remember the consumer 
and job impacts such policies would have.
CONCLUSION
    Today, the official unemployment rate stands at 8.9%, and if the 
underemployed and long term unemployed are counted the figure could be 
as high as 17%. Our nation can and will recover but we cannot let 
rising energy prices and lack of a coherent energy strategy imperil 
this recovery. We need common sense policy and regulation that 
recognizes today's energy resources while also investing in tomorrow's 
technologies. We are blessed with an abundance of the conventional and 
unconventional fuels that will part of our energy landscape for 
decades. According to the Congressional Research Service, the proven 
recoverable reserves of American oil, natural gas and coal combined are 
the world's largest and the USGS estimates that our oil shale reserves 
could be five times as large as Saudi Arabia's reserves. Congress 
should ensure the energy industry has access, regulatory certainty and 
fair fiscal policy to transform these resources into energy to power 
our economy. We are also blessed with a good neighbor, Canada, and 
Congress should eliminate discriminatory policies endangering our 
ability to expand our energy trade. These steps alone will not be 
sufficient to meet all of our future energy needs. However, the threats 
to America's competitiveness and national security will only grow if we 
ignore the tremendous potential of our domestic resources to fuel a 
more secure energy future.
                                 ______
                                 
    The Chairman. Thank you very much for your testimony. I 
gave you a little bit of time because of the generous time that 
Governor Graves had left over.
    Ms. Harbert. Thank you for that fair and balanced 
treatment.
    The Chairman. Mr. Shawcroft, you are recognized.

 STATEMENT OF DON SHAWCROFT, PRESIDENT, COLORADO FARM BUREAU, 
  TESTIFYING ON BEHALF OF THE AMERICAN FARM BUREAU FEDERATION

    Mr. Shawcroft. Thank you, Mr. Chairman, good morning. Good 
morning members of the Committee and particularly 
Representatives from Colorado. My name is Don Shawcroft. I am 
President of the Colorado Farm Bureau, and I am here today to 
testify on behalf of the American Farm Bureau Federation, a 
grassroots organization representing a diverse range of 
agricultural producers from all 50 states and Puerto Rico. I am 
a rancher from the San Luis Valley in Southern Colorado. Thank 
you for holding this hearing and inviting me today.
    We appreciate the opportunity to share the impact that high 
fuel costs have on our nation's farm and ranch families. 
America's farmers and ranchers continue to work hard to produce 
the safest, most abundant food supply in the world. 
Unfortunately, our nation's dependence on foreign sources of 
fuel threatens our livelihood. The prices of energy-related 
imports and interest rates most affect U.S. agriculture's 
bottom line on an annual basis. Over the past 11 years, it has 
been true that some sectors of agriculture have seen good 
prices for their products.
    Farmers and ranchers have little, very little, ability, if 
any, to pass on to the purchasers of our products our cost of 
business, including those for fuel, fertilizer, seed and 
agricultural chemicals. That is why the Farm Bureau believes 
that the United States should be focused on energy 
independence, and develop and employ a diversity of broad-based 
domestic energy supplies. Last week, farm diesel fuel used in 
tractors and combines to plant and harvest crops was on average 
$3.47 per gallon in Colorado.
    Just last night, a news anchor was complaining about how it 
cost him more than $60 to fill his gas tax in his car. I would 
like to tell you a little bit about that reality in filling 
tanks on tractors and combines. Last week, at those prices, it 
would cost over $930 to fill a Case 9370 tractor that is used 
to till the land, and it would over a $1,050 to fill the tank 
on a new John Deere 9870 combine used to harvest those crops. 
Please understand that is not just a one-time fill any more 
than you just fill a tank on a car one time if you make a trip. 
It takes many times of filling those tanks in order to do the 
work on a farm.
    Like many ranchers, I face a challenge which is slightly 
different than filling tractors. I have pickups that have to be 
filled with gas or diesel. I have trucks that have to be filled 
with diesel. I am not fortunate enough to have enough land in 
one place to keep my livestock there year round. Therefore, I 
must cumulatively transport those cattle hundreds of miles 
during a year so that they will have adequate grazing. In order 
to move them safely, I must load them in semi-tractors and 
trailers that take a lot of fuel. A fuel bill for one truck can 
be over $500 for just one trip.
    It also affects rural Colorado as well and rural United 
States. My local school district has reported to me that they 
traveled 148,340 miles with their buses last year. Keep in 
mind, that is not a lot of buses. It is a small school 
district. At the current cost of fuel, that is approximately 
$65,000 for a small school district. Definitely a challenge.
    Given the hype about food versus fuel, I am sure you have 
heard a lot of claims about ethanol's impact on gasoline 
prices. To be clear, ethanol production has no impact on the 
cost of a barrel of crude oil. In fact, as oil prices rise, 
ethanol becomes more important keeping gasoline costs lower, 
but the price of a barrel of crude certainly impacts all 
aspects of agriculture including putting fuel in your tanks and 
food on your tables.
    Farm Bureau energy policy is clear. We support a diverse 
domestic energy portfolio for this country that should include 
all forms of energy, domestic oil and gas production, clean 
coal technology, next generation nuclear technology and various 
renewable energy opportunities. All these energy components 
represent pieces of a puzzle that we can put together to solve 
the problem and so that we can become more independent in our 
energy production.
    We urge you to take the steps needed to make our country 
energy independent. We need a commitment to domestic oil and 
gas production that must include production for our most 
energy-rich areas such as the Outer Continental Shelf, the 1002 
area of the Arctic National Wildlife Refuge and even the 
Piceance Basin in my home state of Colorado. Please continue to 
develop all sources of energy, and please continue the tax 
incentives for ethanol, biodiesel and the approved increase in 
the current ethanol blend of 15 percent. Thank you for the 
opportunity you have given me to testify. I look forward to 
your questions.
    [The prepared statement of Mr. Shawcroft follows:]

     Statement of Don Shawcroft, President, Colorado Farm Bureau, 
      Testifying on Behalf of the American Farm Bureau Federation

    My name is Don Shawcroft, President of the Colorado Farm Bureau. I 
am here today on behalf of the American Farm Bureau Federation (Farm 
Bureau). Farm Bureau is a grassroots organization representing a 
diverse range of agricultural producers from all 50 states and Puerto 
Rico. I am a rancher from the San Luis Valley in Colorado.
    Farm Bureau appreciates the opportunity to share the impact that 
high fuel costs have on our nation's farm and ranch families. These 
prices affect not only our businesses, but our families and communities 
as well. America's farmers and ranchers work hard to produce the 
safest, most abundant food supply in the world; unfortunately our 
nation's dependence on foreign sources of fuel threatens our 
livelihood.
    Our businesses rely on fuel: Diesel to run our tractors and 
harvesters, gasoline for our pickups, natural gas and petroleum used to 
manufacture our fertilizer, herbicides and pesticides. Profitability in 
agriculture is affected greatly by high fuel prices, whether they are 
caused by instability in other parts of the world or increasing demand 
from emerging nations. That is why Farm Bureau believes that the United 
States should be focused on energy independence.
    Our grassroots members, representing all 50 states and Puerto Rico 
and all sectors of agriculture, believe that we must develop and employ 
a diverse, broadbased domestic energy supply. We support the 
development and implementation of a comprehensive national energy 
policy, which includes conservation, efficiency, exploration and 
research and provides for the domestic production of traditional and 
renewable energy sources. Opening and using new sources of petroleum, 
along with existing and future home-grown fuels, should keep current 
and future generations of Americans safe from the economically 
devastating effects of our dependence on foreign energy.
    Over the past 11 years, we have seen very volatile oil and natural 
gas prices due to a variety of factors. Although some sectors of 
agriculture have seen good prices for their products, their 
profitability is hindered by high energy costs. Farmers and ranchers 
have little, if any, ability to pass our costs of business, including 
those for fuel, fertilizer, seeds and agricultural chemicals, on to our 
customers.
    Farmers have been impacted particularly hard by the rising costs of 
inputs needed to grow their crops. According to the USDA Economic 
Research Service (ERS) farmers can expect to pay almost 85 percent more 
than they paid in 2000 just to put their crops in the ground this 
spring. The ERS calculates the operating costs per planted acre--or 
cash costs--of the country's most produced crops. This data includes 
the costs of seeds, fertilizer, chemicals, fuel and electricity, 
repairs and interest on operating capital. It does not include the cost 
of labor for the farmers or an employee, the cost of land, the cost of 
property taxes or the cost of insurance. The ERS data shows that in 
2011 corn farmers can expect cash costs that are 85 percent higher than 
their costs in 2000. Similarly, cotton farmers can expect to see a 77 
percent increase and rice farmers a 72 percent increase. ERS has been 
tracking this data for grain sorghum since 2003. Grain sorghum 
producers have seen their cash costs rise more than 77 percent in 8 
years.
Fertilizer and Chemical Costs
    Farmers and some ranchers depend on fertilizer to enhance the 
nutrients in their soil to produce the safest and most abundant food 
supply in the world. Unfortunately, we have seen fertilizer prices 
skyrocket due to a rise in the costs of natural gas and crude oil, 
increasing demand from emerging countries and a decline in domestic 
fertilizer production.
    Natural gas accounts for 70 percent to 90 percent of the cost of 
producing anhydrous ammonia, a key source of nitrogen fertilizer. The 
sharp rise in natural gas prices and the resulting curtailment of U.S. 
fertilizer production has had a dramatic impact on fertilizer prices 
throughout the marketing chain and, in particular, at the farm level. 
According to ERS, between 2000 and 2011 the fertilizer costs for rice 
rose 125 percent, cotton rose 175 percent and corn rose 197 percent. 
The fertilizer costs for grain sorghum have risen 127 percent.
    As U.S. fertilizer production has slowed, we have become 
increasingly dependent on foreign sources of the product. According to 
The Fertilizer Insitute (TFI) two of the components of fertilizer, 
nitrogen and potash, are usually imported from other countries. Current 
fertilizer prices are expected to surge this spring due to the costs of 
transporting the imported components and growing demand from other 
countries. According to TFI, the United States was the fourth largest 
consumer of fertilizer for fiscal years 2007 and 2008. The top three 
consumers were China, the rest of the world and India. Brazil came in 
fifth, followed by Indonesia.
    Additionally, the Environmental Protection Agency (EPA) is now 
pursuing policies which would replace coal and other fossil fuels with 
natural gas for electricity production. While many factors go into 
determining fertilizer prices, the natural gas price is a principal 
component. Should EPA's policies have the effect of pushing natural gas 
prices higher, we anticipate those costs will combine with other 
factors into pushing fertilizer prices higher. In addition to making it 
difficult for domestic manufacturers of fertilizer to make a profit, 
these policies will make farmers even more dependent on others for our 
farm inputs.
    Natural gas and crude oil spikes have a dramatic impact on the 
costs of the herbicides and pesticides that we use to protect our 
crops. According to ERS, the cost of agricultural chemicals increased 
58 percent for rice and 19 percent for cotton since 2000, and 24 
percent for grain sorghum since 2003. On the other hand, the cost of 
chemicals for corn decreased by 1 percent.
Fuel Costs
    As President of Colorado Farm Bureau, I spend a lot of time talking 
to the corn and potato farmers who grow two of our state's largest 
crops. Last week, farm diesel fuel used in tractors and combines to 
plant and harvest these two crops was, on average, $3.47 per gallon in 
Colorado.
    I know from conversations with farmers and ranchers in other parts 
of the country that they also struggle with rising diesel costs. Like 
all transportation fuels, the price of farm diesel varies from state to 
state. Most states do not publish these prices, with Illinois being the 
exception. According the USDA-Illinois Department of Ag Market News, 
the average price of farm diesel in Illinois rose from an average of 
$1.70 per gallon in March 2009, to an average of $3.56 per gallon in 
March 2011. That is a 103 percent increase in price over the past two 
years.
    Most Americans are feeling sticker shock caused by high gasoline 
prices when they fill their automobile's tank. There is no term in the 
English language to accurately describe what farmers and ranchers feel 
every time they put diesel in the tanks of their farm equipment. I have 
a couple of examples based on the price in Colorado last week.
    The fuel capacity on a CaseIH 9370 tractor is 270 gallons, which 
results in a $936.90 price tag every time the tank is filled. A new 
John Deere 9870 STS has a fuel capacity of 305 gallons. At last week's 
prices the cost of that tank of fuel is $1,058.35. Depending on the 
number of acres being covered, farmers and ranchers have to fill those 
tanks multiple times just to complete the work on one field or pasture. 
Due to the fracturization of land, we have many fields to cover.
    Ranchers face a different set of challenges caused by high oil 
prices. Like many ranchers, I have to keep my herd on several parcels 
of land, which requires daily trips between pastures to check on the 
health and safety of my animals and to feed and water them.
    Throughout the year, I have to move cattle hundreds of miles to 
ensure that they have adequate grazing land. In order to move the 
cattle safely, I must use multiple semi-trailers and make multiple 
trips. The semis typically have 300 gallon capacity fuel tanks. 
Depending on the length of the trip and the terrain we must cover, fuel 
efficiency varies and affects the numbers of times I have to refuel 
these trucks on one trip. The fuel bill for just one truck can be over 
$5,000 on just one trip. Ranchers in other parts of the country face 
similar issues
    Gasoline prices in my area are $3.49 per gallon. I use a lot of 
gasoline in the engines of the vehicles and equipment needed to run my 
business. It makes more sense for me to have the gasoline delivered to 
my ranch rather than going to town every time I need to refuel. 
However, convenience costs--specifically, $3.52 per gallon.
    Given the hype about ``food v. fuel,'' I am sure you have heard a 
lot of claims made about ethanol's impact on gasoline prices. It is a 
myth that ethanol is a factor in the high cost of gasoline. Ethanol 
production has no impact on the cost of a barrel of crude oil. In fact, 
as oil prices rise, ethanol becomes more important to keeping gasoline 
costs lower. At $40 per barrel for oil, the energy value of corn in 
terms of British Thermal Units (BTU) produced is roughly $2.50 per 
bushel; at $100 per barrel, that same bushel of corn is worth more than 
$6.50. This is strictly the energy value of the corn as fuel, not as a 
value added product that has been converted into valuable livestock 
feed and a fuel able to be mixed with gasoline and fully functional in 
our automobiles.
    Farm Bureau believes that renewable fuel production can help make 
our country energy independent, generate good jobs in rural 
communities, and help keep farming and ranching fiscally sound. We 
support the goal of the 25x'25 Alliance to generate 25 percent of our 
nation's energy supply from our nation's farms, ranches and other 
working lands by 2025.
    High gasoline costs have impacts on farm and ranch families that go 
beyond production costs. Many of our families depend on off-farm 
employment to supplement their agricultural income and allow them to 
continue to feed the world. The jobs are rarely just a few miles from 
home. Steadily increasing gas prices are eating away at these families' 
fiscal health. Beginning farmers and ranchers can be hit hardest by 
this situation.
    Rural school budgets have also taken a beating from the high cost 
of gasoline. Our school buses must travel long distances to transport 
our children to and from school every day. Rural schools' ability to 
fund and provide quality education for our children is being eaten away 
by high fuel costs.
    Officials at my local school district told me that our school buses 
traveled 148,340 miles in the 2009-2010 school year. Those buses 
averaged 8 miles per gallon. According to my math, that comes out to 
18,542 gallons of gas. Calculated at the current retail price in my 
town, the yearly cost of fuel for the district is almost $ 65,000--a 
potentially devastating outlay for a rural school district.
    In addition to endangering the futures of our children, this 
situation can create additional tax liabilities for farmers and 
ranchers. Many school districts rely heavily on funds gained from 
property tax revenue. As landowners, we bare a great deal of the costs 
for our rural schools--schools that have educated generations of many 
of our families. However, property tax increases chip away at our 
profitability and reduce our ability to provide for our families and 
the families of our employees.
Solutions
    We must renew America's commitment to domestic oil and gas 
production. Energy rich repositories such as the Outer Continental 
Shelf, the Bakken Oilfields and the Arctic National Wildlife Refuge 
must be explored and opened for oil and gas production. The 
advancements made in oil and gas-drilling technology will increase the 
environmental protections for capturing energy feedstocks. 
Additionally, we must increase domestic oil refining capacity and 
diversify the geographic locations of those refineries.
    We must continue to develop all sources of renewable energy. These 
sources must play a vital role in securing America's energy security. 
As with drilling techniques, much advancement has occurred in the 
production of renewable energy sources such as ethanol, biodiesel, 
biomass, wind and solar energy.
    We must do more to make home-grown energy available to American 
consumers, including implementing the approved increase of the current 
ethanol blend rate to 15 percent and building a biofuel infrastructure 
which includes blender pumps and biofuel pipelines. We must continue to 
provide incentives, such as the tax credits currently in place, to 
encourage the production of biodiesel fuels.
    American agriculture needs reliable and reasonably priced fuels in 
order to maintain its ability to feed, clothe and fuel the world. We 
urge you to take the steps needed to make our country energy 
independent. The livelihoods of our families, our communities and our 
businesses depend on it.
    Thank you for the opportunity to testify. I look forward to your 
questions.
                                 ______
                                 
    The Chairman. Thank you, Mr. Shawcroft. Our last witness is 
Mr. Fox, and you may proceed, Mr. Fox.

  STATEMENT OF MICHAEL J. FOX, EXECUTIVE DIRECTOR, GASOLINE & 
          AUTOMOTIVE SERVICE DEALERS OF AMERICA, INC.

    Mr. Fox. Good morning, Chairman Hastings, Ranking Member 
Markey, members of the Committee. My name is Michael J. Fox, 
and I am the Executive Director of the Gasoline and Automotive 
Service Dealers of America, the trade association representing 
gasoline retailers, and we thank you for the opportunity to 
come here this morning. Our industry, and specifically our 
members, are still attempting to recover from the boom-and-bust 
commodity cycles of the past from Hurricane Katrina to the most 
recent runup in crude oil and gasoline prices. Gasoline 
retailers stand bewildered in the face of such surging and 
volatile prices. Sales volumes and consumer demand have not 
returned to normal demand cycles.
    The housing bubble, unemployment crisis and slow post-2008 
economic recovery have continued to strain businesses and 
consumer pocketbooks and have caused retail stations to close 
at alarming rates. Those remaining still struggle with the 
additional capital requirements, diminished profitability and 
general business uncertainties brought on by higher wholesale 
prices and ever thinning margins due to higher production costs 
and credit card/debit card swipe fees. Gasoline retailers feel 
the effects of higher crude prices and higher wholesale fuel 
costs instantly.
    A gasoline retailer is like a consumer who fills up the car 
weekly, except high-volume retailers need to fill up daily or 
every other day, and their gasoline tanks are 8,500 gallons, 
not 20 gallons like a consumer. Most retailers are not free to 
shop for the best price daily as consumers can when not happy 
with one particular retailer's price that day. Most retailers 
have fuel supply agreements that make them captive customers of 
the major oil companies or middle men called distributors.
    Even when a retailer is supplied by a distributor, most 
times that distributor is a captive customer of major oil. More 
locked in captive customers equal larger big oil profit. The 
facts are clear. Big oil profits are huge and growing no matter 
what the economic climate or troubles come out such as the 
tsunami in Japan, the collapse of Wall Street and subsequent 
big bank bailouts. We continue to see big oil profit while 
small gasoline retailers, consumers and of course our economy 
struggle.
    I am aware that Congress is currently debating measures to 
address rising gasoline prices and to bring relief to small 
businesses like ours and our customers that depend so much on 
our product for their livelihoods and general mobility. I 
commend this Committee and the Congress and both sides of the 
aisle for their commitment to this endeavor. It is certainly 
both in the interest of your constituents and the interest of 
our broader economic well being. Unfortunately, there is no 
magic bullet that will lower the price of gasoline tomorrow.
    However, that is not to say no government solution will 
bring consumers relief at the pump. First and foremost, 
Congress can and should take additional steps to address 
excessive speculation and opaque market activity in the energy 
derivatives market. As a founding member of the CMOC or 
Commodities Market Oversight Coalition, members have been 
advocating for complete transparency, accountability and 
oversight in the energy trading markets.
    CMOC is an informal coalition whose participating members 
represent an array of business, consumer interests that 
advocate in favor of government policies that promote stability 
and confidence in the commodities market and that the preserve, 
the interest of bona fide hedgers, consumers and the broader 
economy. Excessive speculation is the greatest concern to our 
members. While speculation in and of itself is not a bad thing, 
in a transparent and well-functioning energy market, it 
provides the hedging community with the necessary liquidity and 
facilitates price discovery. However, when said speculation is 
driven to excess, it creates volatile markets, unprecedented 
price swings, diminished the ability of commercial hedgers to 
manage price risk associated with commodities such as gasoline 
and dislocates market prices from supply and demand 
fundamentals.
    There are some that argue that the business community and 
commercial end users of derivatives are united in their 
oppositions to reform limits on speculation. This is also not 
true, and I am proof of that here today. I also urge you to 
look at the thousands of comments sent from businesses and 
consumers alike to the CFTC on Monday in support of proposed 
rules on speculation written under mandate by Congress in the 
Dodd-Frank Act. You will note however the financial community 
banks, hedge funds and pensions profit from excessive market 
volatility and speculation at the expense of captive customers, 
retailers, business owners and of course our economy.
    Once the CFT implements the necessary reforms provided by 
Congress in the Dodd-Frank Act which, simply put, assures 
complete transparency and bans all types of excess speculation 
and provides that Congress resist ideological crusades to 
repeal these forms and instead affords the CFT the support, the 
resources and the funding to do the job intended. Congress will 
send a clear message that markets will hear loud and clear, and 
unlike many other solutions being considered by Congress, the 
effect will be immediate. I look forward to addressing all your 
questions and appreciate the time that you have afforded me 
here today.
    [The prepared statement of Mr. Fox follows:]

Statement of Michael J. Fox, Executive Director, Gasoline & Automotive 
Service Dealer's of America, Inc., Connecticut Based Trade Association 
 Representing Gasoline Retailers, Automotive Repair Shops, Body Shops, 
                     Towing Operators & Car Washes

    Honorable Chairman Hastings, Ranking Member Markey and members of 
the committee; thank you for the opportunity to testify before you 
today on rising gasoline prices and the negative impact on small 
family-run businesses and what can be done to provide effective short- 
and long-term relief for both the small business gasoline retailers and 
the customers they serve.
    My name is Michael J. Fox and I currently serve as the Executive 
Director of the Gasoline & Automotive Service Dealer's of America, Inc. 
(or GASDA, Inc.) a trade association who members are responsible for 
pumping over 1.4 billion gallons of gasoline in the State of 
Connecticut. In Connecticut and nation-wide, most gasoline retailers 
are small, family-owned and operated-businesses that are involved in 
their local communities. In Connecticut, they provide employment for 
approximately 4,000 people.
    Our industry and specifically our members are still attempting to 
recover from boom and bust commodity cycles of the past, from hurricane 
Katrina to the more recent run-up in crude oil and gasoline prices. 
Gasoline retailers stand bewildered in the face of such surging and 
volatile prices. Sales volumes and consumer demand have not returned to 
normal demand cycles. The housing bubble, unemployment crises and slow 
post-2008 economic recovery have continued to strain businesses and 
consumer pocketbooks, and have caused retail stations to close at 
alarming rates. Those remaining still struggle with the additional 
capital requirements, diminished profitability and competitiveness, and 
general business uncertainties brought on by higher wholesale prices 
and the ever thinning margins due to higher product costs and credit 
and debit card swipe fees.
    Gasoline retailers feel the effects of higher crude prices and 
higher wholesale fuel costs instantly. A gasoline retailer is like a 
consumer who fills up the car weekly, except some high volume retailers 
need to fill up daily or every other day and their gasoline tank is 
8500 gallons, not 20 gallons. Most retailers are not free to shop for 
the best price daily as a consumer can when not happy with one 
particular retailers price that day. Most retailers have fuel supply 
agreements that make them captive customers of the ``Major Oil'' 
companies or middlemen called ``distributors.'' Even when a retailer is 
supplied by a distributor, most times that distributor is a captive 
customer of ``Major Oil.'' A big reason Major Oil is and has been 
exiting the direct serve market. More locked in captive customers 
equals larger Big Oil Profits. The facts are clear, Big Oil profits are 
huge and growing no matter what the economic climate or troubles come 
about, such as the tsunami in Japan, the collapse of Wall Street and 
subsequent Big Bank bailouts. . .we continue to see Big Oil profit 
while small gasoline retailers and consumers struggle.
    I am aware that the Congress is currently debating measures to 
address rising gasoline prices and to bring relief to small businesses 
like ours and our consumers that depend so much on our product for 
their livelihoods and general mobility. I commend this committee and 
the Congress, and to both sides of the aisle, for the commitment to 
this endeavor. It is certainly both in the interests of your 
constituencies and the interests of our broader economic well-being. 
Unfortunately, there is no immediate ``magic bullet'' that will lower 
the price of gasoline tomorrow, however that's not to say that there 
are no government solutions that will bring consumers some relief at 
the pump.
I. Addressing ``Excessive Speculation'' in the Energy Derivatives 
        Marketplace
    First and foremost, Congress can and should take additional steps 
to address ``excessive speculation'' and opaque market activity in the 
energy derivatives markets. As a founding member of the Commodity 
Markets Oversight Coalition (or CMOC), GASDA members have been 
advocating for complete transparency, accountability and oversight in 
the energy trading markets. CMOC is an informal coalition whose 
participating members represent an array of business and consumer 
interests that advocate in favor of government policies that promote 
stability and confidence in the commodity markets and that preserve the 
interests of bona fide hedgers, consumes and the broader economy.
    We commend the Congress for the reforms that it included in the 
2008 Close the Enron Loophole Act, which was championed by Congressman 
Peter Welch of Vermont, and the 2010 Dodd-Frank Wall Street Reform Act, 
which included comprehensive commodity trading reform under Title VII 
of the Act. The reforms of the Dodd-Frank Act are designed to bring 
energy derivative trading out in the open through mandatory reporting 
and clearing requirements, and to subject such trades to oversight by 
the Commodity Futures Trading Commission (CFTC), including prohibitions 
on fraud, manipulation and excessive speculation, all of which over-
the-counter trading has been free from since these markets were 
deregulated in 2000.
    ``Excessive speculation'' is of the greatest concern to my members. 
While speculation is in and of itself not a bad thing--in a transparent 
and well functioning energy marketplace, it provides the hedging 
community with necessary liquidity and facilitates price discovery. 
However, when said speculation is driven to excess, it creates volatile 
markets, unpredictable price swings, diminishes the ability of 
commercial hedgers to manage price risks associated with a commodity 
such as gasoline, and dislocates market prices from supply and demand 
fundamentals.
    There are some that argue that such a conclusion is ``fantasy'' and 
assert that there are no reputable academic or governmental studies 
that provide evidence that speculation can every be harmful or 
``excessive.'' This is not true. I have included for the record a list 
a sampling of 58 studies, reports, and analyses that show the affects 
that excessive speculation and market opacity have had on the commodity 
markets. I have also included a recent study by Stanford that is 
exceptionally conclusive.
    There are some that also argue that the business community and 
commercial end-users of derivatives are united in their opposition to 
reform and limits on speculation. This is also not true and I am here 
as proof. I also urge you to look at the thousands of comments sent 
from businesses and consumers alike to the CFTC on Monday in support of 
a proposed rule on speculation limits, written under mandate by the 
Congress in the Dodd-Frank Act. You will note, however, see much 
support from the financial community that profit from excessive market 
volatility and speculation (banks, hedge funds, pensions) at the 
expense of others (captive customers, retailers, consumers, business 
owners).
    Some argue that for every gallon of gasoline, consumers are paying 
a ``speculative premium'' of as much as $1 per gallon as a result of 
excessive speculation in the crude oil and gasoline markets. Congress 
could immediately remove this ``speculative premium'' by:
          Supporting the implementation of authorities provided 
        the CFTC under the Dodd-Frank Act, especially comprehensive 
        transparency requirements, rules to strengthen prohibitions on 
        fraud and manipulation, and meaningful position limits designed 
        to protect against the burdens of excessive speculation;
          Fighting efforts to strip funding from this agency at 
        a time in which additional resources are needed to implement 
        these new reforms and to respond to ever changing global and 
        domestic market conditions and trading practices;
          Considering legislation to restrain or limit the 
        involvement of ``index funds'' and other so-called ``passive 
        investors,'' whose buy-and-hold strategies have severely 
        disrupted price discovery and caused volatile swings in the 
        price of gasoline; and by
          Reforming the tax code to close loopholes currently 
        being exploited by Wall Street commodity traders that allows 
        them to pay little or no taxes on their speculative profits 
        while commercial hedgers are taxed at higher rates.
    Once the CFTC implements the necessary reforms provided by the 
Congress in the Dodd-Frank Act, which simply put assures complete 
transparency and ``bans all types of excessive speculation'' and 
provided the Congress resists ideological crusades to repeal these 
reforms and instead affords the CFTC the support, resources and funding 
to do the job intended--Congress will sending a clear message that the 
markets will hear loud and clear. And, unlike many other solutions 
being considered by Congress, the effect will be very immediate.
II. Releasing from the Strategic Petroleum Reserve (SPR)
    A release from the Strategic Petroleum Reserve (SPR) will also have 
an immediate but short term positive impact, unlike reforms of the 
commodities markets, which would have both an immediate and permanent 
impact on the marketplace. However, this solution should not be 
ignored. It is just smart policy. Even a small release of 30 or 100 
million barrels will have the immediate effect of driving some bullish 
and speculative activity out of the marketplace and help signal 
somewhat of a much needed correction to an overly emotional market.
    Some argue there should be no release from the SPR because there is 
no present or imminent supply disruption or surge in demand. Yet, these 
same critics also say that speculation is not at fault because there is 
a global supply and demand problem, and/or they argue that there is a 
domestic supply and demand problem that requires increased domestic 
drilling. I just don't understand this logic. A small SPR release is 
just simply in the interests of small businesses, consumers and the 
struggling economy, especially in light of the delayed reforms at the 
CFTC, market irrationalities and world events.
III. Implementation of a Long-term Domestic Energy Policy
    This SPR release worked during Katrina and at other times in our 
history because it bought time and immediate relief to struggling 
consumers until the damaged refineries could get back up and running 
and pipe lines repaired. Such releases from the SPR are a good idea and 
good timing but without a long-term strategy of increased domestic 
energy production and decreased reliance on foreign energy, it is only 
a short-term fix.
    Once the commodity markets are repaired, our nation can and must 
turn its attention to its energy policy. But not before. We must have 
functional, transparent and responsive commodity markets that can hear 
and respond affectively, much as the stock markets would do to signals 
from Washington and market-makers. Any announcement of a comprehensive 
long term energy policy of domestic energy production increases and 
alternative energy solutions must be heard loud and clear by markets in 
order for them to have the intended result. Otherwise, it could serve 
the same affects of an SPR release--Washington acts, the market 
responds, and then only days later rumors of another ``crisis'' drives 
speculators back into the markets and the prices surge again.
    There is much the Congress can do but it should walk the walk, not 
just talk the talk. Measures to address rising gasoline prices that are 
explored by this committee and this Congress must be backed up by hard, 
concrete actions that can be measured by results. Otherwise this is 
just another form of ``speculation'' and that is what we are trying to 
eliminate. Let's return to markets that are responsive to cold, hard 
supply and demand fundamentals and then give them the supply needed to 
meet the demand through a smart and effective domestic energy policy--
something that is, indeed, long overdue.
    Thank you for the opportunity to come here and speak to you today 
and I will answer any questions you may have.
                                 ______
                                 
    The Chairman. Thank you, Mr. Fox, and thank all of you for 
your testimony. We will now begin a round of questioning. Each 
Member will have five minutes, and I will recognize myself for 
five minutes, and I would like to ask a question of all of you. 
All of your testimony talked on different nuances and different 
things that we could do, but there is a fundamental issue here 
it seems to me, and I just want to know if you agree with me, 
and that is if you have a shortage of something, that tends to 
rise the prices, so one of the antidotes for that is to 
increase the supply.
    Greater supply tends to bring down the price of whatever 
commodity you are talking about, and I just want to ask all of 
you very quickly to you agree with that assessment starting 
with you, Governor Graves?
    Mr. Graves. Certainly, Chairman, and of course I agree with 
the President's efforts reducing our import of foreign oil. It 
seems to me like we have to do three things. We have to 
conserve more. We have to basically find alternatives, and we 
have to maintain domestic production as we transition into our 
future.
    The Chairman. Ms. Harbert?
    Ms. Harbert. I agree. We live in a global oil market. It is 
not controlled by one entity or another. It is a global 
commodity, and we need to send the market short-term and long-
term signals that there would be more supplies that we have a 
more predictable market over the longer term.
    The Chairman. Mr. Shawcroft?
    Mr. Shawcroft. Mr. Chairman, I would agree also with the 
single caveat that not only supply but the reliability of that 
supply and reducing volatility in that supply, and you talk 
about speculation that definitely influences that price.
    The Chairman. Mr. Fox?
    Mr. Fox. I agree, but the problem that we fact today is 
with the speculators in the market that we have today. More 
production, I am afraid that the speculators will just take 
over that increased supply. If we look at the inventory levels 
of crude oil today and gasoline, we are above the five-year 
average. That is a market fundamental that should see prices 
dropping but because of speculators in the market, we are 
seeing prices increase. I think if you times increased 
production, a release from the Strategic Petroleum Reserve 
along with an announcement of real market reforms due to 
speculation and provide funding for the CFTC, we would see 
prices tank.
    The Chairman. Well, the reason I ask that question, and I 
know it was pretty fundamental because it is a supply equation, 
and let me go back a bit. In 2008, when gas prices were up 
above $4.00 a gallon, you all probably painfully remember that, 
I certainly do, there were moratoria, a Presidential moratorium 
and a Congressional moratorium, and both of those ended in 
2008, and yet the prices dropped down, and I think this plays 
into I think, Mr. Harbert, what you said, and probably you all 
alluded to, crude is an international commodity and what we did 
with ending those moratoria was send a signal to the market 
that we are going to utilize the resources we have. Therefore, 
the market reacted, including the speculators, and prices 
dropped.
    We seem to be in a different situation now, but the bills 
that I introduced, for example, and again, Ms. Harbert, you 
alluded to the fact of the huge reserves that we have, I 
alluded to that in my opening remarks, if we drill domestically 
smart where we know there are tremendous reserves, would that 
not suggest that we will get probably a more supply online 
quicker rather than later if we know where these potential 
resources are. I will just ask that to all of you because we 
are not doing that in our country right now, so, Governor, let 
me start with you and go right down the line.
    Mr. Graves. Well, certainly I agree, Mr. Chairman. Again, I 
come to this hearing not so much in search of 25-cent a gallon 
fuel. I come to this hearing in search of some stability in the 
fuel markets and again some guidance or hope that we are 
starting a more pragmatic transition into what our future is 
going to look like, and our transportation industry has relied 
upon petroleum-based products forever, and we are more than 
interested in transitioning to new sources of fuel, new sources 
of power, but it is not something that it is like a light 
switch that just goes on and it changes over night.
    In the meantime, we absolutely don't have a fuel that will 
move 80,000 pounds over the Rocky Mountains other than diesel 
fuel, so our concern again is not seeking cheap fuel. Our 
concern is seeking some stability in the fuel available to us 
for the near term.
    The Chairman. Yes. Very quickly because time is running 
out.
    Ms. Harbert. I think what you are talking about is becoming 
more self-reliant, and according to the IEA, $26 trillion in 
investment is needed to meet the growing world energy demand. I 
think the question is, is any of that money going to be coming 
here, or are we putting policies in place that will discourage 
that investment from happening here. An investment to bring 
those molecules to the surface will happen in other countries, 
and those jobs will be created elsewhere, and they should be 
created here.
    The Chairman. Mr. Shawcroft.
    Mr. Shawcroft. Again, Mr. Chairman, as I stated in my 
testimony, we believe that all forms of energy need to be 
brought online as soon as possible.
    The Chairman. Mr. Fox?
    Mr. Fox. I agree, Mr. Chairman, and I just would like to 
say that if we go on a path of increased drilling, you are 
certainly right on when you say target where the product is, 
but if we create alternate energy sources, that will create 
additional competition which would drive the price down even 
further.
    The Chairman. I agree. That is why I have been an advocate 
of all of the above energy plan. I finally have to say I 
remember 25-cent gasoline by the way. Date myself. Gentleman 
from Massachusetts recognized.
    Mr. Markey. I think I was behind you at that pump. Mr. Fox, 
in the Republican HR-1, their first bill this year, their 
budget, they left in $18 billion for loan guarantees for 
nuclear power, but zeroed out all the loan guarantees for wind 
and solar and renewable energy. Is that a good strategy, or 
would you like to see loan guarantees in their for renewables 
as well?
    Mr. Fox. Absolutely would like to see loan guarantees for 
renewables. Again, any increase in competition----
    Mr. Markey. I got you. Thank you. How about you, sir?
    Mr. Shawcroft. I presume you are speaking to me?
    Mr. Markey. Yes.
    Mr. Shawcroft. Thank you, Mr. Markey.
    Mr. Markey. $18 billion for nuclear and then they took all 
the money out for wind and solar for loan guarantees. Do you 
think we should keep in the competition that exists amongst all 
these energy technologies?
    Mr. Shawcroft. There should be technology, and certainly 
competition, but we believe that all forms of energy need to be 
pursued.
    Mr. Markey. Thank you, so zeroing out wind and solar is not 
a good idea, would you agree with that?
    Mr. Shawcroft. No, I wouldn't.
    Mr. Markey. OK. Good. How about you, Karen?
    Ms. Harbert. The nuclear loan guarantees were passed by 
bipartisan Congress.
    Mr. Markey. No, but what I am saying--
    Ms. Harbert. And the renewable guarantees, they received an 
enormous amount of loan guarantees in the stimulus package.
    Mr. Markey. No, I appreciate that, but you support taking 
out the loan guarantee money for wind and solar?
    Ms. Harbert. I did not say that. I said that they had 
received a much greater amount of loan--
    Mr. Markey. No. I am asking you if you support taking out 
the loan guarantee money for wind and solar and leaving it in 
for nuclear? That is all I am asking you.
    Ms. Harbert. We supported the stimulus package which in it 
had huge loan guarantees for the renewable technologies.
    Mr. Markey. OK. So you do support it?
    Ms. Harbert. And we need renewable technologies.
    Mr. Markey. OK. Thank you. I appreciate that. Mr. Graves?
    Mr. Graves. Congressman Markey, a Governor from Kansas 
supports sun and wind power.
    Mr. Markey. Thank you. Thank you. I appreciate that, so, 
Mr. Fox, the CFTC regulations are being promulgated as we 
speak. However, the majority actually has now cut funding for 
the CFTC by more than a third in HR-1. If we were to cut 
funding for the CFTC and hamper its efforts to issue and 
enforce these new regulations, would that lead to higher energy 
prices for consumers? Would speculators rest easier if they 
knew that the funding wasn't there to police them?
    Mr. Graves. The fastest way to $6 gasoline is to cut the 
funding to the CFTC.
    Mr. Markey. So you do believe it would lead to excessive 
speculation?
    Mr. Graves. Yes, sir.
    Mr. Markey. OK. Now, earlier this month, we heard from the 
former Administrator of the Energy Information Administration 
during the Bush Administration, Guy Caruso. He has been quoted 
as saying that oil prices would be reduced by $5 to $10 per 
barrel by deploying the Strategic Petroleum Reserve depending 
upon the timing and the volume of the deployment. Do you agree 
that deploying the Strategic Petroleum Reserve could have that 
type of impact on prices?
    Mr. Graves. I know we have seen that in the past, but when 
we have deployed the SPR before, we had issues such as 
refineries being down due to Hurricane Katrina so we could 
monitor and see when those refineries were coming back online. 
I believe any release of the Strategic Petroleum Reserve timed 
along with proper funding and proper CFTC authorization would 
drive prices down to that level and more.
    Mr. Markey. Great. In 2008, the American Trucking 
Association testified before the select Committee on Energy 
Independence. In that testimony, the American Trucking 
Association, and I quote, said that, ``The ATA has asked the 
Administration to release oil from the Strategic Petroleum 
Reserve. While we know that the Strategic Petroleum Reserve 
does not contain enough oil to permanently alter the supply of 
crude oil in the marketplace, we believe that strategic 
releases of the SPR could temporarily increase the supply of 
crude oil and hopefully help restore rational behavior to the 
petroleum markets.''
    This type of government intervention could drive 
speculators out of the market and help ensure that petroleum 
prices are once again driven by supply and demand. Do you agree 
with that Governor Graves?
    Mr. Graves. I do, Congressman.
    Mr. Markey. Yes, so the deployment of the Strategic 
Petroleum Reserve can in fact have an impact on the attitude 
and the actions of speculators out in the marketplace.
    Mr. Graves. It can, Congressman, and I said my concern goes 
beyond that to long-term stability in pricing.
    Mr. Markey. Ms. Harbert, could you tell me which nation we 
get the most oil from, and we know it is the Canadians. Canada 
made a decision some years ago that it was going to try to turn 
sand that had low concentrations of tar mixed in with it into 
oil. Very expensive, consumes massive amounts of oil, and it 
turns out that cooking the tar out of the sands takes quite a 
bit of energy. It is so environmentally damaging that the 
European Union is moving to prevent tar sands oil from entering 
the European market, but nevertheless with oil prices above 
$100 a barrel, this production has meant huge profits for Shell 
and BP and other companies.
    My question to you is looking at the greenhouses gases as 
they are being produced out of that source, do you think that 
there is a reason for the United States to ask for additional 
environmental protections to be built into that methodology of 
producing oil?
    Ms. Harbert. Well, first of all, I appreciate your 
acknowledgment that Canada is a hugely important trading 
partner with the United States and has the potential to grow as 
the President recognized that yesterday, and having that 
resource right across our border and having the potential to 
grow it I think needs to be recognized in light of our growing 
energy security challenges. I do think we want to see the oil 
sands continue to make improvements in the way that they are 
extracted and the way they are transported, but make no mistake 
any policy you put in place on this side of the border will not 
deter their continued production.
    Those oil sands are going to be developed, and they are 
going to be sold. The question for us is do they come here 
where we have high emission standards and high refining 
standards, or are they put on tankers, going across large seas 
and refined in areas where they don't have high emissions 
requirements, so I think that also is a fundamental part of the 
equation that needs to be taken into account.
    Mr. Markey. Thank you, Ms. Harbert.
    The Chairman. The time of the gentleman has expired. The 
gentleman from Colorado, Mr. Lamborn?
    Mr. Lamborn. Thank you, Mr. Chairman. Thank you all for 
being here, and I especially want to welcome the witness from 
Colorado. It is good to talk to you.
    Mr. Shawcroft. Thank you.
    Mr. Lamborn. This Committee is well represented by 
representatives from Colorado. I think there are four that I 
know of off the top of my head on both sides of the aisle, so 
thank you for being here. I have a question for you based on 
your written testimony. In it you point out that we are 
increasingly dependent on foreign imports of fertilizer and its 
components due to the decline in U.S. fertilizer production, so 
if there is clearly a market for fertilizer in this country, 
why is domestic production declining, and the second part of 
that question is what does that mean for the consumer, the 
Americans who enjoy our agricultural products?
    Mr. Shawcroft. The cost of production overseas is 
definitely less than it is here in the United States, and that 
is the reason that it comes from out of the United States. 
Ninety-five percent of fertilizer production, particularly 
ammonia, that cost comes from natural gas. That is why we 
believe at the American Farm Bureau we need to develop all 
sources of energy, including natural gas. What it means to 
consumers? Definitely an increase in fertilizer, increase our 
costs, but as I stated in my oral testimony, we as farmers and 
ranchers have a very, very limited ability to pass that cost on 
to the purchasers of our products. Does that answer your 
question?
    Mr. Lamborn. Yes, and I appreciate your being here today. 
It is always good to see someone from my home state of 
Colorado, and, Mrs. Harbert, I have a couple questions for you. 
What new regulations have the Obama Administration imposed on 
energy production in the Gulf of Mexico since the BP oil spill 
that, in your opinion, go beyond what is necessary to ensure 
environmental responsibility? I know some of what they 
addressed was to prevent another spill, but some people have 
said they over-reacted, or they imposed regulations that didn't 
directly address what happened at BP.
    Ms. Harbert. I think the policy framework in the Gulf has 
been one of shutting down production, and we do need to take 
into account what happened in the spill, and appropriate safety 
procedures need to be put in place, and the industry did step 
up to the table, invested billions and now has systems in place 
that the Department of the Interior has certified are adequate, 
even exceed their requirements for response.
    They are putting currently and are promulgating regulations 
and so the industry has yet to have a clear idea of what type 
of criteria they are going to have to meet, and that is very 
difficult to make investment decisions when you don't know what 
your requirements are going to be. Regulations continue to be 
promulgated by the Department of the Interior and will continue 
to be, as I have said, until the remainder of this year.
    They are continuing environmental reviews, environmental 
regulations that are making the production in the Gulf of 
Mexico, quite frankly, remain in flux, and the industry has 
only received in deep water seven permits, permits that were 
already issued before. They have been reissued, so there is 
nothing new going on in the Gulf because no new exploration 
will be happening until they know what criteria they have to 
meet.
    Mr. Lamborn. OK. Thank you, and let me just interject a 
comment here. I am really pleased to join with Chairman 
Hastings in introducing three what I believe are very important 
pieces of legislation to address the deregulatory gridlock that 
has occurred in the Gulf of Mexico in particular, and that will 
speed up permitting and help open up some areas that previously 
were open, but I think have arbitrarily been closed for 
production, so I look forward to that legislation.
    Let me ask you a question about the Strategic Petroleum 
Reserve, Ms. Harbert. Do you believe that this short-term 
action, if it is taken, of tapping into that is good 
considering the long term, and are there better things that 
could be done to lower the price of gasoline and the cost on 
consumers other than tapping in to this reserve?
    Ms. Harbert. The Strategic Petroleum Reserve holds 40 days 
of American demand, and so we should be very careful of how we 
use it because we really have it there as an insurance policy 
for when there is a severe supply disruption of which we do not 
have right now, so the little amount of oil that we would put 
out in the market, the short-term signal, will do nothing to 
ease the long-term price increase. It is increasing because 
demand is increasing.
    China and India are pushing up the demand for oil in the 
world, and as we look around the world where the demand is 
coming from, from the developing countries, that is not 
expected to end, so a short-term solution to a much longer 
long-term problem is not a solution, and so we really need to 
think about the longer-term implications of how to address the 
fundamental problem, which is we don't have adequate supply, 
and we can be part of that solution, or we can choose to 
actually import more from other countries.
    Mr. Lamborn. OK. Thank you very much. Mr. Chairman, I yield 
back.
    The Chairman. The gentleman yields back his time. The 
gentlelady from California, Mrs. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chairman. There are a lot 
of questions that I would have, and time will not permit me to 
ask all of them, but we know that drilling is not going to 
solve the issue. I think we need to look for more alternative 
ways to produce the energy that is necessary whether it is for 
farming or for running the diesel fuel trucks or the equipment 
that is needed in farms. I have been to some of the research 
institutions where they are using algae trying to produce fuel 
for John Deere. I am not sure if you are aware of that, but 
that is something futuristic, and who knows? Maybe that will 
come to fruition some day.
    Mr. Shawcroft, if the entire Outer Continental Shelf were 
open to drilling, it only increases oil production by 1.6 
percent by the year 2030 and peak .787 barrel per day, reduce 
world prices by 70 cents per barrel. The BLM spaced it out of 
41 million acres already under lease onshore, only 12 million 
acres, less than one-third, or 30 percent, is actually in 
production. In the last two years, U.S. has increase oil 
production by more than a third.
    In 2010, the Bureau of Ocean Management offered 37 million 
acres in the Gulf. However, oil companies are only producing 
6.5 million acres, which is 70 percent, so wouldn't it be 
possible that we can't continue to rely on oil production and 
should be focusing time and funding to renewable energies to 
supplant our needs, and I do agree with your statement energy 
independence should be our nation's focus, and I think that 
this Administration has been doing that very well.
    Again, on the research, those are issues that are critical 
for me, and then to the farmers is additional improvements in 
manufacturing and producing the largest crops, especially when 
it deals to water, and the Ranking Member, and water and power, 
and water is a commodity we no longer have too much of, so I 
will lay it on you, and if you will address those?
    Mr. Shawcroft. Thank you, ma'am. Mrs. Napolitano, as well 
as the Committee, several issues you have raised certainly we 
do believe in developing renewable energies, and we believe 
that even futuristic energies that are being developed now we 
need to be working on those things so that when they become 
economically viable, and they really provide a solution or a 
supplement to our need today, that needs to be pursued.
    You raise the issue of leases and production. There is 
another important component that I believe hasn't been 
mentioned very clearly today and that is the permitting 
process. Just because an oil company has a lease in an area 
does not mean that they have a permit to extract what we need 
out of those lands.
    Mrs. Napolitano. They may not have applied for those 
permits.
    Mr. Shawcroft. That is true, and if they do not, as I think 
Ms. Harbert mentioned, they may not know exactly what the rules 
of the game so to speak are going to be, and that is an 
uncertainty of which oil companies are not willing to take. We 
face the same thing as far as uncertainty as to what our fuel 
costs are going to be for the coming growing season. I am very 
troubled by the fact that diesel fuel very likely will be over 
$4.00, maybe over $5.00 a gallon for the summer when we move 
our cattle to and from the range. Last year it cost us $4.00 
per loaded mile. This year, I don't know what it will be, $5, 
$6? It is a very scarey situation. Did I answer your questions 
adequately ma'am?
    Mrs. Napolitano. Sort of. Kind of. Anybody else? I have 
limited time, so I wanted to make sure that I had an 
opportunity for somebody else to answer.
    Ms. Harbert. I think we agree on a number of the points 
that you just raised. We are going to need multiple options 
going forward to secure our energy future, but that doesn't 
mean shutting off the options we have today. I think I would 
comment on your estimate about the amount of oil that might be 
on the outer continental shelf. That is based on 35-year old 
data and has not been updated yet, and we need access to the 
shelf for the industry who is best positioned really to know, 
as was mentioned earlier, about where are the highest 
probability potential reservoirs, and so we are going to need 
lots of options. Let us use today's and invest in tomorrow's as 
well.
    Mrs. Napolitano. Thank you. Mr. Fox, the Administration's 
2012 budget requests $4 per acre-foot for non-producing Federal 
oil and gas leases, which would provide incentive for the oil 
and gas companies to produce more resources. The HR-927, the 
United States Exploration on Idle Tracks introduced by our 
Ranking Member and Representative Holt also institutes this fee 
and repeals deep gas industry royal relief. Is your 
organization supportive of the budget requests and of this 
provision in the legislation, and if not, what improvements 
can/should be made?
    Mr. Fox. I don't know enough about that particular 
provision to answer that question accurately.
    Mrs. Napolitano. OK. Thank you very much. Thank you, Mr. 
Chair.
    The Chairman. I think the gentlelady. The gentleman from 
Tennessee, Mr. Fleischmann, is recognized.
    Mr. Fleischmann. Thank you, Mr. Chairman. Ladies and 
gentlemen, welcome. Thank you for your testimony today. I 
represent the third district of Tennessee. The largest city 
there is Chattanooga. Chattanooga is an outstanding trucking 
hub and, Governor Graves, I want to say it as a great privilege 
to have great trucking companies in Chattanooga, and trucking 
is so critically important and vibrant to our economy to the 
distribution of goods in this country, and I am proud to be an 
advocate for those companies.
    Governor, I have a question to start with you, sir. Higher 
oil prices will undoubtedly have an impact, sir, on small 
businesses across America. In addition this distinguished 
Committee, I also serve on the Small Business Committee in 
Congress, and I would like to know, sir, if you could please 
speak to the cost of higher fuel prices to the companies you 
represent. How specifically will this affect other costs 
associated with these companies, sir, and how long these 
businesses will be able to survive under the current 
conditions, sir?
    Mr. Fox. Well, I mean, I think everyone knows that the last 
couple of years have been just bad generally for all businesses 
but certainly the trucking industry, which is predominantly 
very, very small, independent owner/operators, small family 
businesses with five or fewer trucks. I mean, the UPSes and the 
FedExes are the exception. Very candidly, many have fallen out 
of the business already just simply due to the economic 
downturn, and I think what we are struggling with right now is 
that a lot of people put off capital investment decisions the 
last couple of years because they simply didn't have the money 
to buy new equipment.
    We are faced with a lot of new regulatory issues on driver 
safety, training requirements, and so we are looking at 
increasing driver pay. There are a whole bunch of things right 
now that have been teed up. The timing, you might say, it is 
not good in that there are a number of things we need to do in 
our industry to upgrade our fleets, take advantage of new clean 
diesel technologies, things like that, and we are facing a 
moment with rising fuel prices when we actually need whatever 
cash we have available to go out and take care of our normal 
business, so it is hard enough for the very well-established 
big firms. It is going to be impossible for a lot of the small 
firms.
    Mr. Fleischmann. Thank you, sir. Ms. Harbert, I have a 
question for you, ma'am. Can you please tell me about how many 
jobs have been lost in the United States in the last few months 
as an impact of higher gas prices and how many business you 
have heard from at the chamber that have been negatively 
impacted by these high prices, ma'am?
    Ms. Harbert. Well, thank you for that question, 
Congressman. I don't know that we have any scientific data yet 
because it takes some time for that to be accumulated, but we 
do know that we have 13.9 million people unemployed in this 
country, and we know we are not addressing that gap with high 
energy prices because businesses aren't hiring. They are paying 
their energy bills, and so we know that over the next 10 years, 
we have to create 20 million new jobs, and if we don't have 
affordable energy, we won't be able to meet the employment 
needs of our nation.
    I think while we don't have the month-to-month data, we are 
certainly getting, my phone certainly rings off the hook with, 
small and medium size, and this is all around the country, that 
have a great desire to contribute to our economy but are 
really, really struggling.
    Mr. Fleischmann. I understand. Thank you. As a followup 
question, as you many of you all know, I continue to oppose 
higher taxes across the board in this country. One area I would 
like to ask you ma'am, can you speak to how higher prices on 
the oil industry proposed by this Administration would affect 
jobs in the United States?
    Ms. Harbert. Absolutely. Right now, I mean, American has 
one of the highest corporate income tax rates of the world to 
begin with, and then to go ahead and single out an industry and 
levy additional taxes on top of that in a global energy market, 
which is very competitive, will only force our American energy 
companies to go elsewhere and develop those resources, those 
jobs, and those revenues for other countries rather than here, 
and so we will see a great deal of jobs lost in the energy 
industry, which employees about 9.2 million today.
    We will begin to see them having to make very difficult 
decision of moving overseas, investing overseas when other 
countries are lowering their tax rates to incent people to come 
to their countries. We saw the President in Brazil. Brazil is 
inviting people to come there and develop, and companies are 
responding because it is attractive to invest in Brazil. We are 
not seeing that type of response here in the United States 
because we are contemplating raising taxes on that industry 
upon which we rely.
    Mr. Fleischmann. Thank you. Mr. Chairman, I yield back.
    The Chairman. I thank the gentleman. The gentleman from 
Arizona, Mr. Grijalva.
    Mr. Grijalva. Thank you, Mr. Chairman. Mr. Fox, we hear a 
lot about the importance of free market in our economy, and 
justifiably so. Markets are an essential part of our system, 
but I think we overlook the realities and the histories of 
specific industries, such as the oil industry. Would you call 
the oil market in the pure sense of the word a free market?
    Mr. Fox. No, sir.
    Mr. Grijalva. Do you want to elaborate on that, please?
    Mr. Fox. When you look at the industry itself, when you 
talk about big oil, I think you have to break the industry down 
in segments. Big oil today talks about a free market and free-
market system, and they have it. They are allowed to go 
wherever they can obtain the cheapest commodity, crude oil, 
overseas or here in the United States, so they can put it 
through the refineries at the cheapest cost to the them. Once 
that product is refined and delivered to the middle men or the 
distributors and to our retailers, we are locked in as a 
captive customer with supply contracts. We are not free to go 
around and find the cheapest price.
    More importantly, the excuse of that is because they want 
to ensure integrity of the product. Let me give you an example. 
I was a Mobile Oil retailer for 20 years. Forty-first highest 
volume Mobile retailer in the United States. I could find 
Mobile product in the State of Connecticut where I was based 20 
cents a gallon cheaper, but I was restricted because I had a 
contract directly with Mobile Oil Corp., so in essence, I was 
going to a middle man saving 20 cents a gallon when going 
direct to the manufacturer of the product, I paid the highest 
price for that produce. There is something wrong with that. I 
don't think that is a free-market system.
    Mr. Grijalva. And your opinion, Mr. Fox, let me continue, 
the Dodd-Frank bill. Does it do enough to address the 
speculation concerns that you were talking about earlier in 
your testimony?
    Mr. Fox. I think the argument out there today if we 
implement the Dodd-Frank bill the way it is supposed to be 
implemented, and that is the argument that is out there, how it 
is supposed to be implemented, there are some problems and 
issues that we see with the current proposed CFTC proposals. I 
think we need to strengthen them. More importantly, I think we 
have to need to make sure that the funding is there for the 
CFTC. Unfortunately, here in Washington, you get two shots at 
the apple. You have to fight real hard to get proper 
legislation passed, and once you are able to accomplish that 
against the K Street lobbyists, then you have to fight for the 
funding, so we can pass the bill in its proper form, but if we 
don't get the funding, we can't do the job. You can't do one 
without the other.
    Mr. Grijalva. Thank you. One last one, Mr. Fox, in the 
first question I think you responded to part of this, but as a 
representative of gasoline retailers, someone who is intimately 
involved with the weird intricacies of the international oil 
market, is there something I think about this oil market that 
we talked about in the first question that you wish the 
American public understood better or knew?
    Mr. Fox. I think I wish the public knew that it is not your 
local gasoline retailer. We are the sounding board for the 
consumer when they come in. I think what happens is the news 
and the media does a great job saying gasoline prices went up 
say 15 cents a gallon today, yet the local retailer may go up 
20 cents, and that may be because of a state tax, which is on a 
percentage basis, so my wholesale costs went up 15 cents, now 
my credit card just increased another five cents, and on top of 
that, if I have a percentage-based tax in my state, I have to 
increase it even more, so the end cost to me is not 15 cents. 
The raw cost is.
    By the same token, in Connecticut, when we reduced the 
gasoline tax, we had the highest in the nation, and I sponsored 
legislation to reduce that highest gas tax in the nation, the 
tax only went down 14 cents, yet the retail price of gasoline 
went down 20 cents. That is what I don't think the consumer or 
people in Congress or our local legislators understand very 
well.
    Mr. Grijalva. Thank you very much. I yield back, Mr. 
Chairman.
    The Chairman. All right. I thank the gentleman for yielding 
back. The gentleman from Colorado, Mr. Tipton?
    Mr. Tipton. Thank you, Mr. Chairman, and I would like to 
thank all of our panel for being here and just kind of quick 
comment, Mr. Fox, when you are talking about not seeing free 
markets, I feel the pain here when I have to pay rent in 
Washington, D.C. I don't see free markets here either in terms 
of it. I would certainly like to express especially my deep 
appreciation for Don Shawcroft being here out of the Colorado 
Farm Bureau. I am your proud representative, was just in the 
San Luis Valley not long ago and appreciate all of the efforts 
that the Farm Bureau makes on behalf of our state and the 
citizens of our country and what our potato crop does for 
generating revenues for this country as well, and thank you so 
much for your testimony and being here.
    Mr. Shawcroft. Thank you. I am glad to be here.
    Mr. Tipton. Now, Don, I would like to ask you just a couple 
of questions here that obviously rising gas prices affect 
margins of companies that rely on transportation, to be able to 
deliver the goods as you were noticing and then any aspect of 
their business really. That is a cost that you are going to 
have. Over the past few years, we have seen an increase in 
regulations, particularly the farm industry is paying a huge 
price for this I think in terms of EPA regulations, dust 
particulate, whatnot that they are coming up with now, 
increased restriction on drivers, on capacities, rising 
equipment costs overall.
    Would you like to comment how these things all combined, 
all combined, is this making businesses even more sensitive to 
the rising fuel costs that we are now seeing?
    Mr. Shawcroft. Thank you, Mr. Tipton. Certainly, every cost 
that comes along affects your bottom line. It is even more 
difficult than agriculture because not only does it affect what 
you are actually having to pay for, but it is also affecting 
what happens to your product once it leaves your farm or ranch. 
You mentioned the transportation cost. The transportation cost 
involved in the agricultural product once it leaves the farm is 
tremendous. It is probably the largest component of what a 
retail market, individual consumer goes in and pays for that 
product.
    The other issues, certainly regulatory issues are 
tremendous. There is a proposal right now that if we have to 
apply for an NPDES permit in order to spray pesticides close to 
bodies of water, and certainly Ms. Napolitano mentioned 
adequately the need for water, and Colorado water is vital. If 
we spray pesticides that is labeled according to FIFRA near 
that body of water, we may be required to apply for an NPDES 
permit. We are told that if we do that, that NPDES may cost as 
much as $23,000 for a single individual to obtain. That is a 
cost that is very difficult to bear.
    Mr. Tipton. And these are costs that particularly our farm 
and ranch communities cannot truly pass on?
    Mr. Shawcroft. That is right. We are a price taker. When we 
sell our product, when we purchase products, we purchase them 
at full retail price just as anybody else.
    Mr. Tipton. So if I juxtapose that a little bit to the 
Governor's comment in regards to we are seeing trucking 
companies go out of business, then really with regulations that 
we have here in this country, are we threatening the food 
supply of this country simply because you aren't going to be 
able make it as a farmer and rancher?
    Mr. Shawcroft. Absolutely. Not only are you threatening the 
food supply, but you are also threatening the fiber, the basic 
of a rural community.
    Mr. Tipton. Right.
    Mr. Shawcroft. That farm, if it is next to a source of 
development, is very much a threat in going out of business 
because if you just can't make it, and it is the only source of 
income, or in fact if it isn't your only source of income, but 
you just finally say I have had it, I cannot stand the 
additional expense, and the simply way out, I am ready to 
retire, is to sell and let it be developed.
    Mr. Tipton. OK. I would kind of like to ask you a little 
more I guess philosophical sort of a question.
    Mr. Shawcroft. Sure.
    Mr. Tipton. As an American, is it smarter for us to be able 
to buy food that is grown in this country, or should we be 
relying on food grown outside of our country?
    Mr. Shawcroft. Absolutely smarter to have that product in 
the United States as much as we can.
    Mr. Tipton. Great, so what you are saying--
    Mr. Shawcroft. We are a country who loves to have food, 
whatever we want to eat all year long, 365 days a year.
    Mr. Tipton. So would it be sensible by that extension for 
us to be able to develop our resources to be able to provide 
our fuel? We may have that global economy out there for fuel 
prices, but if that supply given the turmoil in the Middle East 
cuts off those sources coming into our country, would it be 
good common sense maybe to develop our resources right here in 
the United States?
    Mr. Shawcroft. Absolutely. As I stated, we need to develop 
all sources of energy.
    Mr. Tipton. Great. And let us see. I did also have a 
question I think it was for Mr. Graves, and it was your comment 
are those fuel costs, are those passed on to the consumer, and 
how is that impacting prices on struggling families, moms and 
dads, grandmas and grandpas that are having a tough time paying 
their bills?
    Mr. Graves. Well, I would say that initially small 
operators have a difficult time passing through fuel costs. 
They especially get hit hard, especially when it spikes up 
quickly. Again, some of the more sophisticated companies have 
contracts structured in such a way that they more easily pass 
through fuel surcharge costs. Ultimately, when things 
stabilize, everybody adjusts their rates accordingly, and, I 
mean, we are not benevolent operations. We are not 
recreational. We are in it for a business, and it gets passed 
through to consumers, and everybody pays.
    Mr. Tipton. Great. Thank you. Thank you, Mr. Chairman.
    The Chairman. The time of the gentleman has expired. The 
gentleman from New Jersey, Mr. Holt.
    Mr. Holt. Thank you, Mr. Chairman. Mr. Fox, it is the local 
retailers that are catching the brunt of the dissatisfaction 
right now with the high gasoline prices, and I wanted to pursue 
the line that you have been talking about. Do you think that 
big oil companies, the production companies, feel that they are 
in a partnership with the retailers? In other words, do they 
share their good fortune their times of tens of billions of 
dollars in profit with the local retailers?
    Mr. Fox. I think they do a tremendous job of talking the 
talk, and a terrible job of walking the walk of what they are 
saying. In fact, if you look at big oil, they are exiting the 
retail market. Exxon Mobile just recently sold off all of the 
gasoline retailers in the State of Connecticut. They made 
promises to them for over eight years, and every single one of 
those retailers just feels like they were used and abused and 
sold off.
    Mr. Holt. A lot of the talk over the last day or so or 
actually recent weeks, even here in this Committee, has 
suggested that it is the failure of the offshore licensing and 
permitting that is responsible for $3 and $4 a gallon gasoline. 
I would like to pursue that and understand how that could be. 
Governor Graves, is it true that domestic oil production is 
about the highest it has been in a decade and about double what 
it was for each of the previous four years, six, seven, eight 
nine?
    Mr. Graves. Well, that is not a subject that I am expert 
on, but from what I understand, our production has essentially 
just about plateaued in that the issue becomes what are we 
going to do? Wells deplete over time.
    Mr. Holt. Well, let me just ask. I have here a graph. It 
probably doesn't show up for you or for the people looking, but 
in fact, U.S. domestic oil production is about the highest it 
has been in a decade, but even more to the point, it is about 
double what it was in 2005, 2006, 2007, 2008, so I think there 
is something going on here other than domestic oil production, 
and you have touched on this before, a couple of you, with 
regard to speculation. Now, obviously there is a place for 
this, for price discovery, and there is a place for hedging. 
Mr. Fox, do you happen to have any figures or any familiarity 
with the degree to which this is pure speculation or this is a 
matter of useful price discovery?
    Mr. Fox. I spent last night reading a recent 385-page 
report and was amazed to find out that right on page 1 it said 
that prior to 2000, before deregulation came in, that about 70 
percent of all of the speculation that was done in the energy 
markets was for bona fide hedgers, in other words people that 
used and utilized the product, and after deregulation, we have 
completed flipped that. It is now 70 percent pure speculators. 
If that is not factual evidence that speculation is the 
problem, I don't know what anyone will ever believe is.
    Mr. Holt. OK. Now, I guess I would like to ask you to 
repeat for the record something I think I heard you say a few 
minutes ago that removing the ability of the regulators, 
particularly the Commodity Futures Trading Commission, would do 
more to increase prices at the pump than anything else. Could 
you put it in your words what it was you said?
    Mr. Fox. Yes, I think you enjoyed my comment where I said 
the fastest way to $6 retail gasoline prices was to not fully 
fund the CFTC and not impose the Dodd-Frank regulations. That 
is the fastest way to get to $6 gasoline.
    Mr. Holt. So you are saying that it is speculation in the 
financial markets, manipulation of the big companies that are 
having a much greater effect than whether there are leases 
granted offshore or permits granted for more drilling?
    Mr. Fox. I think those speculators will use all those 
debates and arguments, I have coined a new phrase, to use fear 
over facts, and that is how we will get to $6 with the 
speculators in the market.
    Mr. Holt. Thank you. Thank you, Mr. Chairman.
    The Chairman. Time of the gentleman has expired. The 
gentleman from Florida, Mr. Southerland, is recognized.
    Mr. Southerland. Thank you, Mr. Chairman. Mr. Fox, let me 
ask you regarding your retailers, and I think you have been a 
retailer?
    Mr. Fox. Yes, sir.
    Mr. Shawcroft. As a small business owner that you have 
been, and obviously your association with many others, when you 
look at your pro forma of your small business going forward and 
the investment that you have, and I am not familiar with your 
business, I don't know if you are still in or have been in, but 
what is an acceptable profit margin for a retailer/distributor 
that you represent or that you owned?
    Mr. Fox. I can tell you that the word ``acceptable'' 
certainly doesn't come into play because the consumer kind of 
adjusts our profit margin for us. The average is about 10 cents 
a gallon. The problem with that is that is a 10-cent gross 
margin. As gasoline prices, the retail price, continues to 
escalate, credit card fees take up anywhere from seven to eight 
cents of that, and then environmental costs eat up the rest.
    Mr. Southerland. Yes, but clearly in a retail storm, you 
have a business.
    Mr. Fox. Right.
    Mr. Southerland. And you have revenues that come into your 
business?
    Mr. Fox. Correct.
    Mr. Southerland. Not just through gas, but, I mean, through 
all kind of things. I mean, all the products on your P&L at the 
end of the year, what is an acceptable profit margin for the 
business?
    Mr. Fox. We probably operate somewhere in the neighborhood 
of seven to nine percent total.
    Mr. Southerland. OK. And I am a small business owner, and 
that kind of resonates I think across specialties in our small 
businesses, seven to nine percent, so would you describe the 
profits of oil companies because I hear that all the time? 
Would you say those profits are in billions of dollars?
    Mr. Fox. Yes.
    Mr. Southerland. OK. Well, if you think that it is 
acceptable to have a six-, eight-, to nine-percent profit 
margin for your business, then why is a similar profit margin 
not acceptable for all businesses?
    Mr. Fox. Because the CEO of a service station doesn't get 
$450 million in salary, and that is perfectly relevant.
    Mr. Southerland. No, no. And that is great, but it is 
relative, and so if an oil company has to spend, and I am not 
on a board. Again, I am a small business owner, but a profit 
margin is a profit margin is a profit margin, and when I hear 
detractors and people that want to harm oil companies, they 
always talk about the dollar figure, the billions, the 
billions, the billions, but they never, ever talk about it and 
analyze it as a business person would in terms of a profit 
margin. If you have to spend $100 billion to earn a profit 
margin of five, but I never hear it put in those terms.
    Mr. Fox. What does that have to do with the amount of money 
that company spends with the CEO that spends 30 hours a week on 
the golf course making $450 million----
    Mr. Southerland. Sir, look. I will tell you this. You are 
getting down in the weeds. It doesn't matter what a private 
company----
    Mr. Fox. I guess if the expense doesn't matter by lowering 
the profit margin, I don't know what will.
    Mr. Southerland. What a company wants to pay, and what a 
Board and private stockholders want to pay a CEO is their 
business. You don't have to buy their oil. You don't have to 
buy their gas, but to demonize companies that have a six 
percent, seven percent, Exxon 8.8, Chevron, 9.8, BP 6.6, I 
think is a bit disingenuous when all of us in the small 
business world recognize that on a great day if we could obtain 
a six-, seven-, eight-percent profit margin as you claim is 
acceptable for your business, why are you choosing different 
standards? Business is business is business, and it discredits 
your argument.
    Mr. Fox. I don't think it is does, sir, and I will explain 
it to you very simply. When you say if I don't like their 
profit margins, don't buy their gas, don't buy their oil, I 
don't know how I would get to work. I don't know how I would do 
the job that I am supposed to do, so we talk about that they 
operate in the free market, but they operate under a captive 
customer system, so again I think it is very relevant when a 
CEO working 90 hours makes $450 million, and that lowers that 
profit margin to seven percent, and a service station owner 
working 90 hours, makes $60,000 a year. I think that is 
relevant. You may not, but I do, and I guess we will just agree 
to disagree.
    Mr. Southerland. We will agree to disagree. The Ranking 
Member made a comment about imagine, and I enjoy his comments. 
I really do, but one thing I don't imagine, I didn't imagine 
last the gas prices in my neighborhood gas station increase 13 
cents in one day. I didn't imagine that President Obama stated 
that we have to have higher gas prices as a necessary component 
to move America off of oil, and that is what we have. It is 
almost like he planned it this way, and so I thank you for 
being here. I thank you for facing the heat.
    We will disagree, and that is OK. I think through our 
disagreement we can find common ground hopefully, but not at 
the expense of hard work and honest dealings, and success 
usually shows up in the form of money, not debt, and I think 
that applies across any business.
    Mr. Fox. I will agree with your last comment there that no 
one should be forced off of something through higher prices. I 
will agree with you there.
    The Chairman. The time of the gentleman has expired. The 
gentleman from New Mexico, Mr. Lujan.
    Mr. Lujan. Mr. Chairman, thank you very much, and I 
certainly believe that suggesting, Mr. Chairman, and I haven't 
read anywhere that President Obama, as part of any of his 
agenda, said he wants higher prices at the pump for any 
American. I think that is just ridiculous as we talk about this 
notion of an economic recovery, and we need to make sure that 
we are doing all that we can to be able to see what we can do, 
and, Mr. Chairman, I think it is important that as I have----
    The Chairman. Would the gentleman yield?
    Mr. Lujan. Yes, sir.
    The Chairman. I think that the gentleman from Florida was 
alluding to a speech that then candidate Obama made 
specifically in San Francisco about the cost of energy prices 
where he made the statement that Americans would necessarily 
have to have higher energy prices, and he was referring to the 
Cap and Trade legislation that of course only passed the House, 
but I think the gentleman from----
    Mr. Lujan. Mr. Chairman, I think you for making the 
important distinction that the President was not referring to 
fuel prices at the pump. I appreciate that very much.
    The Chairman. No. If the gentleman will yield, it was 
higher energy prices, and I think that is what the gentleman 
from Florida mentioned, but I appreciate the gentleman 
yielding.
    Mr. Lujan. I appreciate that, Mr. Chairman, and, Governor 
Graves, thank you very much for being here as well, sir. In 
addition to your responsibilities with working with the 
Trucking Association, do you also have a trucking company?
    Mr. Graves. Not any longer.
    Mr. Lujan. I think that not any longer still allows you to 
answer some of these questions then, Governor. With some of the 
folks that are members of the Trucking Association, can you let 
me know on average what maybe the profits were that they made 
last year, the dollar amounts?
    Mr. Graves. Well, if you get to double digits, you are one 
of the very, very best. I would say most of them aspire the 
five to six percent, but on average, I would say a lot of them 
are down in the two or three pennies.
    Mr. Lujan. And what does that translate to in dollars, the 
largest, the strongest trucking company in America?
    Mr. Graves. Well, I mean, again, we represent everyone from 
UPS and FedEx, which is in the billions, to single independent, 
owner/operator-type companies.
    Mr. Lujan. Very good, so would it surprise you, Governor, 
that the oil and gas industry last year made $77 billion when 
our trucking companies who are suffering at the price at the 
pump got nowhere near that?
    Mr. Graves. No, I mean, and I think just picking up on the 
previous conversation that took place, I mean, as a Governor, I 
have appreciated companies that have come into my state. My 
fiend, Boone Pickens, who owned the preponderance of natural 
gas holdings in the Hugoton Field, you spend an enormous amount 
of money. It is like any business venture. The investment that 
goes in to actually producing those products is pretty 
substantial, so that is a great thing about America.
    Mr. Lujan. And, Governor, I think this is somewhere where 
we agree that the Gas Company Association appreciates that we 
could be able to get to more fuel associated with natural gas 
for our trucks. Is that something that there is some agreement 
there?
    Mr. Graves. We are certainly interested in the development 
of natural gas. I met with Mr. Pickens and explained to him 
three things. First of all, the trucks are very expensive, 
about double what the current models are. There is a weight 
penalty carrying that additional fueling system, and there is 
no fueling infrastructure in this nation to support across the 
road trucking, but a number of our members are embracing 
natural gas. In fact, I think that is what the President is 
going to see tomorrow at his visit to the UPS facility in 
Maryland.
    Mr. Lujan. Thank you, Governor, and, Ms. Harbert, you said 
you were in favor, and the Chamber is in favor of free markets, 
is that yes or no?
    Ms. Harbert. Yes.
    Mr. Lujan. So should there be $31 billion in taxpayer 
subsidies to support the oil-free market?
    Ms. Harbert. Well, I think there is a prejudice right 
there, that there is a subsidy.
    Mr. Lujan. Yes or no. Chairman? Just a yes or no, Ms. 
Harbert, because we used a little bit of my time having a 
little back and forth with the Chairman.
    Ms. Harbert. Well, I think we need to understand what your 
definition of a subsidy is a tax treatment. Does the 
pharmaceutical industry get a subsidy because they have any tax 
treatment?
    Mr. Lujan. I guess that is a no?
    Ms. Harbert. What is your definition of a subsidy?
    Mr. Lujan. Mr. Chairman, reclaiming my time. Ms. Harbert, 
maybe I will submit the question in writing, and I will see if 
I can get a yes or no that way. I think it is important to note 
that if we stop $31 billion in taxpayer subsidies over the next 
few years, we have seen that over the top five oil and gas 
companies made a trillion over the last five years. As has been 
pointed out time and time again through the hearing, we have 
heard that there is no production going up in the United 
States.
    Under President Obama's Administration, in 2009 and 2010, 
according to the U.S. Energy Information Service, it is the 
highest in a decade. We need to talk about the reality of what 
is plaguing the country, and fortunately, I think that we are 
going to be able to get to the bottom of this, and I would hope 
that as we talk about policy, even if we have a disagreement on 
how much we should open up drilling anywhere in the United 
States that we would at least carefully look at what 
speculators are doing to impact prices at the pump.
    When I go home, Mr. Chairman, a few seconds for your 
indulgence, people are tired of the fighting and bickering back 
forth, and I know you hear it as well as I do, Mr. Chairman, we 
all do, and there seems to be an area where at least some ideas 
that just because they are offered with someone whose party 
begins with a D and the other whose party begins with an R or 
the Independents around the country that these are some things 
that we can get to the bottom of, and, Mr. Chairman, these 
hearings are extremely useful when we get answers to these 
questions understanding we only have a few minutes to ask them 
rather than just trying to come up with an answer that doesn't 
answer the question.
    I appreciate very much the time that we get a chance to 
visit, and I respect the Chairman very much as well, and I 
thank you for the time as well. Thank you, Mr. Chairman.
    The Chairman. Time of the gentleman has expired. The 
gentleman from Arizona, Mr. Gosar?
    Dr. Gosar. Thank you. Governor, in best-case scenario, I 
heard the Ranking Member talk about imagine a technology. Best-
case scenario probably is natural gas. What kind of timeframe 
are we talking about for a fundamental infrastructure, 
particularly for the west?
    Mr. Graves. Well, I think they are well on their. I mean, 
there has been a number of companies that have embraced natural 
gas. I mean, we have seen it in our municipal bus fleets. There 
is a lot of that being deployed in the refuge industry. Anybody 
that is working in an around sort of a confined metro area that 
can establish fueling stations and runs essentially an in-and-
out kind of operation. I start out dispatched in the morning to 
go do a mission. When I am done, I go back to my home base, and 
I have a fueling opportunity there.
    I mean, I think, in my vision, again you would have to 
still build a viable business model, but some day as you take 
metropolitan areas like the Los Angeleses and the Phoenix and 
the Salt Lakes and the Denver, as those natural gas fueling 
stations begin to build out, eventually we will be in a 
position for a long-haul vehicle to leave one of those 
locations, travel across to the other one and be confident 
there is fuel available when they get there. How long will that 
take? I don't know. That may depend in large on the decisions 
that you all make about the government's support for building 
out that kind of infrastructure because it is going to be very 
expensive.
    Dr. Gosar. But wouldn't you say the West is kind of the 
stepchild to the East in regards to that?
    Mr. Graves. Well, I mean, I think, again, the major parcel 
companies are all starting to look at natural gas for 
metropolitan deliveries, and it is even happening on the East 
Coast as we speak, so, again, everybody is watching their 
bottom line, but I think everybody recognizes that Mr. Pickens 
has done a great job of promoting, and more power to him, that 
it is an optional fuel for our industry in the future.
    Dr. Gosar. I agree, but it is more metropolitan, and, I 
mean, Arizona had one of these debacles with natural gas. I 
mean, it cost the state well in excess of $2 billion in 
incentives and wasn't probably thought out real well, and 
particularly with vast rural areas in rural Western America, it 
makes it almost cost-prohibitive and more anti-competitive, 
would you not say?
    Mr. Graves. A the moment, it is cost prohibitive.
    Dr. Gosar. And wouldn't you say it is probably at least a 
decade away?
    Mr. Graves. I would guess that if in my lifetime I see a 
deployment of a lot of natural gas commercial vehicles, that 
would be marvelous.
    Dr. Gosar. Wonderful. Ms. Harbert, competition is really 
the basis of economics, right, and once you have monopolies, we 
have big problems. With what we are seeing with this technology 
or actually lack of technology to be honest with you, and 
particularly out in the West, and we have lots of independent 
truckers, the profit margins on the independents are closer to 
two to three percent, so when we are talking about trying to 
push higher gas prices and looking at energy alternatives, we 
are actually predisposing a monopoly, are we not?
    Ms. Harbert. Well, I think we are also predisposing higher 
prices, and in today's economy, that is a big problem for 
small-and medium-sized businesses and American families. What 
we need to be doing is looking at the whole set of resources 
and ensuring that there are the most options on the table so 
the consumer has some choice, the efficiency of the market 
works, and we deliver maximum product to our advantage. We do 
also need to invest in technologies. The reason we need to 
invest in technologies though is not to force them into the 
marketplace. It is to bring down the costs so that they can 
more effectively compete in the marketplace, so I think we are 
all pro technology.
    I think it is a way to actually invest in technology. The 
purpose is to bring down the cost over time so that we can 
effectively complete in the marketplace and have more options, 
not fewer.
    Dr. Gosar. And so I am getting to that technology 
incentive, so a lot of it is done through tax breaks, is it 
not?
    Ms. Harbert. In many a different industries I think it is.
    Dr. Gosar. Because that is the only way you are going to 
get people to go into those areas. I mean, I am a dentist, so 
we are tech savvy, and you have to have the new toy. The only 
difference between men and boys are the price of their toys, 
but----
    Ms. Harbert. But it depends. I mean, you can't subsidize 
anything forever. We can't afford it, so for early market 
makers and new emerging technologies, do they need an incentive 
to actually get out into the marketplace? Yes and perhaps, but 
do we and can we afford to subsidize those forever, and the 
answer is no, so we have to push those things to be more 
efficient and cost effective.
    Dr. Gosar. In the current environment, do you see us 
picking and choosing which are winners and losers in the energy 
industry?
    Ms. Harbert. Absolutely.
    Dr. Gosar. Thank you. I yield back the balance of time.
    The Chairman. The gentleman yields back his time. The 
gentleman from Oregon, Mr. DeFazio?
    Mr. DeFazio. Thank you, Mr. Chairman. Ms. Harbert, you 
mentioned as a factor in these very, excessively high fuel 
prices the very high U.S. corporate tax rate. Can you name one 
major energy producer who paid that statutory maximum?
    Ms. Harbert. I don't have access to all----
    Mr. DeFazio. I don't believe there is one.
    Ms. Harbert. I don't know their tax returns, but I think 
it----
    Mr. DeFazio. OK. Well, then how about let us go to Exxon 
Mobile. How much did they pay in U.S. taxes last year, income 
taxes?
    Ms. Harbert. You certainly must have----
    Mr. DeFazio. On their record profits, how much did they pay 
in U.S. income taxes?
    Ms. Harbert. Sir, I don't work for Exxon Mobile, so I don't 
know the answer. You must have something in front of you that 
could help us.
    Mr. DeFazio. OK. Well it has been in the press. I am sure 
you read the Journal and the Times and other things. They paid 
nothing. In fact, they accumulated tax carry forwards for 
future years' profits.
    Ms. Harbert. So I guess we are discounting the amount of 
money Exxon Mobile invested to bring the product to market.
    Mr. DeFazio. No. Excuse me. Excuse me. You are making a 
point about the high statutory rate. Nobody but suckers pays 
that rate, some poor little corporation based here in the U.S. 
The multi-nationals on average pay a fraction of that. They 
keep their profits overseas, and Exxon Mobile paid zero income 
taxes in the United States last year, the year before, the year 
before and the year before, and they had very large profits, so 
please don't mention again that it is the high statutory rate 
that they don't pay that drives the excess prices.
    Now let us go to the issue of whether or not we are 
operating in a free market, and I brought this up a couple of 
weeks ago, and the head of the U.S. Energy Information 
Administration, they are pretty oil friendly, he said that even 
if the U.S. was to significantly increase production, OPEC 
would decrease production because they have set price targets, 
which is something I have been onto for years. They set a 
target. Now, that violates the WTO.
    I have asked the Clinton Administration to file a complaint 
at the WTO. They demurred. I asked the Bush Administration to 
file complaint at the WTO against OPEC. Three of them are 
members, two are observers wanting membership. They demurred. I 
have asked the Obama Administration. They demurred. Now, does 
anybody think we really have a free market here when OPEC can 
manipulate and set a price. I mean, they are very overt about 
it. Does anybody agree that perhaps we should use our trade 
agreements and file a complaint against their price fixing?
    Mr. Fox. I don't believe we have a free market, and yes, I 
think you should.
    Mr. DeFazio. OK. Anybody else? OK.
    Mr. Fox. I believe my home state Senators recently 
introduced legislation in the Senate that would allow OPEC to 
be sued.
    Mr. DeFazio. OK. Great. Well, I had a bill in the House 
last time. I will do it again this time, but a bipartisan 
problem with this issue. No one want to take on OPEC.
    Ms. Harbert. OPEC's share of the global energy supply is 
going down, not up. Non-OPEC supply is going up. We have an 
opportunity to be a growing contributor to the non-OPEC supply 
if we open up for exploration and production here.
    Mr. DeFazio. OK. Thank you very much.
    Ms. Harbert. The reason we have increased production today 
is based on what happened in 1990.
    Mr. DeFazio. Thank you. That is excellent. Thank you. Thank 
you. Ma'am, I didn't ask you a specific question. I am 
reclaiming my time. I asked the question of the panel. You 
don't believe we should take on OPEC I take, and we shouldn't 
file a trade complaint even though they are violating the World 
Trade Organization agreements? You don't believe we should file 
a complaint, right?
    Ms. Harbert. We will look forward to what the Obama 
Administration has to say.
    Mr. DeFazio. Well, the Bush Administration, the Clinton 
Administration. It is bipartisan. You represent businesses. You 
represent the free market. How about your supporting my 
proposal and the proposal of the Senator from Connecticut that 
we sue through the WTO OPEC for price fixing and market 
manipulation? Yes or no? Yes or no?
    Ms. Harbert. I think that requires a lot of legal analysis. 
I am happy to have----
    Mr. DeFazio. OK. OK. Ma'am, your answer is no. Now let us 
go to one other quick question here, and that would be, Mr. 
Fox, some have been saying gee, the Enron amendment doesn't 
really matter the fact that most of the people in the market 
were like you, sir, a farmer, and they might or might not take 
ultimate delivery, or they were hedging their production costs. 
Now we have massive speculation in these energy markets, 
incredible volatility. There is right now no shortage of oil 
around the world, but the price somehow is creeping over $4 a 
gallon. I just got to wonder what is really going on here, and 
one would think that perhaps it has something to do with 
speculation, so other than Mr. Fox, does anybody agree that we 
should get rid of the Enron Amendment altogether, go back to 
the status quo ante, which is basically you are hedging your 
producer? Sir, you are a farmer.
    Mr. Shawcroft. Yes, I am.
    Mr. DeFazio. You may use hedging yourself.
    Mr. Shawcroft. I certainly believe that we should do all 
that we can to lower the price of gas and the price of diesel.
    Mr. DeFazio. OK.
    Mr. Shawcroft. We need to be careful about what we do and 
what the unintended complications are, unintended consequences 
are.
    Mr. DeFazio. Right.
    Mr. Shawcroft. Just--WTO, I certainly would support WTO and 
pursuing that if that is what is in the best interest for the 
overall picture of the country.
    Mr. DeFazio. Great. OK. Thank you. Thank you, Mr. Chairman.
    The Chairman. The time of the gentleman has expired. The 
gentleman from California, Mr. Denham.
    Mr. Denham. Thank you, Mr. Chairman. I also wanted to quote 
another small piece out of the press. San Francisco Gate, deal 
with it. We will need oil and gas for decades, and one of the 
paragraphs it says, ``Obama also says the industry is getting 
big bucks and subsidies each year. Not true. Like any business, 
oil and gas companies qualify for tax deductions, but they are 
far less generous than those enjoyed by the majority of energy 
companies. True, oil and gas companies receive Federal energy 
R&D funding, but on average, electric technologies and 
renewables like wind and solar receive more than 22 times as 
much funding. Ethanol and biofuels are subsidized at a level 
190 times that of oil and natural gas.''
    To get back to a point that the Ranking Member made, I 
agree in balance, too. We need wind and solar. We have that in 
the Central Valley of California, but we also have hydro and 
biomass. Would each of you not agree that is an important part 
of our energy portfolio and should also be considered as green 
energy?
    Mr. Fox. I agree we have to look at everything, but the 
problem that you have is everybody is just saying OK, if one 
industry gets billion dollars, we should get a billion dollars 
and another billion dollars and another billion dollars, and 
the problem with that is----
    Mr. Denham. But I am not saying anything about subsidies. 
As part of our green portfolio, hydro and biomass, two green 
facilities in my area, do you agree that should be considered 
as part of our overall portfolio?
    Mr. Fox. Yes, sir, anything that increases competition.
    Mr. Denham. Thank you. Do you also agree?
    Mr. Shawcroft. Absolutely. We need to pursue anything that 
is in fact renewable. Hydro is one of the best renewable 
sources we have.
    Mr. Denham. Thank you. Renewable energy but not considered 
as part of the green energy.
    Mr. Shawcroft. I understand that.
    Ms. Harbert. We have broad differences across our country, 
and so we need to recognize the broadest definition possible 
that recognizes the Southeast is not like the Northwest.
    Mr. DeFazio. Thank you.
    Mr. Graves. Yes.
    Mr. DeFazio. Thank you. I appreciate the quick answers 
since we are short on time. The main part of my questions here 
today are on job losses that we see not only throughout Central 
Valley but throughout the nation. I represent an area that has 
some of the highest unemployment in the entire nation. We are 
at about 20 percent, a lot of that due to environmental 
regulations that shuts off our water and closes down our farms, 
but I am a farmer, and I am one of the fortunate ones that not 
only has water, but I have a permanent crop.
    I grow almonds, and I have the opportunity to hold my crop 
in a warehouse and not ship it until the prices come up, but 
some of my friends that have been forced to pull out all of 
their trees, if they are fortunate enough to get the water 
allocation that they are under contract for, they plant a row 
crop. With the high cost of gas right now, they are now looking 
at can I afford to put a row crop in, or do I just let the 
ground go fallow, which again, when you have 20 percent 
unemployment, will continue to drive up that unemployment rate.
    Just a quick response from Mr. Shawcroft. What type of job 
loss do you expect to see nationally from farm economy just due 
to the gas price whether it is at $4 and if it escalates to $5, 
how many more farmers will just not plant or plant, but then 
not harvest because of the increase in cost?
    Mr. Shawcroft. I really can't give you a figure. It really 
depends on the individual situation. For us, ourselves, you 
have something that is permanent. Cattle, you can't just get 
and out of the cattle business instantly. You have an 
investment in that genetics. You have an investment in what you 
have been able to put together. It is very difficult to jump in 
and out. It would have to be a decision based on individual 
situations. I understand that California in particular is 
facing a real challenge as far as this fuel cost, planting 
cost. They are looking at can I even afford to plant the crop, 
or should I just give it up for the year?
    Mr. Denham. Yes, and, Mr. Shawcroft, if you could provide 
us back any numbers that the Farm Bureau has on loss of crops 
or revenue or jobs, most importantly jobs, with the escalation 
of gas prices, that would be helpful.
    Mr. Shawcroft. I would be glad to do that.
    Mr. Denham. All right. And as well for the Trucking 
Association, Mr. Graves. All of those crops that aren't going 
to be planed, they are obviously not going to be shipped, and 
even in my case, I am going to hold everything in the warehouse 
because I can't afford to ship it right now. How many jobs do 
you think we lost through our farm economy just not shipping 
during this time of high gas prices?
    Mr. Graves. Well, I am not going to have a very good answer 
that one. I mean, we simply know that we are all struggling to 
pull ourselves out of the economic doldrums, and to whatever 
extent fuel prices put the breaks on that, it is bad for 
everyone in all segments of U.S. business.
    Mr. Denham. Thank you, and I do the family shopping when I 
am at home, and I had the same question for the Chamber. I know 
all of our Ag prices are going to go up, all of our Ag 
commodities, everything that goes through the grocery stores as 
well as many other products. Will the Chamber have any numbers 
on what we expect to see the job loss due to the high 
escalation in gas prices at $4 and especially if it gets up to 
$5 this summer on the job loss associated with that?
    Ms. Harbert. Well, we certainly know what it does to 
disposable income and the reduction there and the contraction, 
and people will not be spending on things that will require 
transportation, more planting, et cetera, so it reverberates 
through the entire supply chain, and that is really hard in the 
very short term to put numbers on it, but we will certainly do 
our best.
    Mr. Denham. Thank you. I mean, this is one more impact that 
is going to hit the Central Valley really hard. We are going to 
see a much greater job loss here than the rest of the Nation 
and you guys getting back to us on the job loss that we expect 
nationwide would be very helpful. Thank you.
    The Chairman. The time of the gentleman has expired. The 
gentleman from Michigan, Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman. Governor Graves, Mr. 
Fox has said earlier that excessive speculation is 
significantly driving up prices for consumers. Do you agree 
that speculation is increasing energy prices?
    Mr. Graves. Yes, I do.
    Mr. Kildee. Governor Graves, would you agree with Mr. Fox 
that cutting funding for the CFTC to promulgate and enforce new 
regulations to rein in speculation could lead to higher prices?
    Mr. Graves. I would oppose cutting the funding, yes.
    Mr. Kildee. Thank you. I appreciate your brief and succinct 
answers. Thank you. Mr. Chairman, I yield back the balance of 
my time.
    The Chairman. I think the gentleman for yielding back his 
time. The gentleman from California, Mr. McClintock is 
recognized.
    Mr. McClintock. Thank you, Mr. Chairman. Much has been made 
by our friends on the other side that oil production is higher 
now than it has been in a decade. I think it needs to be 
pointed out that there is an enormous lead time from lease to 
development to production, which means that higher production 
today is a result of decisions that were made years and years 
ago. It is not a reflection of current policy. The current 
policy of this Administration has been highly restrictive, and 
there is concern that is quite deliberate. We have had a little 
bit of discussion about that today.
    Mr. Chairman, I would ask for permission to enter into the 
record an exchange between CNBC's John Harwood and Senator 
Barack Obama in June of 2008. Harwood asks him, ``So, could the 
high oil prices help us?'' His response is, ``Well, I think I 
would have preferred a gradual adjustment,'' so it is becoming 
of great concern that the restrictive policies of the 
Administration are specifically designed to gradually increase 
the price of oil and gasoline in this country.
    The Chairman. Without objection, that will appear in the 
record.
    Mr. McClintock. Thank you. We have been talking a lot about 
opening up the Strategic Petroleum Reserve. Isn't the real 
Strategic Petroleum Reserve of the United States the vast, vast 
petroleum resources that we have locked without our own 
borders? Should we be releasing that reserve? I ask each of you 
that question.
    Mr. Shawcroft. I would certainly support that.
    Mr. Fox. I would support that.
    Mr. Graves. Yes.
    Ms. Harbert. No.
    Mr. McClintock. No, you would not? You don't think we 
should be developing our vast petroleum reserves?
    Ms. Harbert. I am sorry. I thought you said release the 
Strategic Petroleum Reserve. I misunderstood you. No, we 
should----
    Mr. McClintock. I am thinking of the real petroleum reserve 
of this country.
    Ms. Harbert. Real. I am sorry. Absolutely----
    Mr. McClintock. Shale oil reserves that are three times the 
proven reserves in Saudi Arabia, for example.
    Ms. Harbert. I recant what I said, and I fully support the 
development of domestic resources.
    Mr. McClintock. Well, let me go on and ask you another 
question, Ms. Harwood. The Administration contends that the 
vast acreage that has been leased already is sitting idle. You 
touched upon this in your remarks, but I would like you to 
elaborate on it. The implication is that we don't need to lease 
new lands for oil exploration and production because the oil 
companies are currently lackadaisically sitting on enormous 
acreage of leased land they are not even using.
    Ms. Harbert. I think it is important to get some facts on 
the table. That is inaccurate because a lease by this 
Administration is considered idle if it is going through the 
government-required reviews and environmental studies, which we 
all want to see done. It is not considered active until the 
molecules come out of the ground, so all of the money and all 
of the studies and all of the environmental reviews are 
considered part of the ancillary activities. Therefore, they 
are considered idle.
    On the contrary, actually of all of the acreage that we 
have, which came off of moratorium in 2008, only 3 percent has 
been leased offshore. A scant amount of our acreage has 
actually been leased. We have a tremendous opportunity if we 
can get those leases put out for least, put out for the 
industry to actually invest in and create those jobs here at 
home, so we have to get some facts on the record. Nobody is 
sitting on leases. They are doing the required permitting 
process to actually----
    Mr. Denham. So the only reason those leases are considered 
inactive by the government is because of government-imposed 
restrictions and requirements that are holding up the 
development of those lands?
    Ms. Harbert. They are going through the government-required 
permitting process.
    Mr. Denham. One thing that I do agree with my friends on 
the other side about is subsidies. I don't think we ought to be 
subsidizing any form of energy production whether it is 
nuclear, oil, wind or solar. Governor Graves spoke of 
government mandates to force conservation and taxpayer 
subsidies for mandates like natural gas vehicles. Don't 
American consumers deserve accurate price signals so that they 
can make rational decisions about what fuels to use and what 
equipment to buy?
    I mean, prices convey a wealth of data, everything from the 
political situation in the Middle East to piracy in Somalia to 
steel prices, shipping costs, substitute fuel costs, bribery 
rates in Venezuela, American drilling moratoriums. All of these 
and infinitely more data go into the price signals. They make 
it possible for consumers to make rational decisions. Why would 
we want to distort those price signals and deny consumers the 
ability to make rational decisions in the marketplace?
    Ms. Harbert. I think we all agree that a free market 
certainly works the best, and a transparent market works the 
best. I think we have to be clear about what we are talking 
about in subsidies. One man's subsidy is another man's tax 
treatment. Depreciation is treated in the oil and gas industry 
differently than it is treated in a different industry, and so 
if we are going to single out an industry and all of a sudden 
change their tax treatment that every other element of our 
private sector enjoys, then we are doing that.
    We are singling out and penalizing, so we need to be 
careful out singling out industries and changing the rules of 
the game. Depreciation is depreciation is depreciation. It is 
different per industry, but it shouldn't be changed across the 
board.
    Mr. Denham. I see my time has expired.
    The Chairman. The time of the gentleman has expired. The 
gentlelady from Ohio, Ms. Sutton.
    Ms. Sutton. Thank you, Mr. Chairman. This first question is 
for Mr. Fox. Mr. Fox, Exxon paid zero in income taxes last 
year. As a small business owner, did you pay income taxes last 
year?
    Mr. Fox. Yes, ma'am.
    Ms. Sutton. I thought so. Did you receive any subsidies, 
billions of dollars of subsidies?
    Mr. Fox. No, ma'am.
    Ms. Sutton. OK. I just heard the comment one man's subsidy 
is another man's, I think, tax treatment, and so we see what 
the tax treatment that you as a small business owner are 
getting in contrast to what Exxon has been able to accomplish 
for themselves with those helping them do their bidding. I 
would just to like to say about the evidence. We are here and 
we are hearing the claims that opening up new, more publicly 
owned lands, both onshore and offshore to conventional energy 
production will lower energy prices, but the evidence doesn't 
seem to support that conclusion.
    We have heard a lot about 2010 domestic natural gas 
production reached an all-time high, and domestic oil 
production reached its highest levels in nearly a decade. We 
know there are a lot of lands that are available for drilling. 
There are millions of acres of lands already leased, but not 
being drilled, and even as oil prices surge, which we have 
heard a lot here today, the Federal government continues to 
provide billions of dollars in subsidies to the well-
established and well-healed oil industry.
    It is clear that these subsidies and what we are doing now, 
coupled with the increased production has failed to insulate 
the American consumer from energy price fluctuations. We cannot 
continue to subject American families to the outrageous and 
inexplicable increase in prices at the pump, so the question 
is, a number of you mentioned energy independence and the 
freedom from prices by expanded drilling, but what about 
Canada?
    Canada produces 3.3 million barrels a day and consumes 
almost 2.2 million barrels a day. Canada is a big net exporter 
sending a lot of fuel, for example, into U.S. gas tanks, but 
prices at Canadian pumps have tracked with ours since 2007, and 
both nations have been pulled up and down and up again by 
roller coaster gas prices. Canada, with its fast resources and 
small population can't drill its way out of price runups, so 
why should the American people believe when you say that they 
should expect a different outcome in this nation, and if we 
could just be very brief in our answers, and, Mr. Fox, I will 
let you sit this one out.
    Mr. Fox. Thank you.
    Mr. Graves. Well, I said earlier that I don't think I am 
here today seeking cheap fuel. I am here seeking a dependable 
supply of diesel fuel for the foreseeable future, and the thing 
for our industry specifically that is really disruptive is the 
price spikes, and what I think we are fearful of is that if we 
start sending signals as a government that we are going to 
start to move away from a willingness to develop domestic oil, 
that is only going to further drive prices up which in turn we 
pass through to consumers and make quality of life here much 
more unaffordable.
    Ms. Sutton. I thank the gentleman for your answer. Of 
course, as the facts show though, we haven't shied away from 
domestic production because we have seen the increase in the 
past year as just articulated, but I appreciate your response. 
If I could just move on because the time is so limited, and 
this is very simple because this is a yes or no question. If we 
were to open up new and more and what in some cases appear to 
be environmentally sensitive areas to additional and new 
drilling, is it your opinion that the American people should 
believe that OPEC can't and won't counter the impacts of new 
supply through production adjustments?
    Ms. Harbert. I am not here representing OPEC and won't 
speak for them. What I will say----
    Ms. Sutton. I asked for your opinion. That is all.
    Ms. Harbert. The world price for oil is set on the global 
market and that we will certainly have a positive contribution 
to make by amplifying our supply contribution to that, and we 
will be able to import less. Therefore, we will be spending 
less money overseas. We spent $265 billion last year on 
importing oil. We would like to see more of that money actually 
invested here to create jobs here.
    Ms. Sutton. Would anybody like to answer?
    Ms. Harbert. I mean, that would be an inoculation, I think 
it would be----
    Ms. Sutton. I thank you. I thank you, but would anybody 
like to answer the question that I asked?
    Mr. Shawcroft. My response would be supply as well as the 
price of oil is determined by many factors. We need to apply 
all that we can. We need to bring all sources of energy to the 
table. Whether OPEC is going to change that or not, that is 
certainly their decision. What we do in this country does in 
fact impact the prices that we pay at the pump.
    Ms. Sutton. So it is really important that we be diverse in 
our approach to energy?
    Mr. Shawcroft. On both sides of the scale, ma'am.
    Ms. Sutton. Thank you, sir. Would you like to add?
    Mr. Fox. My opinion is OPEC will do whatever it needs to do 
to keep price ranges in the target that they want it in.
    Ms. Sutton. I thank you.
    The Chairman. I thank the gentlelady. The gentleman from 
Pennsylvania, Mr. Thompson is recognized.
    Mr. Thompson. Thank you, Chairman. We have heard a lot of 
discussion this afternoon, and some of it I think was confusing 
subsidies with treatment of the tax code, and I will be the 
first to suggest that our tax code in this country is broken. 
Hopefully, we can do something about that, but that said, I 
also just want to point out in terms of what does make a 
difference in gasoline prices from figures, in May of 2008, 
gasoline prices at the pump was over $4 a gallon, and the 
Presidential moratoria was lifted in June of 2008 followed by, 
and I wasn't here at the time, but my comment isn't about time, 
Congressional moratoria was removed for October 1, 2008.
    You know the price at the pump was $1.75, so don't tell me 
that the policies that we do here in Washington don't have an 
immediately effect on gas prices. My first question is we 
created the Department of Energy a long time ago, and among all 
the purposes, I assume that part of the purpose is to make sure 
that we have reliable and affordable energy for this country, 
something to do with energy security as well. Very important.
    Very quickly, and then my second question we will have lots 
of time to talk about, but given that fact, what letter grade 
would you give the Federal government policy for providing 
affordable and reliable energy since that time? How well have 
we done? What letter grade would you put? A through F. 
Governor, do you want to start?
    Mr. Graves. I would probably pick somewhere around C to C-.
    Ms. Harbert. For today's energy, D. For tomorrow's 
potential energy, they have ranked very high in spending a lot 
of money on that.
    Mr. Thompson. OK.
    Mr. Shawcroft. Overall, I would go in with C-, maybe even 
down to D.
    Mr. Fox. F.
    Mr. Thompson. All right. Very good. Here is the opportunity 
for you to give a little more of a comment, just quickly, you 
all bring expertise to the table in this issue in terms of how 
energy affects our business or families. What is your top 
priority that you would include in a national energy plan that 
would really accomplish the mission of providing affordable and 
reliable energy to both our families and our businesses, your 
top item. We will start with Mr. Fox and go that direction.
    Mr. Fox. I think we have to develop a comprehensive energy 
plan that we don't talk about during an election cycle that we 
actually do and we actually mean. We have to start walking the 
walk and get rid of the political talk we talk. That is the 
most important thing we do. We have been here today for a 
couple of hours, and all we keep doing is talking about the 
other side and the other side and the other side. Get rid of 
the other side. Get rid of the word Republican, Democrat and 
start talking about the issues. It is the only thing the 
American consumer and the people care about.
    Mr. Thompson. So something credible that would actually be 
implemented?
    Mr. Fox. Yes, sir.
    Mr. Thompson. OK.
    Mr. Shawcroft. First off, I would say pursue all sources of 
energy, and the second thing, and particular to that, would be 
to eliminate what speculation you can eliminate and certainly 
eliminate as much regulation as you possibly can. Let people go 
out and get it.
    Mr. Thompson. OK. Thank you.
    Ms. Harbert. There is a reason why the American private 
sector is sitting on a bunch of capital. It is not because they 
want to put it under their bed sheets. It is because of the 
regulatory uncertainty and the problems in getting permitting 
to actually put their capital to work, so we need permit 
streamlining, we need regulatory certainty so we can get some 
energy generation, transmission, distribution and new 
production online.
    Mr. Thompson. OK.
    Mr. Graves. I would say it is the concern that I would like 
to see more discussion about the transition from essentially a 
petroleum-driven economy to an alternatively fueled economy. I 
think we all know we are going that way, but again, my industry 
doesn't see that we are going to be there anytime soon, and in 
the near term, we need diesel fuel to run trucks.
    Mr. Thompson. Right. My next question, there is a 
difference between subsidizing something, which I see as 
pushing into the commercialization prematurely because if you 
take the government rug away, and there are many examples of 
that today, solar and wind is a part of that, if you pull that 
subsidy rug away it collapses and research and development, 
which is extremely important because we should always be 
looking for the future. Is that something that you agree with? 
What are your thoughts in terms of are we over-subsidizing 
versus really we should be focusing our assets on research and 
development versus prematurely commercializing?
    Mr. Fox. I think subsidizing research and development is 
very important, but when we subsidize innovation, I think we 
have to put the checks and balances in place to make sure we 
are not subsidizing failure, but we incentivize success.
    Mr. Thompson. OK.
    Mr. Shawcroft. I certainly agree with that. Subsidies can 
play a definite, necessary role in the research and development 
in certain industries.
    Ms. Harbert. We should be investing in research and 
development, but in the area of subsidies, we need to be 
looking at ways that actually lessen the burden on the 
taxpayer, that are more deficit-neutral like providing perhaps 
concessionery financing that would be paid by the developer 
rather than actually relying on straight-up subsidies that are 
paid for by the taxpayer. There are lots of opportunities to do 
that. It does not need to be just straight tax credits and tax 
subsidies, much more market-friendly, deficit-neutral ways to 
do it.
    Mr. Tipton. OK. Thank you, Chairman.
    The Chairman. The time of the gentleman has expired. Our 
last questioner is a gentleman from Louisiana, Mr. Landry.
    Mr. Landry. Thank you, Mr. Chairman. Ms. Harbert, do you 
know how much taxes Petrobras pays?
    Ms. Harbert. I do not. I do not.
    Mr. Landry. Mr. Fox?
    Mr. Fox. I don't.
    Mr. Landry. No? OK. I don't know why we pick on our U.S. 
companies. Let me ask you also, Mr. Fox, do you know where the 
profits of Petrobras are?
    Mr. Fox. No, sir.
    Mr. Landry. How about the profits of Saudi, Amoco, any at 
OPEC?
    Mr. Fox. No, sir.
    Mr. Landry. No? But you got not problems with them making 
profits?
    Mr. Fox. I wouldn't say I don't. I have a problem with the 
method in which they obtain those profits through non-
traditional, free-market methods.
    Mr. Landry. What would you say to those members of OPEC who 
fly around in those big jets and come party in the United 
States and all that. I mean, do you think that is just terrible 
of them?
    Mr. Fox. I don't think anybody flying around in a jet that 
hasn't earned is wrong. I just think when you can't treat OPEC 
like you can treat any other business in the world when they 
operate through a cartel. You would never let me as a gasoline 
retailer get together with all my retailers in the United 
States and fix the retail price of gasoline. You would pass 
legislation to prevent that.
    Mr. Landry. So you think Exxon colludes with OPEC?
    Mr. Fox. No, sir, I didn't say that.
    Mr. Landry. Well, but you had a problem with the profits, 
and you had a problem with the salaries of Exxon officials and 
oil and gas officials, but you don't have a problem with OPEC's 
profits? I am just trying to make sure we level the playing 
field here.
    Mr. Fox. I absolutely agree on leveling the playing field. 
I have a problem when you make a comparison that Exxon Mobile's 
profits are about seven to eight percent, and you say a 
gasoline retailer's profits are seven or eight percent, and you 
compare those two and saying I am complaining about it. What I 
am complaining about is how you got down to that seven or eight 
percent was to pay the CEO $450 million for doing a 90-hour 
job, and the service station retailers gets paid $60,000 for 
doing it, and the CEO has a private jet and flies that Sheik 
from OPEC here.
    Mr. Landry. Isn't that what America is all about, about 
that American dream, about that kid that might not have it real 
good who maybe grows up in a poor family and works his way all 
the way to the top, and shouldn't he be able to make as much 
money as he possibly can and work as less hours as he can if he 
is that smart and that good? I mean, should we destroy the 
American dream to put your equation into play here? I mean, I 
don't know? I mean, just answer yes or no?
    Mr. Fox. I can't.
    Mr. Landry. OK.
    Mr. Fox. He is not that smart. He is not that good.
    Mr. Landry. Really? OK. Well, are you a member of PMAA?
    Mr. Fox. No, sir.
    Mr. Landry. NACS?
    Mr. Fox. No, sir.
    Mr. Landry. OK. See, I did business with gasoline retailers 
for a long, long time. Now, isn't it true that when prices 
rise, it puts a pinch on you all?
    Mr. Fox. Yes, sir.
    Mr. Landry. OK. Isn't it true though that when prices fall, 
you make a lot more money?
    Mr. Fox. I would say to you when prices are low, we make a 
reasonable profit margin, and when prices escalate, we get 
screwed.
    Mr. Landry. Well, but is it when prices are lower, or is 
when the prices are falling that you make your biggest profit 
margin?
    Mr. Fox. No, sir, I disagree. In today's market, I disagree 
with you.
    Mr. Landry. I disagree with you. That is not from my 
experience, and look. I want you to know, I have no problem 
with you making a profit.
    Mr. Fox. I am just saying to you in today's market----
    Mr. Landry. I have no problem. I would like you to make 10, 
15, 20 percent.
    Mr. Fox. I think your statement five to 10 years ago was 
correct on falling prices. I think your statement today is 
wrong.
    Mr. Landry. Now let me ask you a question. What would an 
all-electric automobile market do to your industry?
    Mr. Fox. Destroy it.
    Mr. Landry. OK. Could you tell me that again what an all 
electric car market would do what to your business?
    Mr. Fox. Destroy it. I am a fossil fuel seller.
    Mr. Landry. All right.
    Mr. Fox. It doesn't mean I wouldn't support an electric 
vehicle as long as I could provide the electric service.
    Mr. Landry. Gasoline to it, right? That is right. If you 
could provide the gasoline, you don't care about whether it is 
electric or not.
    Mr. Fox. If I could provide the alternative fuels that are 
being developed today in a free and open market, I am all for 
it.
    Mr. Landry. Right. That is right.
    Mr. Fox. But when you restrict me from doing that because 
you pass legislation to do that, I have a problem with it.
    Mr. Landry. Well, let me just get the one last question, 
and you all can pick who answers. We have heard from the 
Administration and from across the aisle that increasing 
domestic production will not help our gas prices in the short 
term, but in what term will alternative energy proposals begin 
to affect gas prices? Is it a short term, long term? Can we do 
an alternative project right now that is going to just make the 
price of gas just start falling?
    Mr. Shawcroft. Anything that we do, alternative or not, is 
going to have a time lag.
    Mr. Landry. Thank you. But I am just curious.
    Mr. Shawcroft. Anything.
    Ms. Harbert. All alternatives today are more expensive than 
the resources we have available that are conventional, so that 
is a fact.
    Mr. Landry. Right. The demand should increase--increasing 
the demand. Real quick. I am about to run to out of time.
    Mr. Shawcroft. The obvious flip-side of that question is we 
need to start developing it now, or you won't have it in the 
future.
    Mr. Landry. Right. Real quick. I am about to run out of 
time. Does increasing supply in the market, would that have an 
effect short-term? Would it be quicker to increase supply than 
it would be to go to an alternative energy? Would that have a 
quicker impact on gas prices?
    Mr. Shawcroft. Yes. I believe so, yes.
    Mr. Landry. Yes? OK.
    Ms. Harbert. Market responds to signals like that.
    The Chairman. The time of the gentleman has expired. I want 
to thank the panel very, very much for your testimony. As you 
can see by the give and take from all the Members, this is an 
issue that we are hearing from from our constituents, and it is 
an issue that frankly I believe needs to be resolve, and I 
think it needs to be resolved in a bi-partisan way. I certainly 
agree with the sentiments that all of you have said, but 
sometimes other issues get in the way. That is the nature of 
living in a free society, and I don't think any of us would 
trade that however, so we will have to work our way through 
that.
    I hope, as I mentioned in my opening statements that 
whatever action we take is not going to be a constant reaction 
to $5 gasoline, which would probably be a short-term fix. We 
need a long-term fix, and that is why I mentioned, and others 
have mentioned, and you have all alluded to, we need an all-of-
the-above energy plan, and I have been talking about that for 
some time, but we certainly can't ignore the abundance of the 
resources that we have within our country right now.
    If we utilize those resources, from this Member's point of 
view, we will send a very, very strong signal to the energy 
market that the United States is serious about becoming less 
dependent on foreign energy sources, and I think that is good 
for the American consumer, so thank you all for being here, and 
without objection, the Committee will stand adjourned.
    [Whereupon, at 1:35 p.m., the Committee was adjourned.]

    [Additional material submitted for the record follows:]

    [The prepared statement of Mr. Duncan follows:]

            Statement of The Honorable John J. Duncan, Jr., 
        a Representative in Congress from the State of Tennessee

    In my absence, I submit this statement to the House Committee on 
Natural Resources:
    Similar to my colleagues on the Committee, I am concerned about the 
rising gas prices that we continue to see in this country. This is an 
issue that affects almost everyone in our nation directly and affects 
the rest of our citizens indirectly. Prices will continue to rise as 
long as this de facto moratorium continues as ``law of the land''. I am 
extremely disappointed in this Administration and their unwillingness 
to produce energy in this country. President Obama has recently visited 
Brazil and has congratulated them on their efforts of off-shore 
drilling practices. This ``there not here'' approach is out of touch 
and absolutely ridiculous. Frankly, I want to know ``why not here?'' 
and ``why not now?'' As a former small business owner, I know that if I 
had the ability to do a job myself, it would be more efficient and 
would also save my company money. Wake up, Mr. President! We have the 
ability to produce and explore energy here in the United States through 
off-shore and deepwater drilling, as well as our resources in ANWR. 
Let's drill here and drill now. This will be more efficient, will 
produce American jobs, and will save our nation tremendous amount of 
money.

                                 
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