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

                       TAPPING AMERICA'S ENERGY POTENTIAL
                        THROUGH RESEARCH AND DEVELOPMENT

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

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON ENERGY AND
                                  ENVIRONMENT

                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                           FRIDAY, NOVEMBER 30, 2012

                                   __________

                               Serial No. 112-108

                                   __________

     Printed for the use of the Committee on Science, Space, and Technology

           Available via the World Wide Web: http://science.house.gov

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                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                        HON. RALPH M. HALL, Texas, Chair
    F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
        Wisconsin                        JERRY F. COSTELLO, Illinois
    LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
    DANA ROHRABACHER, California         ZOE LOFGREN, California
    ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
    FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
    JUDY BIGGERT, Illinois               DONNA F. EDWARDS, Maryland
    W. TODD AKIN, Missouri               BEN R. LUJAN, New Mexico
    RANDY NEUGEBAUER, Texas              PAUL D. TONKO, New York
    MICHAEL T. McCAUL, Texas             JERRY McNERNEY, California
    PAUL C. BROUN, Georgia               TERRI A. SEWELL, Alabama
    SANDY ADAMS, Florida                 FREDERICA S. WILSON, Florida
    BENJAMIN QUAYLE, Arizona             HANSEN CLARKE, Michigan
    CHARLES J. ``CHUCK'' FLEISCHMANN,    SUZANNE BONAMICI, Oregon
        Tennessee                        VACANCY
    E. SCOTT RIGELL, Virginia            VACANCY
    STEVEN M. PALAZZO, Mississippi       VACANCY
    MO BROOKS, Alabama
    ANDY HARRIS, Maryland
    RANDY HULTGREN, Illinois
    CHIP CRAVAACK, Minnesota
    LARRY BUCSHON, Indiana
    DAN BENISHEK, Michigan
    VACANCY
                                     ------

                     Subcommittee on Energy and Environment

                       HON. ANDY HARRIS, Maryland, Chair
    DANA ROHRABACHER, California         BRAD MILLER, North Carolina
    ROSCOE G. BARTLETT, Maryland         LYNN C. WOOLSEY, California
    FRANK D. LUCAS, Oklahoma             BEN R. LUJAN, New Mexico
    JUDY BIGGERT, Illinois               PAUL D. TONKO, New York
    W. TODD AKIN, Missouri               ZOE LOFGREN, California
    RANDY NEUGEBAUER, Texas              JERRY McNERNEY, California
    PAUL C. BROUN, Georgia
    CHARLES J. ``CHUCK'' FLEISCHMANN,
        Tennessee
    RALPH M. HALL, Texas                 EDDIE BERNICE JOHNSON, Texas

                                C O N T E N T S

                           Friday, November 30, 2012

                                                                       Page
    Witness List.....................................................     2

    Hearing Charter..................................................     3

                               Opening Statements

    Statement by Representative Andy Harris, Chairman, Subcommittee
      on Energy and Environment, Committee on Science, Space, and
      Technology, U.S. House of Representatives......................    20
        Written Statement............................................    21

    Statement by Representative Ralph M. Hall, Chairman, Committee on
      Science, Space, and Technology, U.S. House of Representatives..    21
        Written Statement............................................    23

    Statement by Representative Brad Miller, Ranking Member,
      Subcommittee on Energy and Environment, Committee on Science,
      Space, and Technology, U.S. House of Representatives...........    24
        Written Statement............................................    25

                                   Witnesses:

    Dr. Anthony Cugini, Director, National Energy Technology
      Laboratory, Department of Energy
        Oral Statement...............................................    27
        Written Statement............................................    30

    Mr. David Martineau, Chairman, Texas Independent Producers and
      Royalty Owners Association
        Oral Statement...............................................    36
        Written Statement............................................    39

    Dr. Daniel Hill, Interim Department Head, Professor and holder of
      the Noble Chair in Petroleum Engineering, Texas A&M University
        Oral Statement...............................................    46
        Written Statement............................................    48

    Mr. Michael Hagood, Director of Program Development, Energy and
      Environment Science and Technology, Idaho National Laboratory
        Oral Statement...............................................    56
        Written Statement............................................    58

                 Appendix I: Answers to Post-Hearing Questions

    Dr. Anthony Cugini, Director, National Energy Technology
      Laboratory, Department of Energy...............................    80

    Mr. David Martineau, Chairman, Texas Independent Producers and
      Royalty Owners Association.....................................    81

    Dr. Daniel Hill, Interim Department Head, Professor and holder of
      the Noble Chair in Petroleum Engineering, Texas A&M University.    82

    Mr. Michael Hagood, Director of Program Development, Energy and
      Environment Science and Technology, Idaho National Laboratory..    83

                Appendix II: Additional Material for the Record

    Letter submitted by Chairman Ralph M. Hall from the American
      Geosciences Institute in support of H.R. 6603..................    90

    ``The new Boom: Shale gas fueling an American industrial
      revival,'' Article, Washington Post............................    92

    ``Oil and Natural Gas Generate EMPLOYMENT and TAX REVENUE,''
      submitted by Mr. David Martineau...............................    97

                       TAPPING AMERICA'S ENERGY POTENTIAL
                        THROUGH RESEARCH AND DEVELOPMENT

                                  ----------

                           FRIDAY, NOVEMBER 30, 2012

                      House of Representatives,
                        Subcommittee on Energy and Environment,
                   Committee on Science, Space, and Technology,
                                                       Washington, D.C.

        The Subcommittee met, pursuant to call, at 9:34 a.m., in
    Room 2318 of the Rayburn House Office Building, Hon. Andy
    Harris [Chairman of the Subcommittee] presiding.

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        Chairman Harris. The Subcommittee on Energy and Environment
    will come to order.
        Good morning, everyone. Welcome to today's hearing entitled
    ``Tapping America's Energy Potential through Research and
    Development.'' In front of you are packets containing the
    written testimony, biographies and Truth in Testimony
    disclosures for today's witness panel. I now recognize myself
    for five minutes for an opening statement.
        Let me begin by noting that this is expected to be the last
    Energy and Environment Subcommittee hearing of this Congress. I
    would like to thank Ranking Member Miller and the members of
    the Subcommittee for working together to consider and address
    issues of great importance to the future of our country.
        As we have highlighted throughout this Congress, the United
    States has a wealth of untapped unconventional energy
    resources. In fact, the International Energy Agency recently
    predicted the United States will overtake Saudi Arabia to
    become the world's largest oil producer by 2020, largely due to
    the potential for development of U.S. unconventional energy
    resources. The significant positive economic benefits
    associated with development of unconventional energy resources
    are widely acknowledged. Tapping America's unconventional oil
    and gas resources will additionally provide sorely needed
    stimulation of our economy, restore our manufacturing sector
    and create high-paying middle-class jobs. Citigroup predicts
    the cumulative impact of new oil and gas production could
    create as many as 3.6 million new jobs by 2020. Unfortunately,
    the degree to which the United States will pursue and realize
    these much-needed benefits remains in doubt, primarily due to
    politics.
        Under Chairman Hall's leadership, the Science, Space, and
    Technology Committee and this Subcommittee in particular have
    explored a broad range of energy production-related issues,
    from the lack of transparency and weak scientific foundations
    underlying EPA's job-killing regulations to the waste and
    imbalance in Department of Energy's research and development
    activities. Unfortunately, time and again, a massive disconnect
    between the President's words and his Administration's actions
    are evident. While President Obama continues to claim he
    supports an all-of-the-above energy strategy, the plain facts
    tell a different story. This was clearly illustrated in May
    when DOE's Assistant Secretary for Fossil Energy testified to
    this Subcommittee that oil shale was a component of the
    Administration's all-of-the-above energy strategy. Yet when
    pressed, he acknowledged that DOE was not spending any funding
    on oil shale R&D, and could not identify anything the
    Administration was doing to actively advance oil shale. In
    fact, despite the President's prominent call for an all-of-the-
    above energy strategy in this year's State of the Union speech,
    just recently the Administration finalized a plan effectively
    reducing lands available for oil shale production by two-
    thirds.
        Unfortunately, the Administration's rhetoric on energy
    production is similarly empty when it comes to shale gas and
    hydraulic fracturing, where the EPA is leading 13 federal
    agencies and offices in pursuit of new ways to regulate this
    incredibly beneficial and safe technology.
        Chairman Hall's legislation, the ``Tapping America's Energy
    Potential Through Research and Development Act of 2012,''
    addresses the obvious imbalance in DOE research priorities. It
    restores a true all-of-the-above R&D focus at DOE through
    authorization of limited and targeted research and development
    activities that develop key technologies relating to oil shale,
    shale oil and gas, and produced water utilization.
        [The prepared statement of Mr. Harris follows:]

            Prepared Statement of Subcommittee Chairman Andy Harris

        Good morning and welcome to this morning's hearing entitled Tapping
    America's Energy Potential Through Research and Development.
        Let me begin by noting that this is expected to be the last Energy
    and Environment Subcommittee hearing of this Congress. I would like to
    thank Ranking Member Miller and the Members of the Subcommittee for
    working together to consider and address issues of great importance to
    the future of our country.
        As we have highlighted throughout this Congress, the United States
    has a wealth of untapped unconventional energy resources. The
    International Energy Agency recently predicted the U.S. will overtake
    Saudi Arabia to become the world's largest oil producer by 2020,
    largely due to the potential for development of U.S. unconventional
    energy resources. The significant positive economic benefits associated
    with development of unconventional energy resources are widely
    acknowledged. Tapping America's unconventional oil and gas resources
    will additionally provide sorely needed stimulation of our economy,
    restore our manufacturing sector and create high-paying middle class
    jobs. Citigroup predicts the cumulative impact of new oil and gas
    production could create as many as 3.6 million new jobs by 2020.
    Unfortunately, the degree to which the U.S. will pursue and realize
    these benefits remains in doubt, primarily due to politics.
        Under Chairman Hall's leadership, the Science, Space, and
    Technology Committee--and this subcommittee in particular--has explored
    a broad range of energy production-related issues, from the lack of
    transparency and weak scientific foundations underlying EPA's job-
    killing regulations to the waste and imbalance in Department of
    Energy's research and development activities. Unfortunately, time and
    again, a massive disconnect between the President's words and his
    Administration's actions are evident.
        While President Obama continues to claim he supports an ``all-of-
    the-above'' energy strategy, the plain facts tell a different story.
    This was clearly illustrated in May when DOE's Assistant Secretary for
    Fossil Energy testified to the subcommittee that oil shale was a
    component of the Administration's all-of-the-above energy strategy. Yet
    when pressed, he acknowledged DOE was not spending any funding on oil
    shale R&D, and could not identify anything the Administration was doing
    to actively advance oil shale. In fact, despite the President's
    prominent call for an all of the above energy strategy in this year's
    State of the Union speech, just recently the Obama Administration
    finalized a plan effectively reducing lands available for oil shale
    production by two thirds.
        Unfortunately, the Administration's rhetoric on energy production
    is similarly empty when it comes to shale gas and hydraulic fracturing,
    where the EPA is leading 13 Federal agencies and offices in pursuit of
    new ways to regulate this incredibly beneficial and safe technology.
        Chairman Hall's legislation, the ``Tapping America's Energy
    Potential Through Research and Development Act of 2012,'' addresses the
    obvious imbalance in DOE research priorities. It restores a true all-
    of-the-above R&D focus at DOE through authorization of limited and
    targeted research and development activities that develop key
    technologies relating to oil shale, shale oil and gas, and produced
    water utilization.

        Chairman Harris. At this time I would like to yield to the
    Chairman of the Science, Space, and Technology Committee for
    three minutes for him to describe his legislation. Chairman
    Hall.
        Chairman Hall. Mr. Chairman, I thank you very much, and you
    have done a very good job of your opening statement. You just
    about said it all. I say to you good morning, and I thank you
    for yielding the time you have given me.
        I want to thank the witnesses for being here to talk about
    an issue that is very important to me and to all of us, and in
    particular, I would like to recognize and thank Dr. Daniel
    Hill, the Chair of Texas A&M Petroleum Engineering Department,
    and I had a good visit with your president two Saturdays ago, I
    think, when they created Johnny Football down there and we are
    waiting to see what they do with it, and Dr. Martineau, the
    Chairman of the Texas Independent Producers and Royalty Owners
    Association, TIPRO, a great organization that I am very
    familiar with, and I think that you started out with Frank and
    Shelby Pitts and they are still with the Pitts organization. Is
    that correct?
        Mr. Martineau. Yes.
        Chairman Hall. How many?
        Mr. Martineau. Forty years.
        Chairman Hall. Well, you are probably getting old to do
    things like that.
        But energy policy is and has always been one of my very top
    priorities, both as a Member, and as Chairman of this
    Committee. I believe strongly that for young people today, the
    importance of energy and how important energy is and the fact
    that nations including our Nation will fight for energy if we
    don't have energy and we shouldn't have to because we have
    plenty, and I am very hopeful for this next two years that we
    can use what we have and be users of our own and salespeople of
    some will have in addition if we just do what we ought to do
    like all of the above. A lot of people talk all of the above
    and do none of the above, and that is what our problem is. I
    think after ``prayer'', ``energy'' is probably the most
    important word in the dictionary to youngsters that are
    graduating from high school, grade school or college. It is the
    foundation upon which our Nation has prospered, and the key to
    our quality of life and standard of living.
        That is why I introduced H.R. 6603, which would increase
    energy security through support for research and development to
    enable prudent development of U.S. domestic energy resources.
    The legislation builds on the record of the Science, Space, and
    Technology Committee during our tenure here this last two
    years.
        The United States is blessed with a wealth of
    unconventional energy resources and we are currently
    experiencing a revolution in oil and gas production thanks to
    those resources. This increased production is not only
    increasing our energy security, it is stimulating our economy
    and creating much-needed jobs. In 2010, unconventional natural
    gas development alone supported over a million jobs in this
    country, and this number is expected and could more than double
    by 2035.
        This bipartisan legislation promotes the development of oil
    shale instead of restricting it, and ensures that we maximize
    the benefits of our unconventional oil and gas resources. The
    bill directs the Department of Energy to undertake R&D
    activities to address the scientific and technological barriers
    to oil shale development. It also supports R&D to minimize
    water use and maximize efficiency in shale oil and gas
    operations. The legislation includes language from the Produced
    Water Utilization Act, a bill I sponsored and others that was
    sponsored in the 111th Congress and passed through the House
    with unanimous consent.
        In 2005, we worked together on and I authored Section 999
    of the Energy Policy Act, which created a very successful
    Department of Energy unconventional oil and gas research and
    development program. The bill before us today is intended to
    complement the ongoing 999 program, which is a program that we
    knew energy was there in the Gulf but we couldn't get it up,
    couldn't get it to the top. We needed technology to get it to
    the top. We traded with a lot of universities. They would give
    us the technology, and we would pay them with the energy they
    got to the top. If we didn't get their technology, it didn't go
    to the top. If we did get their technology, it did, and it has
    worked very well. They take shots at it every year but it is so
    valuable that I am hoping--it is currently set to expire in
    2014 and I hope they are going to continue it beyond that, and
    I think they will, as well as provide direction for the DOE oil
    shale R&D activities and the Administration's proposal for an
    interagency R&D collaboration on unconventional energy
    resources. The only thing that can stop this amazing story from
    continuing is politics, specifically, the Environmental
    Protection Agency's thinly veiled campaign to restrict access
    to these resources.
        In closing, I will just say the bill I am introducing today
    will help to provide a check against EPA's war on energy by
    addressing environmental challenges through technological
    solutions instead of job-killing regulations.
        I would like to ask unanimous consent to enter into the
    record a letter from the American Geosciences Institute in
    support of H.R. 6603, and I look forward to hearing from our
    witnesses today, and I yield back, and Mr. Chairman, I ask
    unanimous consent to enter into the record that letter.
        [The prepared statement of Mr. Hall follows:]

             Prepared Statement of Committee Chairman Ralph M. Hall

        Good morning and thank you Chairman Harris for yielding me time. I
    want to thank the witnesses for being here to talk about an issue that
    is very important to me. In particular, I would like to recognize and
    thank Dr. Daniel Hill, the Chair of Texas A&M Petroleum Engineering
    Department, and Mr. David Martineau, the Chairman of the Texas
    Independent Producers and Royalty Owners Association (TIPRO).
        Energy policy is and has always been one of my top priorities, both
    as a Member, and as Chairman of this Committee. I believe strongly
    that, after prayer, energy is the most important word in the
    dictionary. It is the foundation upon which our nation has prospered,
    and the key to our quality of life and standard of living.
        That is why I introduced H.R. 6603, which would increase energy
    security through support for research and development to enable prudent
    development of U.S. domestic energy resources. This legislation builds
    on the record of the Science, Space, and Technology Committee during my
    tenure as Chairman.
        The U.S. is blessed with a wealth of unconventional energy
    resources and we are currently experiencing a revolution in oil and gas
    production thanks to those resources. This increased production is not
    only increasing our energy security, it is stimulating our economy and
    creating much needed jobs. In 2010, unconventional natural gas
    development alone supported over a million jobs in this country, and
    this number is expected to more than double by 2035.
        This bipartisan legislation promotes the development of oil shale
    instead of restricting it, and ensures we maximize the benefits of our
    unconventional oil and gas resources. The bill directs the Department
    of Energy to undertake R&D activities to address the scientific and
    technological barriers to oil shale development. It also supports R&D
    to minimize water use and maximize efficiency in shale oil and gas
    operations. The legislation includes language from the Produced Water
    Utilization Act, a bill I sponsored in the 111th Congress and passed
    through the House with unanimous consent.
        In 2005, I helped author Section 999 of the Energy Policy Act,
    which created a very successful Department of Energy unconventional oil
    and gas research and development program. The bill before us today is
    intended to complement the ongoing 999 program-which is currently set
    to expire in 2014 but I hope will continue beyond that-, as well as
    provide direction for the DOE oil shale R&D activities and the
    Administration's proposal for an interagency R&D collaboration on
    unconventional energy resources.
        The only thing that can stop this amazing story from continuing is
    politics-specifically, the Environmental Protection Agency's thinly
    veiled campaign to restrict access to these resources. The bill I'm
    introducing today will help to provide a check against EPA's war on
    energy by addressing environmental challenges through technological
    solutions instead of job-killing regulations.
        I would like to ask unanimous consent to enter into the record a
    letter from the American Geosciences Institute in support of H.R. 6603.

        I look forward to hearing from our witnesses today, and I yield
    back.

        Chairman Harris. Without objection.
        [The information appears in Appendix II]
        Chairman Harris. Thank you, Chairman Hall, and Mr.
    Chairman, it is of course been a pleasure to work with you the
    last two years, and I realize that the room has been brightened
    up a little bit by a new picture hanging on the wall opposite
    the Chairman's podium here. Yeah, that is appropriate.
        Chairman Hall. Can I tell you something about it?
        Chairman Harris. I will yield to the Chairman.
        Chairman Hall. I don't know how long it took him to do it,
    but he looked at me for about an hour and a half and took a
    thousand pictures and then he brought the picture in a box down
    to my house in Rockwell and he opened it up, and I said ``Oh,
    my God.'' I looked at it, and I said ``It's terrible.'' He
    said, ``Well, I have my things here. I can touch it up. What is
    your problem with it?'' I said, ``Well, I don't think you can
    improve on it.'' He said ``I can do whatever you ask me to do.
    What is the problem with it?'' I said, ``The main problem, it
    looks just exactly like me.'' Anyway, he eased up a little bit,
    but he did a good job, and thank you, Mr. Chairman.
        Chairman Harris. Thank you, Mr. Chairman Hall.
        I want to again thank the witnesses here today and now
    yield to the ranking member, Mr. Miller, for an opening
    statement.
        Mr. Miller. Thank you, Mr. Chairman.
        Before I begin, I would like the opportunity to welcome our
    newest member, David Curson. Congressman Curson occupies the
    seat left by Thaddeus McCotter representing the 11th District
    of Michigan. He will not be a Member of the new Congress so he
    will probably not have the opportunity Thad McCotter had to
    impress us with his distinctive personality. He brings long
    experience as a member of the United Auto Workers leadership
    and has a technical background in manufacturing, which is a
    welcome addition to this Congress. So we do welcome him.
        Mr. Chairman, we obviously have some disagreement about
    what would constitute an all-of-the-above energy policy. The
    lesson for today's hearing is from the Book of Matthew: ``For
    to the one who has, more will be given, and he will have in
    abundance, and from the one who has not, even what he has will
    be taken away.'' Or as many Americans put it colloquially, them
    that has, gets. That has certainly been the Republican policy
    on energy research.
        Our efforts to assist emerging energy technologies like
    solar, geothermal, wind, and technologies to make our energy
    use more efficient are considered ``green pork'' to House
    Republicans. They have opposed efforts by the Department of
    Energy to promote research, demonstration projects, and
    commercialization of emerging technologies as picking winners
    and losers. The Republican's Views and Estimates for Fiscal
    Year 2012 gave deeply principled reasons for opposition to
    government investment in emerging energy technologies, and I
    quote: ``Fundamentally, the act of providing individual firms
    with government money for the purpose of commercializing
    profitable technology is an inappropriate intervention in the
    market that may crowd out or discourage a greater amount of
    private investment.''
        So for emerging technologies that have not the economic and
    political power of incumbent fossil fuel and nuclear
    technologies, even what they have will be taken away. But
    incumbent technologies, which are already enormously
    profitable, will be given more, and will have in abundance,
    with none of the navel-gazing discussion about picking winners
    and losers or inappropriate interventions in the market.
        The incumbent technologies have benefited from government
    research for generations, government subsidies for generations,
    including research. Hydraulic fracturing is the combination of
    technologies developed by federally funded research. We will
    obviously continue to depend on fossil fuel technologies for
    most of our energy well into the future. Many Democrats,
    including me, have supported government funding for fossil
    fuels research, and will likely support this legislation as
    well. The section of Chairman Hall's legislation on produced
    water is almost identical to legislation passed by the
    Democratic majority in the last Congress. The industries and
    yes, the specific individual firms that will benefit most
    directly from this legislation, already have far more public
    and private investment in applied research and
    commercialization of technologies than do firms developing
    alternative energy technologies, some of which may dramatically
    alter our energy future and some of which may never be
    commercially viable.
        Even more important, continued support in abundance for
    incumbent technologies, often to the exclusion of alternative
    technologies, continues to base our energy future almost
    exclusively on hunting fossil fuels to extinction, leaving us
    woefully unprepared for our longer-term energy needs.
        Mr. Chairman, I suspect that most Democrats will support
    this legislation if it comes to a vote, but I hope that
    Republicans will consider whether the arguments in support of
    this legislation will be equally applicable to research for
    alternative energy sources so that we can have truly an all-of-
    the-above energy policy.
        I yield back the balance of my time.
        [The prepared statement of Mr. Miller follows:]

         Prepared Statement of Subcommittee Ranking Member Brad Miller

        The lesson for today's hearing is from the Book of Matthew: ``For
    to the one who has, more will be given, and he will have in abundance,
    and from the one who has not, even what he has will be taken away.'' Or
    as many Americans put it more colloquially, them that has, gets.

        That has certainly been the Republican policy on energy research.

        Our efforts to assist emerging energy technologies like solar,
    geothermal, wind, and technologies to make our energy use more
    efficient are considered ``green pork'' to House Republicans. They have
    opposed efforts by the Department of Energy to promote research,
    demonstration projects, and commercialization of emerging technologies
    as ``picking winners and losers.'' The Republican's Views and Estimates
    for Fiscal Year 2012, gave deeply principled reasons for opposition to
    government investment in emerging energy technologies: ``Fundamentally,
    the act of providing individual firms with government money for the
    purpose of commercializing profitable technology is an inappropriate
    intervention in the market that may crowd out or discourage a greater
    amount of private investment.''
        So for emerging technologies that have not the economic and
    political power of incumbent fossil-fuel and nuclear technologies, even
    what they have will be taken away.
        But incumbent technologies, which are already enormously
    profitable, will be given more, and will have in abundance, with none
    of the navel-gazing discussion about picking winners and losers or
    inappropriate interventions in the market.
        The incumbent technologies have benefited from government subsidies
    for generations, including funding for research. Hydraulic fracturing
    is the combination of technologies developed by federally-funded
    research. We will obviously continue to depend on fossil fuel
    technologies for most of our energy well into the future. Many
    Democrats, including me, have supported government funding for fossil
    fuels research, and will likely support this legislation as well. The
    section of Chairman Hall's legislation on ``produced water'' is almost
    identical to legislation passed by the Democratic majority in the last
    Congress.
        The industries and yes, the specific ``individual firms'' that will
    benefit most directly from this legislation, already have far more
    public and private investment in applied research and commercialization
    of technologies than do firms developing alternative energy
    technologies, some of which may dramatically alter our energy future
    and some of which will never be commercially viable. Even more
    important, continued support in abundance for incumbent technologies,
    often to the exclusion of alternative technologies, continues to base
    our energy future almost exclusively on hunting fossil fuels to
    extinction, leaving us woefully unprepared for our longer-term energy
    needs.
        Mr. Chairman, I suspect that most Democrats will support this
    legislation if it comes to a vote, but I hope that Republicans will
    consider the arguments in support of this legislation as arguments for
    a truly ``all of the above'' energy policy.

        I yield back the balance of my time.

        Chairman Harris. Thank you very much, Mr. Miller, and I
    join you in welcoming Mr. Curson to the Science, Space, and
    Technology Committee, and I welcome him sitting in on the
    Subcommittee hearing today.
        If there are Members who wish to submit additional opening
    statements, your statements will be added to the record at this
    point.
        At this time I would like to introduce our witness panel.
    Our first witness today is Dr. Anthony Cugini. Dr. Cugini is
    the Director of the National Energy Technology Laboratory for
    the Department of Energy. He previously served as Director of
    the Office of Research and Development at the National Energy
    Technology Laboratory. Before that position, Dr. Cugini served
    as the Focus Area Lead for NETL's Computational and Basic
    Sciences Focus Area. He has been at the laboratory since 1987.
        Our next witness is Dr. David Martineau. Dr. Martineau is
    the Chairman of the Texas Independent Producers and Royalty
    Owners Association. Mr. Martineau has worked in the oil and gas
    industry for more than 50 years. He is an active member of the
    American Association of Petroleum Geologists, the Interstate
    Oil and Gas Compact Commission, and the Barnett Shale Water
    Conservation and Management Committee.
        Our third witness is Dr. Daniel Hill, who is the Interim
    Department Head, a Professor and holder of the Noble Chair in
    Petroleum Engineering at Texas A&M. Previously, he taught for
    22 years at the University of Texas at Austin after spending
    five years in industry. He is the author of the Society of
    Petroleum Engineering monograph ``Production Logging:
    Theoretical and Interpretive Elements'', co-author of the
    textbook ``Petroleum Production Systems'', co-author of an SPE
    book, ``Multilateral Wells'' and author of over 150 technical
    papers and holds five patents.
        Our final witness is Mr. Michael Hagood. Mr. Hagood is the
    Director of Program Development for Energy and Environment
    Science and Technology at the Idaho National Laboratory. He is
    responsible for developing programs advancing energy innovation
    and also for designing and implemented INL's regional energy
    sector strategy, notably the western energy corridor concept.
    Mr. Hagood joined INL in 2003 and previously has also supported
    INL national and homeland critical energy infrastructure
    programs.
        Thank you all for appearing before the Subcommittee today.
    As our witnesses should know, spoken testimony is limited to
    five minutes each after which the members of the Committee will
    have five minutes each to ask questions.
        I now recognize our first witness, Dr. Anthony Cugini, the
    Director of the National Energy Technology Laboratory at the
    Department of Energy, for five minutes.

               STATEMENT OF DR. ANTHONY CUGINI, DIRECTOR,

                 NATIONAL ENERGY TECHNOLOGY LABORATORY,

                          DEPARTMENT OF ENERGY

        Dr. Cugini. Thank you. Chairman Harris, Ranking Member
    Miller and members of the Subcommittee, I appreciate the
    opportunity to discuss the role that the Department of Energy's
    Office of Fossil Energy and National Energy Technology
    Laboratory continue to play in the safe and responsible
    development of the Nation's unconventional oil and natural gas
    resources.
        As you know, since 2008, U.S. oil and natural gas
    production has increased each year. In 2011, U.S. crude oil
    production reached its highest level in nearly a decade.
    Natural gas production grew in 2011 as well, the largest year-
    over-year increase in history. Overall, oil imports have been
    falling since 2005, and our dependence on imported oil declined
    from 57 percent in 2008 to 45 percent in 2011, the lowest level
    since 1995.
        There are a number of unconventional resources with the
    potential to support the President's all-of-the-above strategy
    and to further reduce U.S. reliance on foreign oil. These
    include U.S. oil reservoirs amenable to CO2 EOR,
    heavy oil, oil shale, shale oil, and natural gas resources to
    include methane hydrates.
        Studies indicate that 24 billion barrels of residual oil
    may be recoverable with current CO2 EOR technologies
    and another 36 billion barrels with next-generation technology.
    For perspective, the United States currently produces about 2
    billion barrels of crude oil per year and has proved reserves
    of about 23 billion barrels. The National Coal Council
    estimates that another 33 billion barrels of residual oil zone
    oil is recoverable at a crude oil price of $85 per barrel.
        In combination with oil shale, heavy oil, oil sands and
    shale oil, EIA estimates that unconventional oil resources
    total more than 3,000 billion barrels of liquid hydrocarbons in
    place. Production of unconventional natural gas resources has
    also risen sharply during the past decade. Shale gas in 2012 in
    the United States is roughly 25 times what it was in 2000. EIA
    estimates that 482 trillion cubic feet of unproven but
    technically recoverable natural gas exists, more than 20 times
    2011 annual natural gas consumption of 24 trillion cubic feet.
        Even more abundant than shale gas is natural gas from
    methane hydrate. The Bureau of Ocean Energy Management,
    Regulation and Enforcement estimates in-place gas hydrate
    resources of 21,400 trillion cubic feet in the Gulf of Mexico,
    and the USGS estimates 85 trillion cubic feet on the North
    Slope of Alaska.
        Implicit in the development of our unconventional oil and
    gas resources is that air and water quality and public health
    and safety are not compromised. To this end, the Department
    signed a memorandum of agreement with the EPA and the USGS to
    address the potential environmental, health and safety impacts
    of hydraulic fracturing and the development of other
    unconventional fossil resources. The DOE's NETL is also
    carrying out research to quantify and understand the risks of
    shale gas and shale oil development as well as improve related
    unconventional oil and gas characterization and extraction
    technologies under Section 999 of the Energy Policy Act of
    2005, the Ultra-Deepwater and Unconventional Natural Gas and
    Other Petroleum Resources program. Just this week, the
    selection of 15 new projects was announced as part of the
    Section 999 program.
        Regarding methane hydrates, DOE's efforts have featured
    extensive interagency coordination and collaborations with
    leading international gas hydrate research organizations.
    Because of these efforts, hydrates have moved from a scientific
    curiosity in 2000 to a known resource today.
        DOE and NETL have a long history of success in
    unconventional oil and gas research. Collaboration with
    industry in the 1970s and 1980s was a linchpin in the current
    shale gas revolution. Recent successes include completion of a
    large-scale field test of natural gas extraction from methane
    hydrates on the North Slope of Alaska. Also, Altela
    Incorporated will open two commercial water treatment
    facilities this year in Pennsylvania based on technology
    demonstrated under DOE's oil and gas program. NETL also
    conducts onsite research that complements its extramural
    portfolio and it leverages competencies and capabilities
    including expertise in resource characterization, technology
    development and environmental monitoring to inform responsible,
    sustainable exploration of production of the Nation's
    unconventional domestic gas resources.
        Let me conclude by saying that the United States contains
    significant hydrocarbon wealth that can be extracted and used
    to provide economic benefits for all Americans. The Department
    is committed to developing the science and technology that will
    allow the Nation to use its abundant fossil energy resources in
    a way that balances the energy needs for sustaining a robust
    economy with continued environmental responsibility. I
    recognize the developed legislation that aids in supporting
    unconventional oil and gas research, and while we have not
    developed a position, I am pleased that this legislation is
    focused on this important energy resource.
        Mr. Chairman, this completes my prepared statement. I look
    forward to addressing any questions that you or the other
    Subcommittee members may have.
        [The prepared statement of Dr. Cugini follows:]

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        Chairman Harris. Thank you, Dr. Cugini.
        I now recognize our second witness, Mr. David Martineau,
    the Chairman of the Texas Independent Producers and Royalty
    Owners Association.

              STATEMENT OF MR. DAVID MARTINEAU, CHAIRMAN,

                    TEXAS INDEPENDENT PRODUCERS AND

                       ROYALTY OWNERS ASSOCIATION

        Mr. Martineau. Thank you very much. Good morning, Mr.
    Chairman and members. My name is David Martineau and I am
    representing the Texas Independent Producers and Royalty Owners
    Association, also known as TIPRO. TIPRO was founded in the East
    Texas Field in 1946. Since then, TIPRO has s grown to be a top-
    tier oil and natural gas trade association made up of over
    2,500 members statewide. Our membership ranges from small,
    family-owned businesses to large publicly traded independent
    producers, and includes large and small royalty owners, mineral
    estates, and trusts. I currently have the pleasure of serving
    as the Chairman of the Board of Directors for TIPRO. I am a
    geologist. I worked for Pitts Oil Company for 40 years, as we
    said, and I am truly honored to be here.
        Lately, much has been made of this country's looming fiscal
    cliff. The United States, however, is not only facing a fiscal
    cliff, but an energy cliff as well. Domestic independent
    producers are responsible for approximately 75 percent of the
    domestic natural gas production, and nearly 50 percent of the
    domestic oil production. However, threats to the framework that
    allows independents to maintain and grow their production
    levels exist in various forms. One, tax provisions like
    intangible drilling deductions, IDCs, and depletion allowance
    are crucial to the survival of the small independent producers
    and they are being attacked and mislabeled as big oil
    subsidies. Overreaching regulations from the EPA and U.S. Fish
    and Wildlife Service with no scientific backing pile additional
    unnecessary compliance costs onto the oil and natural gas
    producers. The Federal Government is attempting to go green and
    pick winners by focusing federal research and development
    monies on unproven, uneconomical and unreliable sources. They
    will not face the fact that 85 percent of the energy in the
    United States comes from fossil fuels.
        What needs to be done to continue to tap the American
    energy potential that has been created by the new shale
    revolution? You need to, one, understand variations in
    subsurface properties to avoid drilling marginal wells and
    increase recovery efficiency, scientifically characterize risks
    and inform stakeholders, minimize surface impacts of
    unconventional oil and gas operations.
        In the past, federal dollars have been spent on researching
    and developing improved methods of oil and gas extraction. Much
    of the resultant data and techniques combined with the forward
    thinking of some brilliant and creative private-sector minds
    resulted in some of the biggest energy successes in the
    country's history. Let me outline a few specific cases of
    worthwhile federal research conducted on oil and gas. In 1976
    the U.S. Department of Energy initiated an eastern shale
    project to evaluate the gas potential of and enhance oil
    production from shales within the Appalachian, Illinois and
    Michigan basins in the eastern United States. This project
    showed that we had enormous amounts of natural gas locked in
    these domestic shale formations, which are now the massive
    Marcellus and Utica shale plays. In 1982, the Federal
    Government began funding the research efforts of the Gas
    Research Institute, an industry-formed research and development
    program founded in 1978, which has since resulted in increased
    natural gas viability as a fuel source. In 1991, George P.
    Mitchell, the father of the Barnett shale, with financial help
    from the Department of Energy, drilled and completed his first
    Barnett Shale horizontal well. In 2005, the Energy Policy Act
    and a research program managed with the Research Partnership to
    Secure Energy for America called RPSEA has been a very
    successful program.
        Recognizing the importance of oil and natural gas and
    investing federal money in its development should not be a
    thing of the past. In fact, never in history has it been more
    crucial to continue improving and enhancing our ability to
    recover domestic oil and natural gas. Domestic energy
    independence can be achieved, and federal research money can
    play a part.
        In the State of Texas alone, since the shale revolution
    started in 2006, from 2006 to 2011 we have increased annual
    production of oil from 347 million barrels to 431 million
    barrels and natural gas from 6.3 trillion cubic feet to 7.7.
    This partially is why our imports have dropped from 70 percent
    to 45 percent in that same time period as we head toward energy
    independence.
        Chairman Hall's bill 6603 is a good step in the right
    direction, and I compliment him for his efforts. Many areas
    where additional research could produce significant results are
    outlined in the bill, including hydraulic fracturing,
    development of improved proppants, water minimization,
    management, reuse and alternatives, improved modeling of
    formation, energy efficiency in exploration and production.
        Hydraulic fracturing--the big item. The hydraulic
    fracturing process, as it has evolved over the past 50-plus
    years from vertical wells to long horizontal wells with
    multiple fracture treatments, has introduced many complexities.
    There is a need for research focus in this area to increase
    recovery efficiency. To do so requires focusing on the
    subsurface processes involved with fracturing, including
    modeling of the process, microseismic assessment, emissions,
    water usage and other research. Successful research will
    increase the efficiency of the process, significantly reducing
    the number of well bores required, resulting in a reduction in
    well sites, water usage, emissions, traffic, noise, dust and
    other factors, all while increasing oil and gas recovery per
    well. This area of research, the optics of which do not
    indicate direct environmental impact, can have an overwhelming
    environmental impact.
        Water management is another big issue. According to data
    collected by the Texas Water Development Board, the volume of
    water used in hydraulic fracturing represents less than one
    percent of all the water consumed in the State of Texas.
    However, water management goes hand in hand with hydraulic
    fracturing, and the industry recognizes that there is still
    progress that can be made in this arena. Research and
    development are needed to address mitigation of the volumes of
    freshwater required in hydraulic fracturing; significant
    volumes of water produced from oil and gas shale wells and
    associated concerns as to its composition when it comes back;
    the development of technology to process water, converting the
    industry's largest waste stream into a new, useful product; and
    assuring the ability to safely dispose of water in the
    subsurface by geologic characterization of potential disposal
    zones across the country because they vary from basin to basin.
        Understanding the subsurface conditions and types of
    resource rock found within unconventional gas formations, in
    particular oil and gas shale, require ongoing research. Flow of
    fluids--gas, oil and water--through the low-permeability
    formations, particularly oil and gas shales, is not well
    understood. By increasing our understanding of subsurface
    geologic conditions, we can make progress toward effectively
    answering questions regarding economic recovery and
    environmental safety. Additionally, subsurface research can
    increase recovery efficiency from many unconventional oil and
    gas fields in the U.S., further unlocking minerals yet in
    place. These developed fields each have an entire
    infrastructure already in place with roads, well bores,
    metering facilities, marketing.
        Thousands of small independents, many of whom are TIPRO
    members, do not have the resources to conduct their own
    research, yet cumulatively produce a huge portion of domestic
    oil and natural gas. This is an area where targeted and
    carefully disseminated federally funded research efforts can
    have a significant and immediate impact on production and the
    economy, and I urge you to revive federal research investments
    into this worthwhile industry.
        Often efforts intended to impact major global oil and
    natural gas companies end up having a much larger impact on
    small, family-owned companies, many of whom live and work in
    your hometowns. These companies are a giant component in
    generating American jobs and resources for your state and this
    country, and they are worthy of your investment.
        Thank you for your time.
        [The prepared statement of Mr. Martineau follows:]

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        Chairman Harris. Thank you very much.
        I now recognize our third witness, Dr. Daniel Hill, the
    Interim Department Head and Professor and holder of the Noble
    Chair in Petroleum Engineering at Texas A&M. Dr. Hill.

                     STATEMENT OF DR. DANIEL HILL,

                   INTERIM DEPARTMENT HEAD, PROFESSOR

     AND HOLDER OF THE NOBLE CHAIR IN PETROLEUM ENGINEERING, TEXAS
                             A&M UNIVERSITY

        Dr. Hill. Good morning, Chairman and Committee members. I
    am Dan Hill. I am the head of the Petroleum Engineering
    Department at Texas A&M. I have been a faculty member for over
    30 years after working in industry for about five years, and
    throughout my career I have conducted research on methods to
    improve oil and gas production. For the past ten years, I have
    been supervising research projects funded by the Department of
    Energy studying horizontal wells and hydraulic fracturing.
        Unconventional oil and gas production has changed the U.S.
    energy game. In just a few years, applications of advanced
    technology have led to the most dramatic economic boost our
    country has seen in my lifetime. Production of natural gas and
    oil from unconventional reservoirs, primarily shale formations,
    is soaring, daily lessening this country's dependence on
    imported oil. Slide 1 is a history and forecast of the U.S.
    natural gas supply. In less than ten years, gas production from
    shale formations has grown to over 30 percent of the U.S.
    supply and continues to grow. This is great news in every
    possible way. Natural gas is the cleanest burning fossil fuel,
    it yields the least CO2, and it is low cost, thanks
    to its newfound abundance in unconventional reservoirs.
        Even more dramatic is the rapid increase in domestic oil
    production from unconventional reservoirs. Slide 2 shows that
    oil production from the Bakken formation in North Dakota is now
    close to 500,000 barrels per day. Forecasts are that Bakken
    production will reach a peak of 1 to 2 million barrels per day,
    equivalent to the peak production from the Alaskan North Slope.
    Production from the Eagle Ford formation in South Texas has
    grown from about 800 barrels per day to almost 300,000 barrels
    per day in only three years, as you see in this slide. These
    are just two examples. There are many other unconventional
    reservoirs in other parts of the country that are also rapidly
    adding to domestic production. Without question, there is a
    revolutionary change in U.S. energy supply underway, solely due
    to oil and gas production from unconventional reservoirs.
        And how has this happened? This shale production revolution
    is a result of major advances in the technologies of horizontal
    drilling and hydraulic fracturing, and, in particular, the
    combination of these two technologies. These advances have been
    aided greatly by a modest level of research funding from the
    Department of Energy, funding that supported research primarily
    at universities, small businesses and the national
    laboratories.
        Let me give you one example. Beginning in the early 1980s
    and through the mid-1990s, the Department of Energy, along with
    the Gas Research Institute, supported fundamental research on
    measuring the sounds made as hydraulic fractures are created.
    This research, led by a team at Sandia National Laboratory,
    resulted in a commercial technique for mapping hydraulic
    fractures that is now called microseismic monitoring. This
    technique, which has now been applied to tens of thousands of
    fracture treatments, and which is now itself a multimillion-
    dollar industry, has allowed engineers to greatly improve
    hydraulic fracturing and well completion practices by providing
    a means to measure the extent of the fractured region. Slide 4
    shows a microseismic map of the area affected by a multistage
    fracturing operation. The development of microseismic
    monitoring of hydraulic fracture treatments was clearly enabled
    by the Department of Energy-funded research that proved its
    viability.
        Is the current domestic energy growth sustainable? The goal
    of energy security, and possibly energy independence for the
    United States, is no longer just political rhetoric, but is
    technically attainable. However, it will not be easy, and it
    will require two things: further developments in technology,
    and the trained engineers and geoscientists needed for
    continued growth.
        On the technology side, although hydraulic fracturing
    methodologies have obviously been developed to the point that
    oil and gas are economically recoverable from very low
    permeability unconventional reservoirs, there is still a great
    deal of improvement that can be made to this technology. Major
    challenges include using less freshwater in fracturing and
    drilling fewer wells to contact the same amount of reservoir.
        The Department of Energy has been funding fundamental
    research in conjunction with the Research Partnership to Secure
    Energy for America, or RPSEA, on topics like these for the past
    several years, and this research is having a visible impact on
    industry practices. It is important to continue supporting
    RPSEA as they have a proven track record of producing important
    research results using a unique public-private partnership
    model.
        Perhaps most important is the role that Department of
    Energy funding for unconventional oil and gas research will
    have on the training of the engineers and scientists needed to
    sustain growth in unconventional oil and gas development. The
    research funded by DOE occurs primarily in universities and
    most of the money ends up in the pockets of graduate students.
    The research funding provided to universities through the
    proposed Department of Energy research program will help
    support the graduate students who will become the future
    technology leaders of our country.
        Thank you.
        [The prepared statement of Dr. Hill follows:]

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              Slides presented during Dr. Daniel Hill's testimony

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        Chairman Harris. Thank you very much.
        I now recognize our fourth and final witness, Mr. Michael
    Hagood, the Director of Program Development for Energy and
    Environment Science and Technology at the Idaho National
    Laboratory. Mr. Hagood.

                    STATEMENT OF MR. MICHAEL HAGOOD,

                    DIRECTOR OF PROGRAM DEVELOPMENT,

     ENERGY AND ENVIRONMENT SCIENCE AND TECHNOLOGY, IDAHO NATIONAL
                               LABORATORY

        Mr. Hagood. Chairman Harris, Ranking Member Miller and
    members of the Subcommittee, thank you for the opportunity to
    testify before the House Science, Space, and Technology
    Subcommittee on Energy and Environment.
        I have been asked to provide a statement on aspects of U.S.
    oil shale resource development and the importance of associated
    research development and demonstration. The U.S. oil shale
    resource is immense in size with most of the resource located
    in the States of Wyoming, Utah and Colorado. Estimates from
    recent U.S. Geological Survey studies indicate that among these
    three states, approximately 4 trillion barrels of oil are
    estimated to be in place with a significant portion of this
    resource projected to be recoverable. To put that in
    perspective, some of those estimates are at 800 billion barrels
    of oil. To further put that in perspective, given 2011
    estimates, the use of oil in the United States is approximately
    6.8 billion. It is enormous.
        A viable oil shale industry established on the foundation
    of these world-class western oil shale resources would help
    meet U.S. energy demands and reduce dependence on selected
    imports and their associated costs as well as reduce the risks
    associated with potential supply disruptions. On top of that,
    as already mentioned previously, this also has implications
    relative to the U.S. economy and not just directly but also in
    moving up the value chain associated with manufacturing.
        An oil shale research and demonstration program can
    contribute significantly to unlocking some of the richest
    portions of the western oil shale resource and help achieve
    this in an environmentally responsible manner. Government and
    industry research development and demonstration investment in
    the Canadian oil sands and previous U.S. and current U.S.
    government investment in shale gas and oil development attest
    to the value of RD&D in developing unconventional fossil energy
    resources. In addition, several industry players are currently
    conducting R&D demonstration projects as part of the oil shale
    research and demonstration leasing program managed by the
    Department of Interior's Bureau of Land Management.
        While a U.S. oil shale industry will likely be initiated
    with current technology such as with mining and surface
    retorts, aggressive research development and demonstration is
    also needed to explore and advance new approaches in
    innovation. Research development and demonstration offers to
    expand technology options, improve operability and efficiency,
    mitigate potential environmental impacts, and reduce costs of
    producing oil shale. The objective of a potential oil shale
    research development and demonstration program should be to
    provide solutions that help achieve specific production and
    environmental performance goals. Such a program would have a
    near-term objective of supporting responsible development of an
    oil shale industry but also be sufficiently farsighted to
    anticipate and promote multiple next-generation technology
    advancements. Given the longevity of this resource, it is
    something important to keep in mind. This resource could last
    100 or more years.
        An oil shale research development and demonstration program
    should focus on challenges that exist at both a site operation
    scale and those that occur at industry-wide scale including
    addressing fuel logistics, integrated energy systems and
    address potential cumulative environmental effects. Relative to
    energy systems, these can include integration of renewable
    energy or even nuclear energy with fossil energy development.
        Research development and demonstration associated with site
    operations should include enhancing production efficiency and
    environmental performance associated with in situ processing.
    Addressing environmental performance both at regional and
    operation scale needs to address surface and groundwater
    management, air quality, greenhouse gas, wildlife and land
    disturbance challenges. An effective R&D program should be
    guided by a strong, strategic plan developed working with
    diverse stakeholders and implementing R&D roadmap to ensure
    that the key research needs are identified and prioritized.
    Such a strategy can be built upon work already completed by
    U.S. Department of Energy in supporting and implementing the
    Energy Policy Act of 2005, Section 369.
        Planning should also take advantage of decades of relevant
    research conducted in association with the Canadian oil sands
    as well as what is transpiring recently as part of the
    Department of Interior's oil shale leasing program. This effort
    should also incorporate assets and expertise that have emerged
    around western oil shale operations and research including by
    industry, regional universities, government agencies and
    laboratories.
        The U.S. Department of Energy is a technical integrator
    that can bring together needed assets from both within and
    outside DOE to deliver an impactful RD&D program and can also
    act as an independent broker of technical information. DOE and
    its laboratories are well qualified to provide this leadership
    and to deliver a focused, solutions-oriented research program
    to address key challenges in developing long-term U.S. oil
    shale industry development.
        Chairman and members of the Subcommittee, thank you once
    again for the opportunity to share my testimony with you.
        [The prepared statement of Mr. Hagood follows:]

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        Chairman Harris. Thank you very much, and I thank the panel
    for their testimony, reminding members that Committee rules
    limit questioning for five minutes. The Chair will at this
    point open the round of questions, and I recognize myself for
    five minutes first.
        Mr. Hagood, thank you very much for that testimony. Let me
    get those figures straight. There are estimates that of those 4
    trillion barrels, 800 billion potentially recoverable, and if I
    do my math right, that is over 120 years at our current usage,
    and remember that our current usage of oil is actually
    declining over the past few years, so we have potentially over
    120 years in that oil shale by those numbers?
        Mr. Hagood. Yes.
        Chairman Harris. That is what I thought. And who has the
    largest oil shale deposits in the world? It is us, and is it
    some other country also?
        Mr. Hagood. Well, the United States has----
        Chairman Harris. The United States, so let me see, I think
    I get it. Okay. So it is something we probably ought to be
    investing in.
        Dr. Hill, do you realize that of the--oh, my gosh, let me
    see, $15 billion or so DOE budget, that only $5 million is
    spent on unconventional, none of it on oil shale or shale oil
    and gas?
        Dr. Hill. I am well aware.
        Chairman Harris. You realize that, right?
        Dr. Hill. Yes.
        Chairman Harris. Okay. I know you mentioned the importance
    of getting this money to graduates, but there is no money going
    to graduate students who are looking at oil shale from DOE, I
    anticipate.
        Mr. Martineau, let me just run that one more time because
    even in the current discussion, we are hearing about Big Oil
    and all the rest of that. The intangible drilling cost
    deduction and depletion allowance doesn't go to Exxon, does it?
    The vast, vast, vast majority. I mean, the vast majority goes
    to small owners and drillers?
        Mr. Martineau. Yes and no. Exxon and major oil companies
    get to deduct 70 percent of their intangibles, but when they
    come back into this country and start drilling again, it is
    very important.
        Chairman Harris. That they continue to do it because they
    are drilling here, not making money overseas.
        Mr. Martineau. Amortized over five years.
        Chairman Harris. So when we are talking about that, that is
    about domestic manufacturing. That is what I thought, and I
    thought we all support domestic manufacturing. You mentioned
    that--it is interesting because you kind of mentioned the
    importance of investing in these technologies, and there are
    two ways you can invest. The government can invest in order to
    find ways to condemn the technology, or they can invest to find
    ways to further develop new technologies, and my fear is that
    some of the investment being done over at EPA, and I am going
    to get Dr. Cugini next about DOE, may be the former, that's
    what we want to do, is we want to do research to condemn
    current technologies, not realizing the future is to find the
    next technological breakthrough, and it would seem to me that
    that--and I am just asking if you share that opinion. It seems
    that that is the best way we should be spending our money is
    actually to find out how to increase production through new
    technology, not finding problems with current production in
    order to just condemn it. I mean, that has no use if you are
    not going to also find ways to improve it. Is that correct?
        Mr. Martineau. I think you can improve the technologies
    that we currently have, and----
        Chairman Harris. And that would do both things at once,
    right? It would increase production and help the environment.
        Mr. Martineau. Exactly.
        Chairman Harris. Right, and I am still trying to figure out
    how drilling those wells at Pavilion by the EPA does the latter
    and not the former. I am still trying to figure it out. It is
    just to condemn current technology. It is incredible to me.
        Dr. Cugini, let me end up with you in my last couple
    minutes because, you know, this is about getting money into the
    Department of Energy to do some things. Is that really true,
    that there is no money spent right now on oil shale R&D? I
    mean, that was the testimony before the Committee this year.
        Dr. Cugini. Well, I think there has been some historical--
    --
        Chairman Harris. Not historical--this year.
        Dr. Cugini. But those projects are still underway, so at
    the University of Utah, we have some small amount of work going
    on and----
        Chairman Harris. And how much is a small amount out of the
    $15 billion DOE budget?
        Dr. Cugini. I don't have those numbers----
        Chairman Harris. Can you get that number back to me? And I
    will ask the Committee to make sure we make that request of the
    doctor. Because I suspect it is really small, which is just
    amazing to me because we have testimony, we are looking at 120
    years of oil, and I am not even counting the things that is in
    shale oil and gas. We are just talking about this one resource,
    120 years. We are in the midst of--the whole world would like
    to buy our oil and we are sitting on it, and you are telling me
    there is one little project at Utah, and that is it for oil
    shale.
        Dr. Cugini. Well, I think there is also some work that we
    do with Bureau of Land----
        Chairman Harris. Well, now, let me ask you----
        Dr. Cugini. --Management that you pointed out during your--
    --
        Chairman Harris. Let us pretend we start with a clean
    slate. What are some of the things we should be doing in order
    to move the development of oil shale along? What are some of
    the things the Department of Energy you think could do within
    the realm of possibility?
        Dr. Cugini. Well, obviously several of the projects would
    involve improving the efficiency of the process, looking at
    things like better water management and those type of
    technologies. I think those are the two key components of an
    oil shale program. The energy requirements and water
    requirements are such that it makes it difficult to extra the
    oil economically so I think a program that was addressing those
    two issues would allow us to look further at oil shale.
        Chairman Harris. And do you think that Chairman Hall's bill
    moves us in that direction, or can?
        Dr. Cugini. I think added resources would have the
    opportunity to do it. I think that is the way I would say it.
        Chairman Harris. Okay. Thank you very much for answering.
        I now recognize the ranking member, Mr. Miller, for five
    minutes.
        Mr. Miller. Thank you, Mr. Chairman. I know what Emerson
    said about a foolish consistency but I am still struck by this
    discussion.
        Dr. Cugini?
        Dr. Cugini. Yes.
        Mr. Miller. You said in your testimony that, not oil shale,
    but shale oil technology was a result--that we have now was a
    result of research in the 1970s and the 1980s, Federal
    Government research but closely working with industry in that.
    Is that correct?
        Dr. Cugini. That is correct.
        Mr. Miller. Okay. And how--we have heard the phrase
    ``picking winners and losers'', and the various technologies
    are in competition with each other as the coal industry has
    learned from the decline in natural gas prices, and I think
    most of the assumptions about oil shale is that the reason it
    is not commercially practical, although it has been researched
    within an inch of its life, it is not commercially viable at
    current prices. But how are we not picking a winner? How are we
    not picking winners and losers in the 1970s and the 1980s?
        Dr. Cugini. Well, I think in the 1970s and 1980s, the
    research was developed--was focused on developing technology,
    base sets of technology. So you heard testimony today about
    some of the work that resulted in seismic activity allowing us
    to draw seismic maps. It was somewhat fundamental in nature. We
    were also able to start asking industry to start looking at
    these technologies, providing information about the resource
    maps and other types of information related to resources, and
    working with industry, industry picked up a lot of the balls in
    looking at applying, as we found out, hydraulic fracturing and
    other types of technologies.
        Mr. Miller. And by the way, I support energy research, and
    I support energy research into any available form of energy. In
    the 1970s and 1980s, I think we were spending ten percent of
    all federal research funding on energy research, and I think
    now it is 3, and that seems foolish to me. I think we should be
    spending more on energy research, and it should include energy
    into alternative fossil fuels or unconventional fossil fuels.
    So the research in the 1970s and 1980s was for a fairly early
    stage that might or might not work. Is that correct? Is that
    why the industry wasn't just doing it by themselves without
    needing government to be part of that?
        Dr. Cugini. I think there were a lot of factors in play. I
    mean, part of it was the early stage of the resources--the
    research. It was also a lack of information relative to whether
    that resource was actively there and actively extractable. So
    part of the DOE's budget in research at that time was
    characterizing--working with USGS and others to characterize
    the available resource. So there were a combination of
    interests. I think one of them may have been the early stage of
    the technology development.
        Mr. Miller. I am struck by the arguments, the fairly
    dismissive arguments about alternative energy sources as being
    unreliable, uncertain, and the fossil fuel research that we
    have heard about today is described as a sure thing, a slam
    dunk. Mr. Martineau, that was your testimony, and you are
    nodding your head now, that yes, that is right. But if it is a
    slam dunk, if we know it is going to be profitable, why do we
    need to be funding it? Why is that not an ordinary business
    expense for the industry that will produce it? It seems like
    the more logical funding should be for early-stage research for
    technologies that might or might not prove to be commercially
    viable.
        Dr. Cugini, could you walk me through that? Could you
    explain that to me?
        Dr. Cugini. Well, there still is somewhat risk factors
    associated with some of the technologies, so take for example
    exploiting the natural gas resource from shale development.
    Right now, there is incentive to exploit that resource because
    at about 20 percent extraction of the gas, which current
    technologies, give or take, give us, it is economically
    recoverable. But there is potential to access quite a bit more
    of that gas through novel techniques. There really isn't any
    incentive, I think, in industry or capital in the industry to
    go after improved extraction technologies. So that might be an
    example that I think addresses your question.
        Mr. Miller. Mr. Martineau, if this research is as sure as
    you say it is to produce recoverable energy, why is this not--
    why is our funding for this research not paying for just an
    ordinary business expense for the industry? Why is it not a
    direct, just subsidy?
        Mr. Martineau. A subsidy--well, of course, I have been an
    independent oil and gas operator, which I have been a geologist
    for 52 years now, and I just look back at what has happened in
    the shale itself. We used to drill wells all the time through
    shales, non-commercial, low permeability nanodarcy type thing,
    and you couldn't do it, and until they started the Barnett
    shale program in 1981, when George Mitchell drilled the first
    well, attempting to develop the gas, and you think how many
    years it took before the shale took over. Now we have a shale
    revolution all over the whole United States, but if it hadn't
    been for some of the research work, and I was involved somewhat
    when the first horizontal well that I mentioned here before
    that George Mitchell drilled, was funded somewhat by the
    Department of Energy to see if a horizontal well--at that time
    gas prices were so low, it didn't make sense to do it, and as
    the gas prices came up, we started doing it. But some of the
    research that us independents--because we don't have access to
    research. We strictly drill well, drill producers, dry holes
    and commercial wells, and so I think the research that has been
    done that I have been involved with through my years in the
    business has been a real asset for the small independents,
    because we don't have the research teams to come up with the
    different type of technologies that were advanced in fracking
    itself. Fracking has been around for 50 years. We have been
    fracking wells forever, but the technology of hooking a
    horizontal well with a frack job--and they used to frack them
    all with water in one stage--or no, gel, and then they switched
    to water, increased the production tremendously. The horizontal
    legs now, it used to be 2,000, 3,000 feet. Now it is 6,000 to
    7,000 feet but 50 fracks in it. In other words, the
    technologies and the mapping that he did showing where the
    frack job goes is really critical because nobody knew before.
    The microseismic work that we have done and the technology,
    that was backed by funded research from the Department of
    Energy and different people how to do--how do you trace where
    these frack jobs go.
        The big issue, of course, is frack water contaminating the
    freshwaters, and that mapping that he showed, it only goes 150,
    200 feet away from that well before. They go up into the
    freshwater zone. It doesn't happen. There has never been a well
    yet that has been contaminated by a frack job from the
    freshwater zones. They have been contaminated all right, but it
    is because of poor casing, cementing or the lack of integrity
    in the pipe, which has caused the water, but, you know, they
    have been opening water wells in homes forever and you could
    light a match to it and, you know, it is not the first time.
    Since fracking came around, everybody says, oh, they are
    caustic. That is not true. That has been happening forever in
    this United States.
        Chairman Harris. Thank you very much, and the gentleman
    yields back his time.
        Chairman Hall is recognized for five minutes.
        Chairman Hall. I thank you, Mr. Chairman, and I think Dr.
    Cugini and Mr. Martineau and others of you there could also
    point out that independents seek and search for and majors buy
    it, and independents are the ones that take the chance and need
    some help, and years ago I think that the names of Frank Pitts
    and Shelby Pitts are well known to this Committee. They have
    been before this Committee and before Energy and Commerce many
    times, and thank you. It is a product of theirs for being here.
        Mr. Martineau, I want to thank you also for impact on
    unconventional energy production in Texas. As you know, states
    currently have the authority to regulate hydraulic fracturing,
    though I am concerned that the EPA's activist regulatory agency
    and disregard for scientific methods, not taking a scientific
    approach to it, in their attempts to usurp this authority. How
    does the responsible regulatory agency for oil and gas
    production in Texas--that is the Railroad Commission--perform
    regulation and oversight of TIPRO members and their companies?
        Mr. Martineau. Well, the Texas Railroad Commission has been
    overseeing the development of oil and gas for many, many years,
    and they have got technical staff of engineers and geologists
    just like the oil companies do, and whenever a frack job is
    performed--of course, now with the new frack focus, you have to
    report exactly what has been pumped into the particular well
    and that information was somewhat started kind of by the
    Railroad Commission because everybody kept saying well, we
    don't know what is going into the well. But the Railroad
    Commission oversees all the development when you are drilling a
    well, how much surface casing you have to set to protect the
    freshwaters and how much cement you actually have and you have
    to report all of this information to the Railroad Commission.
    So they have been overseeing the operations of oil and gas in
    Texas forever, and had the EPA come in--and I testified--well,
    I didn't testify. I went over to a hearing where the EPA was
    talking about trying to control fracking, and every state,
    every rock is a little bit different. You frack them all
    different. You can't come up with one rule that covers the
    entire United States. Each state has different types of rock
    and therefore each State has its own regulatory agency and
    therefore you don't need to have one massive rule by people who
    have never drilled a well in their life trying to tell you how
    to do it.
        Chairman Hall. Well, Mr. Miller asked some questions,
    logical questions about why can't the success pay for the
    search, you know. It is probably true that the independents do
    take all the chances and the majors buy them after they are
    successful. That is the reason that they need some support as
    they go.
        Before I yield back my time, I want to thank Mr. Miller for
    his service to this Committee. He has been a very valuable
    member. He goes back to my state, all my people came from North
    Carolina, to give his services there, and I want to wish him
    well there.
        I yield back my time.
        Chairman Harris. Thank you very much, Mr. Chairman, and the
    gentleman from California, Mr. McNerney, is recognized for five
    minutes.
        Mr. McNerney. Thank you, Mr. Chairman, and I thank the
    panelists for coming today and testifying. Most of my
    colleagues, I believe would be in favor in providing research
    dollars for development of energy resources but I just
    challenge my Republican colleagues to be as receptive toward
    spending dollars on clean energy as they are on fossil fuel
    energy. For example, the wind energy production tax credit is
    about to expire this year. That will throw about 40,000 people
    out of work, and this is an industry that has been developed in
    this country by American research dollars. These jobs are going
    to go overseas and they are going to be taken over--this
    industry is going to be taken over by our competitors. So I
    think it is important that we keep that in mind as we move
    forward.
        Now, I think everyone on this panel agrees that the
    unconventional resources are massive, that there is a massive
    amount of energy and fossil fuels there. But what is the energy
    balance of the unconventional resources versus the conventional
    resources? Pick any one of them, tar sands or shale oil. What
    is the energy out versus the energy in compared to what it
    looked like when the oil was first being developed back in the
    early 1900s? Does anyone want to take a shot? Dr. Hill, do you
    want to take a stab at that?
        Dr. Hill. All right. Well, certainly some energy is
    expended in creating these wells, and you could pretty much
    figure it out from the economics, you know, compare the value
    of the oil produced compared with the cost to create and
    complete the wells, and a typical good oil-producing well now
    from a shale formation, you know, that ratio might be two or
    three to one. In other words, two or three times--the value of
    the crude oil produced is two or three times the cost of the
    well. So that is a rough ratio.
        Mr. McNerney. I mean, that sounds about right. Back in the
    spindle oil well days, they were talking about 90 or so to one,
    so we are seeing a much bigger investment of energy into these
    wells than we ever saw before, and those of us that are
    concerned about CO2 and global warming, and I am one
    of those people, we are going to be putting two to three times
    as much carbon into the atmosphere per unit of energy
    delivered. So this is a very big concern for myself, for a lot
    of people across this country about what impact it is going to
    have on our global environment. And I think that is something
    we need to consider as we move forward and the research dollars
    that are spent in this program to understand that impact and to
    find ways to mitigate that impact if carbon sequestration is
    part of the solution.
        Now, another question I have is, will the so-called energy
    independence that we are aiming at result in any lower cost for
    American consumers as opposed to the cost that it will reduce
    for foreign consumers? So what I am getting at is that, yes,
    this is going to produce a lot more energy, a lot more oil but
    this is fungible. This is an international market. Those
    products are going to go overseas just like they are to this
    country. It is not going to help our consumers any more than it
    is going to help any other consumer in the world. So to say
    that this is benefiting American consumers more than foreign
    consumers I think is not necessarily true. It is not
    necessarily a true statement. Does anyone care to respond? Mr.
    Martineau? Go ahead.
        Mr. Martineau. You know, one thing earlier that you said
    about the other resources, and I think of biofuels in
    particular, because it is kind of interesting, you hear a lot
    of conversation, you know, biofuels are, what, ten percent of
    the gasoline you have do now, and the cost of the biofuels,
    which is this third-party energy, green energy-type thing,
    comes from the corn that is grown, and they were talking about
    how much water it takes to keep that corn growing, which is the
    water that we are now talking about how do we use it, we are
    using up all the water in fracking. A lot of it is being used
    to grow the corn. The corn now goes into biofuels and doesn't
    go to the food and so our food prices have gone up. And so, you
    know, these are the third-party-type green energy things that I
    think are very expensive, that people don't put the real dollar
    to it what that ten percent cost is unbelievable----
        Mr. McNerney. I agree. There needs to be a fair look at all
    these sources, and I am not going to single out fossil fuels
    because corn-based ethanol has its problems, no question about
    it.
        The last question I have is regarding to the industry's
    record for hiring veterans of this country. The wind industry
    has the best record of any industry of hiring veterans because
    of the transfer of skills. What is the record of the fossil
    fuel industry in this area?
        Mr. Martineau. I am not real sure, although I heard, and I
    am not sure which group, they are doing a program, I think it
    is Houston--I will have to find out--where they are bringing in
    all of the veterans because the job increases that have
    increased in the United States recently because of the shale
    revolution is unbelievable, and they are putting a program
    together, and I can find out the name of it but it is to ask
    veterans to come in, study how to be a roughneck, how to be a
    roustabout, you know, either that or can they go to college and
    become an engineer or a geologist. So there are programs that
    are using veterans because we can't find people to go to work
    in all these shale plays that are going on right now, and I
    think your group in the wind industry, they can go to work in
    the oil industry. They are not going to have to go overseas.
    They can go right to work in the oil and gas industry.
        Mr. McNerney. Mr. Chairman, I would ask that you consider
    that a part of your bill, Mr. Hall, to give provisions, special
    provisions for training and hiring veterans if they are going
    to be used in this research.
        Chairman Harris. Thank you very much, Mr. McNerney, and I
    now recognize the gentleman from California, Mr. Rohrabacher,
    for five minutes.
        Mr. Rohrabacher. Well, let me just note that when people in
    this country are forced to use energy resources that are more
    expensive than the alternatives that they could use otherwise
    because of some harebrained environmental theory that whatever
    that harebrained theory is, that that expense, which is usually
    hidden from the public, goes right out of the pool of money
    that we have to provide good jobs for our veterans and
    everybody else. So if wind costs five times as much to produce
    the same amount of electricity as natural gas, that is how much
    money less we have to provide good jobs for veterans and
    anybody else in this country because we are eating up resources
    that could be used, put to better use and are now just
    evaporated because that wealth no longer exists. I find wind to
    be one of the, and from what I have seen and heard from various
    sources, one of the most inefficient ways of producing
    electricity per cost and not to mention the fact that there are
    environmental costs to it as well, the thousands of birds that
    get killed. I am not necessarily a bird man here but I can just
    tell you that there are many more birds that are killed by
    windmills than there are by fracking from what I understand.
        And by the way, wind energy is not anything new. My family
    came from a small farm in North Dakota and I used to go up
    there and work in the farm in the summertime, sometimes the
    wintertime. They had windmills back then. In fact, about 100
    years ago, windmills were thought to be the potential use for
    electricity, especially on farms and places like that, but they
    decided not to go that direction because it was cheaper and it
    was a waste of resources not to go with the cheaper method of
    producing electricity, and if you don't go with the cheaper
    method, you are evaporating wealth, which could be put to use
    in improving people's standard of living.
        And let us also note, the idea that we have not been
    financing ``green energy research'' as compared to what we are
    doing with oil and gas is just incredible. I mean, hundreds of
    times more money has been spent on green energy research than
    in oil and gas, and that is documented here.
        And one other thing. I think the oil industry and the gas
    industry, one of the most vilified industries that have done so
    much good for our country. Having come from a family in North
    Dakota, I realize what our cities must have smelled like when
    we were relying on horses for our transportation system, and I
    will tell you that a hundred years ago, one of the biggest
    problems was horse manure, and the smell and the stench and the
    health-related things, and the oil industry saved us from all
    of that, and kids aren't even taught that now. They just think
    that it was hunky-dory back in those days.
        One thing that I probably have disagreed with the industry
    about is about this whole research thing that we are talking
    about today. If we are putting money into research, which is
    what we are talking about, and we are talking about how
    fracking became, you know, a viable source, and there are
    certain technologies that were developed and certain government
    involvement in that. What is the American taxpayer getting out
    of that? Are we going to, as far as I am concerned, if we
    invest in the development technology for your industry, and
    that technology reaps a big reward because we are producing all
    this energy now and making billions of dollars doing it,
    shouldn't the taxpayers be the owners of that technology if we
    are investing in it, and how much have we gotten back from our
    investment in research, for example, in fracking and other
    things? Besides the fact the public is benefiting, there is no
    doubt about that, but we are talking about in the other
    industry and people input money into research and development,
    develop new technologies, they have the patent rights and they
    have the property rights to that utilization and they make
    money on it. Now, shouldn't the taxpayers make money for
    investing and developing your technology? Anybody can answer
    that. That is fine with me.
        Dr. Hill. I guess the government could do that if they
    chose to, in other words, Department of Energy-funded research,
    the Department of Energy could own the intellectual property.
    In general, the way it has always been is that this type of
    research is done for the general benefit of the public and so
    that knowledge that is created is share with everyone.
        Mr. Rohrabacher. Mr. Chairman, just for the record and this
    hearing, that this is one Congressman that would insist that if
    we are going to invest taxpayer money and whether it is the oil
    industry or any other industry, that developing technology for
    them to make a profit, the taxpayers should have an ownership
    right of some kind on the technology that is being developed,
    and that is just for the record. Thank you very much.
        Mr. Martineau. Let me answer one thing there. If you think
    about the economy, the natural gas prices here in the United
    States, they are benefiting because we have so much natural gas
    now that gas prices are down so low and they are benefiting
    indirectly. If they want to move to Europe, they sure can and
    pay $11 in MCF over there as opposed to $3.
        Mr. Rohrabacher. You know any time you do something right
    in a free market economy, it means somebody is going to make
    some more money, right? So it is not just oil and gas, it is
    anybody, if we were paying the research and development costs
    for any other industry and then they were profiting from it,
    that would be different if that industry was using their own
    money and developing their own technology. They would actually
    own the rights to that particular technology and they would
    lease it out to other people and make money from it. Now, if
    the United States government is going to do this for your
    industry or any other industry, I might add, I just think that
    the taxpayers should own that share of the technology they are
    helping to develop and should go into the coffers of the
    taxpayer.
        Chairman Harris. Again, I want to thank the gentleman from
    California, and the gentleman, the new gentleman on the
    Committee has been very patient waiting. It is my pleasure to
    recognize Mr. Curson for five minutes for questioning.
        Mr. Curson. Thank you, and being the newest member, I am
    probably the least knowledgeable about this issue, but I have
    studied the history of this Committee and these hearings, and
    first I want to agree with the previous speaker that I am glad
    that our automobiles aren't powered by horse manure, coming
    from the industry.
        But in this particular issue, I know the question that the
    citizens of my district will ask is, we have got an industry
    that the government has participated in R&D. This is a for-
    profit industry. They provide the oil industry very generous
    tax rates and incentives. The three largest companies, oil
    companies in America, in 2011 made $80 billion in profits while
    the rest of the economy was struggling out of the worst
    recession that we have had in many, many years. Why would the
    government pay for R&D to create more profit for a profit
    company when these companies aren't making nickels and dimes,
    they are making huge dollars? I heard clearly that many of the
    smaller oil companies that don't make these type of profits are
    the ones that are the actual benefactors. Well, there is other
    ways for those companies to take advantage of this rate. I
    believe that--I would like to have an answer on why in the big
    picture with companies making this kind of profit should the
    government be rolling out taxpayer dollars to do your R&D,
    particularly these aren't new technologies. This unconventional
    resources have been around for years and the oil companies have
    decided not to pursue them because they weren't profitable in
    the end. So if now new technologies are making it more clear
    that they can be profitable, you would think that would be the
    responsibility of the oil companies to pursue it, and in
    previous hearings on this very subject when you get a member of
    the U.S. Chamber that says ``I don't think you will find
    anybody in the industry that is saying we need more money from
    the federal government.'' I believe that is the same thing the
    citizens of my district would say.
        So if there is a reasonable answer to that, I would like to
    hear that.
        Dr. Hill. I would like to point out that again, as I said
    in my testimony, the majority of research funding of this type
    that goes to the Department of Energy in general, it is funding
    university research. Is it not going to Exxon Mobil. It is not
    going to these very profitable oil companies. It is being spent
    in universities, and this is how we were able to train the
    engineers that this country desperately needs, and so I would
    encourage you to think of it that way. Don't think of this as
    not money flowing directly to the industry, it is helping
    develop technology that anyone in the country is welcome to use
    but it is really being spent in support of education.
        Mr. Martineau. And that education goes to people like
    Apple. You notice where Apple is on their profits compared to
    Exxon? You need to look at that. It is four times higher than
    what Exxon is, and the engineering that he was just talking
    about from those students is what helped. Will you give up your
    phone? Will you give up your computer? Will you give up the
    plastic that you use every day in these water bottles? It all
    comes from the research done originally by the oil and gas
    industry and utilized by other technologies like Apple.
        Chairman Hall. Will the gentleman yield?
        Mr. Curson. I yield the rest of my time.
        Chairman Hall. What percentage of the little independents
    that drill and hit to those who drill and miss?
        Mr. Martineau. You don't want to know the number of dry
    holes I have drilled in my lifetime.
        Chairman Hall. I think that answers my question.
        Mr. Martineau. And you know, it kind of goes back, speaking
    of dry holes made me think about when we talk about intangible
    drilling deductions, and the reason that bill was put in place
    back in 1913 was because at that time if you drilled a bunch of
    dry holes or non-commercial wells, you were out of business,
    and if you didn't continue having some sort of resources, so
    that tax credit for intangible drilling was passed in 1913, 100
    years ago, and because of that being able to continue if you
    drill dry holes and non-commercial wells, Mr. Hall, is what has
    kept our industry alive, and to be able to say you want to take
    away intangible drilling costs, you will put so many companies
    out of business, it is unbelievable because not everybody
    drills a producer, let me tell you. There can be non-commercial
    wells, and people forget about those, but you haven't got your
    money back. And it is not like making a washing machine or an
    automobile, you know. It comes out every day. You come and
    drill with me, you might not make a well every day.
        Chairman Harris. Thank you very much, and I want to thank
    all the witnesses for your valuable testimony and to the
    members for their questions. The members of the Subcommittee
    may have additional questions for the witnesses, and we ask you
    to respond to those in writing.
        Mr. Rohrabacher. Mr. Chairman?
        Chairman Harris. I am sorry. I yield to the gentleman from
    California.
        Mr. Rohrabacher. I would like unanimous consent for one
    minute.
        Chairman Harris. Without objection.
        Mr. Rohrabacher. I would just like to thank Mr. Miller for
    the job that he has done with us. It has been a lot of fun
    kibitzing with you on various issues, and he is a very
    intelligent member and a very hardworking member of this
    Committee, and sometimes we have had disagreements, obviously,
    but the fact is, is that he is a very respected person here and
    we will miss him and wish him well in the years ahead. Thank
    you for the good job that you have done.
        Mr. Miller. Thank you, Mr. Rohrabacher. I am not aware of
    any instance in which either one of us has convinced the other
    of anything, but thank you.
        Chairman Harris. I want to thank the gentleman from
    California and echo the gentleman's comments. It has been a
    pleasure working with the ranking member. And, you know, in the
    end, we all realize that we want what is best for the country
    and what is best for Americans, and do our little bit here on
    the Energy and Environment Subcommittee of the Science
    Committee toward that end. I want to thank him for his service
    to the Congress and to his district.
        Anyway, again, we will ask you to respond to any questions
    in writing that come from Committee members. The record will
    remain open for two weeks for additional comments from members.
        The witnesses are excused and the hearing is adjourned.
        [Whereupon, at 10:53 a.m., the Subcommittee was adjourned.]

                                   Appendix I

                                  ----------

                       Answers to Post-Hearing Questions

    Responses by Dr. Anthony Cugini

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    Responses by Mr. David Martineau

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    Responses by Dr. Daniel Hill

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    Responses by Mr. Michael Hagood

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    [GRAPHIC] [TIFF OMITTED] T7038.048

    [GRAPHIC] [TIFF OMITTED] T7038.049

    [GRAPHIC] [TIFF OMITTED] T7038.050

    [GRAPHIC] [TIFF OMITTED] T7038.051

                                  Appendix II

                                  ----------

                       Additional Material for the Record

         Letter submitted by Chairman Ralph M. Hall from the American
                 Geosciences Institute in support of H.R. 6603

    [GRAPHIC] [TIFF OMITTED] T7038.052

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      ``The new Boom: Shale gas fueling an American industrial revival,''
                            Article, Washington Post

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    [GRAPHIC] [TIFF OMITTED] T7038.055

    [GRAPHIC] [TIFF OMITTED] T7038.056

    [GRAPHIC] [TIFF OMITTED] T7038.057

    [GRAPHIC] [TIFF OMITTED] T7038.058

    ``Oil and Natural Gas Generate EMPLOYMENT and TAX REVENUE,'' submitted
                             by Mr. David Martineau

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