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

       THE AMERICAN ENERGY INITIATIVE, PART 1: A FOCUS ON OIL SUPPLIES,
                GASOLINE PRICES, AND JOBS IN THE GULF OF MEXICO

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 17, 2011

                                   __________

                               Serial No. 112-22

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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    71-013                    WASHINGTON : 2011
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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    HENRY A. WAXMAN, California
      Chairman Emeritus                    Ranking Member
    CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
    MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
      Vice Chair                         DIANA DeGETTE, Colorado
    JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    BRIAN P. BILBRAY, California         JAY INSLEE, Washington
    CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
    PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
    STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
    ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
    CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
    GREGG HARPER, Mississippi            JOHN BARROW, Georgia
    LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
    BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin
    BRETT GUTHRIE, Kentucky              Islands
    PETE OLSON, Texas
    DAVID B. McKINLEY, West Virginia
    CORY GARDNER, Colorado
    MIKE POMPEO, Kansas
    ADAM KINZINGER, Illinois
    H. MORGAN GRIFFITH, Virginia

                                     _____

                        Subcommittee on Energy and Power

                             ED WHITFIELD, Kentucky
                                     Chairman
    JOHN SULLIVAN, Oklahoma              BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOHN SHIMKUS, Illinois               JAY INSLEE, Washington
    GREG WALDEN, Oregon                  JIM MATHESON, Utah
    LEE TERRY, Nebraska                  JOHN D. DINGELL, Michigan
    MICHAEL C. BURGESS, Texas            EDWARD J. MARKEY, Massachusetts
    BRIAN P. BILBRAY, California         ELIOT L. ENGEL, New York
    STEVE SCALISE, Louisiana             GENE GREEN, Texas
    CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
    PETE OLSON, Texas                    MICHAEL F. DOYLE, Pennsylvania
    DAVID B. McKINLEY, West Virginia     CHARLES A. GONZALEZ, Texas
    CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex
    MIKE POMPEO, Kansas                      officio)
    H. MORGAN GRIFFITH, Virginia
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     1
        Prepared statement...........................................     2
    Hon. Steve Scalise, a Representative in Congress from the State
      of Louisiana, opening statement................................     3
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     4
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, prepared statement...................................   100
    Hon. Gene Green, a Representative in Congress from the State of
      Texas, prepared statement......................................   102

                                   Witnesses

    Lucian Pugliaresi, President, Energy Policy Research Foundation,
      Inc............................................................     6
        Prepared statement...........................................     9
    Joseph R. Mason, Professor, E.J. Ourso School of Business,
      Louisiana State University.....................................    15
        Prepared statement...........................................    17
    Mark Cooper, Research Director, Consumer Federation of America...    24
        Prepared statement...........................................    26
    James L. Adams, President, Offshore Marine Service Association...    31
        Prepared statement...........................................    33
    Rip Daniels, CEO/Manager, WJZD-FM, Vice President, Mississippi
      Gulf Coast Tourism Commission..................................    37
        Prepared statement...........................................    39
    James W. Noe, Executive Director, Shallow Water Energy Security
      Coalition......................................................    45
        Prepared statement...........................................    47
    Martin W. Massey, Chief Executive Officer, Marine Well
      Containment Company............................................    60
        Prepared statement...........................................    62

                               Submitted Material

    Letter, dated June 14, 2010, from Members of the Louisiana
      Congressional delegation to President Barack Obama, submitted
      by Mr. Scalise.................................................    79
    Letter, dated March 1, 2011, from Members of Congress to
      President Barack Obama, submitted by Mr. Scalise...............    81

       THE AMERICAN ENERGY INITIATIVE, PART 1: A FOCUS ON OIL SUPPLIES,
                GASOLINE PRICES, AND JOBS IN THE GULF OF MEXICO

                                  ----------

                            THURSDAY, MARCH 17, 2011

                      House of Representatives,
                      Subcommittee on Energy and Power,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9:13 a.m., in
    room 2123, Rayburn House Office Building, Hon. Ed Whitfield
    (chairman of the subcommittee) presiding.
        Present: Representatives Whitfield, Sullivan, Shimkus,
    Terry, Burgess, Bilbray, Scalise, Olson, McKinley, Gardner,
    Pompeo, Griffith, Barton, Upton (ex officio), Rush, Inslee,
    Green, and Capps.
        Staff Present: Allison Busbee, Legislative Clerk; Garrett
    Golding, Legislative Analyst, Energy; Cory Hicks, Policy
    Coordinator, Energy & Power; Mary Neumayr, Counsel, Oversight/
    Energy; Jeff Baran, Democratic Senior Counsel; Alison Cassady,
    Democratic Senior Professional Staff Member; and Caitlin
    Haberman, Democratic Policy Analyst.

      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. Whitfield. I will call this hearing to order this
    morning. And the title of our hearing today is, ``The American
    Energy Initiative.''
        Over the next weeks and months we intend to examine our
    domestic energy resources of all stripes that will diversify
    our energy portfolio, strengthen our national security, create
    jobs and perhaps most importantly make energy more affordable
    for all Americans. Of course, when we talk about energy, we
    talk about energy to generate electricity; we talk about energy
    for our automobiles, transportation. And today we are going to
    be focused a lot on that as well.
        We are going to focus specifically on the Gulf of Mexico's
    relation to energy production, energy security, oil prices and
    jobs. Over the past several years, 30 percent of our total
    domestic oil production has come from the Gulf. Recent world
    events and market conditions have caused a sudden surge in oil
    prices. And it is in this context that we must thoroughly
    evaluate this Nation's current energy policy by asking
    questions like, are we doing enough to capitalize on all of our
    domestic resources? How can an increased domestic production
    influence prices and affect imports? What role does the oil and
    gas production in the Gulf play in our economic recovery?
        New offshore exploration has taken a severe hit since the
    Deepwater Horizon blowout and spill. Without a doubt, the
    Deepwater Horizon spill was a serious environmental disaster.
    The human and ecological tolls are still being absorbed. But
    out of the disaster created by Transocean and BP arrived an
    economic disaster in the form of a moratorium on deepwater
    exploration issued by the Obama administration. Even since it
    was lifted in October, the Department of the Interior has only
    issued two permits to drill in the deepwater Gulf.
        A Federal district court judge called the administration's
    actions unreasonable and unjustified. And even I notice a few
    days ago, former President Clinton characterized it as
    ridiculous.
        Deepwater leases have become increasingly important to our
    domestic supply over the past two decades. While production
    from shallower regions have steadily declined, ultra deep
    production has grown at an annual rate of 15 percent since
    2002. It is projected to continue this trajectory for the next
    several years. In fact, PFC energy projects that by 2020 over
    50 percent of the Gulf's production will come from ultra deep
    waters. This projection, however, was made prior to this
    administration's moratorium. So we intend to get into all of
    these issues today.
        We do know that as a result of the policy of this
    administration, we are getting 400,000 barrels a day of oil
    less than we currently had projected. And as a result of that,
    we are importing more from places like Nigeria, Libya, Saudi
    Arabia and Venezuela.
        So we really look forward to your testimony today. Your
    testimony is very important. And as you know, at the end of
    your testimony, we will be having questions for you.
        At this time I would like to recognize the gentleman from
    Louisiana, Mr. Scalise, for the purpose of introduction.
        [The prepared statement of Mr. Whitfield follows:]

                    Prepared Statement of Hon. Ed Whitfield

        Today's hearing is the first in a series entitled "The
    American Energy Initiative". Over the next weeks and months, we
    will closely examine domestic energy resources of all stripes
    that will diversify our energy portfolio, strengthen our
    national security, create jobs, and, perhaps most importantly,
    make energy more affordable for all Americans.
        In that context, I want to reiterate my support for a
    greater commitment to achieving energy independence through
    utilizing all of our domestic fuels - both traditional and
    alternative. The goal is that all of our domestic resources
    will play a vital role in achieving this. As a Representative
    from a coal producing state, I am particularly interested, for
    example, in supporting the development of advanced coal
    technologies and alternative fuels, as that provides an
    opportunity to create American jobs, cut our dependence on
    foreign oil and substantially reduce emissions. And I look
    forward to addressing these issues in the coming months as the
    committee continues to look at using all of our domestic
    sources to achieve energy independence and reduce the price of
    gas for American consumers.
        Today's hearing specifically will focus on the Gulf of
    Mexico's relation to energy production, energy security, oil
    prices, and jobs. Over the past several years, 30 percent of
    our total domestic oil production has come from the Gulf.
    Recent world events and market conditions have caused a sudden
    surge in oil prices. It is in this context that we must
    thoroughly evaluate this nation's current energy policy by
    asking the following questions:
        1) Are we doing enough to capitalize on all of our domestic
    resources?
        2) How can increased domestic production influence prices
    and offset imports?
        3) What role does oil and gas production in the Gulf play
    in our economic recovery?
        New offshore exploration has taken a severe hit since the
    Deepwater Horizon blowout and spill. Without a doubt, the
    Deepwater Horizon spill was a very serious environmental
    disaster. The human and ecological tolls are still being
    absorbed.
        But out of the disaster created by Transocean and BP
    arrived an economic disaster in the form of a moratorium on
    deepwater exploration issued by the Obama Administration. Even
    since it was lifted in October, the Department of Interior has
    only issued two permits to drill in the deepwater Gulf. A
    federal district court judge has called the Administration's
    actions "unreasonable" and "unjustified". Even former President
    Clinton just last week characterized it as "ridiculous".
        Deepwater leases have become increasingly important to our
    domestic supply over the past two decades. Companies are not
    drilling there because it is easy or cheap. They go to the
    deepwater for the same reason Willie Sutton would - because
    that's where the oil is.
        While production from shallower regions has steadily
    declined, ultra-deep production has grown at an annual rate of
    15 percent since 2002. It is projected to continue this
    trajectory for the next several years. In fact, PFC Energy
    projects that by 2020, over 50 percent of the Gulf's production
    will come from ultra-deep waters. This projection, however, was
    made prior to the Administration's moratorium.
        And it is at this point that we need to clarify many of the
    claims the Administration wants to make in the face of high
    gasoline prices. While overall domestic oil production is, in
    fact, meeting its highest level since 2003, it is folly to
    believe the lack of deepwater exploration has no consequences
    now and will not for the foreseeable future. EIA's 2007 Energy
    Outlook projected 2010 Gulf production would be 16 percent
    higher than it actually reached. And with relatively fast
    production declines from wells in the Gulf, constant
    exploration is an absolute necessity for stable production to
    occur. Because of the
        Administration's actions, it will take years for Gulf
    production to make its way back to normal levels.
        As we will hear from our witnesses, the Gulf has an
    important role to play in the global oil market. It also
    provides thousands upon thousands of jobs for not only
    households in the Gulf region, but the several industries
    across the nation that rely on business generated by robust
    Gulf exploration and production.
        The Administration is holding these jobs hostage. And the
    American people realized it - a recent Rasmussen Poll indicates
    76 percent of Americans believe we do not do enough to develop
    our own oil and gas resources. When it comes to domestic energy
    production, the Administration is on the wrong side of the
    public's wishes.
        We also cannot fail to mention how important a secure
    source of energy is given today's global political climate. The
    400,000 barrels a day we currently neglect to pump in the Gulf
    are simply made-up by imports from such places as Nigeria,
    Libya, Saudi Arabia, and Venezuela.
        So today we want to have a discussion on how important the
    Gulf is to this nation's economy and security. We appreciate
    our witnesses' appearance here today and look forward to their
    testimony.
        With that I yield the balance of my time to the gentleman
    from Louisiana, Mr. Scalise.

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

        Mr. Scalise. Thank you, Mr. Chairman.
        I really appreciate you holding this hearing. This is an
    issue that we have been very concerned about for a number of
    months.
        I really appreciate the panelists who have come here to
    talk about the issue and especially what is happening on the
    ground, because as we look at kind of big picture, American's
    are fed up with paying high gas prices at the pump. But what is
    going on behind the scenes, the actions that this President has
    taken to create this crisis is even more devastating along the
    Gulf Coast.
        If you look at what is happening in the Gulf Coast, where
    over a third of America's domestic energy is produced, the
    President's policies are literally shutting this industry down.
    And I know we are going to be hearing testimony from people who
    represent a number of organizations, not the big guys that
    everybody talks about but the small companies, those small
    businesses that are trying to hang on, that want to go back to
    work exploring safely for energy here in the America,
    especially at a time when our country is looking out at the
    Middle East at a time when they have never been more volatile.
        And yet the President has got a policy that is actually
    increasing our dependence on Middle Eastern oil. It is leading
    to higher gas prices. We have done a chart just to show how gas
    prices have skyrocketed since the President took the oath of
    office: $1.83 was the price of gas when President Obama was
    sworn in. Today it is over $3.50 and going higher. In fact, we
    had the Energy Secretary yesterday here before us. We asked
    him, what is the President's plan to lower gas prices? And he
    couldn't even tell us what that plan is.
        Now, I did see yesterday that you can find out what the
    President's picks are for the Final Four. You can go to ESPN
    and watch the President making his Final Four picks, yet the
    Secretary of Energy, a Cabinet post, can't even tell you what
    the President's plan is to lower gas prices. This is a crisis.
    It is inexcusable that this administration is sitting by and
    forcing these industries to literally go bankrupt.
        And I know we are going to hear stories about that, and I
    appreciate the panelists.
        But we are fed up with this President's policies that are
    literally driving companies, American companies into
    bankruptcy; over 12,000 jobs already lost, gas prices
    skyrocketing, while the Middle East has never been more
    volatile.
        I appreciate the chairman for letting us address this
    issue, and I look forward to your testimony.
        I yield back.
        Mr. Whitfield. Thank you.
        I recognize the gentleman from Illinois for his opening
    statement, Mr. Rush.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. Well thank you, Mr. Chairman.
        Mr. Chairman, I have to say that was a pretty strange and
    unique introduction that we just heard.
        But I want to thank you and also I want to thank the
    panelists for being here this morning with this committee.
        Mr. Chairman, today's hearing is titled ``The American
    Energy Initiative,'' but ironically, earlier this week, my
    colleagues on the other side of the aisle voted to handcuff one
    of the agencies that has helped move America forward by
    promoting energy conservation and making our vehicles,
    appliances, buildings and power plants more energy efficient.
        Over the past four decades, the EPA has been at the
    forefront of promoting better gas mileage for cars and trucks,
    and saving American families millions of dollars at the pump,
    while also making us less dependent on foreign oil.
        However, instead of offering any real solution or plans
    that would even remotely resemble an energy initiative, the
    Upton-Inhoffe bill that my Republican colleagues just passed
    through this committee will actually increase our reliance on
    fossil fuels, both imported and domestic, which is great for
    the oil companies but not so great for American families.
        I am actually not opposed to domestic oil production,
    including drilling in the Gulf. As long as I am convinced that
    the devastating oil spill that we witnessed last year with BP's
    Macondo Well cannot and will not be repeated, I am in favor of
    domestic oil production and drilling in the Gulf.
        While I understand that there are no guarantees in this
    business, I know that the risk that BP took can and should be
    mitigated. Therefore, I believe that the force of action that
    President Obama's administration took after the BP oil spill
    was prudent and was necessary. After witnessing the explosion
    that claimed 11 lives and watching 4 million barrels of oil
    gush into the Gulf for months without end, I believe it was
    reasonable and wise to halt drilling until we better understood
    what happened, why it happened and how we can better prepare
    ourselves so it will never, ever happen again.
        And when the President lifted the moratorium last October,
    I also agree with the Secretary of Interior's assessment that
    drilling should resume, and I quote, providing the operators
    certify compliance with all existing rules and requirements and
    demonstrate the availability of adequate blowout containment
    resources. For me and for my constituents, the anguish and the
    grief of helplessly watching oil gush into the Gulf for months
    on end while BP and the Federal Government and every other
    entity remained stubborn has not faded from memory.
        Yet I also understand that just as thousands of jobs and
    livelihood were impacted and continue to be impacted by the oil
    spill last year, there are also repercussions on jobs in our
    Nation's energy supply by not allowing drilling to continue in
    the Gulf. So today my hope is to gain an even better
    understanding of where we are now, a year later from the
    initial explosion and spill, and to find out what improvements
    have been made in regard to safeguarding against the same type
    of event from ever happening again.
        I look forward to hearing from all of our witnesses on how
    their lives and their livelihoods have been impacted and their
    thoughts on how we can move forward.
        Mr. Chairman, as I conclude, I just want to say that I do
    empathize with the people of the Gulf. I empathize with their
    fine representatives here and Mr. Scalise. And I look forward
    to seeing a day soon where the drills will be pumping and the
    sea, the fish and the seafood will be productive and on our
    plates and on our tables and in our foods all across this
    country. And I look forward to a time when the Gulf is thriving
    once again.
        Thank you very much, and I yield back the balance of my
    time.
        Mr. Whitfield. Mr. Rush, thank you very much.

       STATEMENTS OF LUCIAN PUGLIARESI, PRESIDENT, ENERGY POLICY
      RESEARCH FOUNDATION, INC.; JOSEPH R. MASON, PROFESSOR, E.J.
      OURSO SCHOOL OF BUSINESS, LOUISIANA STATE UNIVERSITY; MARK
      COOPER, RESEARCH DIRECTOR, CONSUMER FEDERATION OF AMERICA;
    JAMES L. ADAMS, PRESIDENT, OFFSHORE MARINE SERVICE ASSOCIATION;
    RIP DANIELS, CEO/MANAGER, WJZD-FM, VICE PRESIDENT, MISSISSIPPI
        GULF COAST TOURISM COMMISSION; JAMES W. NOE, EXECUTIVE
     DIRECTOR, SHALLOW WATER ENERGY SECURITY COALITION; AND MARTIN
      W. MASSEY, CHIEF EXECUTIVE OFFICER, MARINE WELL CONTAINMENT
                                COMPANY

        Mr. Whitfield. And once again, I want to welcome the panel.
    We have a distinguished group with us this morning. We have Mr.
    Marty Massey, who is a chief executive officer of Marine Well
    Containment Company. We have Mr. Jim Noe, who is the executive
    director of the Shallow Water Energy Security Coalition. We
    have Mr. Rip Daniels, who is CEO and manager of WJZD and also
    vice president of the Mississippi Gulf Coast Tourism
    Commission. We have Mr. Jim Adams, who is President of the
    Offshore Marine Services Association. We have Dr. Mark Cooper,
    who is research director for the Consumer Federation of
    America. We have Dr. Joseph Mason, who is a professor at the
    business school at Louisiana State University. And then we have
    Mr. Lou Pugliaresi, who is the president of Energy Policy
    Research Foundation.
        So I will recognize you, and you can give a 5-minute
    opening statement. And then, after the entire panel has
    completed, we will go into a question-and-answer period.
        So thank you again for being here. And Mr. Massey, I will--
    sorry, I have been instructed that we want to give Mr.
    Pugliaresi the first opportunity to speak.
        So we will recognize you for 5 minutes, and we will go that
    way. Thank you.

                     STATEMENT OF LUCIAN PUGLIARESI

        Mr. Pugliaresi. Chairman Whitfield.
        Mr. Whitfield. And be sure to turn the microphone on, sir.
        Mr. Pugliaresi. Sorry.
        Chairman Whitfield, Ranking Member Rush, and Members of the
    Subcommittee on Energy and Power, on behalf of myself and
    EPRINC we welcome this opportunity to testify today.
        We think it is very important we move quickly to expand
    American employment, grow the economy and deliver adequate
    supplies of gasoline at affordable prices.
        The Energy Policy Research Foundation is a not-for-profit
    organization that studies energy economics, with special
    emphasis on petroleum and the downstream products markets. We
    have doing this since 1944. Our reports are made available free
    of charge to all interested organizations and individuals.
        We have recently done some work on Iraq's potential to
    expand world oil supplies, the Macondo oil spill, the role of
    ethanol in the American gasoline market, Keystone XL pipeline
    and the value of Canadian oil sands to the United States.
        But today I want to know focus on two considerations that I
    hope the committee will give careful thought to as we look at
    how we expand domestic oil and gas development. First is that
    prices of transportation fuels today, they don't reflect just
    what is happening in the physical market now but, more
    importantly, what buyers and sellers believe about future
    supplies. And expectations about the future can affect prices
    today, and this includes expectations on government policies.
        The next issue that I think the committee really needs to
    put a lot of effort into is the government policies related to
    oil and gas, including transportation fuels, that do not hold
    up well under uncertainty are likely to fail and impose very
    high costs on the American economy, its consumers and our
    energy security.
        We are often told that every time we face a period of
    rising gasoline prices that commonsense measures, such as
    expanding access to the Canadian oil sands, opening up drilling
    on the onshore Alaska, permitting drilling in Arctic waters,
    expanding oil and gas leasing in new provinces in the lower 48,
    and deepwater drilling the Gulf of Mexico will bring supplies
    into the market too far in the future to help us with the
    current crisis or that the supply will be too small to make a
    difference.
        Putting aside that we say this every time we have a crisis,
    if we open up our resources for development, we can open up the
    opportunity to shift long-term expectations on domestic supply
    and receive the benefits of lower prices even before the prices
    come to market.
        We may even get some pleasant surprises such as we recently
    experienced with the shale gas revolution. The application of
    new technology and techniques in horizontal drilling and
    hydraulic fracturing learned in producing natural gas is now
    supporting rising onshore crude oil production in the Bakken
    Formation in North Dakota.
        Now major and sustained shifts in the price of crude oil
    since the 1970s can be explained by changes in expectations
    about future output. For example, in the 1973 Arab Oil Embargo,
    we really didn't lose that much oil in the prompt period. But
    expectations about the growth of production from the Persian
    Gulf came way down and prices moved up quickly in the current
    period.
        In 1979, during the Iranian revolution, once again, the
    amount of oil lost during the Iranian and the Iran-Iraq war was
    relatively small. But expectations about future growth of
    production from Iraq and Iran drove up prices in the prompt
    period. And the reason we say this--and I would like to submit
    for the record an article we published on this very topic in
    the Oil and Gas Journal, with your permission, Mr. Chairman.
        Mr. Whitfield. Without objection.
        Mr. Pugliaresi. So this leads us to the question of, why is
    a highly aggressive program for domestic oil and gas
    development so important? What do we get out of that? And I
    think one of the things we can do is go back, look back just 5
    years, what did we believe? We believed first that we were
    running short on natural gas. Right? Many people testified
    before this committee that the U.S. was going to be a massive
    importer of LNG and that we would have very little gas for the
    utility sector. But the shale gas revolution proved that
    completely wrong. We should be grateful for the independent oil
    and gas drillers who don't read the EIA forecast and have
    little confidence that the government knows exactly how much
    oil and gas we have in our resource base. And in fact, the
    shale gas revolution itself in 1 year has probably saved
    American consumers $50 billion.
        We also had a common view that Latin America was fully
    explored. But we now see that with the deepwater discoveries in
    Brazil that that is no longer the case. We don't know how much
    oil we are going to have out of Latin America, but it is going
    to be huge.
        Another concern we have is we have this view that the long-
    run price of oil is going to be very high, say $200 a barrel.
    And I think we would argue that that is going to turn out to be
    incorrect, that if we do the right kinds of things, the long-
    run price of oil is likely to be considerably lower and that a
    lot of the programs we are engaging into are going to turn out
    to be quite costly. We can transition to the fuels of the
    future at a much lower cost.
        I just want to leave you with this one final point here: If
    we can alter the long-term price of crude oil by merely $20 a
    barrel in our base case forecast, $100 versus $80 or $60
    instead of $80--I mean, $80 instead of $100, or $60 instead of
    $80, the present value savings to the import bill alone is a
    trillion dollars. The savings to the economy is more than twice
    that much. And so, in the end, this means that the jobs, return
    on capital, corporate and personal income taxes, government
    revenues from bonus bids and royalties would grow
    substantially. All of this can take place without taking on any
    government debt, will deliver sustainable economic growth, and
    we can put thousands of people to work tomorrow.
        [The prepared statement of Mr. Pugliaresi follows:]

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        Mr. Whitfield. Thank you very much.
        Dr. Mason, you are recognized for 5 minutes.

                      STATEMENT OF JOSEPH R. MASON

        Mr. Mason. Thank you.
        Good morning, Chairman Whitfield, Ranking Member Rush and
    members of the subcommittee. Thank you for the opportunity to
    testify on this very important topic today.
        Unfortunately, little has changed in the Gulf region since
    my initial study on the economic costs of the Gulf moratorium
    in July 2010. Economic activity is still moribund in the
    region, and the outlook for exploration development remains
    subdued. Each day, more exploration and development activity in
    the Gulf is lost. Job losses previously estimated on the basis
    of a 6-month moratorium have increased from 8,000 regionally
    and 12,000 nationally, to 13,000 regionally and 19,000
    nationally. Lost wages of $500 million regionally and $700
    million nationally, are now $800 million regionally and $1.1
    billion nationally. Lost tax revenues estimated to be $100
    million on the State and local level and $200 million on the
    national level, now amount to $155 million and $350 million
    respectively.
        The Fed's August 2010 Beige Book noted that factories,
    farms and mines nationally were all saying, ``Continued gains
    in demand and sales'' while housing sales and the related
    construction industry slowed.
        But in the Atlanta district, ``Fewer manufacturers noted
    increases in new orders and more said that orders were lower.''
        In the Dallas district, the Fed reported directly, ``The
    deepwater drilling moratorium was expected to impact
    revenues.''
        Still economic deniers seem to be unable to accept the fact
    that restrictive economic policies targeted to our most
    productive economic sectors weaken economic growth.
        That growth won't be recovered either. The lost development
    and drilling progress in the permatorium have already created a
    lag in production. The concept can be thought of simply in the
    context of shutting down a construction project or production
    line. When you start it back up, you don't make up for lost
    progress; you just continue where you left off. Moreover, if
    you constrain the production line to work slower than before
    and don't replace the machinery when it wears out, production
    will decline further, perhaps to a much lower rate. That is
    already happening in the Gulf, and recent recovery projections
    illustrate that dynamic.
        But even those projections don't contain the effects of
    additional restrictive policies. President Obama's fiscal year
    2012 comprehensive budget proposal includes an estimated $37
    billion of punitive tax policies for U.S. Oil and gas firms.
    Repealing tax breaks for hiring domestic workers when
    unemployment is hovering at 10 percent just doesn't make sense.
    And double taxing foreign revenues of domestic oil and gas firm
    puts them at a severe disadvantage competing against state-run,
    heavily subsidized oil and gas companies in such countries as
    China, Russia and Venezuela, which brings us to the
    international perspective.
        None of the decline in Gulf production arising from
    restrictive U.S. policies means that worldwide production will
    be affected. As projects in the Gulf and elsewhere in the U.S.
    are abandoned, firms will rationally move to locations with
    more stable and predictable business climates, whether or not
    those are held together by authoritarian regimes or are
    environmentally favorable.
        All the production possibilities discussed previously are
    being foregone in the name of Deepwater Horizon, but while
    debate still rages about the causal factor of the disaster, one
    common thread is accepted by all, BP. Nonetheless, the first
    deepwater permit issue to the Santiago well on March 11th went
    to a project 46.5 owned by BP. It seems to me, therefore, that
    BP is the one firm undeniably culpable, but BP was the first
    rewarded with continued drilling access. That doesn't make
    sense.
        Economically it has to be realized that any regulatory
    policy that raises pecuniary and or nonpecuniary production
    costs will slow economic output. Whether the industry is
    mortgage banks facing onerous terms of a State Attorney's
    General Consumer Financial Protection Bureau settlement or the
    oil and gas industry facing increased environmental compliance
    costs and a permatorium, in both cases, that means less jobs,
    lower wages and lower GDP growth than would otherwise occur.
    Those are immutable laws of economics.
        Last, I would be remiss if I did not point out that the
    Japanese, following a devastating earthquake, are experiencing
    problems in nonfossil fuel power plants. While fossil fuels
    have their faults, other alternatives are only cleaner in terms
    of carbon output. Each, however, still pollutes in its own way.
    And as new energy sectors develop, each is leaving new economic
    externalities, that is on priced byproducts of production and
    use, that promise to devastate the environment in amounts equal
    to or greater than carbon-based fossil fuels.
        There is no environmental economic free lunch. There is no
    clean energy, just energy. The sound policy focus would be to
    use all of it wisely. Thank you.
        [The prepared statement of Mr. Mason follows:]
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        Mr. Whitfield. Thanks, Dr. Mason.
        Dr. Cooper, you are recognized for 5 minutes.

                        STATEMENT OF MARK COOPER

        Mr. Cooper. Thank you, Mr. Chairman, Members of the
    Committee.
        Since the Arab Oil Embargo of 1973, it has been clear that
    the United States must reduce its consumption of oil. Seven
    Presidents have talked about this urgent need, and even
    President Bush, an oil man from Texas, declared that we must
    end our oil addiction.
        In the past, we have failed to do so. Yet today the United
    States has a better opportunity than ever to change the
    trajectory of the American oil consumption, lower consumer
    expenditures, reduce our dependence on Mideast oil and enhance
    national security by dramatically increasing the fuel economy
    of the vehicle fleet. The need is urgent, as gasoline prices
    are pummeling household budgets, especially of the middle
    class.
        Public support for a 60-mile-per-gallon standard is at an
    all-time high. The economics of putting fuel savings technology
    into automobiles and light trucks have never been more
    favorable. And because of the foresight of Congress, over a
    dozen States and the Obama administration, policymakers have a
    better set of tools to respond to the challenge than ever.
        The most important thing that we can do for consumers in
    the short term is to make a long-term commitment to reduce
    American oil consumption. Efficiency is the least-cost most-
    certain cleanest energy resource we have for our American
    energy initiative. Quick fixes simply delay the day of
    reckoning and make it more painful when it comes.
        U.S. gasoline prices this year will hit an all time high if
    the EIA is correct, as will household expenditures. For low-
    and middle-income households the cost of gasoline will be the
    single most determinant of the cost of driving, exceeding
    ownership cost. Driven by high and volatile prices, we find
    that concern about gasoline is that an all time high. Ninety
    percent of the respondents to a recent survey said they were
    concerned about price; 89 percent said they were concerned
    about Mideast imports. This high level of concern translates
    into high support for fuel economy standards. We asked about 60
    miles per gallon, 63 percent said they support that as a target
    for 2025; 70 percent of middle class respondents did.
        Now as a consumer group, we always start our economic
    analysis from the consumer pocketbook. And we find that the
    public support for a 60-mile-per-gallon standard is in fact
    justified by the economics. Our analysis shows that from the
    first month, the reduction in gasoline costs exceed any
    increase in the cost of the new technology in vehicles. It is
    cash-flow positive in the first month of a 5-year auto loan.
    And at the end of the auto loan, the consumer has over
    approximately 2,000 more in their pocketbook. Our confidence
    that consumers will realize these benefits and that a 60-mile-
    per-gallon standard will be met and effective is reinforced by
    the increase in technologies and choices available in the
    marketplace.
        There are now or will soon be four different approaches to
    electric vehicles, hybrids, plug-ins, hybrid plug-ins and
    extended-range electric vehicles, offered across the full range
    of cars that consumers in America like, compacts, midsized,
    family sedans, large cars, SUVs and pickups, by over a half
    dozen mass-market-oriented companies.
        Gasoline-powered vehicles already rival the mileage of some
    of the hybrids, and there is lots of room for improvement with
    greater technologies in engine combustion efficiency,
    transmission systems, vehicle body design, rolling resistance
    and materials.
        But the trump card here is the fact that over the last 5
    years, we have put in place in America the possibility for a
    pro-consumer, pro-competitive, technology-neutral fuel economy
    standards program. We have adopted an attribute-based system,
    which ensures that Americans will have the choice of cars they
    want and automakers will have the incentive to compete to sell
    those precise types of cars.
        Fifteen States have adopted the Clean Cars Program. One-
    third of the people in this country live in those States, which
    stimulated the development of electrics and pushed the Feds to
    a higher level. And the Obama administration has in fact
    transformed the institutional structure of standard setting in
    America, coordinating between the Federal and the State level,
    showing that a 62-mile-per-gallon standard is technically
    feasible and economically practical.
        And proposing a 15-year target, the long-term view allows
    the auto industry and the public to adjust. It reduces the
    marketplace risk of higher standards. It reorients thinking and
    gives them time to retool. This is the moment to change the
    trajectory of American gasoline consumption, to put efficiency
    as the first step in the heart of the American energy
    initiative. Thank you.
        [The prepared statement of Mr. Cooper follows:]
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        Mr. Whitfield. Thank you, Dr. Cooper.
        Mr. Adams, you are recognized for 5 minutes.

                      STATEMENT OF JAMES L. ADAMS

        Mr. Adams. Good morning, Mr. Chairman, and members of the
    subcommittee.
        I am Jim Adams, and I represent the Offshore Marine Service
    Association, OMSA. OMSA speaks for 250 companies, including 100
    firms that own and operate Marine vessels in the Gulf of
    Mexico. Our vessels connect America with its offshore
    resources, transporting every employee, every pipe, every
    wrench, every computer, barrel of fuel, every gallon of
    drinking water to the offshore rigs and platforms.
        After the Macondo tragedy in April of last year, Secretary
    Salazar infamously proclaimed that he would keep his boot on
    the neck of BP. We quickly learned that his intention was to
    keep his boot on the neck of every business owner and worker
    engaged in the offshore oil and gas industry. With the full
    support of the White House, he has ruthlessly shut down our
    industry. Drilling rigs sit idle. Offshore supply vessels are
    moored at the dock, and layoffs mount.
        President Obama and Secretary Salazar say they support
    domestic oil and gas development in this country. However, for
    the past 11 months the administration's moratorium has
    eliminated jobs and continues to export them to foreign
    countries.
        Some have suggested that this is a partisan issue. But
    Democrats and Republicans alike have called for an immediate
    end to the mistreatment of our industry. Former President Bill
    Clinton, Senator Mary Landrieu, Senator Mark Begich,
    Congressman Gene Green of this committee called for the
    administration stand down. Before the Macondo incident, my
    members operated 1,200 vessels that serviced 33 deepwater rigs
    and 50 shallow-water rigs and almost 4,000 fixed platforms in
    operation in the Gulf of Mexico. Our vessels collectively
    provided $4.6 billion annually in wages and represent an
    investment in offshore companies of over $18 billion in vessels
    and equipment. Our vessels and shipyards that build and repair
    our vessels had direct employment of over 30,000 employees;
    additionally, over 100,000 jobs are supported by the economic
    activities by our U.S. shipyards and offshore supply vessel
    operators. The Federal Government collected nearly $1.4 billion
    in taxes directly and indirectly in 2008 due to the operations
    of this segment of the oil and gas industry.
        Like any market the number of employees and vessels engaged
    in the offshore service industry will expand and contract based
    upon customer demand. In this case, the Interior Department
    dictated that our customers activity in deepwater exploration
    would shrink from 33 rigs to none for 10 months and counting.
        In the shallow-water sector, the administration reduced
    normal exploration activities by well over two-thirds from
    previous years. As a result, we are seeing industry-wide vessel
    utilization rates below 50 percent of the fleet's capacity, and
    employment reductions are over 25 percent, and they will rise
    very quickly. Business owners, who are struggling to make
    payroll to retain highly skilled employees for as long as
    possible, will be forced into making more layoffs in the coming
    months.
        Without exploration permits as the demand driver in our
    market, we will see further contraction. This resulting
    shameful decline in the American offshore industry and the
    permanent loss of a world class workforce will be a loss to
    this country's economy.
        The de facto moratorium is responsible for exporting some
    of our most strategically valuable and technologically capable
    U.S. flag vessels and the U.S. jobs that go with them to
    foreign markets. To date, approximately 60 of these highest
    class vessels, with a value of over $1.5 billion, that employed
    over 1,100 hundred Americans have left the Gulf of Mexico for
    foreign markets. On these highly technical vessels, crew
    members enjoyed the highest compensation levels in our
    industry, with an average wage, an average wage, of our $75,000
    per crew member.
        Our skilled workforce is critical to the safe reactivation
    of deepwater drilling in the Gulf. And yet we are in jeopardy
    of losing those assets and the careers that go with them.
        It is time for the blockade to end. President Obama's
    moratorium needs to end because it is killing jobs; it is
    raising the price of energy; and it is making our country more
    vulnerable to an unpredictable international political
    situation.
        Mr. Chairman, thank you so much for this opportunity. I
    will be pleased to answer questions from you or any of the
    members of the subcommittee, and we desperately ask for your
    help to get us back to work.
        [The prepared statement of Mr. Adams follows:]
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        Mr. Whitfield. Thank you very much, Mr. Adams.
        And Mr. Daniels, you are recognized for 5 minutes.

                        STATEMENT OF RIP DANIELS

        Mr. Daniels. Yes, Chairman Whitfield and Ranking Member
    Rush and subcommittee members, appreciate it.
        I am a capital list, I have been in business on the
    Mississippi Gulf Coast since Jimmy Carter was President, and
    that has taken some doing, too, trust me.
        But I must tell you upon being so, it is more than obvious
    to me that it seems as though since April, 20th we have
    forgotten the number of jobs that the coast and Mississippi
    produced as a result of tourism, close to a million. And just
    from a backyard businessman's point of view, trading a
    multibillion dollar tourism and seafood industry for a
    multimillion dollar whale is not good business.
        It is not a matter of the fact that we shouldn't have
    deepwater drilling; I think it is appropriate. What we are
    discussing here is how can it do so without jeopardizing the
    business, small businesses, along the coastline. I think that
    is doable.
        First and foremost, there must be some ecological impact--
    the ecological impact studies should be based upon not only
    marine life but the adverse effect it would have on small
    businesses along the coast if there is a spill. Seems as though
    we have had some kind of selective amnesia as to what
    transpired and what resulted and why it was so important that
    President Barack Obama imposed the moratorium.
        Let me tell you why and what happened. The explosion
    happened April 20th. The 25th, there were robots to have a
    blowout; it didn't work. May 2nd started the drilling relief
    valves. May 7th, there was an attempt to put on a hat, 100-ton
    hat. It didn't work, and on and on. And then they inserted the
    tube around May 14th. Top kill started on the 26th; it didn't
    work. And June the 4th, there was an attempt to cap the valves.
    June 25th there was Hurricane Alex.
        As I sat watching what is happening in Japan, it is also
    about energy, but it is about something else. It is about the
    mere fact that we don't do business in a vacuum. And sometimes
    Mother Nature doesn't cooperate. From the time April 20th
    started with the explosion, there were some five tropical
    storms and three hurricanes. We on the Gulf Coast were cheering
    the fact that there was no more drilling--exploratory drilling,
    especially no leaks, because there was no guarantee there was a
    way to stop it. It made good sense to have a moratorium at that
    time, and it made good sense now.
        The reality is this: I think that there should be deepwater
    drilling, without a doubt. However, the first responsibility
    for us in business is not to do business at the peril of those
    citizens who are our customers. I am a customer. I am not an
    experiment. Right now as we speak, over the last 3 months,
    there have been over 60 dolphin washed up; half of them, half
    of them were calves, stillborns. Right now, they are being
    explored. NOAA called this an unusual mortality event. Moby
    Solangi, who is the director of the Institute of Marine Mammal
    Studies in Gulfport, said this, ``When we see something strange
    like this happen to large groups of dolphin, which are at the
    top of the food chain, it tells us the rest of the food chain
    is affected.''
        Now trust me on this, I am going to eat my seafood; I eat
    it everyday. I am going to it primarily because it is going to
    be my specimen that is going to determine whether or not there
    was an effect. I don't recommend it for pregnant women, and I
    don't recommend it for my children right now. Keep in mind,
    ladies and gentlemen, there is a reason for why at the top of
    the list of inalienable rights was life. Because without life,
    there would be no reason for liberty and the pursuit of
    happiness.
        And what we are talking about right here is whether or not
    on the Mississippi Gulf Coast, there will be. There are still
    tar balls washing up. I went deep sea fishing and caught
    Blacktip shark and about 75 Spanish mackerel. What was strange
    about that was that there were men with HAZMAT suits on Ship
    Island, the Federal island. That was a little bit odd. We still
    get tar balls washing up. And all of us, all of us on the coast
    are a little bit apprehensive as to whether or not there will
    be another storm and our beaches will be black.
        This is new science, but at the very least, the industry,
    be it my industry or the oil industry, has to make priorities
    as it applies to life. That has to come first in our quest to
    pursue happiness. Because without life, there is no reason for
    the other two inalienable rights. Thank you.
        [The prepared statement of Mr. Daniels follows:]
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        Mr. Whitfield. Thank you, Mr. Daniels.
        And Mr. Noe, you are recognized for 5 minutes.

                       STATEMENT OF JAMES W. NOE

        Mr. Noe. Thank you.
        As executive director of the Shallow Water Energy Security
    Collation and senior vice president general counsel and chief
    compliance officer of Hercules Offshore, I very much appreciate
    the opportunity to address the devastating economic impact of
    Obama administration's reckless oil and gas policies.
        Mr. Chairman, the economic impact of the Obama
    administration's offshore oil and gas policies are direct,
    severe and long lasting. Over 400,000 jobs across the Gulf
    Coast alone are tied to the offshore energy business. Each one
    of our shallow-water rigs is a floating factory. These floating
    factories employ 500 highly skilled and well paid Americans,
    from the workers on the rig floor, to the welders, stock
    workers, supply boat captains, helicopter pilots, and equipment
    manufacturers and scores of others that support our industry.
    These jobs are at risk and for one simple reason: The Obama
    administration shutting down these floating factories rig by
    rig.
        At a time when this Nation's economy is struggling to
    recover from one of the deepest recessions in our life time and
    unemployment rates remain high, this administration is
    irresponsibly putting policies in place that are destroying
    thousands of goodpaying jobs.
        Mr. Chairman, this is no abstraction for me.
        The extreme policies of the administration have claimed one
    of our coalition members, and I fear others might follow. Just
    a few weeks ago, the country's second-largest shallow-water
    drilling company, Seahawk Drilling, declared bankruptcy,
    eliminating a thousand good paying jobs. I personally know the
    pain that this caused because I was there. It was late in the
    day on Friday, February 11th, when I arrive at Seahawk's
    offices. As I was lead into a conference room, pensive
    employees got up from their desks, went to their doors and eyed
    me. I had the opportunity to look into the eyes and see the
    apprehension on their faces.
        Once inside the conference room, I executed the necessary
    documents for Hercules to buy Seahawk's 20 rigs. As I left, I
    put my hand on a Seahawk executive's shoulder and saw in his
    eyes that he was fighting back the emotions of the day. He
    paused, took a deep breath and walked out of the conference
    room to inform the large gathering of Seahawk employees that
    the company was bankrupt.
        The bankruptcy of Seahawk was avoidable. Seahawk had
    nothing to do with the Macondo blowout, but it was destroyed by
    the misguided and heartless policies of this administration.
    Members of this committee have joined with others in a
    bipartisan effort to implore the administration to change
    course. Even former President Clinton recently said that the
    administration's offshore drilling policies were ridiculous.
    And yet the administration persists in an ideologically driven
    mission to raise energy prices and to eliminate offshore oil
    and gas production and the many thousands of jobs that depend
    on it.
        Mr. Chairman, immediately after the Macondo blowout last
    April, shallow-water drilling operations were halted for 30
    days by the moratorium issued by Secretary Salazar. Yet after
    the moratorium was supposedly lifted, Interior refused to
    properly and regularly issue shallow-water drilling permits.
    Only 37 shallow-water permits have been approved in the 11
    months since the disaster, when the normal historical rate has
    been 10 to 15 or even more per month. That constitutes an 85
    percent reduction in the rate of monthly permit actions.
        The Obama administration's policies are now coming home to
    roost. The ongoing turmoil in North Africa, the Middle East and
    the decreasing domestic oil and gas production have combined to
    cause dramatic spikes in the price of oil and gasoline. At gas
    stations across America, our fellow Americans are feeling the
    impact of the Administration's policy.
        Mr. Chairman, the facts are clear, despite the repeated
    statements by the Obama administration, to the contrary, rigs
    are leaving the Gulf of Mexico and production is declining.
    Since May 2010 at least 12 offshore rigs have departed the Gulf
    of Mexico, 7 deepwater and 5 jack-up rigs, with at least 4
    additional rigs currently under active consideration for
    departure. Once the equipment leaves the Gulf, it will be
    years, if ever, before the rig and the other vital equipment
    and skilled crew become available again for use in the Gulf of
    Mexico.
        Production in the Gulf of Mexico has already declined. The
    Federal Government's own Energy Information Administration
    confirmed that the production in the Gulf declined by nearly
    300,000 barrels per day since April 2010, and that domestic oil
    production will fall a full 13 percent in each of 2011 and
    2012. This represents a loss of production of about 450 million
    barrels per day. That is $45 billion worth of oil that we will
    have to find somewhere else.
        Mr. Chairman, we simply must reverse course. As a Nation,
    we need to reverse the decline quickly in order to reclaim
    control of our economic destiny and protect our national
    security. Thank you and for your committee for the recognition
    that the Gulf of Mexico and oil and gas supplies are critical
    to our national and economic security and your willingness to
    use all options at your disposal to compel this administration
    to reverse its dangerous energy policies.
        [The prepared statement of Mr. Noe follows:]
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        Mr. Whitfield. Thank you, Mr. Noe.
        Mr. Massey, you are recognized for 5 minutes.

                     STATEMENT OF MARTIN W. MASSEY

        Mr. Massey. Chairman Whitfield, Ranking Member Rush,
    members of the committee, it is a privilege to join you today.
    Let me begin by introducing myself.
        For three decades I have served in the oil and gas industry
    for Exxon Mobil Corporation, during which time operating safely
    has been a top concern of mine as it has been for my
    colleagues.
        I was born and raised in Louisiana. I graduated from LSU
    with a degree in petroleum engineering. And my first job for
    the company was as a drilling engineer in the Gulf of Mexico. I
    am currently seconded from Exxon Mobil to the Marine Well
    Containment Company as its chief executive officer.
        I am grateful for the opportunity to discuss the new marine
    well containment system that our members have developed to
    safeguard the Gulf of Mexico. In the event of a deepwater well-
    control incident, I am glad to report that the interim system
    was completed last month, and it is now available for
    deployment if it is required.
        First, let me briefly summarize the evolution of this
    system. The global energy industry has successfully drilled
    more than 14,000 deepwater wells. But after the tragic chain of
    events from the Macondo blowout, it was clear that the industry
    could improve our preparedness to respond if an operator lost
    control and subsequent containment of a well.
        So, on July 21st, four of the largest energy companies
    operating in the Gulf of Mexico, Exxon Mobil, Chevron,
    ConocoPhillips and Shell, announced that they would design and
    build a containment system for the Gulf. They would form an
    independent, not-for-profit organization that would own,
    operate and maintain the system. BP recently joined us and
    helped establish the interim containment system. I am pleased
    to say that Apache has now joined us as well. Just before
    coming to Washington yesterday Anadarko became the next member
    of our company.
        These companies have done what they set out to do. The
    interim system is ready to go. The Gulf of Mexico is now
    safeguarded by being able to respond in the event an operator
    loses complete control and then subsequent containment of a
    well. One of the system's most critical components is its
    capping stack. That is a piece of equipment that can shut in
    the oil flow or, if necessary, we can divert the oil flow up to
    vessels that are on the water surface. This capping stack can
    handle up to 15,000 pounds per square inch, more than the
    pressure of the Macondo well.
        Today the interim system we have in place has processing
    and storage capacity of 60,000 barrels a day and can operate in
    8,000 feet. That is 3,000 feet deeper than Macondo. We are not
    stopping there. These capacities will be further expanded next
    year. With these additional capacities, we will be able to
    handle up to 100,000 barrels a day and operate in 10,000 feet
    of water.
        In short, this system significantly improves upon previous
    Gulf of Mexico response capabilities. We now have ready access
    to the equipment and the resources that we need to cap or
    contain a well. A few weeks ago, we had the opportunity to
    demonstrate to Secretary Salazar and Director Bromwich the
    system's capabilities. The marine well containment system, the
    interim system, has been accepted for use in permit
    applications. As a result, our members have submitted new
    applications that we are allowing this system if it is
    required. We are hopeful that this will now facilitate the
    approval of deepwater drilling permits.
        The energy resources of the Gulf are critically important.
    They account for 30 percent of the U.S. oil and gas production
    and support more than 170,000 American jobs. As industry and
    governments work together to develop these resources, it is
    critical that we do so responsibly. In creating this new
    system, the Marine Well Containment Company worked closely with
    the Department of the Interior and with the Coast Guard, who,
    as you know, will control or lead the response to any offshore
    incidents.
        We have great confidence in this system. It is ready. The
    marine well containment system meets the requirements of the
    regulation on containment, thus is it enables the men and women
    of the energy industry to get back to work to the Gulf of
    Mexico to produce our Nation's offshore energy resources. Thank
    you for your attention.
        [The prepared statement of Mr. Massey follows:]
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        Mr. Whitfield. Thank you, Mr. Massey.
        And I will recognize myself for 5 minutes of questioning.
        On this new containment system that has been developed by
    these four major companies, plus Apache, plus--is it Anadarko?
        Mr. Massey. Anadarko.
        Mr. Whitfield. Anadarko. You demonstrated this to Mr.
    Salazar and Mr. Bromwich--is that correct--and their staff?
        Mr. Massey. Correct.
        Mr. Whitfield. And when do you expect new permits would be
    issued, the application of which depends upon this containment
    system, do you have any idea?
        Mr. Massey. Yes, as I mentioned, Secretary Salazar and
    Director Bromwich came. They actually visited the site where we
    have this capping stack, which is a critical piece of the
    equipment. And we had an opportunity discuss the system
    capabilities.
        After that meeting, we were given the word that, yes, our
    system is accepted, and you can now use our system in your
    permit applications. So that was good news.
        And now we have members of our company that have actually
    submitted permit applications that rely on our system. So they
    are actually in front of the BOEMRE ready for approval now. I
    am hopeful that in just a matter of days we are going to get
    approval of some of those permits.
        Mr. Whitfield. That is encouraging because I guess we have
    only had two permits issued, and they were both for producing
    wells already so that is encouraging.
        Mr. Pugliaresi, I wanted to ask you, in your testimony, you
    talked about anticipation and its impact on prices. Normally we
    think about just supply and demand on pricing. And would you
    elaborate just a little bit about how anticipation effects
    these oil prices or gasoline prices?
        Mr. Pugliaresi. Yes, I think the best case----
        Mr. Whitfield. You might want to hit your microphone phone.
        Mr. Pugliaresi. The best case we have is actually in
    natural gas. We had a period of time with very high natural gas
    prices. And as the shale gas revolution began to move, even
    though there were periods of time when the prompt period--the
    initial gas in the prompt period wasn't growing that fast--the
    price began to decline rather rapidly because buyers and
    sellers are looking out, and they are saying, this is real,
    this is going happen over time. There is a good chance the
    government won't be able to stop this. It is very interesting.
    If you--I think one of the messages we want to leave you with
    is that you don't want to foreclose really positive outcomes.
    And if we sort of fix ourselves on this view that we know how
    much oil and gas is out there, we know what is going to happen
    in the future and so we don't need to do X or Y, that is
    usually a mistake. We need to open the system up as much as
    possible so we can get as much different approaches to
    developing these oil and gas resources.
        Mr. Whitfield. Do any of you have any thoughts of whether
    or not gasoline would reach $5 a gallon by the summer? OK, it
    would be a guess.
        Dr. Cooper, what do you say?
        Mr. Cooper. Well, I stay away from predicting gasoline
    prices in part because gasoline markets are afflicted by two
    sets of factors that have nothing to do with economics.
        Mr. Whitfield. OK. Well, you can't answer my question, so
    thank you. I appreciate it.
        Mr. Cooper. It is a risky businesses predicting $5 a
    gallon.
        Mr. Whitfield. Mr. Massey, you had indicated in this
    business of drilling in the Gulf, there are about 170,000
    employees; is that correct?
        Mr. Massey. Yes. We have, from third-party sources and so
    forth, that they tallied up the number of jobs. I am talking
    about direct jobs.
        Mr. Whitfield. Direct, but not indirect.
        Mr. Massey. Yes.
        Mr. Whitfield. How many jobs were lost during this period
    over the last 8 or 9 months? Does anyone have any idea total in
    the industry?
        Mr. Daniels. In the tourism industry or the oil industry?
        Mr. Whitfield. Well, I will get to the tourism in a minute.
    I was trying to get to the oil first, and then I would like to
    get to tourism.
        Yes, Dr. Mason.
        Mr. Mason. I will address the question generally and then
    briefly. But that is a very tricky question because of this
    problem that good business owners will try to keep their best
    employees around. They have done that out of their own pocket.
    When you try to count actual job losses, the number can be
    skewed in a way that can create misleading results.
        Mr. Whitfield. OK. We know that Seahawk went bankrupt, and
    they had a thousand employees, correct?
        Mr. Noe. Mr. Chairman, that is correct.
        I think it is frustrating that the administration is using
    the fact that many companies, like Hercules, has acted as a
    good corporate citizen and kept employees on the payroll,
    despite the fact that we don't have jobs for them to do. And as
    you mentioned, the bankruptcy of Seahawk drilling, they had at
    their height about a thousand jobs. Hercules, once we close the
    transaction, will try to hire everybody we can. We can't hire
    everybody. We have even agreed to pay for all the employees who
    are laid off their health care benefits, even if we never hire
    them. So there are real jobs that have been lost.
        But I think as Dr. Mason suggested, many companies have
    been treading water and have been waiting and waiting for the
    administration to act on their rhetoric. And they tell us that
    there is no moratorium, but we don't get permits. So it is like
    running an airline business; if you get a permit to fly from
    New York to Los Angeles and you don't know if you are going to
    get a permit to fly back, when you reach Los Angeles, do you
    lay the crew off, do you mothball the airplane? Those are the
    decisions that we have faced as an industry. Because we have
    been acting as a good corporate citizens, we have decided to
    keep our workers on a payroll, but at some point, it has to
    stop.
        Mr. Whitfield. Thank you.
        Mr. Adams. Mr. Chairman, in the vessel sector, what we saw
    was deferred pain. Our vessels were intentionally engaged in
    the response and clean-up operations through the late fall of
    last year. That meant that crews stayed busy on day-rate jobs.
    Those contracts ended, and there is no work to fill.
        Mr. Whitfield. OK.
        Mr. Adams. And so that is why we would suggest that the
    best efforts have been made to retain crews, but the ability to
    manage cash flow will have an end very shortly.
        Mr. Whitfield. OK. My time has expired, but Mr. Daniel, if
    you have a number on the tourism side, I would be happy to hear
    it.
        Mr. Daniels. Yes, I do. All of the fishing fleet, all the
    shrimping fleet in Gulfport, all of those men lost their jobs.
    All of the fleet in Chalmette, Louisiana, and along the
    Louisiana line, all those men lost their jobs. Thanks to BP
    coming in and hiring them, it helped out a lot. But they all,
    every fisherman on the coast lost his job.
        Mr. Whitfield. Thank you.
        Mr. Rush is recognized for 5 minutes.
        Mr. Rush. Mr. Chairman, I thank you so much.
        We have heard a lot today about the impact of the oil spill
    and the aftermath of the spill on the gas and oil industry. I
    think it should be well noted that Mr. Daniels is here, and you
    can speak to the economic costs of the oil spill to other
    industries on the Gulf Coast, including the tourism industry.
        And I want to note that Mr. Daniels appeared before the EC
    Subcommittee in July of last year before the BP oil was capped
    and before the oil had stopped drilling--stopped flowing,
    rather, into the Gulf.
        It goes without saying that the spill was devastating for
    tourism and the fishing industries. Along the Gulf Coast,
    fisheries and oyster bayers were closed. The fishing industry
    continued to suffer even after fishing resumed as many feared
    that Gulf seafood was tainted.
        My question to Mr. Daniels, you kind of indicated that the
    seafood industry is recovering, but has it fully recovered from
    the oil spill? What is the status of it? Maybe it hasn't
    recovered at all.
        Mr. Daniels. Well, according to the FDA it has. There are
    beds where you can fish and you can shrimp. I put more trust in
    the shrimp and the fish to avoid the oil than I do in the
    government to say whether it is contaminated. Because shrimp
    and--not oysters--but shrimp and fish can avoid poison areas.
        But I can tell you this, I eat a lot of seafood. Most of us
    eat seafood daily and that therein lies of lies the problem.
        In the testimony that I submitted, I quoted the director of
    the FDA suggesting that both the Corexit, which is the
    dispersant, and oils, as evaluating some of the seafood, was at
    lower levels, which I can appreciate. So, consequently, we eat
    it, but yet we are still ending up with these dead dolphin.
        And then I discovered the Federal Government, the FDA, the
    oil spill response has still yet not determined the deaths of
    the 89 dolphin that washed up right after the spill. They have
    not released that information. They did say it was as a result
    of environment over the last year, but they have not said why.
        Under any other ordinary circumstances, Congressman, if in
    fact there were a dozen eggs that showed up in Illinois and
    Chicago, the FDA would evaluate where those eggs came from and
    then consequently pull in that lot from that manufacturer. In
    this case, we have the Gulf of Mexico.
        The FDA samples are very, very few. And how do you sample?
    How do you sample the Gulf of Mexico? How do you say that this
    dolphin calf was stillborn as a result of Corexist or whatever,
    how do you say where it came from?
        So the simple answer to that is we are eating a lot of
    seafood there. It is very, very delicious. We would like for
    you to come down and eat it. However, there is still that
    apprehension that should not be there. It wasn't there before
    April 20th. And my only suggestion to these men in the oil
    industry is that you have got to somehow or another say to the
    rest of us, your customers, that we won't put you in jeopardy,
    and that is basically my point on that.
        Mr. Rush. I appreciate that.
        And that leads me to a question for Mr. Massey.
        Mr. Massey, this containment, marine containment system,
    now, can you undeniably and categorically and absolutely say
    that this system would stop the flow of a subsea blowout like
    the one we saw last year? Is your system, this containment
    system, is this actually what we have all been looking for?
        Mr. Massey. What I can say is that we have the system and
    we have the plan that has been developed to respond to a well
    if an operator loses control and then subsequent containment.
    So we have the plan, we have the equipment that is needed, and
    we have the resources and the people.
        So we have identified the plan and how we would go about
    capping and containing a well. So, yes, I believe we do have
    the system, and we would be ready to respond if called upon.
        Mr. Rush. And Secretary Salazar has certified that this is,
    indeed, the case, that this system is the appropriate one that
    we have been looking for, that is the answer?
        Mr. Massey. What I can tell you is Secretary Salazar and
    Director Bromwich did come visit us. They looked at the system
    capacities and what we are capable of doing, and we have gotten
    the word back that it is acceptable for us to use in permit
    applications. And we now have permits for deepwater wells that
    rely on our system. And we are hopeful that those are going to
    be approved any day now.
        Mr. Rush. Thank you, Mr. Chairman.
        Mr. Whitfield. At this time, I recognize the gentleman from
    Oklahoma, Mr. Sullivan, for 5 minutes.
        Mr. Sullivan. Thank you, Mr. Chairman.
        And this is a down-the-line question to Mr. Pugliaresi--is
    that how you say your name--and Messrs. Noe, Adams, Massey and
    Mason, and I appreciate you being here today, too: With our
    Nation approaching $4 to $5 a gallon gasoline, what do you
    think is the main impediment to U.S. oil development both
    onshore and offshore? Do you think it is economics or Federal
    policies or regulations? If you could comment on that, please.
        Mr. Pugliaresi. Strictly Federal policy and regulations.
        Mr. Mason. Strictly policy.
        One thing I didn't cover in my oral testimony, was covered
    in my written was the history of the OCS development. If you
    will recall, we were ready to open that up just before
    Deepwater Horizon. Now that is completely off the table again.
    The Outer Continental Shelf is extremely important. We need to
    use all of our resources, of course use them wisely, but not
    rule any out just because of policy.
        Thank you.
        Mr. Adams. I believe it is the administration's political
    desire to strangle domestic exploration offshore.
        Mr. Noe. I would agree with Mr. Adams as well. We have
    proven, as an industry, we started, as Americans, we invented
    the offshore drilling business in 1938. We have drilled nearly
    50,000 wells safely in the Gulf of Mexico since Harry Truman
    was in the White House. We know how to operate safely.
        And I will tell you that we have the will as an industry to
    produce oil and natural gas in the Gulf of Mexico. We have the
    means in which to do it safely.
        But we don't have the will from the administration. And we
    have seen that throughout the summer. And the questions to Mr.
    Massey don't even pertain to the shallow-water operations. We
    don't utilize the subsea technology, but even our industry has
    been shut down this summer and have proven to have little
    traction on getting permits.
        So what we need is a few things, Congressman. We need a
    transparent regulatory process. We need the administration to
    issue promptly and regularly and predictably new drilling
    permits. We as a country are the third largest oil producer in
    the world. Deep water alone, if it were a separate country,
    would be the fourth largest oil producer alone.
        We have the resources available. We have the technology
    available. We have the manpower available. We just need the
    administration to promptly execute its statutory obligations to
    expeditiously develop the natural resources of our country.
        Mr. Sullivan. I have a company in my district that is
    sitting out there idle right now. They have a rig, and they are
    in with a couple other companies, and they are paying up to $1
    million a day and just sitting there. And they called the new
    organization--I forget what it is called. It used to be mineral
    management services, and I don't know what the new acronym is.
    But they say that they call them and they are doing everything
    they are telling them to do, but they can't even get phone
    calls returned. Are you hearing some of that? I am sure you
    have.
        But also my main point is they said that this rig operator
    said if they can't pay them any more, they want to get out of
    the contract, that is fine; they already have a place to go off
    the coast of Africa. Let's say that gas prices go to $5 a
    gallon, which I think is possible due to this, and President
    Obama at that point thinks, wow, maybe we need to start doing
    something in the Gulf. Could we get those rigs back quickly and
    those gas prices go down quickly?
        Mr. Noe. Congressman, that is a great question. Just
    yesterday, Transocean announced that it was entering into a 10-
    year contract for one of their deepwater drill ships in India.
    That rig will be tied up through 2020. As rigs leave the Gulf
    of Mexico, they typically go on long-term contracts years, 2, 3
    years. So it will be very difficult to get those rigs back
    quickly.
        But there is, I want to emphasize a point. There is a
    direct relationship between the issuance of permits and
    gasoline prices. As I think some of the other panelists have
    suggested, the market is driven--it is a spot market for
    natural gas and crude oil, and much of that market is driven by
    anxiety and the belief of the marketplace that the policies of
    our government will secure a stable supply of oil and natural
    gas.
        And I think that the gasoline prices today are an
    indictment of this administration's policies on ensuring that
    we are going to have a safe and predictable secure source of
    domestic oil and gas.
        Mr. Sullivan. Yes, sir, Dr. Mason.
        Mr. Mason. Thank you.
        I would just like to revise your hypothetical a little bit.
    I am thinking in a $5 a gallon scenario, it wouldn't open up
    drilling, but the administration would more likely view this as
    an opportunity to further subsidize electric vehicles and the
    batteries they contained.
        In my closing comments, I made a point, there are other
    externalities being developed in what we call these clean
    technologies and batteries. We do not have a recycling program,
    a mandatory recycling program for these batteries, which
    contain huge amounts of heavy metals. In fact, some of the
    manufacturing plants in Michigan are based on one of the
    world's largest fresh water aquifers. Once those heavy metals
    leach into the aquifer, you are done. You can take it off line.
    You can never drink out of there again after you discover it
    through many cancers and stillborn babies and many other
    things. This is not carbon pollution, but it is a very real
    other form of pollution that is not being priced on electric
    vehicles.
        I think it is irresponsible to leave new externalities, out
    there just like carbon was left out there, in developing these
    new technologies. We should price them as completely as
    possible while we develop those.
        Mr. Sullivan. Thank you, Mr. Chairman.
        Mr. Whitfield. We do have a vote on the House floor, two
    votes, but Mrs. Capps, I am going to recognize you for 5
    minutes for your question period.
        Mrs. Capps. Thank you, Mr. Chairman.
        And thank you each of you, for our witnesses, for your
    testimony today. I am going to direct my questions to Dr.
    Cooper, in part because of your title, speaking up for
    consumers as research director for the Consumer Federation of
    America.
        I want to ask you to talk a little bit about the consumer
    benefits of making our cars and trucks more efficient. United
    States imports a little more than half of the petroleum it
    uses. For years we have heard from our colleagues on the other
    side that we can drill our way to lower energy prices. And we
    have heard that again today.
        But more drilling is never going to be enough to reduce
    global oil prices or U.S. imports of foreign oil in any
    meaningful way. We use about 25 percent of the world's oil. We
    have only 2 percent of the world's oil reserves. So my question
    to you is, what would be the impact on world oil prices of
    increasing domestic oil production?
        Mr. Cooper. Thank you, Congresswoman.
        In 2007, the Energy Information Administration, under an
    appointee of George Bush, looked at the question of what
    expanding access to the OCS would do.
        And here is what they concluded: Access to the Pacific,
    Atlantic and eastern Gulf regions would not have a significant
    impact on domestic crude oil and natural gas production or
    prices before 2030.
        That is the Bush administration.
        At the height of the production increase created by access
    to the OCS, they projected an increase of domestic U.S.
    production of 200,000 barrels a day. Now that may sound like a
    big number, but in the global oil market, that is less than
    two-tenths of 1 percent of daily production today.
        And what you have heard today, there is a theory that an
    increase of two-tenths of 1 percent 5 or 10 years from now is
    going to lower the price of gasoline today. Don't bet your farm
    on it. You would never make an investment on the basis of that
    kind of analysis.
        So there may be lots of other reasons to look for oil in
    the Gulf, but lowering the price of gasoline is not one of
    them.
        Mrs. Capps. Thank you.
        I want to pick up on another thing that I have heard you
    say, and that is the key to reducing oil prices is to focus on
    how much oil we use. Reducing our share of global oil
    consumption from 25 percent could have a real impact on both
    oil prices and on imports. Last year, the EPA and the
    Department of Transportation issued new tailpipe rules for
    model years 2012 through 2016 on cars and trucks. The standards
    will reap tremendous benefits. Over the lifetime of these
    vehicles, this program will save $1.8 billion of oil because
    they will be able to go farther and people will go farther on a
    gallon of gas. And now the EIA projects U.S. consumption of oil
    will stop growing, allowing us to import less oil in the future
    than we did in 2007.
        Now you represent a consumer organization, as I mentioned.
    Can you explain how strong fuel efficiency standards benefit
    consumers and also protect them from fluctuating oil prices?
        Mr. Cooper. Madam Congresswoman, Mr. Pugliaresi gave you a
    hypothetical about what might happen with $20 a barrel and what
    happened with Iran and the Mideast, so let me give you another
    hypothetical: What happens if 15 years ago we had adopted a
    standard that would double our fuel economy, just as we have
    proposed today to go to 60 miles per gallon? We would be
    consuming half as much gasoline today as we are today. That
    would be more than 4 million barrels a day of consumption
    reduction. Now that is a significant amount of oil to take off
    the world market. That is over 4 percent.
        That is the kind of reduction in consumption that gives you
    head room. In fact, 4 million barrels a day is equal to the
    total spare capacity in the world oil industry today. So if you
    double spare capacity, that is the way you alleviate pressure
    on prices.
        That is why I say the most important step we can take in
    the short term is to make that long-term commitment, 15 years
    in economics is a long term, to actually reduce our
    consumption. We consume a quarter of the world's oil and
    gasoline almost. If we cut our consumption in half of gasoline,
    that has a big impact. But that takes 15 years. It takes the
    long term. And so we have to stop looking at quick fixes every
    time the price of gasoline jumps up because it is almost
    certain to fall down again and start looking at that long-term
    commitment to lowering our consumption.
        Mrs. Capps. Let me see if I can get one more quick question
    in.
        On Tuesday, this committee passed H.R. 910, the so-called
    energy tax prevention act that would actually take away EPA's
    authorities to set stronger tailpipe standards for cars and
    trucks made after 2016. Just answer quickly then, do you
    support allowing EPA to continue to work with the Department of
    Transportation to consider stronger tailpipe standards for cars
    and trucks?
        Mr. Cooper. We support the interaction of a number of
    agencies. And it turns out that the Clean Air Act is what
    allowed 15 States to be involved in this space. So, in our
    Federal system, when we have 15 States and two agencies in the
    Federal Government coordinating, and that is the big
    development, looking at the problem from different points of
    view, we are better off.
        So there is no doubt that the American consumer is better
    off today, we have a higher standard, because of the
    involvement of those States in the Clean Cars Program than we
    would have been otherwise. And we think that is good for
    consumers in the future.
        Mrs. Capps. Thank you, Mr. Chairman. Thank you very much.
        Mr. Whitfield. I am going to recognize Mr. Terry from
    Nebraska for 5 minutes, and then when he finishes, we are going
    to recess until 11, and we will be back at 11 to resume
    questions.
        Mr. Terry.
        Mr. Terry. Thank you, Mr. Chairman.
        Just an observation prompted by Dr. Cooper's colloquy with
    the gentlelady from California, we have heard some testimony
    here that anxiety or expectations within the marketplace tend
    to drive commodity prices. A real-life example was what we went
    through in 2008, where gas prices shot up above $4 per gallon,
    people were outraged. A lot have thought about speculation
    driving up the cost. But then when the President released a
    moratorium or repealed the moratorium on the Florida coast in
    the Gulf, prices dramatically started reducing. That is a real-
    life example of once there is some certainty put back into the
    marketplace, that it is known that there is going to be new
    fuel or oil in the marketplace, it relieved that pressure and
    that anxiety and brought the prices down. That is a real life
    example that is modern day.
        And so Dr. Pugliaresi--Dr. P, us Irish have a hard time
    with Italian names. I don't know why. Would you agree with that
    assessment that just minor tweaks where the energy world sees
    that there is going to be additions alleviates anxiety and so
    will drive down the prices?
        Secondly, I hear all the time that we have this 2 percent,
    that we control 2 percent, but yet with the Bakken field shale
    up in North Dakota, we are pumping out an unbelievable amount
    of oil from there that even 12 months ago was unexpected. Is it
    an accurate statement to say that since we only control 2
    percent, A, is 2 percent accurate, and the fact that since we
    only control 2 percent, it doesn't matter if we drill or not
    drill?
        Mr. Pugliaresi. Let me give you an example.
        Mr. Terry. You have 2 minutes and 38 seconds.
        Mr. Pugliaresi. Let me give a counter example. I think the
    shale gas, we should really take the lesson off the shale gas
    because we, industry, Congress, the administration, everyone
    believed we were running out of natural gas. We were going to
    have very high gas prices. We built on the Gulf Coast in the
    U.S. large expensive LNG receiving facilities. There are
    operating at less than 10 percent capacity.
        Mr. Terry. By the way, it was Gene Green and I that had the
    LNG bill.
        Mr. Pugliaresi. It was a good idea. But we are now the
    largest natural gas producer in the world. There is not a
    single geologist that came here in front of this committee
    years ago that said, we have a lot of natural gas. They thought
    we had none.
        So the notion that Dr. Cooper said that somehow we control
    X amount of the resources, look, we don't know until we drill
    it. We don't know until American ingenuity and technology has
    an opportunity to try different approaches. And if we lock up
    all our resources, we are never going to find out.
        And another point that is very important, look, petroleum
    for a lot of reasons, has high value in the marketplace. It is
    relatively low to produce. It is expensive, but it is less than
    its value. It produces a lot of extra value. And that value is
    return on capital. It is revenues to the government, bonus
    bids, jobs, and most of the alternative fuels, and even some of
    the efficiencies, they eat money. They eat lots of money.
        And so we have a dilemma here. We have to decide how are we
    going to move to the fuels of the future in a cost-effective
    way, in a way that generates a lot of economic growth? And if
    you foreclose this sector of the economy, which has so much
    value for sustaining economic growth, it is a huge mistake. And
    it is something we really need to sort of think through.
        Mr. Terry. I have 43 seconds left. So I am just going to
    give--Dr. Cooper, I have no doubt about the accuracy of your
    polling. But I will give a real-life story in Lincoln,
    Nebraska, Lincoln Electric, this is about a little over 10
    years ago, they sent out a questionnaire to their customers,
    said, should we add wind power? It is going to add costs. But
    we would like to do it on a voluntary basis. Should we adopt
    this on a voluntary pay basis? Ninety percent, I think it was
    like 89 percent of the customers, sent back a survey checking,
    yes, absolutely, we want you to have wind power, and it will be
    paid for on a voluntary basis. They bought the wind turbines,
    put them up, sent out the voluntary sign up, and the take rate
    was about 7 percent.
        So if you poll me, I want a 60-per-mile-gallon car. Am I
    going to pay five times more for it? No. So I think it is all
    in how we ask the question in a market society.
        And I yield back my time.
        Mr. Whitfield. Thank you, Mr. Terry.
        And we will recess until 11 o'clock and look forward to
    coming back and resuming question and answers. Thank you.
        [Recess.]
        Mr. Whitfield. The hearing will come back to order. And I
    apologize we were a few minutes later than we said.
        At this time, I will recognize the gentleman the Texas, Mr.
    Green, for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman.
        Mr. Noe, a couple of weeks ago, a colleague of mine, not on
    this committee, but Congressman Boustany, who is from south
    Louisiana, and I introduced a resolution that would, hopefully,
    that would try and have a committee hearing and get floor time
    on streamlining some of the concerns I know a lot of us have
    about the Department of the Interior. The resolution requires
    streamlining, review and appropriate approval of applications
    for shallow and deepwater permits in the Outer Continental
    Shelf; to take immediate action to provide shallow-water and
    deepwater industry with a completed sample application which
    meets all of the new safety and environmental regulations as a
    template; and provide written guidance and clarification to
    applicants regarding new safety requirements; and, four,
    provide permit applicants with timely and detailed explanation
    on any areas of the permit which do not satisfy the new
    requirements.
        Some of us in Congress are caught because whenever we say
    we are not issuing, whether shallow water or deepwater, they
    say, well, we don't have a lot of permits that are available.
    But I am also hearing that people aren't submitting them simply
    because they need to have some certainty on what they are
    doing. Is that the concern that we are hearing, that a lot of
    our shallow-water drillers particularly--and I know, maybe a
    lot of members, most of our shallow water is natural gas. If we
    could get oil out of it, we would be happy about it, because
    oil is much more lucrative now. So many of our shallow-water
    drillers are actually natural gas producers.
        Mr. Noe. Well, Congressman, you are not alone in having
    failed to obtain the level of transparency from the Department
    of the Interior that is necessary to understand the true
    backlog of permits. We have asked for months, and in fact,
    members of this committee have asked in writing and other
    members on a bipartisan basis have asked the Department of the
    Interior to tell us one simple number: How many permits are
    pending? We have heard a number of different numbers. Secretary
    Salazar says one number; we say another. In fact, just recently
    in the Ensco litigation matter filed in the Federal Court in
    New Orleans, an affidavit was filed by a senior ranking member
    of the BOEM who said there are 270 pending shallow-water
    permits. So this numbers game is a source of frustration for
    us, Congressman.
        And I think we owe, the American people are owed at least a
    true number of the backlog of actual permits. But I will tell
    you this: There is demand to drill natural gas and oil wells in
    the shallow waters of America right now. According to the
    BOEM's own Web site, there are 20 permits that are pending.
    Scores of others would, in fact, as you noted, Congressman, be
    filed if the industry had some level of certainty as to how
    long those permits applications will take to be reviewed. When
    will they be issued? What will my liability requirements be?
    What level of certainty will I have that the Federal Government
    will back up their rhetoric with action and issue the permits?
        So I think, though, the true numbers are yet to be known,
    and, Congressman, I applaud you and Congressman Boustany for
    asking the questions because I think we deserve answers.
        Mr. Green. Once a permit is approved, how many days does it
    take for you to get your workers actually back to work?
        Mr. Noe. That is a great question, and Congressman,
    unfortunately, through the de facto moratorium that we have
    experienced since April, my company has kept many of its rigs
    idle. We have kept workers on the rigs chipping, painting,
    doing busy work, catching up with paperwork, catching up with
    training on the hopes and prayers that permits would be
    forthcoming. So many of our rigs that are idle are ready to go
    in a matter of weeks.
        But operators sometimes take weeks if not months to plan
    their operations ahead of time, which goes back to the dramatic
    lack of certainty that is causing operators to just throw up
    their hands in frustration. Operators have to engineer the
    well. They have the secure caterers and cooks. They have to
    secure a drilling rig. It is an orchestrated process that takes
    time.
        Mr. Green. I only have about 55 seconds left. Let me get to
    another question.
        So you can't just turn on and turn it off. You have to
    actually have a plan. We wish it was an assembly line, but you
    just can't roll that rig out and get it producing within a day
    or week or even a month sometimes. That would be awfully quick.
        Let me ask you, in your testimony, you talked about in
    recent months, governments like United Kingdom, Norway and
    Australia have carefully examined the continued use of the same
    type of drilling equipment we use in the Gulf of Mexico. And
    each country concluded that the industry can drill safely and
    they are better off securing their own energy and reap for
    themselves significant economic gains of a healthy oil and gas
    industry. We are talking about Norway, United Kingdom and
    Australia.
        And can you elaborate on the process these countries went
    through because they stood down after what happened in the Gulf
    of Mexico with Horizon, but they are back out producing right
    now, aren't they, and drilling?
        Mr. Noe. That is right. And they issued no moratorium in
    the U.K. As an example, the U.K., a very advanced technological
    place. They specifically considered whether a moratorium was
    necessary, and they concluded, just as President Obama should
    have concluded, is should we drill in our own waters using our
    own labor and reap the economic benefits from that activity
    where we know we can drill safely, or should we export those
    jobs and export our energy security to places that are unstable
    or potentially hostile to their interests?
        Mr. Green. Thank you, Mr. Chairman, for your patience.
        Mr. Whitfield. At this time, I recognize the gentleman from
    Louisiana, Mr. Scalise, for 5 minutes.
        Mr. Scalise. Thank you, Mr. Chairman.
        I really appreciated the opening statements that you all
    made, hitting on a number of different points.
        Mr. Noe, I want to start with some of the comments that you
    had made. You started off talking about the bankruptcy of
    Seahawk, and here is a company, as you said, both the second
    largest shallow-water driller. You point out that 85 percent
    reduction that we have seen in shallow-water drilling. Of
    course, this was a deepwater disaster with the Macondo well,
    the President has said many times, there is no moratorium on
    shallow-water drilling, yet as you point out, there is an 85
    percent reduction in shallow-water drilling, not to mention
    what is going on in the OCS. And then you have this bankruptcy,
    kind of riveting the testimony you gave about actually having
    to be there and seeing some of those employees who literally
    are losing their livelihoods, losing their careers, not because
    they did anything wrong but because this administration has
    chosen to go down a path of shutting down an entire industry.
        And so if you could tell me, because obviously this is not
    just limited to the companies along the Gulf Coast--the high
    gas prices that people are paying obviously is one national
    impact. But also the companies that these companies in your
    coalition do business with, they buy pumps for these rigs that
    are made by Caterpillar in Illinois. If you can give me a
    little bit of the ripple effects that this has throughout the
    country, not just in south Louisiana, with this radical policy.
        Mr. Noe. Congressman, that is a great question. We need to
    understand very clearly that this economic tragedy is not
    limited to the borders of Louisiana and Texas, as you noted,
    Congressman. To give you one example, Hercules Offshore, on
    each of our drilling rigs, we have three engines; almost all of
    them they are manufactured by Caterpillar made in Illinois. We
    conducted a survey of just our members in the last couple of
    years and the spin that we contribute outside of Louisiana and
    Texas is frankly staggering: $376 million came from the State
    of Illinois, far from the Gulf of Mexico. And that extends to
    States like Oklahoma, $125 million over a 3-year period of just
    this survey that we conducted; Colorado $35 million. We buy
    each of our several thousand workers two pairs of Red Wing
    boots every year, made in Red Wing, Minnesota. The tentacles of
    the economic connection of the industry reach far beyond the
    Gulf South and will reach the home States of your constituents
    today.
        Mr. Scalise. Let me ask Mr. Adams to touch on that, too,
    because I know you represent a large group of companies that
    work in the industry as well. What kind of ripples are you
    seeing?
        Mr. Adams. Well, we are seeing a ripple effect across south
    Louisiana directly. Imagine being a shipyard owner or a
    shipyard worker: 2011, the market anticipated the deepwater
    wells would move up to somewhere in the mid-40s from 33; there
    were plans for that. There were vessel orders made, and those
    contracts had to be pulled back. There was no work for the
    vessels that would be built.
        And then the ripple effect for building a vessel goes
    across the country, just as Mr. Noe said. We also, our whole
    industry is about delivering goods and people out to the rigs,
    and that goes from groceries to all kinds of hardware supplies,
    and that is just shut down right now.
        Mr. Scalise. I know, Mr. Daniels, I share a lot of the
    concerns you have about tourism, seafood. In fact, I still eat,
    I love eating the great Gulf seafood that we have. We have been
    pushing the FDA to ramp up testing. I think right now Gulf
    seafood is probably the safest most-tested food in the world
    because of this.
        I think the biggest frustration a lot us have is that the
    people being punished aren't the people who actually created
    this disaster. BP, in their negligence, they cut the corners,
    and yet it is the companies that are represented at this table,
    that had absolutely nothing to do with it, that have played by
    the rules, actually have a higher bar for safety, and yet you
    have got the President that is literally initiating a policy
    that is going after and shutting down an entire industry. And
    it is leading to higher gas prices. It is leading to thousands
    of job losses.
        And I think what is most irritating, we have been trying to
    get a meeting with the President to talk specifically about
    this issue. I have got a letter I would like to ask unanimous
    consent to enter into the record.
        Mr. Whitfield. Without objection.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] 71013.046

        Mr. Scalise. Our delegation, all Republicans, all
    Democrats, back in June asked to meet with the President to
    talk specifically about this issue. I think what is most
    frustrating, not only have we not gotten a meeting, we haven't
    even gotten a response from the White House.
        This is the entire delegation talking about a policy that
    has led to thousands of jobs, and yet the President has time to
    go and do his brackets for the NCAA tournament. We know the
    President's bracket picks. We don't know his energy policy.
        The energy Secretary yesterday sat here and said he can't
    tell us the President's plan to lower gas prices, but he has
    got time to let people know what his picks are for energy.
        I would like to also ask unanimous consent to issue into
    the record--this is a letter 100 Members of Congress signed to
    the President weeks ago asking him to let these people get back
    to work drilling safely. We still haven't gotten a response on
    this letter.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] 71013.047

        [GRAPHIC] [TIFF OMITTED] 71013.048

        [GRAPHIC] [TIFF OMITTED] 71013.049

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        [GRAPHIC] [TIFF OMITTED] 71013.051

        [GRAPHIC] [TIFF OMITTED] 71013.052

        Mr. Scalise. It is time for the President to act. This is
    costing jobs. It is raising gas prices, and it is killing
    America's energy security.
        I yield back.
        Mr. Whitfield. Without objection.
        At this time, the gentleman from Washington, Mr. Inslee, is
    recognized for 5 minutes.
        Mr. Inslee. Thank you.
        Just for the record, I would like to say, since our
    commander in chief was questioned about basketball, I would bet
    a dollar he could beat the last gentleman in a game of one on
    one. I would like to see it.
        Mr. Scalise. I would take him up on that. I would like to
    meet with him to do that. If that is what I need to do to meet
    with him, I will take him up on that. I will challenge him in a
    day. Thank you, Mr. Inslee.
        Mr. Inslee. Well, he has taken me to the hoop, so he is a
    good ballplayer.
        I want to ask Dr. Mason some questions.
        And, Doctor, the reason I am asking you these question is
    you have ``doctor'' in front of your name. That is why I am
    asking you these questions.
        So if you went to the doctor and the doctor told you you
    had cancer, what would you do? Would you listen to him in
    general?
        Mr. Mason. It depends on what kind of doctor.
        Mr. Inslee. Let's assume he was a good doctor. Let's assume
    he was a Nobel Prize-winning doctor.
        And let's say you had some questions about that diagnosis;
    as a rational person, you went and got a second opinion, and
    that doctor told you you had cancer. Do you think you might pay
    attention to him?
        Mr. Mason. Perhaps.
        Mr. Inslee. Let's say that you had some questions about
    that doctor, so you went to 2,500 other doctors, and they all
    told you you had cancer. If that happened, would you then go to
    keep trying to find a doctor who said you didn't have cancer,
    or do you think you might do something about it?
        Mr. Mason. Well, 2,500 qualified doctors within their
    specialty field, perhaps.
        Mr. Inslee. So what this, so you will know, what this
    committee has found out is that there is, at a minimum and a
    lot more, 2,500 qualified science doctors who have concluded
    that the Earth has a pathology and that pathology is carbon
    dioxide pollution, which is radically changing its ecosystem to
    our detriment.
        Now this committee voted essentially to ignore all of these
    doctors and sort of go try to find some other doctors somewhere
    in the Earth that had some question about it and have ignored
    all of the physicians of the Earth who have told us we got a
    problem.
        Now, from what you know about the science, and I will give
    you a chance to voice your opinion now, do you think the state
    of these physicians of the Earth who have told us we have a
    problem, do you think we should listen to them and try to do
    something about this pathology we are experiencing, namely
    carbon pollution in the Earth?
        Mr. Mason. I see no problem doing something about it. I am
    not an environmental scientist or really feel qualified to
    opine in any expert capacity about carbon's contribution to
    pollution. My personal belief is that it certainly plays a
    role, however.
        Mr. Inslee. So your belief is, based on what you know of
    the science, that carbon pollution probably does play a role in
    some changes in the climate; is that a fair statement?
        Mr. Mason. I see--I don't object to that statement, no.
        Mr. Inslee. Well, unfortunately, the Republican majority
    did who voted en bloc on a continuing front on their war on
    science to deny all of these scientists yesterday, just so you
    will know.
        I want to refer to some production numbers about oil
    production in the United States. Could we put the graphs up?
    The first graph I would refer the panel to is a chart showing
    U.S. domestic oil production, which sort of bottomed out in
    2008--I think that was the year that President Obama took
    office--and has gone up in 2009--excuse me there is a different
    bar chart. I think we have them in a different order. Now we
    are looking at the right chart. You will see they bottomed out
    at about 6.7 million barrels per day when President Obama was
    elected. Since then, it has been going up. It is about 7.3 in
    2009; it is about 7.5 in 2010. These are production numbers
    from the U.S. energy agency.
        Next slide, please.
        This slide shows Gulf of Mexico crude oil production
    million barrels per month. You will notice it was going at
    about 40 million barrels per month pretty steadily from October
    2006 to Hurricane Gustav and Ike, when it plunged in October
    2008, came back fairly rapidly in the first few months of the
    Obama administration, and now has been in a relatively steady
    state with some ups and downs, about 5 million barrels per
    month production during the Obama Presidency.
        Next slide, please. The next slide shows annual U.S.
    natural gas gross withdrawals. We will see that you get over
    toward the right side, you will see 2000 pretty steady; 2008 it
    has been going up, fairly dramatically in the last 2 years,
    2008, 2009. And right to the right of the graph, you will see
    that it is going up.
        Now from these slides, which are numbers--these are not
    talking points. These are not propaganda. These are not
    political hack jobs. These are numbers. Now, from the numbers,
    it looks to me like the United States is experiencing an
    increase in domestic oil production, an increase in Gulf of
    Mexico, or at least a stable production in the Gulf of Mexico,
    and a significant increase at a fairly rapid rate in natural
    gas production United States. And I just think it is important
    for us to look at the numbers. The numbers don't lie, and
    propaganda does. Thank you.
        Mr. Noe. Congressman, could I add something to that? Could
    I answer that question?
        Mr. Whitfield. Yes, sir.
        Mr. Noe. I think it is a fundamental misunderstanding of
    the way the oil and gas industry works for the Obama
    administration to take credit for the increase in production.
    The increases in production that we have seen in the last
    couple of years are the result of new oil coming on line that
    was decades in the making, literally decades in the making in
    planning, just to name a few, and these are all major new finds
    that took years and sometimes decades to plan and bring online:
    In 2007, Independence Hub and Atlantis; 2008, Neptune, Blind
    Faith, Thunder Horse; 2009, Mirage, Tahiti; in 2010 Telemark,
    Perdido. These took years of planning, and they were planned
    and executed under the apparatus of the prior administration.
    And the Federal Government's EIA has already stated itself that
    production has declined in 2010 and will continue to do so in
    2011.
        Mr. Inslee. That is really interesting because you were
    really to happy to point out he shouldn't get any credit for
    this, but he should be responsible for everything else that
    happens in the world, including increasing gas prices, which is
    a result of demand increases from China and India.
        Thanks a lot for being fair to our commander in chief.
        Mr. Whitfield. Mr. Griffith, you are recognized for 5
    minutes.
        Mr. Griffith. Mr. Chairman, if I could yield to the
    gentleman from Louisiana.
        Mr. Whitfield. The gentleman yields 5 minutes to the
    gentleman from Louisiana.
        Mr. Scalise. I thank the gentleman for yielding. Mr.
    Inslee's idea, I will be happy to take him up. If challenging
    the President to a game of one-on-one basketball gets me a
    meeting with him, so we can talk about this crisis that has led
    to thousands of job losses and higher gas prices, I will be
    happy to challenge the President to basketball.
        And frankly, I think I could take him in a game of one on
    one. I have seen him throw a baseball. So I will be happy to
    offer up that challenge, and hopefully, the President accepts.
    And during the game, we can talk about the fact that you have
    got thousands of people who have lost their job and cannot get
    a response from this administration.
        And this problem is getting worse. When you talked about, I
    think, Mr. Adams, you talked about the revenue losses. I think
    the second largest generator of Federal revenue, next to income
    taxes, is the revenue paid by the oil and gas industry. I know
    a lot of people like to beat up on the oil and gas industry and
    then act like they are not paying any taxes; the second largest
    generator of Federal revenue is the oil and gas industry,
    primarily because of leases, the bonus bids, the royalties, not
    only to Federal Government, to State and local government. And
    with this attempt or this--not attempt, this policy of the
    President to shut down this industry, just what would that mean
    terms of revenue?
        And I think you had some recent revenues of how much money
    the Federal Government collected on all of these various form
    of payments from the oil and gas industry. Can you, Mr. Adams,
    touch further on that?
        Mr. Adams. I believe, my testimony, I had $1.4 billion in
    taxes directly from our segment.
        Maybe Mr. Noe could help me with the full royalties. I
    would like to make two points real quickly. Taking credit for
    last year's production is like the farmer asking the banker to
    give him credit based on last year's yield when he has failed
    to put in a crop this year. It just doesn't work.
        And the other part of this whole economic and jobs argument
    that I think needs to be appreciated is exploration is labor
    intensive. It is capital intensive. Production is production.
    The best production doesn't require intense labor or intense
    capital.
        And so that is why the vessels that serve these deepwater
    rigs, which are the hive, and our vessels are the bees of
    activity, that is why we are in an economic depression right
    now.
        Mr. Scalise. Mr. Noe, did you want to also follow up on
    that?
        Mr. Noe. I just echo on what Mr. Adams said. The biggest
    benefactor and really if you think about it the biggest oil
    company in the world and the biggest shareholder of any oil
    company in the world is the U.S. Federal Government. The U.S.
    Federal Government controls offshore leasing and, since 1982,
    has received over $200 billion from a variety of royalty
    payments, lease payments et cetera. It is in the billions; of
    course, not just from leasing activity but from bonuses paid
    for lease sales, which is important to note that this year, in
    2011, will be the first year in 60 that we haven't had a lease
    sale. The Department of the Interior----
        Mr. Scalise. The first time since when? I am sorry to
    interrupt you.
        Mr. Noe. In the last 60 years. We have had an offshore
    lease sale for a generation.
        Mr. Scalise. Just using the logic of the President if he is
    going to try to take claim for production today that was
    authorized, explored years ago, I guess, in a few years, that
    means that a future President is going to have a big reduction
    in production, and I guess the President will blame that next
    President because of the policies that are being made today
    that are strangling this industry. Would that be an accurate
    statement?
        Mr. Noe. That is accurate. And to respond to the
    Congressman from Washington, this industry is purely supply and
    demand. He is absolutely correct that supply is on the
    increase--or demand is on the increase from places like India
    and China, who have recovered much faster from a recession than
    we had anticipated, and that increase in demand requires a
    barrel for barrel increase in production if you are going to
    keep prices flat.
        And what we have seen is a decline in production. So if
    demand goes up, just economics 101, if demand goes up, supply
    goes down, make no mistake that prices will go up and that is
    what we are experiencing now.
        Mr. Scalise. Historically, when you look through this time
    of year, during the winter, is typically when gas prices are
    going down. The summer is when they go up. And this is a
    historically high level of gas prices, not because of what is
    going on; in fact, the gas prices were rising well before the
    events in the Middle East and North Africa. It was because of
    the President's policies.
        And I want Dr. Mason and maybe Mr. Pugliaresi to comment on
    this because you talked about not only the lost revenues but
    also the supply and demand issue and the policy, the Federal
    policy shutting off production will actually lead to higher
    prices today. If you all can finish with that.
        Mr. Mason. If I may, I just wanted to mention I did talk
    about the lost tax revenues from the Gulf closure, those I have
    estimated to be on the State and local level of about $155
    million so far and counting; on the Federal level, about $350
    million. It is just very simple math. If people don't have
    incomes, they are not going to pay income taxes and they are
    not going to spend income that they don't have to generate
    sales taxes.
        I would also like to follow up on the analogy of the
    cancer, if the doctors wanted me to follow a course of
    treatment for my cancer that could cause another cancer, I
    would think twice about following that course of treatment,
    especially if the doctors were paid by the drug companies that
    were sponsoring that course of treatment. So there is a pure
    conflict of interest there. Thank you.
        Mr. Scalise. Thank you, Mr. Chairman.
        Thank you, Mr. McKinley.
        I see I am out of time.
        Mr. Whitfield. At this time, I recognize the gentleman from
    Colorado, Mr. Gardner, for 5 minutes.
        Mr. Gardner. Thank you, Mr. Chairman.
        And thank you to the witnesses for being here today and
    spending time with us to share your expertise.
        Just a question for you, if I could start with Mr.
    Pugliaresi, if I could start with you and just answer this
    question perhaps down the line, do you believe the
    administration is doing enough to help lower gas prices by this
    summer?
        Mr. Pugliaresi. No, absolutely not. Of course, it is hard
    to know what expectations, how they may shift things. But as we
    say, if we had a very aggressive development program, if we had
    approved Keystone, if we had not denied the permit for Shell to
    drill in the Beaufort Sea, we are creating a set of conditions
    out there in which it appears that we are unwilling to produce
    our own resources.
        Mr. Gardner. Dr. Mason.
        Mr. Mason. I think there are two things that can reduce gas
    prices. The one that people typically point to is increasing
    supply. So, certainly, if we had enough supply on line, demand
    would adjust to supply and we would see lower prices.
        The other thing, though, is reducing demand. And it strikes
    me that nobody has really talked much about what I think was a
    very good idea that the Republicans advanced a little while
    back about revisiting some old regulations and doing away with
    them. And one key regulation we still have on the books
    prohibits the production of high mileage diesel automobiles in
    the U.S. because of old, stinky 1970s diesel, which is not even
    available in the U.S. anymore. We can have 65-miles-per-gallon
    cars right now with the stroke of a pen. Nobody wants to do it.
        Mr. Gardner. Could you send me information on the
    regulation you were referring to? Thank you.
        Dr. Cooper.
        Mr. Cooper. The ability of the President or any other
    policy maker in Washington to affect the price of gasoline by
    the summer is quite limited. It is the long-term decisions that
    we make. I look on the demand side and see if we actually
    adopted a 15-year program to double our gasoline mileage 15
    years ago, we would have twice as much spare capacity in the
    world, and we would be a lot better off. So in the short term,
    I think short-term fixes are a mistake because they only make
    the long-term problem more difficult.
        Mr. Gardner. So do you think the Obama administration has a
    plan to deal with increasing gas prices?
        Mr. Cooper. I think any administration that said they had a
    plan to deal with gasoline prices would be whistling in the
    wind, as every one of the past seven Presidents have been. They
    simply--President Bush was faced with constant ups and downs in
    gas prices, and he never had a plan. Jimmy Carter didn't have a
    plan.
        The simple fact of the matter is that the President's
    ability to affect the price of gas in a 30-day or 60-day or 90-
    day period is extremely limited. And it is a mistake to claim
    you can do things that you can't do.
        Now it might be fun to blame him, depending on which side
    you are on. But the simple fact of the matter is that, and you
    have heard it here today, taking responsibility or throwing
    blame at Presidents, especially over the short term, is just a
    political game. It has nothing to do with sensible policy.
        Mr. Adams. Thank you, sir.
        I believe the President's moratorium is planned moratorium,
    is raising gas prices and killing jobs.
        Mr. Gardner. Mr. Daniels.
        Mr. Daniels.well, I am just a small businessman, not an
    oilman, but I can tell you this, the only way the President or
    this government can control the price of gas is to socialize
    it, and Heaven forbid that happen. That won't happen.
        With that said, the only other way he can control gas--I
    noticed something else when it comes to supply and demand as it
    is in most businesses, as we do business at our peril, it used
    to be on the other end supply and demand. Now, as a business,
    we demand as much as they can pay. And now we are dealing with
    what I call the squeal factor. Unfortunately, we have graduated
    a few folks coming out of Harvard maybe who feel, OK, we have
    to get everything done on time, we have got to have production
    below, above the expectations and completion below the----
        Mr. Gardner. Mr. Daniels, I am sorry. I have to make sure
    we get to everybody.
        Mr. Noe.
        Mr. Noe. Just one quick thing. I said that this is the
    first time in 60 years--actually, it is the first time in 45
    years that we don't have a lease sale. But I would say, look, I
    don't want a sound bite. I don't want to testify before
    Congress. I want to go back to Houston and put my workers back
    to work. And I want to drill for oil and gas. I am not out to
    blame anybody, but I will say that if you let me go drill for
    oil and gas, I am going to produce more and that will impact
    gasoline prices.
        Mr. Gardner. Mr. Massey.
        Mr. Massey. My focus today really should be on the marine
    well containment company. I can say that our members have
    permits in, and if they are allowed to drill and those wells
    are successful, that is new production, and new production is
    good.
        Mr. Gardner. Mr. Noe, President Obama last week said, ``I
    will go anywhere any time to be a booster for American
    businesses, American workers and American products.''
        In your opinion, does domestic energy development boost
    American businesses, American workers, and American products?
        Mr. Noe. Absolutely. And not just for oil workers, as we
    mentioned, it is the hard hat manufacturer in Pennsylvania; it
    is the steal toe boot manufacturer in Red Wing, Minnesota. This
    is a nationwide economic tragedy that is occurring.
        Mr. Whitfield. At this time, I recognize the gentleman from
    West Virginia, Mr. McKinley, for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman.
        Dr. Cooper, can you tell me a little bit, this is the first
    opportunity I have had to talk to someone about the CAFE
    standards. What happens to a manufacturer who does not meet
    these those standards? Are they fined?
        Mr. Cooper. Well, in the past, they had been fined, but it
    turns out they haven't frequently paid fines. They have been
    excused from fines. But that is part of the program, is the
    incentive to meet the standard is to pay the fine, and
    therefore, it is better to meet the standard.
        Mr. McKinley. I was suspicious that they were fined,
    whether they paid them or not or however they worked out those
    things. What I don't understand is, from the free market, if
    people, if your statistics are correct, that people want cars
    to have 60 miles per gallon, why aren't they manufacturing them
    then? And why is it that the Federal Government is going to
    step in and say, we know better than the public? If the public
    really wanted cars at 60 miles per gallon, can't they buy them?
        Mr. Cooper. In point of fact, the supply side of the
    automobile market is not perfect. And so you had American
    manufacturers who completely missed the shift in demand, and
    they kept manufacturing gas guzzlers, because their rate of
    profit internally is higher on gas guzzlers than it is on
    efficient cars. And now, having gone through bankruptcy, GM has
    reproduced itself, recreated itself as an efficiency-oriented
    company. They said they will meet the 60 miles per gallon,
    Toyota has said they will meet the 60 miles per gallon. So a
    standard, here is what a standard does. It takes the risk out
    of investing in those technologies because they now know----
        Mr. McKinley. I like the idea of having cars that have 60
    miles, but that should be my choice as a consumer and not the
    Federal Government. Honestly, I tell you I can't find anything
    in here, in the Constitution, that allows us this right to tell
    the public or tell the manufacturers, can you share with me
    what section of the Constitution, where would I find it in
    there that says we are going to set the standards for
    automobiles?
        Mr. Cooper. Well, the, as interpreted by the courts for at
    least in the case of fuel economy standards, for 40 years----
        Mr. McKinley. Can you get back to me on that?
        Mr. Cooper. I will be glad to give you a legal history of
    why it is that the government can protect the American people.
    So now every time you consume a barrel of oil, you are sending
    a troop to the Middle East.
        Mr. McKinley. Sixty-mile-per-gallon car, but you are going
    to put more people at risk because you know very well that
    individuals that are injured that are in impact accidents in
    smaller vehicles to achieve your ideologically driven
    motivation is more highly likely to be injured in an accident--
    --
        Mr. Cooper. Absolutely not.
        Mr. McKinley. You know that?
        Mr. Cooper. Absolutely not.
        This standard does not require weight reduction, and if it
    did require weight reduction, it would be with high-strength
    materials. Science has produced much stronger materials that
    weigh less. So there is absolutely no reason to believe that
    that is the case.
        Mr. McKinley. You are not denying that there are more
    injuries in smaller cars, is that what you are trying to tell
    us, this panel, that you are safer in a small car----
        Mr. Cooper. Today?
        Mr. McKinley. Getting gas mileage with safety----
        Mr. Cooper. With air bags, you are safer in a smaller car
    today than you were in a bigger car 30 years ago. With
    seatbelts, which the industry never gave us. Let's talk about
    seatbelts. Now there is a government program that infringed
    your freedom to sit in a car without a seatbelt and impose all
    kinds of costs. Are you against seatbelts? Absolutely not.
    There are millions of Americans alive today because the
    government decided that seatbelts and air bags were good for
    you.
        Mr. McKinley. Just tell me what section it is.
        Mr. Cooper. You didn't know well enough to know that you
    needed a seatbelt or an air bag. So we helped you out.
    Seatbelts and air bags. Think about it. Tell your constituents
    that they really should be in cars without those safety
    features. The industry never gave us those. The regulation did.
        Mr. Whitfield. At least we have some enthusiastic
    witnesses, which I think is important.
        Mr. Rush. Mr. Chairman, in our chamber it's been our
    practice that the witness should be allowed to answer the
    question, so you cut him off in the middle of his answer.
        Mr. Whitfield. Dr. Cooper, do you want to make another
    statement?
        Mr. Cooper. Obviously, there is a philosophical difference
    here, and I have got millions of live people who are actually
    better off because we told them to wear seatbelts.
        Mr. Whitfield. We want to have lively hearings, and we
    appreciate your being here.
        And Mr. Daniels, it is my understanding that, as much you
    don't want to leave, you need to leave. So we will excuse you.
    We do thank you for joining us, and we look forward to being in
    touch with you more on these issues. Thanks for attending the
    hearing.
        At this time, I recognize the gentleman from Texas, Mr.
    Olson, 5 minutes.
        Mr. Olson. Thank you, Mr. Chairman, and thank you to the
    witnesses for coming today and giving us your expertise.
        And I promise I am not going to have some of the fireworks
    that my colleague from West Virginia had because I am not going
    to talk about or ask questions about CAFE standards. I want to
    get back to the Gulf. And I am going to ask you basically three
    questions: The first one is kind of, when do you think this
    economic nightmare is going to end?
        We have had a moratorium that supposedly the court threw
    out that was lifted, replaced by a permatorium. And in my
    opinion, the industry, this was a great safety record, 20 years
    out there drilling in the deep water, and the largest oil spill
    in American history, I grant that, and the industry has
    responded as best they could.
        One thing the industry did all by themselves, and Mr.
    Massey, I think you are somewhere down at the bottom of this
    picture, but this was an industry driven solution to the
    problems we encountered in April with the Macondo well.
        And again, one thing we can't get a handle on here is what
    is really happening out there in the Gulf?
        And so the question I have for probably you, Mr. Noe, and
    Mr. Adams and Mr. Massey, is how many rigs, how many deepwater
    rigs have left the Gulf as of today?
        Mr. Noe. Congressman, there have been I believe 12 rigs
    that have left the Gulf since April and others that are
    negotiating contracts, long-term contracts, outside the Gulf of
    Mexico. In May of 2010, there were 25 floating rigs and 39
    shallow-water jack-up rigs actively working in the Gulf of
    Mexico. By January of this year, only 8 floating rigs and 27
    shallow-water rigs were actively employed in Gulf of Mexico
    activities. So rigs are in fact idle and either idled in the
    Gulf of Mexico and have laid off their crew or, like Hercules,
    are keeping their crew on the payroll despite the fact that the
    rigs aren't working, and then we have seen other rigs leave the
    Gulf of Mexico entirely.
        Mr. Adams. So we have had 60 highly technically capable
    offshore vessels leave the Gulf of Mexico for foreign
    operations.
        Mr. Olson. So, basically, we have been taking American jobs
    overseas and increased our dependence on foreign oil.
        Mr. Adams. In the case of the vessels, that is 1,100 U.S.
    jobs for those vessels. And those jobs, as they enter into
    foreign markets, will by the requirement of most countries be
    replaced with foreign nationals.
        Mr. Noe. Congressman, I will add that when rigs leave, it
    has a cascading negative impact on America.
        First, obviously, the rig is no longer available to produce
    domestic sources of oil and natural gas. The jobs leave with
    the rigs. The tax revenue that is generated from the economic
    activity associated with those rigs leaves as well.
        And then we can't forget the fact that we spend nearly $1
    billion each and every day on buying oil from foreign sources
    from the Middle East, from North Africa, almost $1 billion a
    day. And so when those rigs leave, they just produce oil and
    gas in some far flung land, and we are just going to buy it
    back and give it to some potentially hostile regime to put on a
    tanker and to float it up into our ports.
        Mr. Olson. Again, less American jobs, more dependence on
    foreign oil.
        One last questions, this is more about the jobs. Mr. Adams,
    I want to say I have seen, I have heard the testimony specific
    to what you are talking about, about the small companies and
    what they are doing to carry on.
        And I think Mr. Scalise was there and Dr. Mason. We went
    down to New Orleans in August I believe it was, Steve, and we
    had a woman who ran a--she was the president of a rig, a boat
    company that was going back and forth to the rigs, about 30
    employees. We asked her, how are you getting by? And she said,
    well, I have had to cut the pay of two of my people, herself
    and her husband. They were taking nothing to carry the rest of
    their people as long as they could until this moratorium got
    lifted.
        Dr. Mason, this question is for you, the administration, I
    have seen estimates they did about the job loss somewhere in
    the 22--somewhere under 30,000 jobs across the country. And I
    know you have done some research that indicates that that is
    just a drop in the bucket. It is much more than that, with all
    you take, all the indirect costs, just not throughout the Gulf
    Coast but throughout our entire Nation. And I wonder if you
    could elaborate more on the job costs, just not what is
    happening now, the direct jobs, but what is going to happen in
    the future and how it is going to impact or economy negatively.
        Mr. Mason. Thank you. First, I would like to point out that
    the administration's estimates were, for no explainable reason
    and no empirically justifiably reason, cut in half to reach
    their final numbers. They have never explained that. They have
    never defended it, but knowing what I know about the
    methodology, I know there is no reason for it either.
        The losses continue to mount. They just continue to build.
    And as others have pointed out, these losses are to the Nation.
    The drilling pipe comes from steel mills in Ohio, Indiana,
    around the Chicago area, where I grew up. All those materials
    come from throughout the Nation. We are an integrated economy.
    It is an economic fact that if you raise costs for businesses,
    there will be less production.
        But it appears that, with respect to your first question,
    Mr. Olson, when will this end? I hate to say it, but I think it
    goes far beyond energy and oil and gas. I think that it is a
    far-reaching problem throughout regulatory agencies. We have
    the example of the EPA regulating carbon, which is still
    challenged as whether it is within their authority. The EPA
    previously regulated tallates in a similar way with a
    permatorium; this is nothing new. They did both without any
    economic impact studies whatsoever. The EPA hasn't conducted an
    economic impact study in decades.
        We are going after the--well, Consumer Financial Protection
    Bureau is now trying to regulate foreclosures backdoor through
    a settlement. And so, you know, BOEMRE is just following in the
    footsteps of other agencies and I guess doing what modern
    agencies do. And unless we are ready to constrain regulatory
    agencies and their activities to affect economic growth and of
    willy-nilly, well, we are going to have this same yanking
    around.
        Mr. Olson. Thank you, Dr. Mason.
        Mr. Chairman, if I can yield back no time, I yield it back,
    thank you.
        Mr. Whitfield. You did a good job at that, thanks. This
    time I recognize the gentleman from California, Mr. Bilbray,
    for 5 minutes.
        Mr. Bilbray. Thank you very much.
        Mr. Cooper, do you think there is any short-term or long-
    term benefit for America opening up more public lands for oil
    exploration and exploitation?
        Mr. Cooper. Consumer Federation is a consumer group. We
    don't deal with environmental questions. I believe that supply
    can help. Unfortunately, it becomes a distraction, not a
    solution. So the potential contribution from the demand side--
    --
        Mr. Bilbray. OK. Now would you agree that research and
    development of second-generation green fuels would be
    beneficial for long-term approach of----
        Mr. Cooper. Supply side can help us lower--well, it
    probably wouldn't affect the world price of oil.
        Mr. Bilbray. I am not talking about supply and
    independence.
        Mr. Cooper. It will create domestic sources----
        Mr. Bilbray. All right. Let me give you two scenarios. We
    today are exploring billions and billions of dollars to the
    Third World by buying oil overseas while we have oil potentials
    within our own boundaries. What if I propose to you that this
    Congress passes a law that any new areas opened up for oil
    exploration will have those revenues or a portion of those
    revenues committed to a fund, much like what we have done with
    interstate freeways, and that is have a committed fund directly
    for a certain purpose. And what I would propose to you is, what
    would be your reaction to a piece of legislation that said we
    will now open up public lands for exploration with the funds,
    profits from that being dedicated to next-generation green
    fuels? So rather than our money going oversees to Third World
    countries, it may go into the United States, but a large
    portion or a portion of it will be set aside to develop those
    next-generation fuels.
        Mr. Cooper. We firmly believe in compromise, pragmatic
    legislation. I would bargain for a firm commitment to a much
    higher fuel economy standard, because that will do us a lot
    more, but we will certainly look at it. And my resolutions
    don't oppose that. We really want to make sure we use the
    royalties well.
        Mr. Bilbray. Well, the fact is, sir, if we went to diesel,
    you know those numbers and you saw what happened in the 1970s.
    I was a member of the Air Resources Board, so I have watched
    this stuff. I was a member of the air district--I mean, the ARB
    in California. So I have watched this thing go. The fact is,
    though, we cut get better mileage, but the fact is diesel is a
    toxic emission, mega times over what dioxin is, so a lot of
    these things have offsets that we have to look at. But my
    question again is the fact that we have these options that we
    can develop it.
        You were talking about the CAFE standards. Are you aware
    that the CAFE standards are set with 100 percent fossil fuel as
    the fuel being used to set those standards?
        Mr. Cooper. Going forward, we are incorporating other fuels
    in there. So we clearly have a----
        Mr. Bilbray. Whoa, whoa, whoa. Who is----
        Mr. Cooper. We have a flexible fuel offset in the current
    standards. We are looking at how to deal with electric vehicles
    in future standards.
        Mr. Bilbray. OK, let me--right now, EPA tells me, as they
    always have, they are using fossil fuels, 100 percent, even
    though that is illegal in the United States. No consumer in
    America has the right to buy fuel for his system that doesn't--
    that is 100 percent fossil fuels; that is not an option for
    consumers today. But the Federal Government continues to use
    that in their standards.
        Mr. Cooper. The standard clearly has an offset for
    flexible-fuel vehicles, which actually assumes----
        Mr. Bilbray. I am not talking flexible fuel. I am talking
    about the fact that you are mandated to put ethanol in your
    fuel today; nobody can sell gasoline without ethanol. Ethanol
    has only 70 percent of the carbon chain, and you do agree that
    ethanol is a mileage-robbing additive into our fuel stream.
        Mr. Cooper. Actually, the jury is out on what it does to
    mileage because of the way it affects knocking and efficient
    burning.
        Mr. Bilbray. Wait, whoa, you are telling me as an expert in
    this that you feel that ethanol gives the same mileage as
    gasoline does?
        Mr. Cooper. No, I said I have seen evidence on both sides
    of that, but it is----
        Mr. Bilbray. Before you go any further, I would be very
    interested, sir, to see that.
        Mr. Cooper. I will submit that.
        Mr. Bilbray. I am telling you, in the 6 years at ARB, we
    knew that this was a problem in California in 1992 when the
    Feds were looking at this. I have watched this issue go over.
        Now, I will just say this, when you get to the mileage,
    that that additive, we now have laws in this country that says
    if you have alcohol, if you use ethanol, you get the tax write-
    off, you get the mandate, you get subsidized. But if you come
    in with green fuel, algae fuel----
        Mr. Rush. Regular order, Mr. Chairman.
        Mr. Bilbray. OK. I am just asking, do think it is fair that
    we are giving ethanol priority for mileage?
        Mr. Rush. Regular order, Mr. Chairman.
        Mr. Cooper. Well, clearly, if you produce a flexible-fuel
    vehicle, you get to assume that it always runs on the flexible
    fuel, which is a tremendous benefit under the standard.
        Mr. Bilbray. Mr. Chairman, let me clarify, we are not
    talking flexible fuel.
        Mr. Rush. Regular order, Mr. Chairman.
        Mr. Whitfield. Mr. Rush, I am going to let these two
    continue their explanation.
        Mr. Bilbray. I ask unanimous consent----
        Mr. Whitfield. Hold it a minute.
        Now, what you were saying?
        Mr. Bilbray. I would ask for unanimous consent for 1 more
    minute, please.
        Mr. Whitfield. All right. We have a unanimous consent
    request for one additional minute.
        Mr. Bilbray. Sir, you have to understand, I am not
    talking----
        Mr. Whitfield. Wait a minute, Mr. Bilbray.
        Mr. Rush. Mr. Chairman, I don't object, but let's make it 1
    minute. This has been back and forth for an enormous amount the
    time.
        Mr. Whitfield. All right.
        Mr. Bilbray has 1 minute, and Dr. Cooper----
        Mr. Bilbray. Mr. Cooper, I was trying to clarify. We are
    not talking flex fuel. We are talking every automobile that
    burns gasoline is required to have ethanol in its mix. We are
    trying now to go to second generation, but the laws, the tax
    laws, the mandates and everything else do not give next-
    generation fuels the same tax breaks that corn ethanol is
    getting today. Do you think we should continue to maintain the
    subsidy for first generation, which you and I know was always
    supposed to be abandoned and moved to two, do you think we
    should abandon that system we have now and allow second
    generation the same tax breaks and same opportunities to
    replace first generation?
        Mr. Cooper. The Consumer Federation has in fact supported
    and underscored the importance of the second generation. So I
    am perfectly happy with that approach. We believe that the
    second generation will produce a much more environmental----
        Mr. Bilbray. Even though they don't get the tax cuts now?
        Mr. Cooper. Well, there are lots of things we would fix in
    the tax law, make no mistake about it.
        Mr. Whitfield. OK, time has expired.
        And Dr. Cooper, you and Mr. Bilbray can meet outside and
    finish this discussion if you would like.
        Mr. Cooper. He believes as strongly as I do.
        Mr. Whitfield. I know. And I think you agreed to provide us
    some additional information and the committee will get back for
    those of you who had committed to provide additional
    information.
        So this concludes this hearing. And the record will remain
    open for 10 days for additional materials and statements.
        And with that, we thank you very much for your time, for
    the information that you provided and look forward to seeing
    all of you again soon.
        The hearing is adjourned.
        [Whereupon, at 12:01 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
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