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


 
AMERICA'S ENERGY FUTURE, PART I: A REVIEW OF UNNECESSARY AND BURDENSOME 
                              REGULATIONS 

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2012

                               __________

                           Serial No. 112-163

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 13, 2012....................................     1

                               WITNESSES

Mr. C. Michael Ming, Secretary of Energy, State of Oklahoma
    Oral Statement...............................................     6
    Written Statement............................................    10
Ms. Patrice Douglas, Commissioner, Oklahoma Corporation 
  Commission
    Oral Statement...............................................    14
    Written Statement............................................    16
Mr. Mike McDonald, President, Triad Energy, Inc.
    Oral Statement...............................................    26
    Written Statement............................................    28
Ms. Patricia D. Horn, Vice President for Governance and 
  Environmental Health and Safety, OGE Energy Corp.
    Oral Statement...............................................    36
    Written Statement............................................    39
Mr. Brian Woodard, Vice President of Regulatory Affairs, Oklahoma 
  Independent Petroleum Association
    Oral Statement...............................................    58
    Written Statement............................................    61
Mr. Joseph Leonard, Environmental Health and Safety Engineer, 
  Devon Energy Corporation
    Oral Statement...............................................    64
    Written Statement............................................    66


AMERICA'S ENERGY FUTURE, PART I: A REVIEW OF UNNECESSARY AND BURDENSOME 
                              REGULATIONS

                              ----------                              


                         Friday, July 13, 2012

                  House of Representatives,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The committee met, pursuant to call, at Constitution Hall, 
University of Central Oklahoma, Edmond, Oklahoma, Hon. Darrell 
E. Issa [chairman of the committee] presiding.
    Present: Representatives Issa, Lankford and Farenthold.
    Staff Present: John Cuaderes, Majority Deputy Staff 
Director; Linda Good, Majority Chief Clerk; Kristina M. Moore, 
Majority Senior Counsel; Cheyenne Steel, Majority Deputy Press 
Secretary; and Donald Sherman, Minority Counsel.
    Chairman Issa. The Committee will come to order.
    Welcome, to all of our guests. Today we come to Oklahoma 
City at the request of Chairman Lankford. As members of the 
committee that oversees all of Government, the most important 
part of Government is our relationship with the private 
sectors, job creators. So our field hearings, around the 
country, including here in Oklahoma City today, are about 
finding out how jobs are created and what the impediments to 
job creation are, red tape, stumbling blocks of all sorts, 
sometimes simply Government not getting out of the way, are 
what we usually hear about.
    Today, obviously, the subject will be energy and energy 
independence at a time when America imports as much oil as it 
produces and, yet, we find in oil and natural gas, in coal and 
other minerals, we could be self-sufficient.
    Our Committee is here today to find out why we are not. 
When asked to come to Oklahoma City by Chairman Lankford, I not 
only said yes, but I said when would be the best time to do it? 
And he said it's beautiful in Oklahoma City all year. Not 
believing that, I consulted with the weatherman, and they said, 
you know, you can come anytime to Oklahoma City and you will 
get weather.
    So, James, I want to thank you for providing the kind of 
weather we hoped for today.
    Additionally, Mr. Farenthold has come from Texas. He will 
make an opening statement. He will insult Oklahoma 
appropriately by calling it some portion of northern Austin. Be 
prepared for it.
    I will close what is an informal opening statement by 
making it clear that I do have a connection to Oklahoma. Now, 
my connection is tenuous, but I want you to understand that we 
can stretch to it, because Blake may stretch to it. Boone 
Pickens' wife is my constituent. So I know Boone comes to 
Oklahoma from time to time to give a few bucks to universities, 
a few, but not necessarily here. I didn't see the stadium at 
this particular location.
    But you do have three members of Congress who each have 
something in common. We all claim Boone Pickens, which means we 
all understand that America is the Saudi Arabia of natural gas. 
And, in fact, we could have a--we do have an abundance of a 
very clean fuel, one that, if we use, should please both the 
left, who want us to reduce our carbon footprint, and the 
right, myself included, who want to know that America can feed 
itself the energy that changed the Stone Age because, as a 
friend of mine once said, the Stone Age didn't end because it 
ran out of stone; it ended because we learned how to harness 
energy.
    And with that, I recognize--actually, I'm going to save you 
for last, Mr. Farenthold, for his opening statement. And then, 
Chairman, if you would introduce the Panel in your Opening 
Statement, I'd appreciate it.
    Thank you.
    Mr. Farenthold. Thank you, Chairman Issa, Chairman 
Lankford, I'm happy to be up here north of the Red River. As I 
was so appropriately informed by Representative Lankford 
earlier this morning, I am not really from Texas. I'm from 
Baja, Oklahoma.
    I always thought Oklahoma was far north Dallas.
    I'll accept being from Baja. I'll accept being from Baja, 
Oklahoma, today.
    And, you know, energy is critical to our country. And the 
energy production and low energy prices we have right now 
overcome a lot of problems with American competitives. We have 
a higher labor rate, higher cost of doing business here in 
America and a higher regulatory cost. But our low energy prices 
make America a real good option for a revitalization of 
manufacturing jobs. If we cannot overcome paying our people 
well here, but we can overcome paying our people well here and 
an intrusive amount of Government regulations.
    So I think one of the things I would like to get out of the 
hearing today is impact and feedback from the Panel about how 
overegulation from Washington is affecting, not only the oil 
and gas industry, but overall, the economic development in 
Oklahoma and the remainder of the country.
    I think you will find that you've got a group of people up 
here from Congress, Chairman Lankford, Chairman Issa and 
myself. Chairman Issa is from California. Obviously, Mr. 
Lankford is from Oklahoma. I'm from Texas. That's three of the 
top five crude oil producing states in the country, and I'm 
proud to be in the top five with you guys.
    So I'm looking forward to listening to what our panelists 
have to say and then ask our questions in developing a record 
so we can take the Oklahoma experience back to Washington, 
D.C., and learn how it's being done in states like Oklahoma and 
Texas where it's working.
    Thank you.
    Chairman Issa. Mr. Lankford, I want to thank you for 
bringing us here. And the hearing is yours, at least through 
the introduction of this incredibly good panel.
    Mr. Lankford. Thank you. And I do want to say thank you, as 
well, Chairman. Thank you for bringing us here. It is an 
unusual thing to bring Washington to Oklahoma. We try to take 
Oklahoma to Washington. Now we're trying to turn that thing 
around, get some wisdom into it. So I really appreciate you 
being here. And for the staff that's here and for Blake, for 
being here, as well and being a part of it.
    I want to thank the University of Central Oklahoma, as 
well, for hosting this event and for allowing us to come to 
this great facility, this great room.
    And then, also, our witnesses, which I will introduce in 
just a moment, I have a formal opening statement, I will get a 
chance to read through it, to set the tone for what we're 
trying to accomplish today, to be able to set some of those 
questions there.
    Since the 1970s and all the energy crisis and all the 
spikes in fuel costs, our nation has talked about an energy 
policy that would make our nation energy independent. We're all 
used to the comments of why aren't we energy independent. We 
focus on exploration, on supply lines, on diversification of 
fuels, renewable fuels, natural resources, the environment and 
more.
    We've asked ourselves, do we consume too much? Do we 
produce too little? Or are our resources, are they just in 
short supply?
    In the middle of this four-year journey, we invested in 
oil, coal, natural gas, hydroelectrics, solar, nuclear, 
geothermal, biofuels, hydrogen and multiple other experimental 
fuels. But we're not energy independent yet. Not even North 
America is energy independent yet.
    What I want to know is why? What's preventing us from 
obtaining energy independence.
    Our economy runs on inexpensive and reliable energy, 
millions of jobs are created by energy.
    If we can move from talking about it to actually doing it, 
our energy independence could make the difference in the 
American economy.
    Around 300 billion dollars a year is spent on purchasing 
crude oil from foreign sources, which is a tremendous drain on 
our economy.
    We have to deal with the national security and the 
implications of that, as well, depending on foreign sources.
    Our Navy just sent out the green fleet for a test run on 
biofuels that cost $27 a gallon. The goal is to find a way to 
function our military on fuels that we can grow and produce so 
we're not at risk for a fuel shortage in the time of war.
    That's a noble cause, but, again, it begs the question, why 
can't we produce our own energy at a reasonably rate and ample 
supply.
    I want to know today, is it our lack of supply? The 
President loves to imply that we're running out of oil, and we 
have to switch to other fuels. He repeats often, two percent of 
the world's crude in reserves, but we use 20 percent of the 
world's oil. Are we running out?
    In the 1970s, President Jimmy Carter's administration 
focused--forced the electricity generation towards coal, 
because he believed that we were running out of natural gas, 
and we need to use an abundance fuel for electricity 
generation.
    Now that Oklahoma is demonstrating an incredible abundance 
in natural gas in America, this administration has turned it's 
attention to attacking natural gas for exploration and usage.
    I want to know, is it our regulatory environment? The 
Federal Regulations and guidance appear to be in front of 
science at times. The BLM and EPA have already made major moves 
against hydraulic fracking. But in 2010, a Congressionally 
mandated study of fracking has not even released its draft 
findings for it's first year of the study. For the past two 
years, in fact, the EPA has studied the nations five worst 
environmental sites around fracked wells to look for any 
environmental consequences.
    And though the studies have not been released, it's my 
understanding, that the initial findings were actually very 
positive. The first year of the study, without any conclusive 
findings, will be released late this year and, by the way, 
right after the election. And the final data will be released 
in 2014. The control wells in the frac state have not even 
begun the field research yet.
    But the lack of evidence hasn't slowed the frequent 
guidance of regulation concerning fracking for the Federal 
Government.
    The same is true for air quality around the sites. The EPA 
has manipulated gas release data from flowback from a few well 
sites and extrapolated that data onto all producers, when, in 
reality, even the initial data study, the three company's 
flowback was seriously flawed, and it's been demonstrated the 
EPA is flawed. But that doesn't seem to slow down the EPA 
assault on admissions around well sites. And, in fact, it's 
estimated that the EPA overestimated the release by 1,400 
percent. That's a slight error.
    What's ironic is the Regional Haze rule policy that came 
about because environmental groups sued the EPA, and the EPA 
quickly settled with them in what we call ``sue and settle.''
    We can go on and on about the issues. It's just connecting 
science with the actual practice of energy. I want to know, is 
our regulatory environment slowing down our production?
    Permits for oil and gas and mining have dropped 
dramatically on Federal lands. The length of time it takes to 
acquire Federal permits to drill is ten times longer on Federal 
land than it is on private land.
    And when a project finally does move forward, brace 
yourselves for this, we have to still deal with the Department 
of Interior and Fish and Wildlife.
    Let me give you two Oklahoma examples you may or may not 
have heard of. In Western Oklahoma, we have a wild chicken 
called the Lesser Prairie-Chicken. This chicken, apparently, is 
a chicken, and it will not breed around anything tall and 
noisy. So Fish and Wildlife have stated it wants control over 
Western Oklahoma, and it wants to keep at least 64 percent of 
all of Western Oklahoma uncultivated to benefit the Lesser 
Prairie-Chicken.
    The Fish and Wildlife wants control over how many cows can 
graze in the field, how many fields or farms are for crops, 
when we put in roads, energy production, including wind energy, 
and much more.
    You may not know about that chicken right now, but once we 
begin more and more exploration of oil and gas in Western 
Oklahoma, you'll know more about it.
    In Southern Oklahoma, we have a multi-million dollar 
pipeline project on hold because a doctoral student in Kansas 
gave his work about burrowing beetles to Fish and Wildlife. 
Now, the Keystone Pipeline and other pipelines are on hold 
until they can prove they won't affect the beetle.
    Do you remember the President standing in front of a big 
stack of empty oil pipes, talking about how we're going to 
expedite all the permits for the Keystone Pipeline in the 
southern leg?
    Guess what. They've all stopped because Fish and Wildlife 
has shut it down, because of the burrowing beetle. It's common 
across Southern Oklahoma.
    I want you to know, I want to know, if we don't have energy 
independence because the Federal Government cares more about 
chickens and beetles than people and national security, I think 
we need to find that out.
    I want to know if the Federal Government is intentionally 
slowing down production by taking over the states primary to 
permit electricity generation and exploration.
    And I want to know if we're really running out of supply, 
so we have to move today a different fuel for our national 
survival. Today is the day for Oklahoma common sense.
    In the hearing the testimony of people who have to live 
with the Federal regulations and still provide energy that our 
nation requires to thrive.
    I really am looking forward to the testimony, and to the 
insight.
    Several of these folks, I have met before; several of them 
I have not. But I'm looking forward to your expertise.
    Let me introduce the people that are here.
    Michael Ming is the Oklahoma Secretary of Energy, 
incredibly knowledgeable and incredibly passionate about the 
future of our nation's energy independence.
    Patrice Douglas is our newest Commissioner of the Oklahoma 
Corporation Commission. The Oklahoma Corporation Commissioner 
is very well known in this room and in Edmond as the former 
Mayor of Edmond.
    Mr. Mike McDonald is the President of Triad Energy, Inc., 
and President of Domestic Energy Producers Alliance. He comes 
with a lot of experience and background on independent 
production.
    Patricia Horn--I think it's just Trisha Horn, isn't it--is 
the Vice President for Governance and Environmental Health & 
Safety of OG&E and has a great deal of knowledge about wind and 
about coal and about the background of how we use that for 
electricity generation.
    Mr. Brian Woodard is the Vice President of Regulatory 
Affairs of the Oklahoma Independent Petroleum Association and 
comes with tremendous background and experience in the 
regulatory environment.
    Mr. Joseph Leonard is the Environmental Health and Safety 
Engineer at Devon Energy Corporation and knows extremely well 
the issues that we face in the regulatory environments and in 
the environment in drilling and producing on Federal lands.
    So I'm honored theses guests are here.
    Mr. Chairman.
    Chairman Issa. Thank you, Mr. Lankford.
    Chairman Issa. The Oversight Committee exists to secure two 
fundamental principles. First, Americans have a right to know 
the money Washington takes from them is well spent.
    And, second, Americans deserve an efficient and effective 
government that works for them. Our duty in the Oversight and 
Government Reform Committee is to protect these rights. Our 
solemn responsibility is to hold Government accountable to 
taxpayers, because taxpayers have a right to know what they get 
from their Government.
    We have an obligation to work tirelessly in partnerships 
with citizen watchdogs to deliver the facts to the American 
people and bring genuine reform to the Federal bureaucracy. 
That is why we're here today.
    Pursuant to our Committee rules, I would ask that all the 
Witnesses please rise and take the oath. Raise your right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth and nothing 
but the truth?
    Let the record indicate all answered in the affirmative. 
Please take your seat.
    As promised before we began, I will reduce how we do 
business on the Committee to a simple stoplighting that we all 
deal with. In front of you there is a timer that has a green, a 
yellow and a red light. Green means go; the yellow means go 
fast to get underneath the light before it turns red. And red 
means get to the intersection and stop, if you're not in an 
intersection. If you have not reached the intersection, find a 
way to stop it anyway.
    So with that, Mr. Ming, if you would present your 
testimony, recognizing that, for all of you, your full 
testimony will be placed in the record. So you may go off 
script as you see fit to help make the record more complete.

                       WITNESS STATEMENTS

                  STATEMENT OF C. MICHAEL MING

    Mr. Ming. Good morning, Chairman Issa, and Members of the 
Committee. My name is Michael Ming. I currently serve as the 
Oklahoma Secretary of Energy under Governor Mary Fallin. I 
previously served five years as the President of the Research 
Partnership to Secure Energy for America, a nonprofit public-
private partnership, which I helped found, that manages the 
nation's unconventional natural gas and ultra-deep water 
research programs with oversight from the U.S. Department of 
Energy.
    Prior to that, I spent 25 years as an independent oil and 
natural gas producer drilling and operating wells as a hands-on 
operational petroleum engineer. So I have been at this business 
for over thirty years.
    I appreciate the opportunity to be here today before you to 
discuss the important topic of unnecessary and burdensome 
regulations, one that could not be more important at this 
critical time to our nation's security and economic well being.
    My comments today are of a general, but pointed, nature. I 
will discuss the roles of both Federal and State Governments in 
developing and enforcing regulations that should seek to 
balance the needs of producing reliable, secure, affordable, 
and environmentally acceptable energy supplies for America.
    While others may speak to specific examples of overreaching 
and onerous regulations, I will direct my comments to the 
diseased Federal regulatory culture.
    I will focus on three areas: (1) what appears to be a 
concerted agenda to push for Federal regulation over State 
regulation, especially around hydraulic fracturing; (2) the 
overtly compromised practices of Federal agencies, struggling 
to justify their existence in a world of reduced government 
budgets; and (3) a concerning increase in the influence and 
direct involvement of activist environmental groups in Federal 
research and regulation.
    To appreciate the rapid acceleration of this unprecedented 
regulatory effort, it is critical to first understand what has 
transpired in the last seven years in America. A literal 
tsunami of new but traditional energy supplies has totally 
disrupted our nation's energy future, starting first with 
unconventional natural gas from shale formations, progressing 
to unconventional oil from shales and now unlocking formerly 
marginal supplies of oil.
    While a few years back these newfound supplies of natural 
gas were viewed as just a clean bridge fuel to the future, they 
are now also unquestionably a part of our energy future for 
decades to come.
    2011 marked the highest annual U.S. natural gas production 
on record, eclipsing records from the early 1970's, and 
January, 2012, was the highest monthly natural gas production 
on record. And the United States is now the largest natural gas 
producer in the world. If the value of U.S. natural gas 
production was calculated based on its energy content relative 
to an oil-equivalent price, as it is generally elsewhere around 
the globe, it would imply an economic stimulus of approximately 
$300 billion per year to the U.S. economy. It is also likely 
that, in the next four or five years, the U.S. will erase 20 
years of oil decline, and depending on the forecaster, it is 
possible that North America could be energy independent in the 
next 10 years. Excessive regulation and the climate of 
uncertainty created thereby, places these opportunities and 
America's chance at energy independence at risk.
    Hydraulic fracturing has become the point of attack. It is 
both the key to accessing these new supplies, and it is the 
epicenter of the disruptive wave that ideologues are attempting 
to stop.
    These impressive developments have significantly changed 
the tactics of those who want to see traditional fuel use 
eliminated. Rather than attempting to make our energy system 
better, they would prefer to ideologically replace traditional 
energy at any cost. Yet, this view of the world ignores three 
critical aspects of energy policy: Balance; system 
optimization; and scale.
    First, all forms of energy have consequences, whether 
traditional or renewable. It is critical, therefore, to balance 
the tradeoff between human needs and environmental 
sustainability.
    Second, in order to optimize our existing energy resources, 
we must look at energy as a system instead of indiscrete fuel 
silos. This means looking for synergistic opportunities to 
leverage our energy resources, instead of simply using them the 
same way we always have.
    Finally, the issue of scale has to be acknowledged. It 
seems that some in Washington either don't understand this 
concept, or they don't want to understand it.
    Traditional fuels provide unmatched energy on demand at 
scale, today, and are, therefore, indispensable to our energy 
portfolio. It is also important to recognize that there is no 
better way to protect the environment than to have a strong 
economy. Environmental protection is clearly correlated to 
economic health. One only has to look at the developing world 
to understand this tragedy. Whether looking at the denuded 
hillsides in Haiti or Africa, experiencing virtually 
unbreathable air in Chinese cities, or witnessing unregulated 
toxic discharges in third-world countries, economic health is 
the gateway to environmental protection.
    In this light, it seems we are on a well- orchestrated and 
micro-managed path that sacrifices economic development in an 
ideological quest to eliminate all fossil fuels. It is 
disguised in the name of environmentalism and carried out under 
the auspices of regulation.
    I confess that I am both a capitalist and an 
environmentalist. One can be both. I lecture frequently on how 
traditional fuels in partnership with renewable energy and 
energy efficiency actually possess almost unlimited potential.
    Leveraged together and treated as a system, the combination 
can affordably power our nation's factories, homes, and 
economic future, while reducing emissions, improving system 
reliability, enhancing fuel diversity, and hedging price 
volatility.
    Just as importantly, it offers the first real opportunity 
in decades to essentially become energy independent. We can't 
let ideological regulation stymie the important role that 
capital markets can play in this evolution.
    There are those, however, who are not pleased with this 
grand disruption, and the unprecedented emergence of 
unconventional resources in time and scale based on private 
sector technology and innovation. This new supply of affordable 
energy has imparted a newfound sense of urgency to opponents of 
traditional energy. I believe these opponents play a key role 
in this new era of exceptional regulation. One only has to look 
at the recently announced Sierra Club's Beyond Gas campaign, 
which I believe actually sacrifices environmental benefits in 
the name of environmentalism.
    This Committee's recent hearing on sue and settle, or, as 
others have called it, a wink and a nod, only reinforces the 
perception of something that cannot pass the sniff test. Recent 
specific events that have highlighted the close connection of 
environmental activists to bureaucrats should be of great 
concern.
    Furthermore, there appears to be a huge conflict of 
interest between government research and regulation. In a 
recent hearing before the House Committee on Energy and 
Commerce Subcommittee on Energy and Power, Congressman Joe 
Barton revealed that a disturbing number of EPA's supposedly 
``independent'' Clean Air Scientific Advisory Committee were 
also recipients of Federal research funding. Such practices 
undermine scientific credibility, and lead to the most 
insidious form of science, where the experiments might be 
designed to produce the desired results.
    Furthermore, widely referred studies used to justify policy 
objectives simply because the conclusions fit the desired 
outcome even if the conclusions are flawed.
    Chairman Issa. If you could summarize.
    Mr. Ming. Excuse me?
    Chairman Issa. If you could summarize.
    Mr. Ming. Okay.
    Chairman Issa. I'm looking at the number of pages there.
    Mr. Ming. I've just got half a page, but I'll go to the 
summary.
    Chairman Issa. Thank you.
    Mr. Ming. I greatly appreciate the opportunity to speak to 
you today and encourage you to take a pragmatic and balanced 
approach to energy. While digging into specific overreaching 
regulations is one approach, it only addresses the symptoms. I 
urge you to look at the root of the problem, which is the 
diseased culture itself, and I have described three of the 
viruses: A perceived agenda to pre-empt State regulatory 
authority; unchecked growth in the bureaucracy; and the 
relationship of third-party activists in creating regulations.
    I also urge you, if you are so inclined, to consider 
reading Governor Fallin's Oklahoma First Energy Plan. It is a 
pragmatic and balanced plan, one that other states, and the 
Federal Government, can use as a template to optimize their own 
resources.
    Thank you for your invitation and your attention.
    Chairman Issa. Thank you. And thank you for the years in 
which Mary was a member of Congress. She gave us quite a few of 
those ideas during that time, too.
    [Prepared statement of Mr. Ming follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Issa. Ms. Douglas.

                  STATEMENT OF PATRICE DOUGLAS

    Ms. Douglas. Thank you for coming to Oklahoma and thank you 
for letting me be a part of this proceeding today.
    I would be remiss if I didn't welcome you to Oklahoma, but 
I would be extremely remiss if I didn't welcome you to Edmond 
as its former Mayor.
    So I am so glad you're here.
    Edmond is glad you're here, and we're proud to have this 
proceeding taking place here.
    I'm going to go off script. I'm going to talk a little bit 
about my perspective as a State Regulator. And I have to 
disclose to you that, in my former life, I was a banker. So I 
have a healthy skepticism of Federal Regulations. I have seen 
what Federal Regulation can do to an economy and to an 
industry. And so when I was asked to be on Oklahoma's Chief 
Regulating Board for so many industries, I brought the 
skepticism with me.
    I want to talk about three different things today. I want 
to talk, first, about the difference in a State Regulator and a 
Federal Regulator. I want to talk, also, about how Oklahoma has 
managed some of the national topics, like disclosure of 
chemicals in fracked fluids. I also want to talk to you a 
little bit about how I see this overlap into the utility 
industry and what I see coming for Oklahoma, based on some of 
the regulations that are being forced down on Oklahomans.
    First, I'm disheartened by the fact that we even have to 
talk about whether a State regulatory body should be in charge 
of the oil and gas industry, in charge of the utility industry, 
in charge of so many of the industries that we regulate.
    The State Regulators have vast amounts of experience. We, 
just this year, the Oklahoma Corporation Commission held over 
30,000 hearings. We issued over 10,000 orders, and more than 
6,500 of those orders involve the oil and gas industry.
    So in one year, we had 6,500 cases worth of experience in 
regulating the oil and gas industry.
    And then you multiply that times the fact that we have a 
regulator on our Commission who's been there for 24 years. And 
you can see the vast experience that we bring.
    The other thing that Oklahoma Regulators know and 
understand is that we've been fracking wells since 1948. And I 
think you can drink our water and you can breathe our air. 
We've been regulating this industry since the early 1900s, and 
we have, right now, over 190,000 active wells in Oklahoma.
    So the Corporation Commission has vast experience in 
regulating the oil and gas industry. We have a lot of 
expertise. And I believe, also, we're able to recognize that 
every individual is different, every State is different, as is 
every geological formation. So what fits in Pennsylvania 
doesn't fit in Oklahoma. One size does not fit all when it 
comes to regulation of this kind of an industry. And, as a 
State Regulator, I get to take into consideration what my 
industry in Oklahoma needs.
    Secondly, I want to talk to you a little bit about how we 
did a different approach with regard to the disclosure of 
hydraulic fracking chemicals. There was a big push--I'm sure 
you've seen it in the news, about how bad hydraulic fracking is 
and how concerned people were about the chemicals that were in 
hydraulic fracturing, the process.
    So we, in Oklahoma, decided to be a leader in this area. 
Our industry came together, and almost 100 percent of the 
industry agreed that we should disclose, even if the industry 
didn't believe it was going to make people safer, they felt 
like it was going to give the perception of making people feel 
safer. So they were willing to come to the table and talk to 
us.
    As we worked on a rule for how we were going to disclose 
these chemicals, we found out that small companies and large 
companies had different needs. But we all wanted to reach the 
same goal, making sure that Oklahoma was protected.
    So instead of having a one-size-fits-all kind of rule, what 
we did was we enacted a rule that allowed this disclosure 
through two different methods, and recognizing that a small 
business guy can't afford the additional time and research and 
training that it takes to maybe input all this data into a 
database with regard to the chemicals used, we, as a 
commission, took that responsibility on ourselves.
    So we gave two different avenues by which you can report 
these chemicals, and we allowed companies to choose.
    So we show in that rule that one size does not fit all, 
that Oklahoma needed a rule that would work for Oklahoma.
    Lastly, I want to say something really quickly about the 
utility industry. I see the EPA pushing a rule that, as a 
regulator, is going to force me to enact $2.1 billion dollars 
of increases on utility customers in Oklahoma. Are they going 
to get safer electricity? No. Are they going to get more 
electricity? No. Is it going to be more reliable? No.
    What it does is it forces utilities to make decisions about 
assets before the time is ready to make decisions about assets. 
So I believe, if Oklahoma was given the choice of formulating a 
rule, we would formulate a rule that encourage what our natural 
resources are, that encourage the use of those natural 
resources, and that helps Oklahoma consumers.
    Thank you for letting be here today.
    Chairman Issa. Thank you so much.
    [Prepared statement of Ms. Douglas follows:]

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    Chairman Issa. Mr. McDonald.

                   STATEMENT OF MIKE MCDONALD

    Mr. McDonald. Chairman Issa, Congressman Lankford, 
Congressman Farenthold, I appreciate the opportunity to testify 
today.
    I thank the Committee for it's oversight of the Executive 
Branch Agencies and for investigating regulations that hamper 
the production of domestic crude oil and natural gas. These 
fossil fuels are critical to Oklahoma and the nation.
    I am the co-owner of Triad Energy, Inc., a 31-year-old 
independent producer of crude oil and natural gas. I have 11 
employees. I am the current President of the Domestic Energy 
Producers Alliance and immediate past Chairman of the Oklahoma 
Independent Petroleum Association.
    This year, our company will drill 10 wells.
    I have submitted my written testimony for the record and 
will take only a few moments to address key points.
    First, we must understand that fossil fuel opponents follow 
a proven strategy to curb production of oil and natural gas, a 
strategy to wrap small businesses like mine with enough red 
tape to affect our mission to provide affordable U.S. energy.
    These professional fossil fuel opponents did not rely on 
facts or science to justify their effort. So they resort to 
fear mongering. This strategy has been on grand display lately, 
especially on hydraulic fracture. The EPA's wrongful actions in 
Texas, Wyoming and Pennsylvania and the resignation of an EPA 
Regional Administrator, when he has, I quote, ``crucified 
them,'' enforcement plan was exposed, showed the limits of 
Federal credibility when it comes to regulating oil and gas 
operations.''
    Regulators now admit that hydraulic fracturing is a safe 
and proven technology governed by effective State controls. But 
the Bureau of Land Management will press forward with costly, 
time-consuming and additional rules to regulate hydraulic 
fracturing on Federal and Tribal lands.
    Flaws in a 40-year old Endangered Species Act allow fossil 
fuel opponents to slow energy development with species listings 
that make no sense and for which there is no recovery plan.
    The EPA's new greenhouse gas reporting regime will cost our 
industry hundreds of millions of dollars annually. Every dollar 
that I must spend on compliance and paperwork is a dollar I 
cannot spend exploring for oil and gas.
    In effect, these regulations are hidden taxes on my 
company. Compliance costs cannot be recovered because I do not 
have the ability to increase the price of my product. We are 
price takers, not price makers.
    But the Agency merely reflects the President's anti-fossil 
fuel bias. Each of President Obama's four budgets has 
specifically targeted small producers like me. The President 
has proposed raising my taxes by repealing a tax provision, 
which has been the law of the land since 1913, that allows me 
to expense normal business costs, such as labor, fuel and 
supplies. And by preventing me and millions of royalty owners 
from coast to coast from depleting well assets as they decline, 
which has been on the books since 1926.
    The impact of such tax proposals would be devastating for 
American energy independence. Without my ability to expense 
normal business costs, I will be forced to cut my drilling 
budget by at least 30 percent. That's less steel manufactured 
in Pennsylvania, fewer jobs to help our nation's economic 
recovery, less money in the pockets of my royalty owners and 
less revenue to Oklahoma and the U.S. Treasury.
    And this is not a small impact. There are 18,000 
independent producers like me operating in 32 states, who would 
also have to reduce their budget. We are not big oil. But, 
together, we independent producers drill 95 percent of all 
wells drilled in the U.S. and produce, roughly, 82 percent of 
U.S. natural gas production, and more than 54 percent of U.S. 
oil production.
    And we pay a lot of taxes, royalties, in rent to Federal, 
State and Local Governments. In 2010, we generated $131 billion 
for Federal and State coffers.
    In Oklahoma, our industry is responsible for one out of 
every three dollars in gross state product. One out of every 
five dollars in personal income, and represents one out of 
every six jobs in our State. Since 2009, our industry has added 
nearly 12,000 jobs, with the average compensation of more than 
$113,000 per job.
    We are helping the U.S. economy recover, but we cannot 
create more jobs nor make America energy independent if our 
hands are tied by Federal red tape.
    Thank you very much for allowing me to appear today. I look 
forward to any questions you may have.
    [Prepared statement of Mr. McDonald follows:]

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    Chairman Issa. Ms. Horn?

                 STATEMENT OF PATRICIA D. HORN

    Ms. Horn. Good morning, Chairman Issa, good morning 
Representative Lankford and Farenthold. It's so nice of you to 
be here in Oklahoma, and we so appreciate all the work that you 
do for us in Washington.
    I'm here to speak on behalf of Oklahoma Gas and Electric, 
an electric utility headquartered in Oklahoma City. OG&E is the 
largest utility operating in Oklahoma with, approximately, 
790,000 customers in 268 communities in Oklahoma and Western 
Arkansas.
    If I could just brag for just a moment. In 2011, OG&E was 
named best in class for customer service by J.D. Powers and 
Associate. Later in 2011, OG&E and its members were named 2011 
Utility of the Year in North America by Electric Light & Power 
Magazine. We're proud of those accomplishments.
    My company and I appreciate the opportunity to come before 
you today and speak about the unnecessary and burdensome 
Federal Regulations that are affecting our industry. Our 
electric industry is the most capital intensive industry in the 
U.S. economy, a reality which necessitates that we have a 
multi-decade plan on the horizon.
    But the recent suite of EPA rules affecting issues such as 
Regional Haze, visibility, maximum achievable controlled 
technology, best technology available for cooling water intake 
structures and disposal and handling of coal combustion 
residuals make cost effective, capital investment planning by 
utilities, such as ours, very difficult, extremely costly.
    The required compliance that began with EPA's new rules 
effectively compels OG&E to make a premature and illogical 
choice about expensive capital investments that determine, long 
term, how we will generate electricity.
    We are not faced with the situation where one alternative 
is costly and another is not. Rather, all of the compelled 
choices required by EPA's rules are expensive and are made more 
difficult due to their technical complexity and uncertainty.
    To put the Regional Haze cost quandary that you heard 
something about this morning in perspective, the estimated 
capital cost of installing scrubbers on four of OG&E's five 
coal units, as ordered by the EPA in its Federal Implementation 
Plan, is over one billion dollars.
    Chairman Issa. Say that again.
    Ms. Horn. It is over one billion dollars for our company 
alone. And that doesn't even include the O&N on the--that would 
be annual between $70 and $150 million.
    On the other hand, the other choice faced by OG&E is if we 
replace its coal units with natural gas generation, we would 
face a capital cost of replacing, retiring and converting coal 
units baseload capacity and the related natural gas fuel costs. 
We estimate that that switch to natural gas would even be more 
expensive than installing scrubbers and also leave our 
generation fleet with no fuel diversity, something we talked 
about this morning that we feel is very important.
    Both of these options involve unprecedented rate 
implications for our customers, and would commence, what we 
believe, an adverse ripple effect on our Oklahoma economy and 
the ability of our State to create jobs.
    Aside from the cost implication, we are troubled by the 
justifications and the analysis that EPA provides for 
implementing these regulations, whether old regulations or new. 
EPA overrode a State implementation Plan for Regional Haze that 
was a product of intensive good faith negotiations with the 
entire range of Oklahoma interest. That said, achieved the 
visibility objectives at a fraction of the cost of the Federal 
Implementation Plan.
    Similarly, EPA has also determined that Oklahoma should be 
included in the Cross-State Air Pollution rule, a rule that 
came out in late 2011 and included Oklahoma almost as an 
afterthought.
    Based on what? Based on our air emissions affecting a 
county in Michigan that was in attainment status.
    We are encouraged that the Federal Courts have issued stays 
in both the Regional Haze case and across state matters pending 
the considerations of those merits of our appeals. Until those 
legal processes reach an end, OG&E must face the possibility of 
eventually complying with these very extensive rules which 
threaten our ability to invest, create jobs and provide 
Oklahomans a cost- effective power for both their homes and 
their businesses.
    But those are not our only regulatory threats. EPA is 
considering a proposed Clean Water Act rule that, in the name 
of protecting fish, bait fish and minnows, from impingement in 
attainment, would require us to incur millions of dollars in 
additional capital and operating costs to retrofit the water 
intake structures in our cooling water lakes at three of our 
facilities.
    We have pointed out to the EPA that the Oklahoma Department 
of Wildlife Conservation ranks these lakes currently among the 
top fishing venues. And they have found no material adverse 
impact on the fishery resources of those lakes.
    Why would anyone order us to spend tens of millions of 
dollars to reconfigure when there's no demonstrated harm to the 
fish in those lakes?
    I could go on about the coal combustion residuals, as well. 
It offers the same story and concerns.
    Finally, I'd like to note that, aside from the EPA's 
regulatory excesses, the energy sector is very concerned about 
the possible listing of the Lesser Prairie-Chicken, which 
you've heard today.
    It would affect our wind farm developments, our electric 
transmission projects, our natural gas gathering and 
transportation pipelines. Those could be blocked or seriously 
delayed, which means that energy resources, jobs and beneficial 
economic activity associated with those projects would be in 
jeopardy.
    Our written testimony describes the alternative ways of 
protecting the Lesser Prairie-Chicken that we are looking at, 
and we are working with numerous other Oklahoma agencies and 
companies to actively engage our state wildlife experts to do 
just that.
    In all these matters, the EPA and the Federal agencies 
would be well served by an understanding of the implications 
and the affected interests prior to taking action. And to take 
a rational and harmonized course of action designed to minimize 
the impact to energy development, which is a critical economic 
engine for our State and for the nation.
    Thank you for allowing me to be here to present my views.
    Chairman Issa. Thank you.
    [Prepared statement of Ms. Horn follows:]

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    Chairman Issa. Mr. Woodard.

                   STATEMENT OF BRIAN WOODARD

    Mr. Woodard. Chairman Issa, Chairman Lankford, Congressman 
Farenthold, my name is Brian Woodard, and I am the Vice 
President of Regulatory Affairs with the Oklahoma Independent 
Petroleum Association.
    I appreciate the opportunity to testify in my hometown 
today concerning unnecessary and burdensome regulations which 
unduly threaten America's energy future.
    The OIPA was founded in 1955 and represents, approximately, 
2,300 small to large independent operators who are primarily 
involved with the exploration and production of crude oil and 
natural gas in the State.
    In recent years, assisted by technological advances in 
horizontal drilling and hydraulic fracturing, Oklahoma oil and 
gas operators have actively developed sources of natural gas 
like the Woodford Shale, as well as sources of natural gas 
liquids and crude oil in the Cleveland, Tonkawa, Granite Wash 
and Mississippi Lime plays.
    Since 2009, Oklahoma's oil and natural gas industry has 
added nearly 12,000 jobs.
    As I hope my testimony reveals, this industry, along with 
the associated jobs and energy from the fossil fuel it 
produces, is critical, not just to Oklahoma, but to the nation.
    However, as I sit before you today and tout America's 
current oil and gas renaissance, and as the blueprint has been 
laid for a true era of U.S. energy independence, the current 
administration has countered with an equivalent flood of 
regulatory policies which threaten to undermine this bright 
energy future.
    To elaborate on this, I will briefly discuss two recent 
Federal air regulations in addition to challenges we, as 
Oklahomans, face due to recent and unprecedented actions under 
the Endangered Species Act.
    In 2008, Congress directed the EPA to conduct an inventory 
of greenhouse gas emissions throughout all sectors of the 
economy. Subpart W is the section of the resultant EPA rule 
dealing with the onshore oil and natural gas industry.
    Although Congress directed the EPA to conduct ``an 
inventory,'' EPA's rule requires annual reporting on behalf of 
operators.
    According to analyses of past GHG inventories, oil and 
natural gas production activities were believed to collectively 
account for two percent of national GHG emissions, with the 
largest portion of that two percent being vented natural gas 
itself, or methane.
    To place this level of methane emissions into context, 
EPA's own inventories note that enteric fermentation, or cattle 
flatulence, contribute substantially higher quantities of 
methane. However, rather than using simple estimation 
techniques, EPA created an extremely complex and burdensome 
regulation that consumed 44 pages in the Federal Register and 
has led to excessive financial impacts on the order of hundreds 
of thousands, if not millions, of dollars for some of our 
larger independent producers.
    In a similar fashion to this administration's recent 
proposal to regulate the practice of hydraulic fracturing prior 
to the completion of the Hydraulic Fracturing Study, EPA has 
continued their ``regulate then validate'' trend by crafting an 
additional air rule which regulates the very emissions for 
which Subpart W was designed to inventory. While the EPA has 
commented on the record that this New Source Performance 
Standard Subpart 0000 rule will be cost-effective for the 
industry, this statement is not only misleading, but is 
insulting.
    Under this rule, EPA has used methane as a surrogate for 
volatile organic compounds to justify the economic basis of the 
rule. In order to be cost effective, the rule should only apply 
to production streams which contain a meaningful VOC 
concentration. For sources with significantly low to zero VOC 
content, such as dry gas shales like the Haynesville and 
Barnett and others, the cost per ton of emission reductions 
drastically exceeds historically acceptable levels.
    Unfortunately, excessive regulation under the Clean Air Act 
is only one of many regulatory hurdles, which Oklahoma oil and 
gas producers face.
    Switching to the topic of the Endangered Species Act, in 
September, 2011, the U.S. Fish and Wildlife Service reached an 
unprecedented settlement agreement with the two conservation 
groups.
    As a result of the settlement, the Fish and Wildlife 
Service is required to establish annual work plans that 
gradually reduce a backlog of greater than 600 candidate 
species over a six-year period. Of particular concern to 
Oklahoma, as previously noted, oil and gas operators is a 
listing and critical habitat designation for the Lesser 
Prairie-Chicken.
    As previously mentioned, Oklahoma has been blessed with 
rich energy resources including four of this nation's leading 
tight oil and gas plays; however, the listing of the Lesser 
Prairie-Chicken threatens to jeopardize the development and 
production of this economic boon, as the chicken's habitat 
range directly overlies the core acreage of these plays. It is 
our hope that the Fish and Wildlife Service, working with State 
and local stakeholders, will recognize and support the 
extensive voluntary conservation efforts that are currently 
underway, rather than impeding economic development with a 
chilling, threatened or endangered listing under the antiquated 
Endangered Species Act.
    And last but not least, I would like to mention a recent 
ESA development affecting oil and gas producers, among others, 
throughout the eastern portion of our State. The American 
Burrowing Beetle was listed as endangered in 1989. At the time, 
the beetle's known habitat consisted of two colonies 
encompassing two counties across the U.S., one of which was 
Oklahoma's own Latimer County. The listing was made without the 
designation of any critical habitat, and the recovery plan 
hasn't been updated in over two decades.
    However, the beetle has since been recognized to exist by 
the thousands across many of the southern plains states. With 
the unveiling of a shocking new Guidance Document in April, 
overnight, and, again, I'll say overnight, Guidance Document, 
the Service had revised the beetle's habitat range based on new 
modeling standards and eliminated industry's only protocol 
allowing for continued, sustained development within the 
habitat range.
    A revised guidance supporting interim relief measures and 
protocols for continued development without guidance, 
construction of oil and gas pad sites, pipelines and roads will 
continue to be stalled throughout the beetle's habitat range.
    In conclusion, we must reduce the insurmountable Federal 
regulatory hurdles which plague domestic operators and impede 
our ability to achieve energy independence and freedom from 
foreign fuels.
    This concludes my testimony.
    Thank you.
    Chairman Issa. Thank you.
    [Prepared statement of Mr. Woodard follows:]

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    Chairman Issa. Mr. Leonard.

                  STATEMENT OF JOSEPH LEONARD

    Mr. Leonard. Good morning and thank you for providing the 
opportunity to testify on such an important issue.
    My name is Joe Leonard, and I am the Environmental, Health 
and Safety Engineer for Devon Energy with a particular 
technical expertise in air quality.
    EPA's unreasonable and inappropriate misuse of industry 
data and bad science leads to unnecessary and burdensome air 
quality regulations on the oil and gas industry. I would like 
to focus on two examples of this today.
    First, I would like to address EPA's development of an 
emission factor for well completions by improperly using 
Natural Gas STAR data. In short, the EPA assumes that gas 
recovered would have otherwise been flared or vented. However, 
industry data shows that reduced emission completions account 
for significantly more gas produced and sold than would be 
flared or vented during older and less common completion 
processes.
    The figure in my written testimony depicts the comparison 
between what EPA perceives and what industry data actually 
shows.
    Second, EPA Region 6 recently designated Wise County in the 
State of Texas, a significant production and transmission area 
to be in ``nonattainment'' for ozone. Region 6's argument can 
best be described as arbitrary and capricious.
    Their stance rests only on two data points and their 
attempt to link The Barnett Shale gas production development. 
Their science behind the designation is lackluster and relies 
on methods rejected by other EPA regions.
    In regards to flawed completion emissions, EPA continues to 
state that reduced emission completion estimates are reasonable 
estimates for gas that would have otherwise been flared or 
vented - despite a wealth of data showing that those estimates 
are dramatically overstated. This overstatement is consistent 
with the latest industry study from API/ANGA of more than 
90,000 wells that demonstrated estimates were at least 100% too 
high across upstream processes. This work follows similar 
industry work that shows even greater errors.
    This is outrageous because EPA, using incorrect 
assumptions, applying inappropriate data, and then analyzing it 
improperly, has not only changed its emission estimates for 
completion operations on a forward-looking basis, but revised 
all oil and gas completion estimates back to 1990 - a period 
before the combined use of horizontal drilling and hydraulic 
fracturing.
    Since revising its estimates, EPA submitted those estimates 
as part of the US input to the UN Intergovernmental Panel on 
Climate Change, giving it a worldwide audience.
    The effect of the revision has allowed for the 
mischaracterization of natural gas. Non-governmental 
organizations and university studies have claimed that (on a 
life-cycle basis) gas-fired electricity generation is no 
cleaner than coal-fired, and that natural gas-powered vehicles 
are no cleaner than those running on gasoline.
    The ripple effects like these will continue until EPA 
acknowledges and corrects this inaccurate data. Severe damage 
has been inflicted on the many benefits of using natural gas as 
a clean fuel that will last for years to come. EPA must 
exercise more scrutiny in their methods for calculating such 
factors if the oil and gas industry is to be represented 
fairly. This issue proves that casual efforts on the part of 
the EPA can have such a strong and negative impact to our 
industry.
    As I mentioned earlier, EPA has recently designated Wise 
County, Texas, as an ozone non-attainment area contributor. An 
area is considered ``nonattainment'' when it exceeds a national 
air standard, in this case, ozone. The area must then take 
steps to come to ``attain'' the standard, or come into 
``attainment''.
    That action, in Region 6, was initiated under a since-
resigned regional administrator who once likened enforcement 
action approaches to the oil and gas industry to what might be 
described as examples by crucifixion.
    There are several other concerns when analyzing their 
justification for nonattainment.
    Concern 1: The model used by Region 6 is inadequate for 
modeling ozone formation and transport. Other regions, 
specifically, refused to use this method because of its 
unreliability.
    Concern 2: The model only traced two events over four years 
passing through Wise County, one of which originated in the 
notoriously nonattainment Tarrant County, which is 
coincidentally the same county of the only monitor that EPA 
provided results for. Data shows that winds blow from Wise 
County into Tarrant County less than three percent of the time. 
Other EPA regions denied nonattainment considerations based 
solely on wind occurrences of less than 20% of the time.
    Concern 3: We do not know the results from other monitors 
downstream of the prevailing wind from Wise County. If the EPA 
Region 6 wanted to justify Wise County as a contributor of 
ozone, why did they not provide results from more 
representative monitors? As the Texas Commission of 
Environmental Quality described, the presented data seems to be 
``cherry-picked''.
    The second figure in the written testimony shows a 
composite of all modeling results done by EPA Region 6, with 
the two Wise County events highlighted in red.
    If Wise County is, in fact, nonattainment, then Devon will 
diligently comply with the regulations, but we do not believe 
the EPA's argument, or the data supporting their decision.
    In conclusion, it is difficult to adequately capture all of 
the unnecessary and burdensome air regulations imposed on our 
industry. I hope that the examples of completion emission 
estimates and Wise County Nonattainment provide at least some 
insight into this issue.
    This concludes my testimony. Thank you.
    Chairman Issa. Thank you.
    [Prepared statement of Mr. Leonard follows:]

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    Chairman Issa. I want to thank all of you for your 
testimony. We've got more questions than we possibly have time 
to have answered. So I would ask each of you, the questions we 
don't get to in this session, will you agree to make your best 
effort to answer them in writing? Without objection your 
answers in writing will be also be included, as well in the 
oral testimony today.
    Mr. Leonard, Winston Churchill once said, an appeaser is 
somebody who feeds crocodiles hoping they will eat him last. 
Has Congress been effectively, as many of us think, including 
Mr. Woodard, appeasers by, instead of fighting the, if you 
will, the cooked books, the flawed science and so on, simply 
trying to reach a compromise, do a piece of it? Is one of our 
challenges the fact that we haven't confronted agencies that no 
matter how clean the air and water is, and no matter how much 
it would cost to incrementally clean it a little more, we, 
essentially, try to compromise rather than saying, at what 
point do we weigh the cost benefits in a different way when the 
cost to augment is higher. Ms. Horn certainly brought that up 
with a billion dollar example.
    Do you think, in fact, it's time for Congress to stop, as 
Senator Inhofe might say, appeasing?
    Mr. Leonard. We've actually met with some members of the 
Government. In regards to completion emission issues, we, quite 
frankly, feel that we've been stonewalled. We presented both 
written comments and met with them personally and have not 
received the feedback that we would deem as adequate.
    However, organizations like this seem to be open to 
communicate, and we sincerely appreciate that.
    Thank you.
    Chairman Issa. Ms. Horn, when energy production facilities 
are put online on behalf of, if you will, the downstream 
constituency, does EPA, OSHA, everybody else weigh in to every 
little nuance of detail of how much you're going to put out in 
order to produce that electricity?
    Ms. Horn. No. We don't have everyone weighing in. 
(Inaudible).
    Chairman Issa. Right. So in order to get a license, your 
scrubbers and your stacks, your processes, all are evaluated 
and approved when you get your permit, both Federal and State; 
isn't that true?
    Ms. Horn. Yes, that's true.
    Chairman Issa. So in a sense, when Government comes in 
during a licensed period, let's say a 30-year period, which is, 
I think, typical for plants and then relicensing, when they 
come into the middle of a period, aren't they breaking an 
implied contract, one in which you know you were online safe, 
there was an actuarial calculation over the life of that 
production using coal, what would come out in the way of 
emissions, isn't the Government, in fact, breaking a promise, a 
promise that, during that licensed period, you would be able to 
do certain things?
    Ms. Horn. Yes, I agree, they are. It's an implied contract 
that, based upon how we looked at it at the time, that we're 
going to conduct it that way.
    Chairman Issa. And with an anticipation of re-licensing 
your facilities, and your facilities go through re-licensing, 
you do normally anticipate that there will be updates, 
modernization and costs, correct?
    Ms. Horn. Yes.
    Chairman Issa. So as members of Congress, trying to figure 
out where the fair balance is, shouldn't we give you that quiet 
period of enjoyment unless there is irreparable harm, not 
anticipated in the permit, so that the taxpayers, in this case, 
the rate payers, could know that, over that period of time, 
they could expect--and this is assuming you get the same 
quality of coal, the same everything else. Isn't that, 
essentially, the broken promise that you deal with in your 
industry and boiler MACT and these other new regulations coming 
in and wanting to grab you for billions of dollars mid-stream.
    Ms. Horn. Absolutely. Certainty is something we must have 
to run our utility business.
    Chairman Issa. Ms. McDonald, you were very convincing of 
something I'm glad you put it in the record, and that is that 
the tax treatment that you enjoy is, in fact, tax treatment 
that every manufacturer, every production, everybody enjoys and 
the ability to expense labor. But more importantly, the dates 
you put in. And I want to thank you for that.
    Often, in Washington, we lose track of the fact that these 
aren't some sort of special deal that was struck in under some 
evil administration, like Ronald Reagan's. In fact, these are 
ones that FDR didn't see a problem with, and neither did 
anybody else until, suddenly, they just wanted to find a little 
more revenue for the Federal coffers and you were as good a 
villain as anyone.
    Mr. Ming. Yes, sir. You'll notice in the media and even our 
opponents in Congress call these things ``subsidies.'' They're 
not subsidies. The Government does not send us a check I assure 
you. If they do, I missed out on it, and I'd like to sign up.
    Like you said, any manufacturer gets his ordinary and 
necessary business deductions, and we are--everybody has 
testified today, we're making great strides in America and 
North America in energy independence, and that's because of our 
increased rate in drilling. They do away with these tax 
provisions, our rig count is going to drop 30 percent. There's 
no way around it.
    Chairman Issa. It is sort of amazing that a country that 
prints money wants yours faster than you actually make it.
    Mr. Ming. That's a good point.
    Chairman Issa. Ms. Douglas, you regulate, among other 
things, what happens to the water, what's in the water, it goes 
in for fracking, and what happens to it after it comes out; 
isn't that correct?
    Ms. Douglas. For the most part.
    Chairman Issa. So under your State control, you've, in 
fact, you and other State agencies, are concerned to make sure 
that, if, let's just say, a chemical is in the water, you know, 
in the mixture, if you will, for fracking, when it comes out, 
you make sure that it doesn't end up in the water supply, in 
the neighborhoods and the surrounding areas; isn't that 
correct?
    Ms. Douglas. Absolutely. We live here. We drink the water.
    Chairman Issa. And what's the typical well depth in 
Oklahoma?
    Ms. Douglas. It depends. It's gotten a lot deeper with the 
new technology. You can have wells going two or three miles 
down and a mile out. So sometimes they go two miles out.
    Chairman Issa. But are there any aquifers below a few 
thousand feet in Oklahoma?
    Ms. Douglas. No. We, at the Commission, make sure that the 
water supply is protected. And most of the aquifers are much 
more shallow than where the wells are drilled. So the drilling 
goes much farther down and farther out. And we make sure that 
the casing, that everything that is put into the well is 
protected, protects our water supply.
    If we find out that something has happened, if we find a 
well that was drilled in 1907 or 1910 where there is a problem, 
we have a procedure, at the State level, to do an immediate 
plugging so we can protect our water supply.
    Chairman Issa. And I do realize that Oklahoma is often 
known as a pincushion of the past. You've been drilling here a 
little longer than other places.
    I will note that, having had our first of this series of 
hearings in Bakersfield, we've got some old wells in 
California, including one that is under Beverly Hills High. And 
it's still producing.
    I often remind my Congressman Waxman, he has oil production 
in his district. He hasn't yet been able to shut down.
    Mr. Ming, I've run out of time. But I briefly wanted to 
sort of recognize a question by asking, and you control energy 
so you deal with your portfolio of oil and natural gas, and, of 
course, coal; isn't that right?
    Mr. Ming. (Nods).
    Chairman Issa. And when we look at hydraulic fracking, 
you're not extracting huge amounts of soil or other activities. 
So, just briefly, for the record, when we look at the history 
of taking copper, gold, silver, or, for that matter, coal out 
of the ground, contrast what the effect of fracking is on the 
actual disturbance thousands of feet down versus almost any 
other kind of mineral extraction, just so we can have that in 
the record.
    Mr. Ming. Well, to start with, just for the water 
implications, the water requirements, from start to finish, for 
the life cycle for natural gas are virtually the lowest of any 
form of traditional energy. So in that regard, the impact is 
minimal. As you say, there's no large extractive component to 
it.
    The other side of that, the benefits from natural gas are 
extraordinary in terms of what they do for the environment in 
terms of reduced criteria pollutants, reduced carbon emissions, 
energy efficiency opportunities from natural gas.
    The all-in potential of natural gas is what makes this so 
illogical to me an engineer. We are, essentially, trying to 
kill the form of energy that holds the most promise for our 
nation.
    Chairman Issa. Thank you.
    Mr. Lankford.
    Mr. Lankford. Thank you, Mr. Chairman.
    I didn't hear from anyone that our problem is supply. I 
asked, initially, is the problem regulatory or is it supply 
issues, or is it our efficiency, or is it a combination of all 
of that. I didn't hear from anyone that we're running out of 
resources. Is there a perception here that we're short of 
supply, that we don't have the resources to meet the needs of 
our nation?
    (Several Witnesses answered no)
    Would you have said that 25 years ago? 25 years ago, 
looking back in time, we didn't have the same technology that 
we have now, would you have said 25 years ago we don't have the 
supply; we can't meet it?
    (Several Witnesses said ``no'')
    Okay, then, I'm hearing them pretty loud and clear that 
this is not supply issues; this is something else. Is it State 
policy that's the problem? And you can go ahead and speak 
freely. Patrice is right there.
    Mr. Leonard. No.
    Mr. Lankford. Okay. Then is it Federal policy that's taking 
this on, because I heard a lot of Federal regulations coming 
out, one after another.
    Mr. Ming. Yes.
    Mr. Leonard. Yes.
    Mr. Lankford. Okay. Let me just ask you a couple of these, 
then.
    First, let me ask about this: The Regional Haze, as you 
mentioned, over a two billion dollar increase on rate payers is 
coming down now, a billion in just the Regional Haze bill, why 
can't the State take primacy in that one and the State make the 
decision?
    Ms. Douglas. The EPA won't let us.
    Mr. Lankford. Five years ago, was the State making the 
decision dealing with Regional Haze?
    Ms. Douglas. Five years ago, I'm not sure that people were 
talking about it in the way that they're talking about it now. 
It's being construed in the way now, it looks to me, it's being 
construed in a way to meeting an objective that's coming from 
the top office in the nation.
    I think that, if we were permitted to make the regulation 
in Oklahoma, we could make the regulation in Oklahoma. We can 
make it with all of the stakeholders at the table. We would 
remember Oklahomans who live here, we would remember Oklahomans 
who are going to be paying these utility bills. We would be 
looking at the natural resources we have, as well as the 
economic resources.
    The Commission is in a unique position. And I what to point 
this out to you. The Oklahoma Corporation Commission has 
constitutional authority to regulate these industries. But we 
also have a statutory mandate to balance and protect both 
natural resources and economic resources.
    So unlike many of these Federal agencies that are only 
looking at one thing, we have to look at the whole picture. So 
we have to bring everyone to the table, and we have to talk 
about how we can best balance natural resources and economic 
resources.
    So a State level regulation better fits the topics we're 
discussing.
    Mr. Lankford. This morning, we talked about Regional Haze. 
That sounds like something you'd never want to breathe and 
never want to take in. Is this a health issue, Regional Haze?
    Mr. McDonald. Regional Haze is a visibility standard.
    Mr. Lankford. It's visibility. So this only affects the 
visibility? There's nothing in the Regional Haze standards that 
deals with the quality of the air that you actually breathe?
    Mr. McDonald. No. It's only about visibility and----
    Mr. Lankford. Would you turn up your microphone, please? 
Yes, your microphone button right there in front of you.
    Mr. McDonald. I apologize.
    And it's only in Federal parks. It's protected visibility 
in Federal parks. That's the whole purpose of the statute.
    Mr. Lankford. Okay. So is there a Federal park, in 
particular, that's been identified in Oklahoma?
    Mr. McDonald. We have two areas in Oklahoma that we look 
at. The Lawton wilderness area, as well as one in Arkansas, as 
protected areas. But we don't have the same type of parks that 
some of the other states have.
    Mr. Lankford. Okay. So, in Oklahoma, our Regional Haze 
standards are not about health; they aren't anywhere in the 
nation. And it's about trying to provide better visibility in 
one State park in Oklahoma. And it will be a billion dollars.
    Do you know the difference in that visibility rating that 
they're talking about? Is it something that I can see with the 
naked eye, that I can tell if I looked at the park, and what 
they're recommending, and what we actually have now, could I 
tell by looking at it, the difference?
    Mr. McDonald. We don't believe you really can tell visibly. 
We--especially, we--in talking with the Commissioner about what 
the State could do, the State implementation plan is exactly 
how the State could take control of this through the Regional 
Haze. And if EPA would have allowed us to look at our State 
implementation plan, we could have done this as a State. And in 
doing that, the plan we came up with would do the same 
visibility improvement that the Feds would do at a much less, 
lower cost.
    Mr. Lankford. The rules that are going down deal with 
hydraulic fracking, specifically, whether it be air quality 
coming out of that or whether it would be the water affects on 
it. Are those science-based at this point? Is there a 
scientific study completed by EPA or by any agency that says we 
have to make these decisions because we've done the study, 
completed it, and so this is the product?
    Mr. Woodard. I'll answer that, Congressman. No. The answer 
is no. In fact, they've come out and stated that there were 
issues with hydraulic fracturing now on multiple occasions 
without the necessary data quality and without the proper 
testing standards, if you will.
    And they recently backtracked on three of those----
    Mr. Lankford. Yes, Mr. McDonald mentioned three cases where 
the EPA made an accusation and later came back and said oops, 
that it really wasn't what it was.
    So right now, that you know, there is no study from the 
Federal Government showing any issues with hydraulic fracking 
or air or water quality. So these decisions are based on 
something besides science?
    Mr. Woodard. That's correct.
    Mr. Lankford. Just as a point of reference, the last time 
we had an administrator from EPA in front of our Committee, 
trace, we asked, pointblank, do you know of a single source of 
water in the country that is contaminated because of hydraulic 
fracking? And their response to us was, no, we don't know of 
one, not one source of water that's been contaminated by 
hydraulic fracking. So that's an interesting interaction on 
that.
    Chairman Issa. Do you remember how many wells have been 
drilled in Oklahoma that are fracked? We had that figure at one 
time. Isn't it in the tens of thousands?
    Mr. Lankford. It's well in excess of tens of thousands. We 
have 190,000 wells in Oklahoma right now. And we've been 
fracking since 1948. So it's a few.
    Chairman Issa. It's a few. It's sort of amazing that you'd 
almost think that anything else we do, you would have at least 
a few accidents. So it's sort of one of those things it's so 
good they've got to stop us from doing it.
    Mr. Farenthold.
    Mr. Farenthold. Thank you, Mr. Chairman.
    I guess I'll start with Mr. Ming. Texas and Oklahoma have a 
lot in common as oil and gas states and such. And I was at an 
event with our Attorney General a couple of months ago. And 
somebody asked him, well, what's your job? And he goes, well, I 
get up in the morning. I go to the office. I sue the Federal 
Government. I go home and come back the next day and sue the 
Federal Government again, trying to get oppressive Federal 
regulations dealt with or infringements on the various rights 
that the Attorney General and myself believe that are reserved 
for the States.
    What is Oklahoma doing with respect to defending itself 
from these regulations?
    Mr. Ming. Well, right now, if we just look at the hydraulic 
fracturing, we are closely monitoring what we feel is a clear 
move by the EPA for regulation to assert primacy over the 
activities that Commissioner Douglas described.
    And I'll quote from an inside EPA wire service. This is an 
individual, Fred Hauchman, Director of EPA's Office of Science 
Policy, they are currently, ``we're doing a pretty 
comprehensive look at all the statutes where there are some 
holes to allow additional regulation.''
    And while officials from EPA say they have no intention to 
regulate the States, they don't have the capability to regulate 
the States, we're clearly seeing actions don't meet words. And 
so----
    Mr. Farenthold. Is that being--do you have a thought as to 
how that's being driven? I know we had the three points, 
activism, activists involved in the EPA, bureaucrats trying to 
protect their job. What was the third one? There was a third 
one.
    Mr. Ming. So you have the growth of the Federal 
bureaucracy; you have activists; and then you have this agenda 
for Federal preemption of State primacy.
    Mr. Farenthold. All right. Let me go to Mr. McDonald for a 
second. As an oil and gas man, do you drill on Federal lands?
    Mr. McDonald. I do not.
    Mr. Farenthold. Is there a reason you don't?
    Mr. McDonald. Yes, sir.
    Mr. Farenthold. Would like to share that with us?
    Mr. McDonald. Well, the--you know, the BLM is, I think--
maybe Congressman Lankford, one of you all, in your all's 
introductory remarks, talked about how long it takes to get a 
permit, and all of the things that you have to do to do that. 
And I've got a few Indian leases where I've had to deal with 
that. And I have intentionally, in the last 15 years, not bid 
on another Indian lease, because I have to interact with the 
Federal Government.
    They tell me now--and I want you to believe this. This is 
the God's honest truth.
    They tell me what I should pay every month. In other words, 
I'm trying to get the best price I can for natural gas. And 
they've got a formula, and they come in and tell me, well, you 
didn't get enough. So you have to pay us $20, $30----
    Mr. Farenthold. Regardless of the fact----
    Mr. McDonald. Yes.
    Mr. Farenthold. Regardless of the fact that gas is now down 
to what, $2.70?
    Mr. McDonald. Exactly. It's unbelievable that I wouldn't 
try to get as much money as I could for my product. But, yet, 
they impose that on us.
    So when those wells are gone, I won't be involved in 
Federal or Indian land anymore.
    Mr. Farenthold. I appreciate that.
    I want to go to Ms. Horn for a second. You were talking 
about the cost of regulation on your company. When the cost of 
regulation and the cost of doing business goes up, that doesn't 
come out of your profit. That comes out of what you charge to 
the people buying electricity; is that not correct?
    Ms. Horn. That is how we work as a utility----
    Mr. Farenthold. So would it be a fair statement to say that 
increased regulatory costs, for all practical purposes, are a 
tax on the low income and middle class Americans?
    Ms. Horn. It operates to be a tax, yes.
    Mr. Farenthold. I have a lot more questions. But I realize 
I'm already out of time.
    Chairman Issa. We're going to do a quick second round.
    Mr. Leonard, if you were to present to the Federal 
Government, using known bad results, known flawed science, 
anecdotal information that you extrapolated to get a result you 
wanted to get, and then you submitted it into a Government 
submission for a permit, what would happen to you?
    Mr. Leonard. I would receive a weak response to my 
comments, thank you for your efforts, a pat on the back, and a 
thank you very much.
    Chairman Issa. And that's if you didn't get prosecuted for 
lying to the Government, right?
    Mr. Leonard. That's correct.
    Chairman Issa. So fraud on the Government would be one of 
the things that could happen if you knowingly delivered false 
information, extrapolations that weren't true and used that to 
achieve an agenda to get a permit when, in fact, you shouldn't 
get one, right?
    Mr. Leonard. Yes, sir. And not only would the Government 
reprimand me, but so would the press.
    Chairman Issa. So one of my questions to you is, since 
we're from the Government and we're here to help you, what 
should we do and how should we change our Washington 
bureaucrats who knowingly produce and extrapolate and create 
false documents when we discover that, in fact, they did it 
with a reason, with malice and forethought in order to get a 
rule or some agenda that, in fact, was inconsistent with the 
true science that they knew or could have known?
    Mr. Leonard. Well, I understand it's challenging for the 
EPA to exercise proper scrutiny on all the calculations and 
regulations they must make. But they must be open to 
communication when such concerns are brought to them. And--
that's what I think.
    Chairman Issa.  Is there a real likelihood that you would 
simply stop worrying about clean air and clean water if the 
government went back to it's historical levels of allowing you 
to regulate?
    Ms. Douglas. No. We live here. And I have a constitutional 
duty. I take office, and I take an oath, and I have a 
constitutional duty to protect Oklahoma, to protect our natural 
resources, to protect our economic resources.
    So much like you're talking about being prosecuted for 
information down there, I can get in big trouble, and I, 
frankly, don't want to be in big trouble. I respect Oklahoma 
and Oklahomans.
    Chairman Issa. Well, I'm just going to have to ask one 
closing question. I'll probably just get nods, because it's 
more of a comment than a question.
    If we were able to not send $300 billion outside the U.S., 
if we were, in fact, driving down the cost of all our energy, 
similar to the way natural gas has gotten, wouldn't we, in 
fact, have tens of hundreds of billions or even trillions of 
dollars more to put into environmental research, into cleaning 
up the air, into finding science that would advance all kinds 
of benefits to mankind? And, in fact, for that matter, helping 
to educate or people?
    Mr. Woodard. Yes.
    (Other Witnesses nod)
    Chairman Issa. So just one closing question to all of you 
who deal in energy: Shouldn't the greatest obligation of 
Government be to, in fact, allow and then promote energy, 
driving the advancement so that the spin-off advancement of a 
profitable and prosperous country, in fact, is the ability to 
do all these other things that our taxpayers our American 
citizens want us to do?
    Mr. Woodard. Definitely.
    (All Witnesses nod)
    Chairman Issa. So, lastly, as my red light is on, I'm going 
to respect the red light.
    Is the Government on exactly the wrong track by not 
considering the cost of benefit in weighing that, as we lower 
cost of energy, we increase productivity, we create American 
jobs, and that fuels all of the ability to do the other things 
that the American people want us to do?
    Mr. Woodard. Yes, sir.
    (All Witnesses nod)
    Chairman Issa. I'll take that back with me.
    Mr. Lankford.
    Mr. Lankford. Ms. Douglas, when there's a problem with a 
well and with any kind of operation, there's a spill that does 
occasionally happen.
    This is not a perfect entity at all. Do you find, 
typically, that they have violated an existing regulation or 
that there's some other new problem that has occurred when 
there's a problem with a well site.
    Ms. Douglas. No. It's, typically, an existing regulation 
that we have already got a solution for and got a regulation at 
the State level.
    Mr. Lankford. They're just slapped on the wrist, or they're 
fined, or they're punished, or reprimanded? What happens?
    Ms. Douglas. All of those things. All those things. It 
depends on the severity of the accident.
    Mr. Lankford. When something new occurs, hadn't thought 
about it, hadn't seen, brand new on it, how do States share 
that or how do States share this, this occurred in our State, 
and so state-to- state, is there some process already in place 
to pass this on to the State Regulators?
    Ms. Douglas. Absolutely. We pass on all the information we 
get to other State regulatory bodies. We have a national body 
called Naylor that's the regulatory commission where we can 
share information like that.
    We also have formulated specific groups to deal with 
specific problems, like the group called Stronger, which was 
really addressing oil and gas issues across State lines.
    Mr. Lankford. And how long does it take to get a new rule 
in place with them?
    Ms. Douglas. On a State level?
    Mr. Lankford. Right, State level.
    Ms. Douglas. At the State level, we started rule making 
processes in December and had them wrapped up in March, and 
that was after we took all the input from the stakeholders, and 
we had technical conferences, as well.
    Mr. Lankford. It's a little longer than that, in the 
Federal Government, isn't it?
    Ms. Douglas. Yes, sir.
    Mr. Lankford. That seems a little more agile.
    Ms. Douglas. Yes, sir.
    Mr. Lankford. Mr. Leonard, I want to bring up one of your 
charts that you have listed there. This is a ten-year flowback 
chart. We'll see if we can bring that up. Because I want you to 
be able to explain that when it comes up, and we'll see if the 
magic of technology can bring it.
    There it is. I want you to explain this chart a little bit 
to me, and talk about--you spoke about this in excellent 
technical language that probably nine people, totally, got. So 
I want to walk through this and try to help understand.
    This deals with air quality and EPA estimates of how 
they're trying to determine what the air quality is around 
sites; is that correct.
    Mr. Leonard. Yes, sir.
    Mr. Lankford. Okay. So talk us through this chart.
    Mr. Leonard. Okay.
    The chart represents the relationship between time and gas 
volume for a typical well flowback completion. And when a 
natural gas flow is hydraulically fractured, the first thing 
that comes out of the hole is water and sand. It must flowback 
out of the well so that gas may be produced.
    And at the initial start of flow, the stream is mostly 
comprised of this water and sand, with very little gas being 
able to fit in the pipe. But as more water and sand is 
recovered, that gas volume increases.
    Now, typically, after--results show that, after three and a 
half days, the gas has recovered much water and sand and is 
producing enough gas to sustain itself. After those three and a 
half days, the well is either turned to production or shut in.
    Now--and you can see after that, after three-and-a-half-day 
point, when the well is making enough gas to sustain itself, 
there is very little water and sand still left downhole, and 
the gas volume greatly increases.
    Now, industry data shows that we're only emitting the gas 
volume represented by the blue in that three-and-a-half days.
    But the EPA assumes that industry is creating emissions 
from flowback processes up to 10 days. And, therefore, it 
accounts for both the blue and the red gas volumes as emissions 
from our industry.
    Mr. Lankford. Okay. So here's my question: You represent 
Devon. If Devon were to release all of that red area that you 
show there just into the air and not capture it and sell it, 
would that be a wise thing to do or an unwise thing to do?
    Mr. Leonard. Very unwise.
    Mr. Lankford. I think they'd probably have somebody's job 
if they let that much gas just into the air on it.
    But you're saying EPA assumes, for 10 days, all gas that's 
coming out from flowback is not captured, is not sold. It's 
just released into the air?
    Mr. Leonard. Correct.
    Mr. Lankford. And their data--my point for that is their 
proof of that is what?
    Mr. Leonard. Their proof of that is an industry study, a 
voluntary industry study, called the National Gas Star Program. 
And the National Gas Star Program captured emission reduction 
efforts from industry. And they captured numbers from green 
completions. Now green completions are very different from the 
typical completion processes, which is represented by the blue.
    Green completions, gas is captured. And so, during the 
recompletion process, everything in the red is captured.
    But the EPA assumes that that is all emitted.
    Mr. Lankford. Okay. So you're saying it is actually 
captured, and the EPA says, no, we think you're actually 
letting it go instead?
    Mr. Leonard. Yes, sir.
    Mr. Lankford. Just a quick question, because I see my 
yellow light is coming on.
    Chairman Issa. Would the gentleman yield for a minute?
    Mr. Lankford. Absolutely, I would, Mr. Chairman.
    Chairman Issa. I'm originally from Cleveland. So it gets 
colder there in the winter, kind of like here. But let me just 
put this in terms of, hopefully, I would understand.
    You're sort of saying that, in the winter when you start 
your car and you don't want to go, you go back in the house for 
a minute or two while it warms up. And then you drive down the 
street.
    It's like saying that your basic fuel economy on your car 
was one mile per gallon for that first street, rather than, 
because it included all the time you idled while it warmed up. 
And you went back in to get coffee. And that first acceleration 
going down the street. And it's capturing that and saying, over 
the life of that tank of gas, you're going to get one mile per 
gallon.
    Mr. Leonard. Yes, sir, that would be a correct statement.
    Chairman Issa. But there's just, literally, it's cooked 
books again, right?
    Mr. Leonard. Yes, sir.
    Chairman Issa. Thank you, sir.
    Mr. Lankford. Actually, in Oklahoma, we go start our cars 
early in the summer.
    A couple of quick comments.
    Chairman Issa. Would the gentleman yield one more time, 
please?
    Mr. Lankford. I would.
    Chairman Issa. I would note that I formerly created remote 
starters, so you push the button, and whether it was hot or 
cold, the car adjusted before you went out there. But that's a 
former life.
    Mr. Lankford. Secretary Ming, you mentioned we are 10 years 
away from energy independence if we don't mess this up. Do you 
have a couple of areas that you look at and say these are 
really the critical areas, or is it just a whole series of 
things? But a statement to say we're a decade away from energy 
independence is a pretty strong statement.
    Mr. Ming. It is a strong statement, but the reality is in 
the data. And I said that in regard to North America.
    Mr. Lankford. We'd be in North America.
    So Canada, United States, Mexico, take just energy, so we 
don't need OPEC oil, we don't need Venezuelan oil; we don't 
need North African oil, just for North America, we can reach 
energy independence in ten years.
    Mr. Ming. That's correct. And it's a combination. You have 
new energy supplies coming from the oil sands of Canada, 
extraordinary new oil supplies coming from North Dakota and the 
Bakken shell, and formerly marginal supplies of oil in, 
essentially, counties in Western Oklahoma that were out of the 
money just as soon as ten years ago. Everything is back in play 
now.
    So you take those three combinations of supply, and then 
you take the opportunities around energy efficiency, plus the 
opportunities of natural gas as a substitution fuel for 
transportation. All of those, collectively combined, it is very 
possible that we can be energy independent in the next ten 
years.
    Mr. Lankford. Mr. Leonard, I'm going to follow up with 
additional written questions about Wise County. That is a very 
serious issue, dealing with what's happened in Wise County, 
because that can affect us here in Oklahoma City, obviously.
    Mr. Leonard. Yes.
    Mr. Lankford. And the days to come on that.
    And one quick statement from Mr. McDonald about not 
drilling on Federal lands. My comment on that is, obviously, if 
other drillers, like you, and I know that has occurred, that 
the process is now so bulky to drill on Federal lands, and a 
couple of things, one that reduces income to taxpayer, because 
the taxpayer is not getting the royalty amount now.
    And then in the western part of the United States, where 
the bulk of the land is BLM lands. In Oklahoma, we have very 
little Federal lands and crop lands and such. But you get into 
areas like, Utah and Nevada, and it's up to 90 percent of the 
real estate in the State is controlled by the Federal 
Government, that's a tremendous hit to jobs in those areas if 
other drillers continue to do that.
    Mr. McDonald. That is true. And, also, the Federal 
Government is taking a lot of that land out of the ability to 
lease for oil and gas. So you've taken a huge resource that, 
even if they were to permit it, you know, in those certain 
areas, they've taken it, and you can't even drill.
    Mr. Lankford. It is my understanding we're headed to North 
Dakota, and it will be one of the questions that I have for 
some of the folks in North Dakota, because they have a mixture 
of BLM lands and private lands there that I want to ask the 
timing, how long it takes to get a permit on private, how long 
it takes to get a permit on Federal lands there.
    Mr. McDonald. The Oklahoma Corporation Commission has got a 
special provision if I pay a little more money, I can go down 
there and get a permit in one day if my permit is in proper 
order. But I've been told by friends six, nine, twelve months a 
lot of times, for a permit on Federal land.
    Mr. Lankford. Well, the good news is they make you pay 
additional money anyway.
    Chairman Issa. Mr. Farenthold.
    Mr. Farenthold. Thank you very much.
    Mr. Ming, you talked a little bit about natural gas and the 
abundance of natural gas moving transportation over to natural 
gas. Is Oklahoma involved in doing anything to promote that or 
stimulating or working with the private sector to get that to 
happen more quickly?
    Mr. Ming. Congressman, I'm really glad you asked that 
question. Yes, we are. Governor Fallin along with Governor 
Hickenlooper of Colorado have led an effort among Governors, no 
offense to Washington, but we feel the States can push this 
effort forward to do a statewide procurement of natural gas 
vehicles, which would partner with manufacturers to entice them 
to build a functional and affordable natural gas vehicle at a 
price point where consumers can buy it. And as of today, 13 
Governors, in a very bipartisan fashion, have signed onto that. 
And we anticipate releasing a request for a proposal to all the 
automobile manufacturers here within a couple of weeks.
    (Inaudible)
    It will actually be auto and truck, yes.
    Mr. Farenthold. It's my understanding that part of the 
problem with natural gas vehicle is getting refueling 
infrastructure in place with the gas stations that now sell 
gasoline, would sell--have some sort of facilities to sell the 
natural gas for the vehicles.
    It's also my understanding that, in typical American 
entrepreneurial fashion, even the large auto manufacturers in 
Detroit are realizing that there's a potential market here. And 
there was a recent Wall Street Journal article that says 
they're doing combination vehicles that have an eight-gallon 
gasoline tank, as well as a natural gas tank. So when you're in 
a location where you cannot refuel in natural gas, you're 
stuck. And that was done despite the Government involvement 
with the automobile industry. It was done with a minimal amount 
of Government help of choosing winners and losers.
    Ms. Horn. I want to go back. You were talking about 
diversity of fuel sources as being a key to the success of the 
electric energy. And it's my understanding Oklahoma, obviously, 
has coal and wind, natural gas. I'm assuming there's some 
nuclear here, as well?
    As far as our company, we're a natural gas, coal and wind.
    Mr. Farenthold. Okay.
    Ms. Horn. Nuclear is over in Arkansas.
    Mr. Farenthold. Now, your wind farms, the Endangered 
Species Act is also, the prairie-chickens, are also an issue 
with your wind farms. The green folks seem to think that wind 
is the end all, be all. Can you tell me what the problem is 
with the prairie-chickens and the wind farms?
    Ms. Horn. That's an interesting question, because we were 
asking that same question. What is it about wind farms that 
either affects or threatens the species? And right now, we have 
not heard anything about the structures themselves, that they 
documented that actually affects the species. So we're looking 
at what threatens the chickens and making sure that what we do 
is----
    Mr. Farenthold. I think it scares them. They think it's a 
bird of prey coming after them, is what I've heard.
    Let me ask you one more question about EPA.
    You indicated the EPA comes in and tells you you've got to 
do a lot of stuff. Are they good at helping you with exactly 
what you're going to do? They come in and say, oh, you know, 
you're in noncompliance on this. Obviously, the next question 
is: What do we need to do to get in compliance? Are they 
helpful in that at all.
    Ms. Horn. I'll just have to say, most recently, they seem 
to have an agenda. And that agenda seems to be affecting the 
way we generate--and the fuel we use to generate electricity. 
So there seems to be an agenda. While they are very, you know, 
(inaudible) EPA, overall, it seems to be that they have an 
agenda in mind or are not willing to compromise.
    Mr. Farenthold. All right. Well, I see my yellow light is 
coming on. Again, I could go on for quite a while, but I will 
(inaudible).
    Chairman Issa. Thank you.
    If there are no further questions, I had one last thing for 
Mr. McDonald. Now, you did say you're still operating on Tribal 
lands?
    Mr. McDonald. Yes.
    Chairman Issa. And paying a royalty?
    Mr. McDonald. Yes.
    Chairman Issa. 17 or 18 percent?
    Mr. McDonald. I think it's more like 20 percent.
    Chairman Issa. 20 percent. Now that's on the gross, right?
    Mr. McDonald. Yes, sir.
    Chairman Issa. So Government doesn't actually take a hit 
for how little you make. If your gross and your net came off--
if you, in fact, made not a penny, you'd still pay 20 percent 
of the gross.
    Mr. McDonald. That is correct.
    Chairman Issa. So your partner on Federal land is a partner 
that takes first and doesn't worry about whether there's 
anything left at the end.
    Mr. McDonald. Yes, sir.
    Chairman Issa. I just wanted to make sure we understand the 
problem you have with Federal lands. I couldn't resist.
    It's our goal to make the Federal Government a better 
partner, one who does protect the American people, and one who, 
at the same time, recognizes that America's low cost, high 
quality energy is, in fact, part of the most important 
difference between the caveman and modern man. And countries 
who don't understand that do so at their peril.
    I travel around. Many of us get to take sometimes what's 
called junkets, you know, overnight to Afghanistan or Iraq. But 
I also go to China, and I also go to many of those other 
countries. And they all have strategic energy plans in which 
they're trying to make sure that they control their energy 
future.
    It's our commitment on the Committee to take what you've 
told us today, plus the additional questions you'll answer in 
writing, put it not just into the record, but put it into an 
action plan for the next administration.
    And with that, again, I thank you for your testimony. Your 
ability to revise and extend any additional ideas you came up 
with will also be placed in the record.
    And with that, I want to finally thank our audience. You've 
been extremely good. I've heard neither interruptions through 
phone ringing nor did I hear any boos.
    So with that, we stand adjourned.
    [Whereupon, the committee was adjourned.]

                                 
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