[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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                    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.
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    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:]
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    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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