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


 
DRILLING FOR A SOLUTION: FINDING WAYS TO CURTAIL THE CRUSHING EFFECT OF 
                   HIGH GAS PRICES ON SMALL BUSINESS

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

                                HEARING

                               before the

                      SUBCOMMITTEE ON AGRICULTURE,
                            ENERGY AND TRADE

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             APRIL 14, 2011

                               __________


                                [GRAPHIC] [TIFF OMITTED] TONGRESS.#13


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            Small Business Committee Document Number 112-011
          Available via the GPO Website: http://www.fdsys.gov
                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                           OPENING STATEMENTS

Hon. Scott Tipton................................................     1
Hon. Mark Critz..................................................     2

                               WITNESSES

Mr. Jim Ehrlich, Executive Director, Colorado Potato 
  Administrative Committee, Monte Vista, CO......................     5
Mr. Rick Richter, Operator of Richter Aviation & President of the 
  National Agricultural Aviation Association, Maxwell, CA........    11
Mr. Dick Pingel, Operator of Finally Trucking, Inc., Plover, WI..    22
Mr. Robert Weiner, Professor of International Business, Public 
  Policy and Public Administration, and International Affairs, 
  George Washington University, Washington, DC...................    30

                                APPENDIX

Prepared Statements:
Mr. Jim Ehrlich, Executive Director, Colorado Potato 
  Administrative Committee, Monte Vista, CO......................     8
Mr. Rick Richter, Operator of Richter Aviation & President of the 
  National Agricultural Aviation Association, Maxwell, CA........    14
Mr. Dick Pingel, Operator of Finally Trucking, Inc., Plover, WI..    24
Mr. Robert Weiner, Professor of International Business, Public 
  Policy and Public Administration, and International Affairs, 
  George Washington University, Washington, DC...................    32

Statements for the Record:
National Association of Convenience Stores.......................    48


    HEARING ON DRILLING FOR A SOLUTION: FINDING WAYS TO CURTAIL THE 
          CRUSHING EFFECT OF HIGH GAS PRICES ON SMALL BUSINESS

                              ----------                              


                        THURSDAY, APRIL 14, 2011

                  House of Representatives,
       Committee on Small Business, Subcommittee on
                             Agriculture, Energy and Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building. Hon. Scott Tipton 
[chairman of the Subcommittee].
    Present: Representatives Tipton, Fleischmann, Landry, 
Critz.
    Chairman Tipton. Well, good morning everyone. I would like 
to thank you for joining us for this hearing and it will now 
come to order.
    This is our first Subcommittee hearing and the subject 
truly could not be more timely or important. Rising oil and 
gasoline prices have a crippling effect on small businesses, as 
well as our overall economy. In fact, just this morning the 
headline of the Washington Examiner--I will even grab this--it 
says gas prices hobble small businesses. When we look at 
yesterday's Washington Post, $4 a gallon gas fuel fears stymie 
our recovery here.
    I would like to extend special thanks to each of our 
witnesses for making this trip to Washington, D.C., and taking 
time out of your busy schedules. I would especially like to 
welcome Jim Ehrlich today, who is a constituent of mine out of 
Colorado.
    Today we will hear directly from small businesses on how 
increased fuel prices have affected their bottom lines and 
ability to expand and be able to create jobs. Small businesses 
have been hit especially hard by high fuel prices. In addition 
to driving up the costs of transportation for their goods and 
services, the spike in gas prices is drying up consumers for 
many of our small businesses. Just yesterday, Walmart's chief 
executive officer told the Washington Post that the retail 
giant's number of customersis increasing with rising gas 
prices. In an effort to tighten up their budgets by driving less, 
consumers tend to consolidate their shopping trips to one larger box 
store to be able to do their shopping rather than going to a handful of 
community shops where they would normally visit.
    This trend is even more alarming when taking into 
consideration that many communities across our country have 
already seen their consumer bases dwindle in conjunction with 
staggering unemployment. We are essentially watching the 
extinction of the mom-and-pop shops play out before our very 
eyes.
    Retailers, of course, are not the only ones feeling the 
pinch of high gas prices. As we will hear today, it is hitting 
our farmers, our ranchers, especially hard, and any business 
that relies on fuel to send or receive their goods and 
services. This increased cost of doing business is either 
absorbed by the company, diverting resources away from 
investment and expansion, or passed along to cash-strapped 
consumers who have already tightened their belts in cutting 
back. In either case, it is a roadblock to economic security in 
this country, economic recovery, and job creation.
    In this country, in addition to hearing testimony today, we 
will be talking about the direct impact high fuel prices are 
having on small businesses. We will explore the root causes of 
these rising costs, including overregulation and punitive 
taxation on the energy industry. We will look at possible 
solutions to jumpstart the energy exploration and production in 
our country and discuss the need for the U.S. to embrace an 
``all of the above'' energy platform that includes wind, solar, 
oil, natural gas, and coal. I look forward to hearing from our 
witnesses as they provide testimony today, and we seek to find 
solutions to curb the effects of high gas prices on small 
businesses.
    I would now like to recognize our ranking member, Member 
Critz, for his opening statement.
    Mr. Critz. Thank you, Mr. Chairman. And before I go into my 
statement I just wanted to thank the witnesses for coming today 
to talk about the gas prices, but also to thank Scott, our 
chairman. He and I have had a couple of meetings, a couple of 
talks, and it looks like we are going to have a very productive 
Subcommittee. I am looking forward to working with him on this 
issue and on many issues that face small businesses.
    Small businesses play a key role in the economy creating 
nearly two-thirds of net new jobs. However, with gas prices 
rising, their contributions to this growth may be jeopardized. 
In the last 3 months, oil prices have reached a 30-month high 
exceeding $112 per barrel. With the U.S. importing more than 
200 million barrels of oil per month, the cost of doing so is 
substantial. Many analysts are suggesting that these increases 
could lead to gas prices of $5 or more per gallon. Small 
businesses are drivers of economic progress, but a recent 
report shows that surges in energy prices are a top concern 
among them. According to the PNC Economic Outlook Survey of 
Small Firms, nearly three-quarters responded a sustained rise 
in energy prices would have a negative impact on their business 
potentially restraining growth.
    In order to deal with these price increases, small 
businesses are often faced with two choices. They can 
eitherabsorb the costs or pass them on to their customers. Absorbing 
the higher prices creates financial challenges resulting in less 
capital to expand their business or hire new employees. Passing the 
cost increases on to consumers can reduce demand for a firm's goods and 
services. Neither are preferable alternatives and this is why we must 
find a solution.
    Whether these solutions focus on increasing supply or 
reducing demand, it is clear that the status quo is not an 
option. Steps must be taken to increase U.S. energy 
independence. While much of the price increases are tied to the 
uprisings occurring in Northern Africa and the Middle East, 
growing demand as the global economy recovers is also a 
significant part of this equation. Increasing the supply of oil 
can lead to lower gas prices. While there are several options 
to do so, one of the most promising is increasing access to 
potential oil resources under the U.S. Outer Continental Shelf, 
particularly in deepwater areas.
    The Department of Energy projects that oil production would 
increase from 5 million barrels per day to 7.3 million barrels 
per day by 2030 with a complete access to this area. Doing so 
could lead to greater domestic oil reserves and ultimately 
reduce prices for all consumers of gas, including small 
businesses.
    Another important energy alternative is to increase the use 
of oil shale. I know the Green River Oil Shale Formation in 
Colorado, Utah, and Wyoming is estimated to hold the equivalent 
of 1.38 trillion barrels of oil equivalent in place. The 
Marcellus Shale is the largest unconventional natural gas 
formation in the United States. Until recently, the natural gas 
in the Marcellus Shale was locked in an impermeable layer of 
rock which made the natural gas uneconomical to extract. 
However, with the advent of new drilling technologies coupled 
with the rising demand for domestic natural gas, the 
development of the Marcellus Shale has increased exponentially 
in states such as Pennsylvania, Ohio, and West Virginia.
    The shale is estimated to hold 4.9--excuse me, 493 trillion 
cubic feet of extractable natural gas currently valued at more 
than $1.8 trillion. As with most economic activity, the impacts 
of the natural gas affect more than just the specific firms 
directly involved in the industry. There are also important 
employment and income effects on local businesses who supply 
the industry, such as oil-filled service companies, 
restaurants, retailers, and hotels, in addition to effects that 
result from employees spending their wages locally.
    In Pennsylvania, 75 percent of the natural gas it uses 
every day is being imported. The Marcellus Shale Formation 
holds enough recoverable natural gas reserves to not only serve 
Pennsylvania's needs but to turn our country into a significant 
exporter of energy generating equally significant economic 
benefits. This is incredible when you think back to 10 years 
ago when we were only discussing the importation of this gas. 
The high-paying jobs available today in the Marcellus Shale gas 
industry are expected to multiply in the future, meeting the 
needs of gas companies' efforts to increase drilling and 
production across the region. In Pennsylvania alone it is 
estimated that more than 110,000 new jobs have been created 
because of the development of this shale.
    I would just like to emphasize that as long as we develop 
this shale in an environmentally responsible manner, its 
potential is monumental. This is an immediate source of 
alternative energy that is currently being tapped. Excuse me. 
As our country continues to develop new sources of energy, 
carbon capture and sequestration technology allows it to 
continue using coal as a base load fuel while capturing and 
sequestering the carbon emissions that would have otherwise 
been released into the atmosphere.
    The United States has enough coal to meet projected energy 
needs for almost 200 years. Here again is another immediate 
source of alternative energy. While supply-related options show 
great promise, there are equally important policy options that 
could reduce demand. Reducing the use ofgas by improving energy 
efficiency measures could also lead to lower prices. Small businesses 
can readily do this by adopting new technologies such as replacing gas-
based vehicles with hybrid flex-fuel or electric-based cars and trucks. 
This would lessen their and our nation's need for oil. By doing so, 
entrepreneurs would face less volatility in their energy costs.
    Several initiatives are spearheading the replacement of 
gas-based vehicles. Small businesses have been encouraged to 
purchase more fuel efficient vehicles through tax credits, 
including gasoline electric hybrids and plug-in electric 
vehicles. In addition, substantial funding has been provided to 
advance research into alternative automotive energy and fuel 
cell technologies. As commercialization occurs, small 
businesses will have a broader array of energy efficient 
vehicles to choose from. Whether it is increasing the domestic 
supply of oil or decreasing demand, everything should be on the 
table to help reduce U.S. dependence on foreign oil. Doing so 
will not only benefit small businesses and consumers but will 
increase our nation's energy security as we can reinvest 
savings into alternative fuels.
    In this regard, I am particularly looking forward to 
hearing the witnesses' views on policy options and what effect 
they could have on prices. If we do nothing, rising gas prices 
have the potential to dramatically impact small businesses and 
disrupt the recovery we are currently experiencing. If small 
firms are going to lead the economy forward and create new 
jobs, they need greater predictability and less volatility in 
the prices they pay for energy. I hope today's hearing is a 
step forward in this direction.
    Thank you, Mr. Chairman. I yield back.
    Chairman Tipton. Well, thank you, Ranking Member Critz. 
Talking about developing energy here at home we are going to 
get along just fine. I do appreciate that.
    I am a small businessman. This is the first Committee 
hearing that I am chairing. I would like to thank our chairman 
for having the privilege of being able to do this. Sam is very 
gracious. And I would also like to give a tip of our hat to our 
staff as well. A lot of the work that goes on behind the scenes 
to be able to put one of these together is extraordinary. And I 
really appreciate all of the help. And Mindi, thank you for 
your help as well.
    So if other Committee members do have an opening statement 
prepared I would ask that they submit that for the record 
today.
    And I would like to take a moment, gentlemen, to be able to 
explain our lighting system in front of you. You will each have 
five minutes for your testimony. The light will start out as 
green. Once it gets to the four-minute level it will then turn 
to yellow, and at the expiration of time it will then turn red. 
And I would ask that you wrap up your comments at that point 
and we would appreciate it as you finish.

STATEMENTS OF JIM EHRLICH, EXECUTIVE DIRECTOR, COLORADO POTATO 
   ADMINISTRATIVE COMMITTEE; RICK RICHTER, OPERATOR, RICHTER 
      AVIATION; PRESIDENT, NATIONAL AGRICULTURAL AVIATION 
ASSOCIATION; DICK PINGEL, OWNER, FINALLY TRUCKING, INC.; ROBERT 
 WEINER, PROFESSOR, INTERNATIONAL BUSINESS, PUBLIC POLICY AND 
    PUBLIC ADMINISTRATION AND INTERNATIONAL AFFAIRS, GEORGE 
                     WASHINGTON UNIVERSITY

    Chairman Tipton. So it is my pleasure right now to be able 
to introduce our first witness today, a constituent of mine, 
Mr. Jim Ehrlich.
    Jim is the executive director of the Colorado Potato 
Administrative Committee, representing a significant industry 
in my home district. Jim, we appreciate you being here today 
and we look forward to your testimony.

                    STATEMENT OF JIM EHRLICH

    Mr. Ehrlich. Well, I would like to thank Chairman Tipton 
and the Committee for inviting me today.
    I speak on behalf of the 170 different potato growers in 
the San Luis Valley of South Central Colorado. These growers 
typically produce about 2.2 billion pounds of potatoes a year 
with a market price of 175- to $240 million depending on the 
price of potatoes that year. The San Luis Valley is a high 
alpine desert, base elevation of 7,600 feet with less than 7 
inches of moisture annually. Irrigation supplies are dependent 
on abundant snowpack and sustained utilization of a vast 
underground aquifer. Colorado ranks as the second largest 
shipper of fresh market potatoes in the country, a fact that 
many people do not know.
    This 6-county region of Colorado is dependent upon 
agriculture as the economic engine for the valley's 50,000 
residents. Unfortunately, we possess some of the poorest 
counties in Colorado with many rural families having incomes 
below poverty level and without opportunity for better jobs.
    Today I am going to focus on three things: the impact of 
high energy prices and gas prices on potato producers in the 
valley, the inability of the United States to increase domestic 
production of our vast energy reserves, and the cost of 
regulation to potato producers, the impact of high energy and 
gas prices on potato producers.
    I recently read a report claiming that for every 10 cent 
increase in gas prices there is a net loss of $5 billion to the 
United States' economy. When you consider the fragile state of 
the worldwide economy and our economy in the United States, 
this has great significance. When you consider that petroleum-
based products are the only source for most of the 
transportation needs in the world today, there is no real 
mystery why when you have one supply and limited supply of that 
one item and worldwide demand is growing like it is, why there 
is a problem.
    Agriculture requires energy as a critical input to 
production. Potato production uses energy directly as fuel and 
electricity to operate tractors and equipment, cool potato 
cellars, process and package product indirectly, and 
fertilizers and chemicals produced off the farm but needed as 
critical inputs for crop production. Total energy costs of an 
irrigated potato crop in the San Luis Valley can be as great as 
50 percent of the total production expenses.
    Unlike areas of the country where irrigation is unnecessary 
or no-till practices are common, this is not the case with 
potato production in the San Luis Valley. It requires large 
amounts of electricity to irrigate and large amounts of 
tillage. Crop must be stored at the correct temperature and 
humidity year round to ensure marketable condition for 
consumers. The crop must be shipped in refrigerated trucks to 
distant markets across the country throughout the year.
    So what happens when gas prices rise like they have this 
year? Because farmers are price takers and lack the capacity to 
pass on higher costs through the food marketing chain, the net 
result is a loss in farm income. The reality is prices of most 
fuel sources tend to move together. So as gas prices typically 
rise, other energy prices rise in concert. Fertilizer prices 
are dependent upon natural gas prices and potatoes require 
large amounts of nitrogen, phosphate, and pot ash fertilizers. 
Harvest, sorting, grading, and shipping are all heavily 
mechanized energy-dependent steps. The San Luis Valley is 
located in an isolated mountainous region. High diesel prices 
affect freight rates and truck availability cutting into the 
growers' bottom line.
    The economic reality for our area is when gas prices rise, 
farmers make less money. The local economy suffers because it 
is dependent on the farmers. Farmers are forced to cut back on 
expenditures and this lack of economic activity impacts local 
businesses and communities, school districts, et cetera, the 
inability of the United States to increase domestic production 
of vast energy reserves.
    Because the United States relies on imported sources of oil 
for over 60 percent of our oil needs, we export wealth daily, 
primarily to countries that are hostile to us. This not only 
causes economic stress but is a threat to our national 
security. Without a stable source of relative economical energy 
for agriculture, our nation's food security is at risk also, 
and as a result, our national security. As the proud father of 
a U.S. Marine serving in Afghanistan currently, I speak from my 
heart.
    I recently read a report from the Congressional Research 
Service detailing the potential fossil fuel reserves of the 
world. This report came out in December. I was encouraged to 
see the United States might actually have the largest fossil 
fuel reserves in the world, but I was distraught because as a 
country we continually fail to develop these resources. It is 
time to find bipartisan solutions to develop all energy 
resources available in this country,including alternative 
energy sources. Energy prices are going to continue to rise with 
increasing worldwide demand, even if we develop every source of energy 
we have available as quickly as possible. Failure to act puts our great 
nation and its ability to feed the world at risk.
    The last thing I want to talk about is the cost of 
regulation to potato producers. I encourage the Committee to 
consider the economic impact overregulation has on agriculture 
and small businesses across the country. Any new regulation 
should be thoroughly analyzed for the often unintended economic 
consequences that result. I applaud the recent House vote to 
prevent unnecessary NPDES permits that were actually being 
forced on agriculture without just cause.
    As a nation, we have to respect and consider everyone's 
opinion when we make decisions affecting the environment, food 
safety, school meal plans, et cetera. But as elected officials, 
you have the responsibility to create laws that carefully 
represent the beneficial interest of the majority of citizens. 
It is not impossible to please all interests and I know this 
because I work with farmers and make progress.
    An example of this overregulation is the EPA. I cannot even 
begin to go there but I will point out one example. They are 
proposing dust regulations for rural America and they do not 
have the data to show that these regulations are an actual 
problem. They do not even have a rural dust monitoring network. 
The reality is rural America is dusty. Potatoes grow in the 
dirt, the good dirt that feeds all of us.
    In closing, I would like to thank the Committee for the 
opportunity to testify today. Colorado potato growers are very 
grateful for the work you are doing and the commitment you have 
to agriculture and our nation. Thank you very much.
    [The statement of Jim Ehrlich follows:]

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    Chairman Tipton. Thank you very much, Jim. I appreciate 
your testimony.
    Our next witness is Mr. Rick Richter, who has flown as an 
agricultural pilot for over 32 years and is the proprietor of 
Richter Aviation. He is the current president of National 
Agricultural Aviation Association and represents them in his 
testimony today. Mr. Richter.

                   STATEMENT OF RICK RICHTER

    Mr. Richter. Thank you, Chairman Tipton, Ranking Member 
Critz, and all members of the Subcommittee for the opportunity 
to testify on the effects that the increase in fuel prices have 
on small aerial application businesses.
    My name is Rick Richter, owner of Richter Aviation, an 
aerial application business in Maxwell, California. And I am 
testifying today on behalf of the National Agricultural 
Aviation Association, also known as the NAAA, of which I am the 
2011 president.
    NAAA is a national association which represents the 
interests of small business owners and pilot licensed as 
commercial applicators that use aircraft to enhance the 
production of food, fiber, and biofuel, protect forestry and 
control health threatening pests.
    Aerial application accounts for an estimated 18 percent of 
commercially applied crop protection products in the United 
States and is often the only method for timely pesticide 
application, especially when wet soil conditions, rolling 
terrain, or dense plant foliage presents the use of other 
methods of treating an area for pests.
    The average aerial application business consists of two 
operating aircraft, four people, including two pilots, a mixer-
loader, and an administrative staffer. Increases in fuel prices 
result in a number of cash flow and service marketability 
issues for the aerial application industry. And, of course, the 
price of fuel for agriculture will trickle down to the end 
consumer of food.
    According to the United Nations' Food and Agricultural 
Organization, food prices reached a record high in February, 
and prices in March of this year remain 37 percent higher than 
those in March of 2010.
    At the beginning of the season, an aerial applicator sets a 
base price per acre treated by air based on the expected cost 
of operation. This is the amount he charges his farmer clients. 
Depending on the type of fuel used, of which there are two--
avgas for piston engineered aircraft and Jet A for turbine 
engine ag aircraft--an operator includes a base price for fuel 
going into the season. Some applicators stick with this price 
regardless of fluctuations in fuel price, and as a result may 
lose money when prices go up steeply. Other applicators will 
incorporate a fuel surcharge into their pricing structure.
    Incorporated within that fee per acre charge is the fuel 
charge which is based on an average price of fuel per gallon. 
This ranges but on average it is estimated to be about $2 per 
gallon. If fuel rises above that figure, a fuel surcharge is 
added, and a typical fuel surcharge is the difference between 
the average price for a gallon of fuel that an applicator 
builds into his acre charge and the price of a gallon of 
aviation fuel at the time of application, assuming that the 
latter is a greater amount, multiplied by the average number of 
gallons burned by that particular aircraft in an hour 
multiplied by the amount of time it took to make the 
application for the farmer.
    Fuel surcharges in our industry have been met with minimal 
complaint by farmer clients as of late because they will be 
getting a good price for the crop. If this was 2002 and we were 
faced with the same high prices for fuel that we are facing 
today but ag commodity prices were two to three times lower 
than what they are today, our industry would be facing some 
real challenges. As of April 6, 2011, the wholesale price of 
Jet A without taxes was $3.33 per gallon as quoted by a large 
Southeast U.S. fuel supplier. If in 2002 when commodity prices 
were much lower and Jet A fuel for turbine-powered ag aircraft 
was the same price today or the same price that it was at its 
height in 2008 when it averaged $4.72 per gallon, it would be 
much tougher for a farmer to embrace a fuel surcharge for 
aerial application services rendered.
    Realistically, when input prices such as fuel are high and 
commodity prices are low, a significant drop in the use of 
aerial application services and other farm services would occur 
as a result of containing costs. Well, this helps the farmer 
contain expenses but frequently results in less yield and poor 
crop quality, hence negatively affecting his revenue potential. 
The lack of application work is a challenge for an aerial 
application operator that requires steady business each season 
to remain viable.
    Another challenge that aerial applicators face, 
particularly when fuel prices are high, is the financial terms 
that fuel suppliers have for payment of their fuel and how 
those terms differ from their own accounts receivable terms. 
The typical payment term that an aerial applicator has with his 
fuel supplier is 10 days with established credit. This usually 
differs from payment terms that aerial applicators' customers 
are accustomed to paying, which is typically between 45 and 60 
days. This can pose challenges because fuel costs consist of 
approximately 20 percent of an aerial applicator's total 
expenses. If the average ag aircraft burns 50 gallons per hour 
and is flown 300 hours per season and there are 2.2 aircraft on 
average per aerial application operation, then 38,600--excuse 
me, 36,816 gallons of fuel will be required.
    When an applicator is facing a deficit in accounts payable 
compared to his accounts receivable and outlaying large chunks 
of capital for fuel particularly when the price of fuel is 
high, this may result in sizeable interest payments for small 
aerial application businesses. It is widely expected that 
higher interest rates will return and coupled with the greater 
demand for fuel globally will likely lead to a steady increase 
in the price of fuel and place much greater cost pressures on 
small aerial application businesses. High fuel cost conditions 
in some instances do lead to aerial applicators taking more 
risk in trying to hedge the price of fuel by filling up their 
tanks early and storing fuel. But storing for too long of a 
period can result in developing moisture in the fuel, algae 
problems in Jet A, and possibly evaporation of avgas.
    One other issue of concern to the agricultural aviation 
industry that is related to fuel supply is an effort underway 
to phase out the use of avgas. EPA has mentioned the 
possibility of a new environmental standard associated with 
avgas due to its emissions of lead in the air and calls by 
environmental activists to ban the fuel completely. Avgas is 
used in 51.87 percent of ag aircraft in the U.S. today. NAAA's 
primary concerns are with the safety and feasibility issues 
associated with mandated a shift from avgas. NAAA hasencouraged 
the EPA and the FAA to allow time for and devote resources toward the 
development of a suitable alternative to avgas before imposing avgas 
regulations or banning the use of the fuel altogether. NAAA urged the 
agency to consider the detrimental economic impacts that could occur to 
our industry and the farmers that rely on us should avgas be phased out 
prior to the development of a safe and practical alternate fuel. Piston 
engines are a notably less expensive engine for ag aircraft compared 
with turbine engines and for smaller aerial application businesses it 
may be the only affordable type of power plant available.
    Chairman Tipton, Ranking Member Critz, thank you very much 
for the opportunity to explain these issues affecting the 
aerial application industry in regards to the increase in fuel 
prices and supply for ag aviation aircraft. More detail on the 
issue and how it affects the aerial application industry can be 
found in the written comments that we have submitted. A 
national policy that can be developed that would ensure a 
stable price and supply for Jet A and avgas is imperative for 
our industry and the farmer clients we treat. Also, 
continuation of the fuel tax exemption for aviation fuel used 
for large aircraft while flying over the farm has provided some 
relief to our farmer customers.
    Our industry provides a valuable service in aiding in the 
production of the safe, affordable, and abundant global supply 
of food, fiber, and biofuel, and as such, a steady supply and 
price of fuel is vitally important to us and our farmer 
customers. Thank you again to you and the members of the 
Subcommittee.
    [The statement of Rick Richter follows:]

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    Chairman Tipton. Thank you, Mr. Richter. We appreciate your 
testimony.
    I would like to now introduce Mr. Dick Pingel, who has been 
an owner-operator trucker for over 28 years, and I also have it 
on good authority that Mr. Pingel has personally driven over 
three million miles without a single accident. That is notable. 
The Subcommittee appreciates you taking the time to speak with 
us today, Mr. Pingel.

                    STATEMENT OF DICK PINGEL

    Mr. Pingel. Good morning. My name is Dick Pingel. I live in 
Plover, Wisconsin, and have been a small business trucker for 
the past 28 years. I am a member of Owner-Operators Independent 
Drivers Association and currently run a one-truck operation 
hauling food around the country.
    As you are most likely aware, O-O-I-D-A, or OOIDA as it is 
known in the trucking industry, is a national trade association 
representing the interests of small business trucking 
professionals and professional truck drivers. The more than 
152,000 members of OOIDA are small business men and women in 
all 50 states who collectively own and operate more than 
200,000 individual heavy-duty trucks.
    The majority of the trucking community in this country is 
made up of small businesses as 93 percent of all carriers have 
less than 20 trucks in their fleet and 78 percent of carriers 
have just 6 or fewer trucks. In fact, a one-truck operation 
such as me represents nearly half of the total number of 
federally registered motor carriers. Assuming that the trucking 
industry exclusively moves about 70 percent of our nation's 
goods and that just about all freight is moved by truck at some 
point in the supply chain, it is not hard to see that the costs 
and burdens that encumber small business truckers have an 
impact on our nation's businesses and consumers. The cost of 
fuel is very often the largestoperating expense with which 
small business truckers must contend. For folks like me, fuel costs can 
easily be 50 percent or more of our annual operating expenses. To give 
you some perspective, the average OOIDA member runs their truck about 
120,000 miles or more each year while getting somewhere in the ballpark 
of only 7 miles per gallon. Most of us will be operating trucks 
equipped with either twin 135-gallon tanks or twin 150-gallon tanks, so 
we can easily see a bill of over 1,000 dollars when we fill up.
    In addition to the fuel going into the tanks of my tractor, 
I use a trailer with a diesel-powered refrigerating unit to 
haul dairy products for producers in Wisconsin. Until recently, 
I could count on it costing about $50 to fill up my tank for 
the reefer unit. However, in recent months the cost to fill 
this tank has increased to more than $100. The additional money 
I am now spending on fuel for my truck and trailer once went 
into investing in other areas of my business, but now it must 
cover basic operating expenses. Every time I pull into a truck 
stop I hear similar stories, as truckers are paying 
significantly more at the pump.
    The national average for diesel is now around $4.12 a 
gallon, with prices in some states approaching $4.50 per 
gallon. To put this into perspective, each time the price of a 
gallon of diesel fuel increases by a nickel, a trucker's annual 
cost increases by $1,000. Diesel prices today are more than a 
dollar higher than they were this time last year, resulting in 
an enormous extra burden on small business truckers whose 
average annual income is less than $40,000. However, unlike 
past spikes in fuel prices, the recent increases in the cost of 
fuel are not occurring in isolation. Over the past few years, 
the trucking industry has been laboring under a steadily 
increasing amount of costly and often unnecessary regulations 
which, when coupled with the rising cost of fuel, are certain 
to force many small business truckers in very difficult, if not 
insurmountable economic situations.
    Small business truckers operate in a hyper competitive 
market, so managing their number one expense is imperative for 
their survival. In our marketplace, we often see costs increase 
without any corresponding rate increases. As such, the only way 
to survive is to become more efficient in how one operates 
their truck. Small business truckers always drive with an eye 
towards saving fuel no matter what the price because our 
business survival depends on it. As small business truckers 
like myself know, reducing fuel costs is not a science, it is 
an art and one that we pride ourselves on being masters of. 
However, our ability to practice this is made more difficult by 
increased regulation and artificially high fuel prices, issues 
we look forward to working with Congress to address.
    Thank you for this opportunity to speak with you, and I 
look forward to answering any questions that you may have.
    [The statement of Dick Pingel follows:]

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    Chairman Tipton. Thank you very much, Mr. Pingel. I 
appreciate that. And I would now like to yield to Ranking 
Member Critz, who will be introducing our next witness.
    Mr. Critz. Dr. Robert Weiner is a professor at George 
Washington University. Professor Weiner has authored or co-
authored four books on energy markets and oil. He has also 
authored more than 50 articles on environmental and natural 
resource economics focusing on energy security, risk 
management, and the oil and gas markets and companies. 
Professor Weiner's current research interests include financial 
innovation and commodity markets, oil and gas trading, and risk 
management in the oil and gas industry.
    He received his Ph.D. in 1986 from Harvard University and 
has been at George Washington since 1994 serving as chairman of 
the International Business Department from 2001 to 2005. He is 
currently associate director of the Global and Entrepreneurial 
Finance Research Institute at George Washington. Dr. Weiner.

                   STATEMENT OF ROBERT WEINER

    Mr. Weiner. Mr. Chairman, Ranking Member, other members, 
thank you very much for the opportunity to be here. I would 
like to say that I am not representing anyone except for myself 
as a student of the industry.
    What I would like to do is divide my remarks into three 
parts. First, where prices are and where they are going and the 
implication for small business; second, political risk and the 
impact of political risk, including political risk in the 
United States on investment in the oil industry, oil 
production, and eventually prices; and third, time permitting, 
the causes of the underlying increase in oil prices.
    First, the key question for everyone especially for small 
business, is how to adapt to higher and more volatile prices. 
In order to figure this out we have to get a sense of where 
prices are going and also where they are likely to be in the 
future in an industry in the United States that produces over 5 
million barrels a day. The average well produces 10 barrels a 
day. So I would like to remind people here that the small 
business that we discuss includes the oil industry. There are 
many small businesses in the oil industry, both in conventional 
oil but also in the newly emerging technologies that will be 
important in the future, such as shale and services for 
deepwater exploration.
    In order to look at forecasts, we need to get a sense of 
what the market thinks. I am not a forecaster but I am a 
consumer of oil price forecasts, and the advantage of the 
market forecasts are three. The first is that they are widely 
available, and like some of the best things in life they are 
actually free. You do not have to pay for them. Second is they 
reflect the consensus of many, many small buyers and sellers in 
the market, putting their own capital at risk and their 
clients' capital, and they will lose if their forecasts are 
wrong. And then finally, the tendency of these forecasts to be 
right on average. In other words, these forecasts are on bias. 
Whatever the forecast is for the end of the year, which is 
about $105 a barrel, the chances are equal that it will be too 
high and too low.
    What the forecast tells us is four things. First, that 
people expect the price increase to be permanent, where 
permanent in my world means six or seven years. The futures 
price for the end of 2016 is $105 a barrel, only slightly below 
today's $110 a barrel. And, of course, future price 
expectations include expectations about the deliberations of 
this August body in terms of the ability of the U.S. or the 
lack of the ability of the U.S. to increase production. And so 
that skepticism or concern is inherent in prices.
    Second is prices are expected to stay high but to plateau. 
No future increase in prices unless there are some political 
events that are hard to predict such as those in Libya or Japan 
or indeed in the Gulf of Mexico.
    The idea of peak oil, which is the third idea, is simply 
not supported by expected prices. Peak oil suggests we are 
running out of oil. I think we have seen the entrepreneurship 
and the ingenuity and technology of business in the United 
States. The ability to, at least for now, stay well ahead of 
the battle against depletion and to be able to increase, if 
allowed, by regulation our domestic energy production.
    And finally, there is no intrinsic value for oil. All of us 
who may have hoped that just because prices are higher than 
historically now means that they will go back to previous 
levels, the forecast says that they will not. The new normal is 
that there is no normal.
    Because I am running out of time I would like to switch to 
talk about political risk. Political risk restricts investment 
at all levels. Political risk is not something that we think 
about just for a country like Libya or Iraq. Political risk is 
very much present in the U.S., especially in the deepwater Gulf 
of Mexico and in shale because of uncertainties about 
environmental effects and difficulties of the industry in 
getting permits and permission to drill. Right now an enormous 
amount of industry capital is tied up essentially doing nothing 
or very little, wondering when permits will be issued. The 
industry has long been able to deal with regulation and taxes 
as long as it is clear. As the president of Exxon said a few 
days ago, the U.S. is a very difficult country to do business 
right now. Political risk means it is hard to figure out 
whether the industry should invest. Without more investment 
there will not be more production, and without more production 
there can only be higher prices.
    I see that I am out of time so I will reserve the rest of 
my remarks for my written testimony. Thank you very much.
    [The statement of Robert Weiner follows:]

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    Chairman Tipton. Thank you Dr. Weiner. We certainly 
appreciate your testimony and paying attention to the lights, 
too. We often ignore them up here.
    I appreciate all of you gentlemen taking the time for being 
able to join us today and I will start out our questioning 
here. And I would like to start out with my constituent, Jim 
Ehrlich.
    Jim, I do not think that Americans truly realize the 
significant amount of energy that is necessary to be able to 
produce food stuffs in our country that we eat daily. Given 
that upwards of 50 percent of total production expenses are 
reliant upon energy costs as you noted in your testimony, do 
you believe that if oil prices reach or exceed, and they 
already have now, the 2008 gas price level of $4 a gallon that 
it will force potato farmers out of business or force them to 
make substantial cutbacks?
    Mr. Ehrlich. Well, I think that they will definitely have 
to cut back but I think the key to that is the price of 
potatoes. This year the price of potatoes is quite high, as all 
commodity prices are. As a matter of fact, a lot of commodity 
prices are at all-time highs. Whether that is sustainable, 
history would tell us no. So I would say that they will 
definitely be hurt. If potato prices go back to last year's 
levels, it will force producers out of production.
    Chairman Tipton. Well, I thought it was worthy of note in 
your testimony you were talking about the domino effect. If the 
potato farmer is not doing well, essentially you were noting 
that the person who operates the local theatre or the local 
drive-in is going to be impacted as well. Are you seeing that 
as well in our rural communities?
    Mr. Ehrlich. Well, I would say since the economy had the 
downturn, our area of the country has suffered. And it was 
not--it did not happen rapidly in agricultural rural areas like 
that, sometimes the effect happens a little later. But I would 
say we are actually--we are not out of a recession in the area 
that I live in. And if the farmers are the only ones making 
money down there right now, this rise in fuel prices will 
definitely have a detrimental effect on our area.
    Chairman Tipton. Great. Thanks, Jim.
    Dr. Weiner, as you know, President Obama's 2012 budget 
included roughly $90 billion on taxes on the energy industry. 
Given your testimony that you just presented, do you believe 
that implementing more stringent tax policies on energy 
producers will contribute to higher prices at the pump?
    Mr. Weiner. I think it will but I think what is most 
important is that the energy producers know what the taxes are. 
I think the thing that is most difficult is when they do not. 
And one important aspect of higher taxes and tax uncertainty is 
value destruction. In the current budget for the U.K. that was 
just released a couple of weeks ago there was a sharp rise on 
taxes proposed for U.K. and foreign oil producers. The 
immediate effect was a 15 to 20 percent destruction of value of 
those investments. So these taxes go right to the bottom line 
and where there is destruction in value of the asset, of course 
there will be less investment and eventually less production 
and higher prices.
    Chairman Tipton. Great. Thank you.
    Mr. Richter, in your testimony you pointed out that 
potential EPA regulations on avgas, which is still being used 
by the majority of agricultural aviators, you noted that there 
is no viable alternative right now for avgas. If gas 
restrictions are put into place, would this effectively close a 
lot of our sprayers?
    Mr. Richter. Mr. Chairman, yes, it would. It would 
definitely close some of the smaller businesses that are using 
piston-engine aircraft. What you have got to understand is that 
the larger turbine aircraft are several times more expensive 
than the smaller ones, and if it would restrict or if there is 
a ban completely on avgas you would see probably some of those 
going out of business because small businesses could not afford 
the larger turbine aircraft. And it would eventually have an 
effect on food prices in the end.
    Chairman Tipton. Great. Mr. Pingel, you indicated that over 
the last five months, 15 new major regulatory rulemaking 
proposals were proposed on the trucking industry. Can you 
highlight some of the most significant new regulations that you 
are seeing come out?
    Mr. Pingel. Well, we have seen laws come out at FMCSA on 
onboard recorders, on speed limiters, on cell phone use. We 
have seen, not so much in the last five months but in the last 
few years, 07-10, we have had EPA regulations coming out for 
emissions on the trucks and those have all, you know, we have 
had to pay for those.
    Chairman Tipton. Just kind of curious. You know, in your 
commentary that is over and above when you noted that for every 
nickel increase in a gallon of gasoline that is a thousand 
dollars a month if I recall correctly or $1,000 annually in 
terms of cost.
    Mr. Pingel. Annually.
    Chairman Tipton. These are for independent small business 
people earning $40,000 a year?
    Mr. Pingel. Correct. And that comes off the bottom line.
    Chairman Tipton. So the increased regulations that we are 
seeing are hurting small businesses, costing consumers more, 
and hurting the American economy?
    Mr. Pingel. Correct.
    Chairman Tipton. Thank you so much. I appreciate that. I 
would like to now yield to Ranking Member Critz for questioning 
of the witnesses.
    Mr. Critz. Thank you, Mr. Chairman. You know, what is 
interesting about these hearings is that usually we come with 
prepared questions and then as we listen, all these other 
questions come to light that we want to ask. And Mr. Ehrlich, 
you had mentioned about in your area the downturn in the 
economy usually hits slower and it stays longer. I am from 
rural Pennsylvania and it is usually an indicator in most rural 
indicators that it takes longer for recessions to hit but it 
usually hangs on longer and it takes our areas longer to 
recover as well. And although our hearing is about gas prices, 
you hit on something that is really a sore spot for me as well.
    And actually, my question is going to be to Dr. Weiner, is 
that EPA regulations--and you know, we did just take the vote 
on the NPDES--but you had mentioned, Dr. Weiner, about EPA 
regulations and the need for stability and ways for companies, 
whether they be oil, gas, or any company, to be able to plan 
based on what a stable environment looks like in the future. 
And I am curious if you can, although it is sort of off the 
track of gasoline, if you could comment on some of the actions 
currently that are going on at EPA, what you see, and what the 
future looks like and what we need to do up here at the 
congressional level to try to create that stable playing field 
for industry.
    Mr. Weiner. I apologize, Congressman, I am not an expert on 
EPA at all. I know more about energy than the environment.
    I think in general when you are looking at regulations, 
some regulations affect the bottom line of producing companies 
a lot more than others. Those are the ones where stability and 
certainty are really the most important. And there may be a lot 
of regulations and some of them may be irrelevant or a nuisance 
but they may not have as big an effect on the bottom line. The 
question is where does it--where does the buck stop? That's 
when the question about whether it affects people's decision on 
investment. The little description that I gave you about the 
increase in taxes which is just as important for stability in 
the North Sea, the first thing that happened is some of the 
companies said we are reassessing because these are high cost 
fuels to produce. We may not be investing anything. If they do 
not invest, no production. And no production simply means that 
more and more of our oil is going to come from places like 
Venezuela and Iraq and places that we have come to depend on.
    Mr. Critz. Okay. And I think it is that stability. You 
mentioned at some point there is a whole lot of people sitting 
around waiting for permits and different things whichmeans 
there is no production going on. And like I said, that is sort of a 
sore spot for me. And when you mentioned the EPA and NPDES and you 
mentioned it, I thought, sorry, I have got to veer off here because I 
have got a thorn in my side and I am trying to extract it.
    Mr. Pingel, I have one question for you that, again, it is 
about gas prices but it is also about infrastructure. Is that 
there is a debate going on about--and actually this could be 
for anyone who wants to comment--a debate going on about 
highway--the reauthorization of the highway bill and what it 
means to infrastructure, building our infrastructure. And we 
have a huge issue because of lack of money in the Highway Trust 
Fund to do a lot of these projects. So there is a lot of debate 
going back and forth on increasing a gas tax. And, of course, 
in our neck of the woods that is, you know, talking about 
increasing taxes is nothing that anybody ever wants to talk 
about but when you are talking about infrastructure sometimes 
you have to have a tough nut to swallow.
    I would be curious what your thoughts are being in the 
trucking industry you are on the highways all the time, and 
actually in aviation as well. What that means, you know, what 
the lack of a highway bill means to you folks.
    Mr. Pingel. Well, I think as far as the gas tax, we 
realize, the industry realizes that we have to pay for the 
infrastructure and we know that it is crumbling. But we also 
see that if we can improve the infrastructure, we can save 
ourselves money and congestion and, you know, wear and tear on 
equipment. It is just a matter of taking that money, you know, 
that we pay in and using it for infrastructure, not for high-
speed rail and bullet trains and bike paths and some of the 
other stuff. I mean, as an industry, I mean, like I said, we 
realize that we use it probably more than anybody else and we 
are willing to pay for it but we want that money to stay where 
it goes.
    Mr. Critz. Right. Right. Okay. Any comment, Mr. Richter?
    Mr. Richter. I might add that many of the agricultural 
operations, aviation operations, occur on airstrips that are 
not improved. They are on private airstrips. And we are very 
fortunate to have a fuel tax exemption. And that has been real 
good for our industry. It has served us very well. But as such, 
we rarely use improved airstrips.
    Mr. Critz. Okay. Well, I appreciate that.
    Mr. Chairman, I have about a thousand questions but in the 
interest of time I will yield to other members of the Committee 
so that they can ask their questions and on the second round we 
will come back around. Thank you very much.
    Chairman Tipton. Thank you, Member Critz. And I would now 
like to recognize Congressman Fleischmann.
    Mr. Fleischmann. Mr. Chairman, Ranking Member, thank you 
very much.
    Gentlemen, this is outstanding. I have really enjoyed this 
testimony so far. It is very helpful.
    My name is Chuck Fleischmann. I represent the 3rd District 
of Tennessee. In addition to serving with the chairman on this 
Committee, I serve on the Committee of Natural Resources, 
Energy, and Minerals Subcommittee with my distinguished 
colleague, Mr. Landry. I am also on the Small Business 
Committee, so this has really brought my three disciplines 
together and I have enjoyed this very much and I thank you.
    Dr. Weiner, I appreciate your comments on this and I 
listened very, very intently. One of my goals and one of my 
passions is to encourage the development of our natural 
resources in this country--coal, oil, natural gas. I think we 
have got the domestic resources, particularly the oil, to go 
out and harvest and develop it. When we were talking, and I 
appreciate your discussion about value destruction and the 
like, we were talking about taxes. I am generally adverse to 
taxes. Okay? Overwhelming. But with the Obama administration's 
proposed taxes on the oil industry, I think that would be 
viewed more as a deterrent. You mentioned the term about 
predictability. What would bethe best thing in your view to get 
the industry to be more attractive as an investment to go out and to 
develop our oil resources?
    Mr. Weiner. Congressman, I think you make some very good 
points. I think the single most important thing is access and 
stability about access. Right now people who have invested 
hundreds of millions in heavy equipment in the Gulf of Mexico 
are watching their equipment stay idle. Of course, that is 
costing a lot of money. People are uncertain about the ability 
to lease things, both on land and offshore. Uncertainty about 
environmental treatments. And so one of the questions about 
shale gas which extends to your state as well is about the 
ability to exploit shale gas given environmental uncertainties.
    Resolution of uncertainty is very important. Just like the 
trucking industry, the oil industry can live with taxes as long 
as the industry knows what the taxes are. And when you get a 
lot of uncertainty and flipping back and forth in policy, 
people in the industry do not know what to do. That is where 
the value destruction comes. If you cannot exploit the asset, 
as you mentioned the natural resources, it is just lying idle 
it is not contributing any value to society.
    Mr. Fleischmann. Okay, thank you. Dr. Weiner, I wanted to 
ask you something about the permitting process. It seems to 
have been impeded greatly by this administration. Have you 
delved into that and ways it perhaps could be alleviated so 
that we could get more permits so that we could actually go 
about recovering our resources? As you say, these people have 
got the rates and the machines ready to go but they cannot get 
the permits at a rapid enough pace. It has been impeded greatly 
until lately. They just recently eased up. Do you have any 
thoughts about that, sir?
    Mr. Weiner. Very important question, Congressman. The big 
change has been the change in regulations associated with the 
Deepwater Horizon accident from exactly a year ago. The 
procedures have changed and, therefore, the review process 
changed and the Bureau of Ocean Energy Management that does 
this permitting does not have much of a staff. And so unless 
you guys see it appropriate to give them the resources that 
they need it will be hard for them to get more permits. They 
have a very small number of staff members for a lot of ocean 
out there, so one of the things you have got to do is give them 
the resources and the industry, like the trucking industry, has 
a good return on capital and would much, much prefer having a 
stable process where they know they can get their permit 
process as opposed to just sitting on someone's desk. That is 
much more important than just having lower taxes.
    Mr. Fleischmann. Thank you, Dr. Weiner. Thank you, 
gentlemen. I yield back, Mr. Chairman.
    Chairman Tipton. Thank you, Congressman Fleischmann. I 
would now like to introduce Congressman Landry for questioning.
    Mr. Landry. Mr. Chairman, I have got to tell you I cannot 
thank you enough for bringing Professor Weiner here. I am going 
to work on trying to get you in front of the Natural Resources 
Committee. Your testimony today has been enlightening in an 
argument that we have been making for the past month and a half 
in that committee.
    But I want to make sure that what I am hearing is correct. 
We have the ability or do you believe that we have the ability 
that an increase in production in this country of oil has the 
ability to affect the price?
    Mr. Weiner. Yes, Congressman, it does.
    Mr. Landry. Thank you. Thank you.
    The other question--and of course I represent the 3rd 
District of Louisiana which is along the coast. All that idle 
iron that you are talking about, all of those hundreds of 
million dollars in investment of my constituents and my 
business owners that are reeling from this de facto moratorium 
and the policies that this administration is putting on us. One 
of the things that I found amazing is that the price of natural 
gas seems to have stabilized over the course of, I would guess, 
the last 24 to maybe 36 months. Would that be a correct 
statement?
    Mr. Weiner. Yes, you are seeing the effects already of the 
shale gas investment and the shale gas production. Shale gas 
has come online much earlier than people expected and so now 
you have a disconnect where gas is much less expensive relative 
to oil than in the past. And I think one of the opening remarks 
of one of your colleagues said the U.S. has the capability in a 
few years to be actually an exporter of gas which would help 
our country in a number of different ways.
    Mr. Landry. Would you say that prior to that trend oil and 
natural gas, that prices moved in cadence from peaks and 
valleys when you look at the graph, I guess, in the last 30--
other than say from 2008, I guess, from the time the shale 
plays were put into play, but prior to that that oil and gas 
basically moved in cadence? When oil was up, gas was up.
    Mr. Weiner. That was true most of the time because gas has 
a restricted transportation system. When you have something 
like a freeze in the central part of the country where you 
cannot get more gas in there you sometimes had these peaks and 
spikes in natural gas prices that you did not see in oil, 
especially in the cold winter. But your statement is true, over 
the longer term they tended to move together.
    Mr. Landry. Now, when they move together, I am just 
curious, I do not know the answer to that but when they move 
together, we were still importing a tremendous amount of our 
oil but we were not importing a lot of natural gas. Was it just 
that oil drew gas up or was it truly a supply and demand issue?
    Mr. Weiner. Well, Congressman, I believe that everything is 
truly a supply and demand issue.
    Mr. Landry. Me, too. I am confused by it.
    Mr. Weiner. The U.S. imported about 10 to 15 percent of our 
natural gas needs so we were importing primarily from Canada, 
but also liquefied natural gas to Louisiana and other places. 
Oil and gas--oil is priced in a world market so we have an 
influence. If we produce more, that will put downward pressure 
on oil prices; if we produce less, it will put upward pressure 
on oil prices. Natural gas is more of a local or regional 
phenomenon, so it tends to track oil but not exactly. Until 
some of my distinguished colleagues on the panel can put 
natural gas more easily into their transportation equipment, 
natural gas will continue to sell at a discount to oil. Seventy 
percent of the nation's oil consumption is in transportation.
    Mr. Landry. And I only have one minute but it is a great 
point because my question would be if we move natural gas, aka 
transportation-type fuel, we would recognize there would be a 
bump in the cost of natural gas. But based upon the supply that 
we have in the country would that be--how great would that rise 
be do you believe? Would it be a dollar? Two dollars? Would it 
be 5-, $6?
    Mr. Weiner. I think nobody knows for sure. The outlook for 
natural gas, especially with shale, is very promising. And so I 
am afraid that if we do not do as you suggest, the price of 
natural gas could go way down and that would hurt the natural 
gas producers and all the associated businesses that supply the 
natural gas industry. So I actually think that making natural 
gas into more of a transportation fuel would help support the 
domestic industry.
    Mr. Landry. So it would actually act as a buffer, both 
protecting the natural gas industry but also keeping the price 
at a stable level?
    Mr. Weiner. That is correct.
    Mr. Landry. Maybe just a little higher than it is today but 
nothing near the records that we are seeing oil at?
    Mr. Weiner. Nobody knows for sure but I think that is a 
very good guess, Congressman.
    Mr. Landry. Thank you so much. Thank you again. Excellent. 
Sorry, guys.
    Chairman Tipton. Thank you, Mr. Landry and Mr. Weiner. We 
appreciate that.
    I would like to do one follow-up question and I know the 
ranking member has a couple.
    Mr. Ehrlich, I saw your head bobbing when we were talking 
about being able to use natural gas. Is that a good viable 
alternative for our agricultural community?
    Mr. Ehrlich. Well, I think it could be. Probably the reason 
my head was bobbing was I was thinking about fertilizer 
production and the cost of natural gas because that is a huge 
deal for our producers. And quite frankly, most of the 
fertilizer coming into the United States today or actually most 
production of fertilizer in the United States today is 
imported. And so I was just--I think natural gas would be a 
good choice for vehicles but I do not know enough about it to 
make a good comment.
    Chairman Tipton. Thank you. I now yield to the ranking 
member.
    Mr. Critz. Thank you, Mr. Chairman. I just have a couple 
more questions.
    Mr. Ehrlich, in your testimony you talked about how you 
have massive amounts of energy needed to irrigate your crops 
and that your association is exploring solar power as an 
alternative. Could you describe what you have been doing in 
that or what the cooperative has been doing with that and are 
we at the federal level supporting the efforts in any way?
    Mr. Ehrlich. Yes. Well, we are in a coalition with several 
other members, agricultural-type members like often with the 
utility companies, trying to develop solar power. More of a 
community-based economic development program, too, that would 
allow us to use this solar power to irrigate, to run pumps and 
motors and things like that. But one of our problems is to use 
it as economic development we have to have more transmission 
capacity. And so we have met some opposition with landowners of 
where the line has to go in order to export power out.
    Mr. Critz. Right.
    Mr. Ehrlich. And so it is a difficult process because there 
is a very wealthy landowner in that part of the valley and we 
respect his private property rights, but he has been very 
successful in using the regulatory process to slow down the 
project. So I do not know what the outcome will be but that is 
what we are involved with.
    Mr. Critz. The landowner is not Ted Turner, is it?
    Mr. Ehrlich. No.
    Mr. Critz. I get the land report every month and I see he 
is like the largest landowner in the country.
    Mr. Ehrlich. He owns land very close to it.
    Mr. Critz. Okay. See, I was not far off.
    Mr. Pingel, the trucking industry is starting to increase 
its use of alternative fuels such as natural gas, ethanol, and 
biodiesel. How does that work for the independent trucker? I 
mean, you are not--you mentioned and I know I have lots of 
small family trucking firms all around my district and, you 
know, when you are talking 3, 6, maybe 10 trucks, is it 
economically feasible for the small transportation company to 
move from strictly diesel to some sort of either mix or 
completely natural gas engine?
    Mr. Pingel. Well, some of the states like Minnesota, like I 
said, being from Wisconsin, they mandated B5, a 5 percent 
biofuel. And the problem that we ran into at that time was 
during the winter because biofuel has a tendency to gel up 
faster. So it is great during the summer. And as far as natural 
gas, the problem with natural gas is the range on my truck 
right now in miles per gallon is over 1,000 miles. You cannot 
carry enough natural gas to go that far, and the range on most 
of the natural gas trucks that I have seen is right around 300 
miles. So you are stopping consistently more times.
    Mr. Critz. Right. Right. And that is what I have seen as 
well, is that there is a future but it is not just you flip a 
switch and you get there.
    Well, I appreciate it, Mr. Chairman. Thank you for your 
testimony. I really appreciate it and this is a great hearing 
and, you know, from the articles the chairman showed, obviously 
we are all thinking about gas prices right now. So thank you, 
Mr. Chairman.
    Chairman Tipton. Thank you, Ranking Member Critz. And I 
would like to thank all of our witnesses once again 
fortestifying before the Subcommittee today. You highlighted many of 
the negative impacts of surging gas prices on small businesses in the 
United States and, more importantly, you have shown us here in Congress 
that the best way to be able to reduce these heavy burdens is to engage 
in an ``all-of-the-above'' approach to high gas prices.
    The keystone of this strategy is American oil from American 
soil. By allowing increased domestic drilling within our 
borders and within our waters in the near term we can reduce 
our significant dependence on foreign oil while enabling other 
more cleaner, more sustainable fuels to be further explored and 
better integrated into our society, such as natural gas and 
biofuels.
    The recommendations voiced today have not fallen on deaf 
ears. We will take what we have learned today and inform our 
colleagues as we move forward or enact or amend policies 
affecting American small businesses.
    I would ask for unanimous consent that members have five 
legislative days to submit statements and supporting materials 
for the record. Without objection, so ordered and this hearing 
is now adjourned. Thank you.
    [Whereupon, at 11:05 a.m., the subcommittee was adjourned.]

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