[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE AMERICAN ENERGY INITIATIVE, PART 28: A FOCUS ON THE OUTLOOK FOR
ACHIEVING NORTH AMERICAN ENERGY INDEPENDENCE WITHIN THE DECADE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 13, 2012
__________
Serial No. 112-176
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire MIKE ROSS, Arkansas
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
_____
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
JOHN SULLIVAN, Oklahoma BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois KATHY CASTOR, Florida
GREG WALDEN, Oregon JOHN P. SARBANES, Maryland
LEE TERRY, Nebraska JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington LOIS CAPPS, California
PETE OLSON, Texas MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado HENRY A. WAXMAN, California (ex
MIKE POMPEO, Kansas officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 4
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 6
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 7
Prepared statement........................................... 9
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 10
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 10
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 11
Witnesses
Harold Hamm, Chairman and Chief Executive Officer, Continental
Resources...................................................... 12
Prepared statement........................................... 15
Daniel P. Ahn, Chief Commodities Economist, Citigroup............ 29
Prepared statement........................................... 30
John Freeman, Managing Director, Equity Research, Raymond James &
Associates..................................................... 41
Prepared statement........................................... 43
Daniel J. Weiss, Senior Fellow, Center for American Progress
Action Fund.................................................... 88
Prepared statement........................................... 90
John Purcell, Vice President of Wind Energy, Leeco Steel......... 118
Prepared statement........................................... 120
Mark P. Mills, Senior Fellow, Manhattan Institute................ 124
Prepared statement........................................... 126
Peter Howard, President and Chief Executive Officer, Canadian
Energy Research Institute...................................... 128
Prepared statement........................................... 130
THE AMERICAN ENERGY INITIATIVE, PART 28: A FOCUS ON THE OUTLOOK FOR
ACHIEVING NORTH AMERICAN ENERGY INDEPENDENCE WITHIN THE DECADE
----------
THURSDAY, SEPTEMBER 13, 2012
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:05 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Sullivan,
Burgess, Scalise, McMorris Rodgers, Olson, McKinley, Pompeo,
Griffith, Barton, Upton (ex officio), Rush, Castor, Sarbanes,
Markey, Green, Capps, and Waxman (ex officio).
Staff present: Charlotte Baker, Press Secretary; Sean
Bonyun, Communications Director; Anita Bradley, Senior Policy
Advisor to Chairman Emeritus; Maryam Brown, Chief Counsel,
Energy and Power; Allison Busbee, Legislative Clerk; Cory
Hicks, Policy Coordinator, Energy and Power; Heidi King, Chief
Economist; Jason Knox, Counsel, Energy and Power; Ben
Lieberman, Counsel, Energy and Power; Andrew Powaleny, Deputy
Press Secretary; Michael Aylward, Democratic Professional Staff
Member; Greg Dotson, Democratic Energy and Environment Staff
Director; Kristina Friedman, EPA Detailee; Caitlin Haberman,
Democratic Policy Analyst; and Alexandra Teitz, Democrat Senior
Counsel, Energy and Environment.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. I would like to call the hearing to order
this morning. The topic of our hearing, and today we continue
our hearings on the American Energy Initiative. This is
actually the 28th day, and today we are going to talk about
what I consider some very good news, and that is the
achievability of North American energy independence and
particularly oil independence within the span of a mere decade.
As a matter of fact, one of our witnesses today made the
comment in a study, a comprehensive study, that by the end of
the decade, they estimate that new U.S. oil and gas production
could add at least $200 to $300 billion in revenue, which in
turn could stimulate many hundreds of billions more in economic
activity, investment and consumption, creating at least 2
million and as high as 3-1/2 million new jobs.
So after many decades of hearing that the United States
basically reached the end of its reserve, as a matter of fact,
as recently as 2010 President Obama stated in a national
address that we are running out of places to drill, and he
still cites the outdated and misleading claim that we possess
only 2 percent of the world's oil reserves. But this
pessimistic view is being blown away by reality. Increased
domestic oil production is already cutting into the amount we
need to import from oil-exporting nations, and many experts
believe that this production growth can continue for years to
come. And when you add the equally impressive growth from our
ally Canada, the goal of North American oil independence could
be reached in as little as a decade.
The global implications are tremendous because the one
thing that has not changed is the instability in the Middle
East and the hostility of several major oil-producing nations
towards the United States. However, the more oil that is
produced in the United States and Canada, the less leverage
OPEC or any of its individual member nations can exert over us.
And now we have the chance to reduce that leverage virtually to
zero with North American oil independence.
The geopolitical benefits alone are enough to make this
goal worthwhile, and the economic benefits are simply icing on
the cake. North American energy independence would bring with
it hundreds of thousands, if not millions, of new jobs in a
rejuvenated energy industry. Indeed, it would succeed where
unfortunately our stimulus package failed, and rather than cost
over $800 billion, it would actually add revenues to the
Federal Treasury. And when you compare the real oil-industry
jobs already being created in States like North Dakota, and as
you know, in North Dakota right now, the unemployment rate is
less than 3 percent, and all the experts agree that that
primarily comes from the fact of the new oil fields that have
been hit there, the jobs that are being created. And not only
can we talk about oil but we also could talk about independence
in natural gas because of the tremendous finds that we are
finding in that area.
President Obama has not really been helpful to us in this
effort, in my view. As you know, he rejected the Keystone
pipeline that would allow 700,000 barrels per day of additional
Canadian oil to come into the country. And without that,
Canada's growing surplus of oil may go to China and other
willing buyers abroad.
One of the areas that we certainly want to get into today
as well is because we hear constantly from some individuals
that even though the United States may increase its oil
production, it is not going to have any impact on the price of
oil, and I would like to have an additional discussion about
that today because there was a law of supply and demand that
has been with us for many years that if you have more supply,
you can decrease prices, or if you reduce demand, you can
decrease prices. So we want to get into a discussion on that
today as well.
We have a panel of expert witnesses today, all who have
practical experience and academic experience and are quite
knowledgeable in this area, so we look forward to all of your
testimony.
So I am delighted that you are here today. We look forward
to the testimony of all of you.
[The prepared statement of Mr. Whitfield follows:]
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Mr. Whitfield. At this time I would like to introduce and
recognize the gentleman from Illinois, Mr. Rush, for his
opening statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I want to thank you, Mr. Chairman.
We are here today examining the issue of how we may reach
North American energy independence within the next decade. This
hearing, Mr. Chairman, gives us an opportunity to discuss the
many different initiatives that President Obama has put in
place to help us come closer to reaching this goal.
Mr. Chairman, unlike the simplistic Sarah Palin ``Drill,
baby, drill'' Romney-Ryan energy plan, President Obama has put
forward a comprehensive energy policy that encompasses concrete
proposals to not only make us less reliant on imported oil from
overseas but which also takes into account the serious issue of
climate change. While my Republican colleagues are loathe to
even mention the words ``climate change'' and have claimed it
to be a hoax, I can assure you, Mr. Chairman, that most of the
farmers across this Nation will disagree with that position as
we have witnessed the worst year of record temperatures,
drought and crop loss in modern American history.
Mr. Chairman, in 2011, the Obama administration introduced
and released the Obama administration's energy plan titled
``New Plan for Secure Energy Future.'' This comprehensive
energy proposal would build ``21st century clean-energy economy
by reducing our dependence on oil focusing on expanding clean-
energy sources of electricity and achieving additional energy
efficiency through a combination of an all-of-the-above energy
policy.'' I would add, the Obama strategy strongly promotes the
creation of jobs by developing renewable-energy sources such as
wind, solar, biomass and hydropower while also investing in
clean-coal technology, increasing production of natural gas and
expanding nuclear power. However, unlike the Romney plan, the
Obama energy proposal endorses safe and responsible production
of domestic energy sources which allows input from community
members and stakeholders who are directly impacted by oil and
gas drilling.
Any credible expert would have to give credit to the Obama
administration for the advances that they have put in place to
put us on track for achieving energy independence which
includes increased domestic production, a move towards cleaner
and renewable-energy sources of the future as well as
additional conservation and energy efficiency measures.
U.S. oil consumption, which peaked in 2005, dropped by more
than 1.5 million barrels per day, or about 9 percent, by 2011.
While some of this recent decline in demand was related to the
economic recession, improvements in fuel efficiency and broader
economic trends put forth by the Obama administration are also
responsible for these developments. One instance, the Obama
administration's vehicle greenhouse gas and fuel economy
standards for model years 2012 through 2025 are projected to
save more than 2.2 million barrels of oil per day by the year
2025 and will help us become less reliant on both oil imports
and oil in general.
Mr. Chairman, I look forward to this hearing and I expect
to have robust interaction among the witnesses today and the
members of both sides, and Mr. Chairman, I sincerely hope that
we can have a balanced and honest debate on these and all the
ancillary issues.
I thank you, and I yield back the balance of my time.
Mr. Whitfield. Thank you, Mr. Rush.
At this time I would like to recognize the gentleman from
Michigan, Mr. Upton, chairman of the full committee, for an
opening statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you.
No administration has talked more about technological
breakthroughs in the energy sector or spent more tax dollars on
failed attempts to achieve them than the current one. Yet a
genuinely transformative energy revolution has emerged, and it
has happened in spite of those policies.
The advances in drilling technology that we will hear about
today have accomplished more for the American people than all
of the Solyndras and the other Federal stimulus giveaways
combined. They have already rewritten the conventional wisdom
that America's natural gas production is declining, and we are
now doing the same for domestic oil production. In fact,
predictions of dwindling North American oil supplies have been
replaced with very realistic predictions of North American oil
independence within a decade.
Indeed, while the President was trying to convince
Americans that Solyndra's new solar panels would take the world
by storm and create green jobs, these game-changing energy
breakthroughs have quietly continued to unfold in places like
the Bakken formation in North Dakota and other State and
private lands where the Federal Government has little or no
role. And unlike Solyndra and other Title 17 loan guarantees
that have been a sponge for taxpayer dollars, achieving North
American oil independence won't cost the American people a
single dime. All it requires is the Federal Government to get
out of the way.
But getting out of the way is something this administration
refuses to do. It continues its go-slow approach to oil leasing
on Federal lands and offshore. For example, its most recent 5-
year plan for offshore leasing offers fewer lease sales than
under any president, Democrat or Republican, going all the way
back to Jimmy Carter. And, the administration's pace of onshore
leasing is below that of his predecessors. Even those Federal
areas already under lease are now being subjected to
unprecedented permitting delays. In fact, nearly all the
increase in domestic oil supplies is coming from State and
private lands, but on Federal lands, production has actually
dropped 100 billion barrels this last year. The dramatic
improvements in drilling technology that are responsible for
increased oil production on non-Federal lands have not yet been
given the chance to do so on Federal lands.
The same is true of vital oil infrastructure. The
administration continues to reject the Keystone XL pipeline
expansion project, without which Canada's growing oil
production cannot reach the United States. The pipeline would
also provide an outlet for the growing oil production from
North Dakota.
The potential benefits of North American energy
independence seem almost too good to be true. But they are real
and they can be achieved. Between increased domestic oil
production and growing supplies from Canada--a million barrels
a day already, by the way--we have the opportunity to liberate
ourselves from OPEC's influence, create many new energy-
industry jobs, and ensure greater supplies and lower prices at
the pump in the years ahead.
This committee has initiated legislation to remove the
administration's obstacles to North American energy
independence. We will continue to fight for increased leasing
on Federal lands and a streamlined permitting process, and we
will not give up on Keystone XL. The goal of North American
energy independence is within our grasp and it is much too
valuable an opportunity to squander.
And I would yield back to Mr. Barton.
[The prepared statement of Mr. Upton follows:]
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OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. I just want to say very quickly, Mr. Chairman,
that back in 2005, this committee initiated what came to be
known as the Energy Policy Act of 2005. Most members of the
committee still serving supported that bill in the committee
and on the floor, and today is the law of the land.
We incentivized in that Act every feasible form of energy
we thought could be produced in American, whether it was
conventional or unconventional. If you could produce it in any
shape, form or fashion, we incentivized it from our
conventional sources, oil and gas, to unconventional wind,
solar, biomass, saw grass, you name it. The underlying premise
was, though, except for the newer technologies, it would be a
market-based energy policy. Because of that, today if you read
this North American energy initiative inventory, we have a
possibility to be energy independent almost at any time we want
to be in the next 10 to 15 years. That is an amazing story, Mr.
Chairman, and this committee can take pride in the fact that
the base bill that has allowed that to happen came out of this
committee.
So I am very proud of that bill. It is now the law. I am
proud of the committee, and I am looking forward to this
hearing.
With that, I yield back, Mr. Chairman.
Mr. Whitfield. Thank you. At this time I recognize the
gentleman from California, Mr. Waxman, for 5 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Mr. Chairman, today's hearing presents two
different visions of an energy policy for America. One vision
doubles down on the energy policies of the past. Its mantras
are ``drill, baby, drill'' and tax breaks for the oil industry.
The other vision recognizes that energy is key to America's
economy, national security and environment. It supports a mix
of energy sources to provide American consumers with
affordable, clean energy. The choice is all of the above or oil
above all, and the answer will affect the lives of every
American.
Not so long ago, we actually implemented an energy plan
written by and for the oil industry. In 2001, President Bush
and Vice President Cheney unveiled the Bush administration's
energy plan, written in secret with oil, coal and other energy-
industry interests. So in 2005, I examined what had happened to
energy prices and dependence on foreign oil under the Bush
energy policy since 2001, using data and analysis from the EIA.
Under the Bush-Cheney oil industry energy plan, gasoline prices
more than doubled. Crude oil prices more than doubled. The
average American family spent $2,000 more each year on energy
costs. And the oil companies reaped record profits. This energy
plan did not benefit America's families. It did not boost our
economy or improve our national security, and it certainly did
not clean up pollution or address the threat of climate change.
Today we are discussing another Republican energy plan that
was drafted with industry, especially the oil industry. And it
is a backwards-looking plan that resurrects the Bush-Cheney
policies. It calls for more tax breaks for oil companies,
opening new areas to drilling, and putting the States in charge
of issuing drilling permits on Federal lands.
The Obama administration's energy policy is fundamentally
different. President Obama hasn't just promised to reduce our
dependence on foreign oil; he has actually done it. For the
first time in decades, we are importing less than half the oil
we consume. His administration's new motor vehicle standards
will save more than 2 million barrels of oil per day. And U.S.
domestic oil and natural gas production has reached record
highs. Perhaps most important, the Obama administration has
also made investing in clean energy technologies a national
priority.
This committee can write our Nation's energy laws, but we
can't amend the laws of nature. Climate change is a reality.
The nations with the strongest economies will be those that
recognize this fact and build the clean energy technologies of
the future.
Unlike many members of this body, the Obama administration
faces facts, listens to scientists, and has a forward-looking
vision for America, and that is why the President has invested
in wind, solar, and other renewable energy sources, energy
efficiency, and cleaner use of traditional energy sources.
Mr. Chairman, at this point I want to yield the balance of
my time to Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. I thank my ranking member, Mr. Chairman, for
allowing me.
I strongly support increasing our domestic production of
oil and natural gas, and I fought this battle for years. That
said, I think it is misleading to debate our energy
independence based on geology, technological or economically
achievable in the absence of other constraints. There is always
to be external factors that affect the level of production.
I want to point out that according to the Energy
Information Administration, under existing policies, the United
States is on pace to eliminate all natural-gas imports by 2020
and shrink its net oil imports down to 38 percent. We are now
at 42 percent, from what I understand, with two-thirds of those
imports coming from friends in Canada in Mexico. The number is
expected to drop even further thanks to the CAFE standards by
the President's administration. We are still fairly close to
the North American energy independence in 2020 regardless of
what we do.
I share our panelists' concerns about the potential
regulation on things like fracking, and I will continue to
watch the administration. I support a broad Outer Continental
Shelf drilling and I disagree with the President's 5-year plan.
Likewise, I disagree with not approving the TransCanada
pipeline but I also know this is the first President that I
have served under in 20 years who actually stood at the State
of the Union and last week at the Democratic convention and
talk about the success of natural-gas production in our
country, at least the first Democratic President, and I think
that is where we are going, and I want to complement my former
chair of the committee. The energy bill of 2005 did expand it.
My frustration, we are going to have a bill on the floor
tomorrow that will take some of that expansion away from us
including oil and gas alternatives and other alternatives.
So that is our problem we have with this Congress. We are
passing a lot of messages but not actually legislation, and I
yield back my time.
Mr. Whitfield. The gentleman's time is expired.
At this time I will call on each witness, and you will be
given 5 minutes for an opening statement. Before I call on you
individually, I am just going to introduce the entire panel.
First of all, we have with us today Mr. Harold Hamm, who is
the Chairman and CEO of Continental Resources. It has played a
vital role in the development of the Bakken field. We have Dr.
Daniel Ahn, who is the Chief Commodity Economist at Citigroup.
We have Mr. John Freeman, who is the Managing Director of E&P
Equity Research at Raymond James and Associates. We have Mr.
Daniel Weiss, who is the Senior Fellow for the Center for
American Progress Action Fund. We have Mr. John Purcell, who is
the Vice President for Wind Energy at Leeco Steel Company. We
have Mr. Mark Mills, who is the Senior Fellow at the Manhattan
Institute, and we have Mr. Peter Howard, who is the President
and CEO of Canadian Energy Research Institute.
So we have a broad spectrum of interests here to testify
this morning on this important subject matter, and Mr. Hamm, I
will call on you first for a 5-minute opening statement.
STATEMENTS OF HAROLD HAMM, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, CONTINENTAL RESOURCES; DANIEL P. AHN, CHIEF
COMMODITIES ECONOMIST, CITIGROUP; JOHN FREEMAN, MANAGING
DIRECTOR, EQUITY RESEARCH, RAYMOND JAMES & ASSOCIATES; DANIEL
J. WEISS, SENIOR FELLOW, CENTER FOR AMERICAN PROGRESS ACTION
FUND; JOHN PURCELL, VICE PRESIDENT OF WIND ENERGY, LEECO STEEL;
MARK P. MILLS, SENIOR FELLOW, MANHATTAN INSTITUTE; AND PETER
HOWARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CANADIAN ENERGY
RESEARCH INSTITUTE
STATEMENT OF HAROLD HAMM
Mr. Hamm. Thank you, Chairman Whitfield and members of the
committee. I am very glad to be here, very honored to be
speaking this morning. As you said, we are a leading expert in
the Bakken formation, have been there from the beginning.
Continental is the largest producer of the Bakken resource in
Montana and North Dakota and also the entire Wilson Basin. Our
production is about 70 percent oil and, you know, we are known
as an oil company.
I also serve as an energy advisor currently to Governor
Romney but I am not here representing any campaign, any
political party. I am just here as an American, an American
patriot, someone that started with nothing, a one-truck
operation, you know, the son of a sharecropper that had 13
kids, the last of 13, built a small, one-truck operation into a
large leading energy company in America.
Very exciting day to talk about the great American promise
of energy independence within this decade. For far too long, we
stood under OPEC dominance as producers some 40 years. People
lost the will to look for oil in this country. They couldn't do
it. Every time we got to work, you know, OPEC would turn the
taps on and drown us, put us out of business. It finally got
down to where nobody was looking for oil. Everybody was looking
for natural gas in this country. Finally, the day came that
they didn't have excess capacity any longer that they could
drown us like that so we could go back to work, and we did.
And we came out with some great things, the great
technology of today, and that one technology that has been
developed, primarily by our company and others, independent
companies over the past 15 years, primarily, has been one
thing, and that is horizontal drilling. And as an
explorationist and a geologist, I can tell you that this was a
wonderful breakthrough. It drowns out all the breakthroughs of
the past, you know, 2D seismic, for instance, that saw a bump
in production in the United States and the world, 3D seismic
that came out that everybody was so excited about in the early
1990s, and here we are today talking about something that
dwarfs all of those, and that is horizontal drilling: the
ability to drill down 2 miles, turn right, drill 2 to 3 miles
further and hit your lapel pin if we want to. So it is that
technology, that precision that has been adopted out there. And
what that allows us to do, it allows us to enter another world,
the world of immobile oil. We have been producing mobile oil,
the stuff that would move to you, trapped in different
reservoirs all over, and that is what we have been chasing all
this time. Today we can go after the source rocks themselves
where the oil is stored, tight rocks, heavy oil, tar sands, all
those things that we couldn't get to before. So it is an entire
new world of geology that is out there waiting for us and we
are able to do that successfully repeatedly across the Nation,
and we have been doing that for the past 15 years and the
result is tremendous as to what has happened.
So we look at what that result is. In 2005, we thought we
were running out of natural gas. Everybody thought we were
going to be about out. And we had about 7 years' supply at that
time, current production that would sustain us, reserves. Now
we are at about 125 years, a lot of these shale resource plays
that we are able to tap into, natural gas across the country.
But then we have a few that are oil, and what do we got there?
Well, we have seen great, great fields come on. The Bakken is
certainly a good example of that. You know, with the technology
that we have today, we can get into that tight rock, you know,
where the Bakken oil was generated and stored over time, and it
is a tremendous resource.
So today we are the number one natural-gas producer in the
world, and today we are the number two crude-oil producer in
the world. A lot of people don't realize that statistic. We
just passed Russia in oil production. We are just slightly
behind Saudi Arabia in oil production. So we get back to that
old thing, supply and demand. You know, we are bringing on a
lot of new supply. You will hear people talk today about the 3
to 5 million barrels a day that we are going to increase
production before 2020, and you ask if this new energy
renaissance is achievable. Hardly any of the scientists that
know what the drill is today will say that that is not
achievable because it certainly is achievable, and it is a
great promise for our country. We are finally out from under
OPEC dominance, and it means so much, the stability of our
Nation, national security, you know, the jobs. You mentioned
all those things. Good things flow from American oil and there
is a tremendous amount of it, and I am excited to talk about
all those.
I see my time is up. Thank you.
[The prepared statement of Mr. Hamm follows:]
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Mr. Whitfield. Thank you, Mr. Hamm.
Dr. Ahn, you are recognized for 5 minutes.
STATEMENT OF DANIEL P. AHN
Mr. Ahn. Chairman Whitfield, Ranking Member Rush and
Chairman Upton and distinguished members of the committee,
thank you for the opportunity to testify at today's American
Energy Initiative hearing.
My name is Daniel Ahn, and I am the Chief Commodities
Economist at Citigroup in New York. Earlier this year, my
colleagues and I published a report entitled ``Energy 2020:
North America, the New Middle East,'' and I would like to take
the opportunity to share and update its conclusions. North
America has recently become the fastest-growing hydrocarbon
producer and exporter in the world, and this trend should
accelerate to the end of the decade. This energy renaissance
has been driven by both declining domestic consumption and the
successful deployment of new technologies to extract hitherto
inaccessible oil and gas resources, particularly in tight and
shale rock formations using horizontal drilling and hydraulic
fracturing techniques. These two trends, declining demand and
burgeoning supply, should have dramatic consequences for
national energy security and for the domestic and global
economy.
I will echo the chairman's opening statement and state that
I estimate that new U.S. oil and gas production could add at
least $200 billion and possibly $300 billion in revenue and in
turn could stimulate many hundreds of billions more in economic
activity, investment, consumption, and create at least 2
million and possibly as high as 3-1/2 million new jobs.
Furthermore, American dependence on imported oil outside of
North America should shrink or even be eliminated entirely. The
current account deficit, which had seen trillions of dollars
pass from American consumers on to foreign oil exporters, could
be slashed by two-thirds. This would strengthen the credibility
of the U.S. dollar as the world's reserve currency of choice.
Global oil prices could fall by 15 or even 20 percent.
Energy-intensive manufacturing industries such as petroleum
refining, petrochemicals, fertilizers, iron, steel, aluminum
smelting, all should strategically benefit. Natural-gas-fueled
vehicles could proliferate on American roads.
Distinguished committee members, a minor industrial
revolution is in the making in our heartland. This is testament
to the technical ingenuity and flexibility of American workers
and enterprises and the bounty of our natural resources.
With that, I look forward to further discussion and
questions during the rest of the hearing. Thank you.
[The prepared statement of Mr. Ahn follows:]
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Mr. Whitfield. Thank you, Dr. Ahn.
Mr. Freeman, you are recognized for 5 minutes.
STATEMENT OF JOHN FREEMAN
Mr. Freeman. Thank you. I would like to take this
opportunity to thank all the members of the committee including
Chairman Upton, Ranking Member Waxman and specifically would
like to thank Subcommittee Chairman Whitfield and Ranking
Member Rush for holding this hearing and inviting me to testify
on behalf of Raymond James. My name is John Freeman. I have
worked as a part of the Energy Research Group at Raymond James
since 2000 together with my colleague, Pavel Molchanov, who
joins me in the room. I welcome the opportunity to appear
before the committee and share our team's perspectives on the
progress the Nation is making towards energy independence.
America is already a major exporter of coal, and together
with Canada, we are already self-sufficient when it comes to
natural gas, and for the first time in over 50 years, there is
clear visibility on how oil independence can be achieved. Many
of the themes I am going to describe today are sustainable
trends driven by the private sector, and they can continue for
a long time, even without additional policy steps. However,
Congress can and should play a constructive role in
accelerating these trends and supporting industry efforts along
the way.
The Nation's all-time peak for petroleum imports was in
2005 at 13-1/2 million barrels a day. By 2011, imports were
down to 9.7 million barrels a day. That reduction in imports
was almost evenly balanced between rising domestic production
and declining consumption, and we believe imports can disappear
entirely by as early as 2020.
All of you are aware of the unprecedented boom in
unconventional drilling activity across the United States. This
game-changing trend first materialized in the natural-gas
industry and led to the United States becoming the largest
natural-gas producer in the world. In the oil industry, the
unconventional boom began a bit later but we think the real
inflexion point is now upon us. This year alone, we project a
supply increase of nearly 1 million barrels a day, about as
much as the prior 2 years put together. In fact, we forecast
the United States will become the largest oil producer in the
world before the end of this decade.
Despite the impressive production growth the industry is
accomplishing, it does not come without its share of
challenges. One of these will be difficult for this committee
to do anything about, and that is what we refer to as the
graying of the oil patch. The average U.S. petroleum engineer
is 50 years old. Some of the most active drilling areas such as
the Bakken in North Dakota have widespread labor shortages
across the spectrum. It is no surprise that North Dakota has
the lowest unemployment rate of any State.
The other two constraints are issues that Congress has more
influence over. One is the development of pipeline
infrastructure, and while very few pipeline projects will
achieve the political notoriety of Keystone, permitting
bottlenecks can still slow down the process, especially at it
pertains to Federal lands. The growth in drilling activity in
recent years has been much more visible on private and State
lands rather than Federal lands, which reflects the more
stringent regulatory scrutiny associated with Federal lands.
The challenge here is to balance prudent environmental
protection with the industry's needs.
If I turn to demand, the Nation's oil demand began to fall
well before the onset of the financial crisis in 2008. Between
1992 and 2005, demand was up every single year except one.
Since 2005, demand has fallen every year except one.
There are four long-term drivers, and in our view will
result in a sustained decline in U.S. oil demand. The first
driver is ongoing improvement in fuel economy. Between 2006 and
2011, the increase in average fuel economy of actual passenger
car sales improved more in absolute terms than it had in the 15
years combined prior to that.
Second, there is an ongoing decline in vehicle miles
traveled. The use of public transport, greater reliance on
Internet commerce, the fact that the number of automobiles per
household peaked in 2007, due in part to demographics, are just
some of the factors driving this trend.
The final two reasons involve a shift from oil to natural
gas in the petrochemical industry as well as in transportation.
The cost advantages of the U.S. chemical industry compared to
its overseas competitors helps explain why many new chemical
plants are in development. And oil-based feedstocks have been
cut in behalf since 2005. Transportation is another emerging
arena for natural-gas usage due to the cost advantage over oil.
In conclusion, America is blessed with an abundance of
natural resources. We are the largest producer of natural gas
in the world, the second largest producer of coal, and in the
next several years will become the largest oil producer in the
world. The future has never been brighter for achieving energy
independence.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Freeman follows:]
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Mr. Whitfield. Thank you, Mr. Freeman.
Mr. Weiss, you are recognized for 5 minutes.
STATEMENT OF DANIEL J. WEISS
Mr. Weiss. Thank you, Chairman Whitfield, thank you,
Ranking Member Rush and members of the subcommittee for the
opportunity to testify today.
Congress must not ignore climate science when developing
energy policies. Promoting an energy independence plan that
increases carbon pollution is like setting your house on fire
to stay warm. It may work at first but the long-term
consequences are horrendous. Any North American energy
independence plan must reduce carbon pollution too.
This year, the polluted climate struck back with the worst
U.S. drought in over 50 years and the third hottest summer ever
measured, and the drought has cost us at least $5 billion in
crop damage so far.
The Obama administration's all-of-the-above energy strategy
includes both pollution reductions and domestic energy
production. It modernized fuel economy standards, which will
save drivers $1 per gallon. We cut carbon pollution from cars
and invested in clean-energy technologies. Renewable
electricity generation has doubled. Domestic oil production is
the highest in 15 years, and imports are the lowest. Natural-
gas production is the highest ever. Seventy-thousand new oil
and gas jobs have been created in the last 3 years.
To build on these successes, we must continue to invest in
renewable energy, energy efficiency and clean vehicles and
fuels so that our companies can compete with those in other
Nations. Without incentives, financiers will invest elsewhere,
effectively outsourcing clean-energy jobs to China and other
nations with more supportive policies.
Domestic oil production benefits our economy and security.
Fewer imports will reduce our trade deficit. But more domestic
production won't do much to lower prices at the pump because
gasoline prices are mostly based on oil prices that are set on
a world market controlled by the OPEC cartel.
The Associated Press tested whether more U.S. drilling
would lower gasoline prices by analyzing three decades of U.S.
production and price data. The AP found, and I quote, ``no
statistical correlation between how much oil comes out of U.S.
wells and the price at the pump.'' Canada is oil-independent
yet it had the same high gasoline prices this year as the
United States did.
Contrary to some claims, expansion of drilling into
protected public lands and waters would have little impact on
gasoline prices. However, such policies would increase carbon
and other pollution because many oil and natural-gas production
techniques generate significant emissions.
In addition, there is a proposal now to let States decide
whether to allow oil drilling in National Park Service units
and other public lands within their borders. This tempts States
to sanction drilling to generate oil revenues rather than
safeguard the natural resources of these lands for their owners
who are the American people. The New York Times noted, and I
quote, ``States tend to be interested mainly in resource
development.''
Yesterday, the Center for American Progress released data
highlighting 30 National Park units that could have future oil
and gas drilling, including the Flight 93 Memorial in
Pennsylvania and Everglades National Park in Florida. These
places would be vulnerable to oil drilling if Federal oversight
is eliminated in favor of more relaxed State rules.
A columnist for Field and Stream magazine warned that State
control of energy development on public lands would devastate
outdoor activities: ``When it comes to the future of public
hunting and fishing, fewer proposals could be more
frightening.''
The proposal to build the Keystone XL pipeline won't
increase our energy security much either. A significant portion
of the Canadian tar sands oil would flow to Gulf Coast
refineries and be refined and exported as diesel or gasoline,
and the increase in production of energy-intensive Canadian tar
sands oil made possible by the pipeline would add even more
carbon pollution to our overburdened atmosphere. In fact,
Raymond James and Associates--John Freeman is a
representative--predicts a significant oil production increase
in the coming years without any expansion of drilling into
protected places or weakening of environmental safeguards. A
quote from their report: ``By 2020, based on domestic oil
production, growth in biofuels and declines in demand, we
expect net imports to reach essentially zero.''
To become more energy independent while reducing carbon
pollution, we must increase investments in efficiency and
clean-electricity vehicles and fuels. We can pay for these
investments by ending $2.4 billion of annual special tax breaks
for the five largest oil companies: BP, Chevron,
ConocoPhillips, ExxonMobil and Shell. These five companies made
$60 billion in profits in the first half of 2012, and a
recorded $137 billion in 2011. The money from these tax breaks
would be better invested in the clean energy technology of the
future that will make us both energy independent and cut carbon
pollution. That would lead to real energy independence.
Thank you very much.
[The prepared statement of Mr. Weiss follows:]
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Mr. Whitfield. Thank you, Mr. Weiss.
Mr. Purcell, you are recognized for 5 minutes.
STATEMENT OF JOHN PURCELL
Mr. Purcell. Thank you, Chairman Whitfield, Ranking Member
Rush and subcommittee members. My name is John Purcell and I
serve as Vice President of Wind Energy for Leeco Steel. I
appreciate the opportunity to speak briefly today about
America's wind power contribution to a secure and affordable
national energy portfolio. I would especially like to focus on
the impact on Leeco Steel and the U.S. wind energy due to the
impending expiration of the renewable energy production tax
credit, the PTC.
We at Leeco Steel feel it is imperative for the PTC to be
extended in its full form as soon as possible as included in
the Family and Business Tax Cut Certainty Act that was passed
on a strong bipartisan basis by the Senate Finance Committee by
a vote of 19 to 5.
Leeco Steel is a wholly owned subsidy of O'Neal Steel, the
largest privately held metals distribution company in the
United States. Headquartered in Lisle, a western suburb of
Chicago, Leeco Steel is a carbon, high-strength low-alloy steel
plate distributor and processor serving the United States,
Mexico and South America from seven locations throughout these
regions. We have distribution facilities in Portage, Indiana;
Oshkosh, Wisconsin; Pittsburgh, Pennsylvania; Chattanooga,
Tennessee, and Fort Worth, Texas.
Leeco Steel first began delivering steel plates and
fabricated plate products to the wind industry in 2004. Revenue
from the wind industry now accounts for nearly 40 percent of
our company's revenues. The wind business for Leeco has become
a keystone of our overall business and a driver for development
of our company overall.
Leeco Steel has provided over 500,000 tons of steel plates
to 12 tower manufacturing facilities in 12 States across the
United States, 500,000 tons of steel in the last 6 years that
didn't exist to a market that didn't exist before 2004 for us,
most of which has been built in the last 8 years. The PTC has
helped us to expand our company in the wind industry and into
new markets, and has helped us weather the recent economic
downturn. Since the early development of our wind business, we
have hired over 70 people at my company to help maintain the
growth strategies that we have planned for our company.
In the past 6 years, when there has been certainty of a
PTC, our wind business and the wind industry overall have been
important drivers of economic growth. Of the 12 tower factories
mentioned above, 10 of those factories did not exist before
2002. Taking an average of 250 employees per factory, that is
2,500 new, good-paying jobs that were created in a very short
amount of time within our supply chain alone. This does not
take into account the thousands of additional jobs that exist
in the supply chain that supplies goods and services to each of
these 12 factories.
Because of the PTC, the U.S. wind industry has seen
tremendous growth and innovation and has become an American
success story. Overall, wind energy capacity has grown to over
50 gigawatts, which is enough energy to power over 13 million
American homes. Iowa and South Dakota now get roughly 20
percent of their electricity from wind generation alone. The
wind industry has generated investment upward of $20 billion
annually and created 75,000 jobs. Since the PTC was last
allowed to expire, there was approximately only 25 percent
domestic content in each wind turbine that was erected, on
average. Today, the average is over 65 percent domestic content
in each installed turbine. And wind power is more affordable
than ever, with costs falling 90 percent since the 1980s to 5
to 7 cents per kilowatt-hour today.
With such a positive impact on communities across the
country, it is no surprise that the PTC has enjoyed widespread,
bipartisan support. One example of this support can be seen in
the list of 113 cosponsors, including 27 Republicans, of H.R.
3307, a bill that would extend the PTC through 2016. Another
PTC extension bill on the Senate side, S. 2201, was introduced
on a bipartisan basis and there is strong support by both
Republican and Democratic governors as well for a PTC
extension.
With the PTC extension uncertainty, many of Leeco's
expansion plans are at risk. There have been high-level
discussions to increase the amount of steel plate capacity for
the wind business in the coming few years. However, those
discussions have now gone silent, as there needs to be business
case certainty to move forward with such huge capital
investments.
In similar fashion, over the years many plans to increase
wind tower production in the United States have been scrapped
due to the uncertainty caused by the on again-off again nature
of the PTC. As a result, the wind industry as a whole is
already seeing massive layoffs. Many plans to add to existing
facilities or invest in new facilities are on indefinite hold
or again have been scrapped altogether. Industry-wide, 37,000
jobs will be lost if the PTC is not extended immediately.
It is my opinion that the supply chain was built for the
wind industry, and billions of dollars were invested in it,
because companies expected a long-term PTC that would allow for
stable growth in the wind business for many years to come.
Major factories have been established from coast to coast, and
many North American headquarters have been established in
cities such as Portland, Chicago and Denver. Without an
extension of the PTC, all of these assets are at a premium risk
of being shuttered or downsized dramatically.
With an immediate extension of the PTC, the development and
construction of these turbines can continue as planned. The
tens of thousands of jobs that can be created with this
extension will allow the wind industry to not only continue
being a leader in job creation, but help secure our Nation's
energy future by diversifying America's energy mix and locking
in stable power prices over a long timeframe. The PTC is also
crucial for regaining our Nation's leadership in new technology
and innovation that will keep our economy competitive. The wind
industry is on the verge of becoming competitive without the
PTC, but failing to extend it immediately would prevent us from
finishing the job.
Again, thank you for the opportunity to be here today. I
look forward to answering your questions. Thank you.
[The prepared statement of Mr. Purcell follows:]
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Mr. Whitfield. Thank you, Mr. Purcell.
Mr. Mills, you are recognized for 5 minutes.
STATEMENT OF MARK P. MILLS
Mr. Mills. Thank you, Mr. Chairman, and thank you to the
committee for the opportunity and the honor of testifying
before you today.
As you know, I am Mark Mills, a Senior Fellow with the
Manhattan Institute. I have spent almost all of my career as a
technologist, as a practitioner, an analyst and fundamentally
in recent decades a forecaster of technologies.
We are at an interesting turning point technologically in
the energy arena that no one expected us to arrive at at any
time in the last five decades. But let me put into context, if
I may, the idea of energy independence that we have been
talking about since 1973 from the first Arab oil embargo.
The idea of energy independence is not one of isolationism
for the United States. I would suggest that we consider
independence in the same context as we are interdependent of
food and agriculture. The United States is the single largest
supplier of grains to the world. We provide 40 percent of the
world's trade in grains. That provides America with all of the
associated revenue benefits, trade, jobs benefits. It is of
enormous value to this country.
Technology is now doing for the American energy and fuel
sector what happened to the agricultural sector. It is a
revolution of profound proportions and suggests something that
can be done that we have never considered for decades. It is a
complete reversal of the energy paradigms that were put in
place in foreign policies for the last four decades. These are
paradigms that everybody knows were based on the idea of
shortages and limits and rising imports. We can now think
realistically, as you have heard from a number of the witnesses
this morning, we can think realistically not just in terms of
dramatic continual increase on hydrocarbon production in the
United States. We could accelerate and incent that and become a
net energy exporter to the world and become within less than
two decades, probably within a decade, the world's largest
supplier of hydrocarbons and fuels, just as we are now the
world's largest supplier of food.
You have already heard from a number of witnesses, and
there are at least a half dozen excellent reports including
that from Citi and Raymond James that point out that we are in
that context on track to generating millions of jobs from this
kind of trajectory and probably trillions of dollars of net
economic benefit to our economy. All these analyses have been
done in the context of business as usual. If we leave the
industry alone, it will continue to generate these benefits. I
would like to suggest this morning that that is not adequate to
the times. It is not adequate to the task or the opportunity. I
know that we have in the general political discourse made fun
of the idea of ``drill, baby, drill'' but it is a practical
reality that the infrastructure of the hydrocarbon industry is
now capable of generating more jobs, more economic benefits to
the U.S. economy than any single activity we could incent in
the entire economy. We could literally drill, but I would
expand this to drill, dig, build and ship our way out of the
economic and jobs crisis that we are in right now by
recognizing the technological and resource realities that are
now in place.
No one expected this any time in the last 40 years. Nobody
expected this even 5 years ago. The reality here of course is
that this comes at a terrific time for the United States. We
are no longer the primary energy consumer of the world and no
increase in energy demand. In fact, most likely zero energy
demand growth occurs in the United States over the next decade,
net demand growth. All of the net energy demand growth in the
world is occurring outside of the United States, which is a
complete reversal of where we were in the 1970s. The world will
add to its demand over the next two decades the equivalent of
adding two United States' worth of energy demand and it will
occur without regard to anything that occurs in the United
States within our borders or in North America.
We now have the opportunity to help fuel that hungry world.
Eighty-five percent of the world's energy is currently in
hydrocarbons. In a sense, all of the or a majority of all the
growth in demand will come from hydrocarbons over the next two
decades. There is a very significant role for non-hydrocarbons
but the majority will be hydrocarbons.
So the United States is sitting here at an interesting
turning point. We could see this enormous opportunity to
produce and fuel the world and generate millions of jobs in
America and generate trillions of dollars of net economic
benefit or we could choose not to do so. I would suggest that
the issue that should be considered is not how do we not impede
the industry from continuing to bring this very happy
circumstance of becoming the world's fastest-growing
hydrocarbon province. How do we accelerate that? How do we
accelerate those economic benefits, the benefits to the world,
to our economy and fundamentally reset the geopolitics of the
energy economy for the entire world?
Thank you, Mr. Chairman.
[The prepared statement of Mr. Mills follows:]
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Mr. Whitfield. Thank you, Mr. Mills.
Mr. Howard, you are recognized for 5 minutes.
STATEMENT OF PETER HOWARD
Mr. Howard. Thank you, Mr. Chairman. My name is Peter
Howard, and I am President and CEO of the Canadian Energy
Research Institute located in Calgary, Alberta, Canada.
The Canadian Energy Research Institute is an independent
not-for-profit research institute specializing in the energy
economics of energy production, transportation and consumption
sectors. The central goal of CERI is to bring the insights of
scientific research, economic analysis and practical experience
to the attention of government policymakers, business-sector
decision-makers, the media and the general public. CERI is
funded by the government of Canada, the government of the
Province of Alberta, the Canadian Association of Petroleum
Producers, and the Small Explorers and Producers Association.
CERI has published several reports that deal with the
economic analysis and short- to medium-term forecasts of
hydrocarbon production from the Canadian provinces and
territories including conventional oil, conventional gas,
coalbed methane, unconventional gas, oil sands, LNG and
natural-gas liquids. These reports are available on CERI's Web
site and are the basis of my comments today.
With respect to liquid hydrocarbons, in 2011 Canada's
average daily production was made up of the following. From
western Canada, light crude was 562,000 barrels; condensate,
128,000; conventional heavy, 422,000; upgrade bitumen, or SCO,
at 846,000; non-upgraded bitumen at 759,000; and from eastern
Canada, primarily Newfoundland, conventional light at 272,000
for a total of 2,989,000 barrels per day average. In 2011,
Canada's average daily exports was 2,138,000, of which 98
percent of those volumes went to the United States.
Canada's conventional-oil production, light and heavy,
peaked in the mid-1970s at 2.2 million barrels per day and has
been on a steady decline since that point in time until very
recently. In 2010 and 2011, the year-over-year production rate
actually increased. The reason: applying horizontal drilling
technology to old oil fields to access bypassed oil and
increase the recoverable oil percentage. During those years the
number of oil-directed wells increased from 1,647 wells in 2008
to 4,339 wells in 2011 with horizontal wells being 60 percent
of the total. CERI's conventional-oil model is forecasting a
conservative increase in conventional oil of 200,000 barrels
per day by 2015 and an optimistic increase of 300,000 barrels.
The Alberta oil sands currently produce, on average, 1.681
million barrels per day with 60 percent sourced from mining
operations and 40 percent from in situ operations. Production
ramp-ups and de-bottlenecking efforts over the next 2 years
will expand production to 2.2 barrels per day. An additional
408,000 barrels per day is scheduled to be connected from
projects that are currently under construction and due on
stream in and about 2015. Additional volumes of 1.3 million
barrels per day and another 1.3 million barrels per day on top
of that either have the regulatory approval or are awaiting for
their regulatory approval. And on top of all that, there is a
further 1 million barrels per day from projects that have been
announced that have not gone before the regulator. Total
potential from the oil sands is around 5.3 million barrels per
day. In other words, there is 2-1/2 million barrels, or five
pipelines, of production that is considered land-locked and is
looking for a pathway to either an existing market or a new
market.
The current export capacity of pipelines from the WCSB from
an operational point of view is 3.45 million barrels per day.
Add to this, two projects that Enbridge Pipelines is currently
undertaking to increase capacity on line 67 and 61 totaling
200,000 barrels per day. Total export capacity by 2015 and
forward will be around 3.65 million barrels per day.
In 2012, the Trans Mountain Pipeline System connecting
Alberta to Vancouver was 60 percent oversubscribed. By 2016,
CERI is forecasting that the export pipelines connecting
Alberta to the United States will be approaching an
oversubscribed situation. Some possible relief from the
railways is envisaged by transporting upwards of 200,000
barrels per day to market which would shift that point to about
2018.
There are three possible pipeline projects that are on the
books to be constructed: the Keystone XL, the Trans Mountain
Expansion and the Northern Gateway. In addition to those, there
are three other proposals. The first one is Enbridge's line 9
to reverse that and change the flow direction Sarnia, Ontario,
to Montreal, Quebec. Total volume will be 240,000 barrels per
day, and this would be conventional crude sourced out of
Alberta and Saskatchewan. TransCanada has also proposed
converting one of their Canadian mainline gas pipelines over to
oil and bitumen service. This would connect western Canada to
all the eastern Canada refineries, including the Irving
refinery in New Brunswick.
The port of Churchill, Manitoba, is currently ice-free for
9 months of the year and this is being investigated as a
potential pipeline connection and tanker port.
I see that my time has come up, so I will belay my comments
with regard to natural gas and cede to the chairman. Thank you.
[The prepared statement of Mr. Howard follows:]
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Mr. Whitfield. Mr. Howard, thanks very much, and I want to
thank all of you for your testimony. The testimony was quite
enlightening, and when you think about a few years ago, as has
been said, we all were sort of wringing our hands about being
able to meet the energy demands not only of our country but the
increasing energy demands around the world, and to hear this
optimistic testimony today is something I think all of us can
feel very good about.
Dr. Ahn, you even mentioned the words ``a minor industrial
revolution.'' Would you just elaborate on that a little bit for
me? I love that term, ``minor industrial revolution.''
Mr. Ahn. Thank you, Chairman. I would be happy to. Indeed,
the scale and the promise to our economy, which is still
struggling to recover from the aftermath of the 2007-2008
recession, is staggering enough that ``industrial revolution''
might be the appropriate phrase to put it. As I mentioned, we
are seeing $200 billion to $300 billion in activity just from
the oil and gas revenue alone, but because our economy is still
substantially far away from what it has the potential to
produce and the number of jobs that it can potentially support,
this energy revolution can serve as that trigger, as that
stimulus to push our economy back to or even beyond potential
output.
Mr. Whitfield. And how many new jobs did you estimate maybe
by the end of the decade?
Mr. Ahn. Yes. The specific estimates are 2 to 3.3 million
jobs. About one would be in the energy and the manufacturing
sector and then the remainder would come from multiplier
effects, as economists would term it, as this new energy boom
ripples through the rest of the economy, creates virtuous
cycles of consumption and investment.
Mr. Whitfield. And did you or Mr. Freeman make any
estimates on the amount that we could reduce our trade deficit
by the end of the decade?
Mr. Ahn. I am sure Raymond James has something but our
estimates, my estimate was for the U.S. current account deficit
to be reduced by two-thirds.
Mr. Whitfield. Mr. Freeman?
Mr. Freeman. We looked at a couple a years ago. Half of
your trade deficit was importing oil. Obviously if you are no
longer having to import oil by 2020, then you are looking at a
meaningful reduction in that trade deficit.
Mr. Whitfield. Right. And, you know, the President makes
the comment frequently that oil production has gone up since he
has been President, which is actually true, but it certainly
hasn't gone up as a result of any affirmative government
program, but I think you would agree with me, Mr. Hamm, that
this has been generated because of private capital, people
willing to invest their capital, take the risk. There has not
been any government program that has assisted in this, has
there?
Mr. Hamm. No, actually it has been done actually in spite
of, you know, what is going on here in Washington. This thing
has taken about 20 years. It was led perhaps by George
Mitchell, Linda Barnett, taking--a lot of us were engaged with
highly deviated drilling under the cities and actual
directional wells even in the 1970s, so it goes a long ways
back. But it has been brought on by the private sector
entirely.
Mr. Whitfield. Well, now, the President has made some
comments and others have sort of left the impression that our
reserves, our known reserves, are rather small, and I know that
the SEC has certain rules on what you can book as reserves.
Would you elaborate on that issue a little bit, the known
reserves, the reserve issue?
Mr. Hamm. Yes, I would like to. He makes a statement, you
know, the United States has only 2 percent of the world's
reserves, and actually our production is about 12 percent of
daily production in the world, so a huge disconnect here in the
way that the United States calculates reserves and the rest of
the world. We have what is known as a 5-year rule that it is
like the Bakken, we are going to be drilling wells there and
developing at least 15 years, probably 25 years from now to
fully develop it yet we cannot book anything beyond 5 years, we
can drill beyond 5 years. And even though we are in a
continuous--the largest continuous oil deposit found in North
America and basically the rock is the same through a lot of it,
if it's not right against forward drilling, we can't claim it
as direct offsets, even though the rock is much the same 20
miles away, 40 miles away, 80 miles away. We can't claim it.
Mr. Whitfield. So you have great certainty that it is there
but from a financial standpoint you simply cannot claim them?
Mr. Hamm. Yes, it is an absolute geologic certainty, and it
has been proven. Just due to the rules, we can't claim it.
Mr. Whitfield. Well, last night, I was looking on--or a few
days ago--the Department of Energy Web site and the 1705 loan
guarantee program, under the DOE Web site, said they created
1,175 new jobs at a cost of $12.8 million of taxpayer dollars
per job, and I think about the contrast about what is going on
in the oil and natural-gas fields.
Anyway, my time is expired, and Mr. Rush, I recognize you
for 5 minutes.
Mr. Rush. I want to thank you, Mr. Chairman. A very
interesting panel so far.
We keep hearing how the Obama administration has somehow
implemented policies that are hostile to the oil and gas
industries, although I would argue that the facts would
indicate that those industries actually have been not hampered
but aided and helped in terms of us experiencing the kind of
boom that the witnesses have spoken to so far.
And my question is to Mr. Weiss and Mr. Purcell, do either
of you agree that, or do both of you agree that the Obama
administration is hostile to the oil and gas industries, and
what evidence would you point to to support your argument?
Mr. Weiss. Thank you, Mr. Rush. First, let me just--I want
to address something that Chairman Whitfield just asked about,
which is has there been government support for oil development
on private lands, and in fact I believe in Mr. Hamm's written
statement, he talks about the value of the tax treatment of
investments in drilling where they get a tax break for
intangible drilling costs, and I would personally classify that
as a form of government support.
Now, to answer your question, I think the only--some in the
oil industry may argue that the administration hasn't been
hostile the oil industry because they have issued new standards
for worker safety and environmental safety on oilrigs in the
wake of the BP oil disaster. I think that is an incredibly
positive development and in fact the predictions of all the oil
growth that Raymond James and Citigroup have made all assume
that those new rules are going to be implemented yet we are
going to have this explosion in oil production, yet with the
production of which offshore is going to be much safer for the
workers and for the environment. So I would see that as a plus
of what we have done.
The other thing that the administration is focused on is
eliminating tax breaks, some of which go back to 1916, that
benefit the oil industry that were appropriate at the time that
the oil industry was new and starting out but now is
unnecessary, and I would argue that the $2.4 billion that goes
to the big five oil companies in tax breaks every year could be
better spent on things like extending the Production Tax Credit
for wind energy, which is a new industry in the way that oil
was new 100 years ago.
Mr. Rush. Mr. Purcell, do you want to try your hand in
this, please?
Mr. Purcell. I can. I can't speak as much to the oil and
gas industry and Mr. Obama's position on that as I can his
position in carrying out the Production Tax Credit for
renewables including----
Mr. Rush. Let me ask you this question then. Why should
Congress invest in renewable energy and wind in particular?
What are the benefits in terms of decreasing our reliance on
foreign oil as well as in creating jobs and putting Americans
back to work?
Mr. Purcell. Yes, sir. I think, you know, part of my
testimony lends to that policy and the continuation of the
Production Tax Credit. We have created over 75,000 jobs in a
very short amount of time and 37,000 of those are manufacturing
jobs of which companies of which I serve. We have had $15
billion of private investment in the wind industry on average
over the last 4 years. So there is a tremendous amount of
private industry in the wind industry as well. However, with
uncertainty with the PTC, both those manufacturing jobs and
that investment is at risk today. In fact, most of the
developers of wind farms and wind turbines aren't investing
money for next year because of the impending expiration of the
PTC so as recently as yesterday there was another announcement,
another one of the customers that I serve having to close their
wind tower factory in Columbus, Nebraska, and Ephrata,
Washington, and last week DMI Industries announced closing of
three facilities, two of which are in the United States, one in
North Dakota and one in Oklahoma, because of the uncertainty of
the PTC, so----
Mr. Rush. How many jobs are affected with the closures?
Mr. Purcell. With those five factories at peak employment 2
years ago were roughly 1,500 jobs in those factories alone, and
those are just two examples recently in the last 2 weeks of
plant closures due to the uncertainty of the PTC, and of
course, I would say again as part of testimony that I feel like
we have bipartisan support from both parties that believe in
the Production Tax Credit. You know, we think that now is the
time. It is beyond time, and so we appreciate the President's
support of the PTC very publicly and it was something quite
frankly that President Bush extended back in his term as well,
so we feel like both recent Presidents have acknowledged the
benefit of the Production Tax Credit and of the wind industry.
Mr. Rush. Thank you, Mr. Chairman. Yield back.
Mr. Whitfield. I recognize the gentleman from Texas, Mr.
Barton, for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman. A couple of
observations and then I will ask some questions. You know, some
of the opponents of our current market-based energy policy keep
harping on the fact of the scarcity issue and the chairman in
his questions asked a question about the reserve base to Mr.
Hamm. I just want to point out that Texas, which except for a
few years in the 1970s and 1980s has been the number oil-
producing State in the country, Alaska when Prudhoe Bay was in
full production was number one for I think 10 or 15 years, but
Texas has averaged somewhere between a million and 2 million
barrels of oil production a day for over 100 years. Texas by
itself has produced somewhere between 40 and 50 billion barrels
of oil in the last 100 years, and one of the most prolific
fields in Texas is the Permian Basin, which has been in
production since the 1920s, and because of the new
technologies, horizontal drilling and hydraulic fracturing and
also some water flood projects, Permian Basin this year will
produce as much oil as it has produced in any given year.
You know, if you look at what is called proven reserves,
which is recoverable today at today's prices and today's
technology, the United States proven reserves are 20 to 30
billion. But if you look at recoverable reserves, which it is
technologically possible, that we know the oil is there, it is
in the trillions. It is in the trillions. And in Mr. Hamm's
home State--I assume you are from North Dakota. Is that
correct?
Mr. Hamm. Well, I am sure there a lot, but I am actually
from Oklahoma.
Mr. Barton. Oklahoma. But your oil company is in North
Dakota?
Mr. Hamm. Yes.
Mr. Barton. North Dakota 10 years ago was producing 3,000
or 4,000 barrels a day. I mean, it was in the thousands. In the
near future, North Dakota is going to produce over a million
barrels of oil a day. You know, so it is not necessarily about
proven, it is about recoverable, and when you look at the
statistics of what is out there, the chairman's home State,
Chairman Upton of Michigan, is going to be a huge producer of
natural gas, and Michigan is not noted to be an energy
production State but in the next 10 years Michigan is going to
be producing probably a billion cubic feet of natural gas a
day. It is just stunning. So I just wanted to put that on the
record.
I want to ask Mr. Purcell, who I have great sympathy for,
you are here talking about the wind credit, I believe, and in
the 2005 Energy Policy Act, I supported the inclusion from the
Ways and Means Committee of the wind credit that you talked
about. However, today I don't, and the reason is, because 7
years ago wind was an emerging technology and we didn't have a
lot of wind production. Well, today we do, and the cost per
kilowatt-hour of wind is very competitive now, less than 10
cents a kilowatt-hour. In Texas, where we have an intrastate
deregulated market, we have wind projects which are selling
power into the grid at negative prices because they get the
2.3-cent wind tax credit. I believe that wind power is now a
conventional source and a mature industry, although it is still
growing, which is a good thing, and it is not acceptable to
spend a billion to a billion and a half dollars a year on tax
credits. What is your response to that?
Mr. Purcell. I appreciate your comments, and I can't speak
to the negative pricing. I am a steel guy, so you would have to
ask somebody a lot smarter than me about that as far as the
electricity going back in from western Texas. However, I do
know that your State did provide a leadership role in wind
under Governor Bush, started the wind initiative in the State
of Texas, and today you have the most installed megawatts of
any State in the country, over 10,000 megawatts of installed
power, getting 8 percent of your electricity generation in
Texas from wind power, so it has been a wonderful thing. We
appreciate your support in 2005 and sorry you don't feel the
same way today.
However, as a steel provider to this industry, and
speaking, I think, from industry as a whole, we don't feel like
we have completely finished the job and we need the Production
Tax Credit extended for a certain period of time to help us
finish the job. We have brought down the cost of wind power to
where it is competitive over a 20-year power purchase
agreement. It is the only power that I know of that can offer a
utility a sure price of fuel for 20 years because of course the
wind is free. So in my estimation as a steel guy, I am watching
my customers laying off folks all across the country and I
won't be providing steel plates to any of those factories again
so I can't answer your question about negative pricing. I will
leave that to someone else.
But with regard to the need for the Production Tax Credit,
to continue the manufacturing renaissance, much like was talked
about by colleague down the table, we feel like we also have
had a major manufacturing renaissance in the wind power
industry and those jobs are at risk and being lost today, Mr.
Barton. Thank you.
Mr. Barton. My time is expired.
Mr. Whitfield. The gentleman's time is expired. At this
time I recognize the gentleman from Texas, Mr. Green, for 5
minutes.
Mr. Green. Thank you, Mr. Chairman.
Mr. Ahn and Mr. Freeman, both of you note how increased
domestic production would bring down the price of oil in the
next 10 years yet petroleum and gasoline prices are set by a
complex mix of factors including global crude prices, increased
world demand, refining capacity, maintenance schedules,
gasoline imports, proscriptive fuel mandates and geopolitical
events. Unfortunately, these factors are beyond our effective
control. Canada is a net exporter and an actual oil-independent
nation but gasoline prices in Canada rise and fall in
accordance with world events. Can you please walk me through
the basis on why you made your projection that it would
actually be able to lower prices if we just increased more in
the United States? Now, I agree if you put more oil on the
world market, you know, the price will be more flexible just
like every once in a while when the President decides to
release it from the SPRO, we will see some flexibility over a
few weeks but it goes back.
Can you tell me why you think that our gasoline prices will
go down if we produce more domestically, either one of you or
both of you?
Mr. Ahn. Thank you, Congressman, for that question. I will
be happy to elaborate. As I mentioned in my remarks, we are
estimating that global oil prices could fall by 15 to 20
percent thanks to the combination of both new supply and
declining consumption domestically. Just to break that down a
little, we see about 14 percent of that comes from new supply
and about another 3 percent of that comes from declining
consumption, but this is ceteris paribus, all else equal, when
you so correctly mention that global oil prices are set by a
multitude of factors, much of this outside of our borders.
That said, both the secular decline in consumption
domestically is part of a broader movement of declining
consumption around the world in response to historically high
prices during the latter part of the past decade, even in
countries such as China, as part of the 12th economic 5-year
plan have made improving their domestic energy efficiency a key
goal. So we will be seeing both a broad trend of declining
consumption around the entire world at the same time as we see
not just a burgeoning supply coming from the United States and
North America but also from the Middle East, from Africa, from
Australia, from Brazil, even the resurgence of supply from
traditional sources such as Iraq, Russia, et cetera. So the
United States is at the heart and at the forefront of this
revolution but it is a global revolution in which we would see
substantially lower prices.
Mr. Green. Mr. Freeman, I only have less than 2 minutes. Do
you basically agree with that that it is both increased
production not just in the United States but potential in other
countries but also substantial reduction in demand?
Mr. Freeman. Yes, it is definitely a combination of both.
You know, obviously it was easier to drive down the natural-gas
price because natural gas was not a fungible global commodity
in North America and there is a reason you have got, you know,
nearly decade low natural-gas prices. It does take longer for
oil because it is a global fungible commodity. You probably
have noticed, you know, your West Texas intermediate price is a
good $17 less than what the global oil price is right now. So
we are seeing an impact from the rapid supply growth we have
got in this country. We are expecting the oil price here to
drop a good $30. Now, there will be times when OPEC may respond
and cut production, and that will temporarily pop up the price
again.
Mr. Green. Let me cut off because I only have 45 seconds
left and I have a number of other questions. But, you know, not
only production, which I support expanded domestic production,
offshore and onshore, and also what Canada possibly brings on,
but one of the issues I have--and I had a great trip, by the
way, to Alberta a couple weeks ago to see the oil sands and the
success that they are having. We would like to get that to our
five refineries but a million barrels a day sounds great, but
the district I represent, we use over a million barrels a day
in our five refineries so I don't think there is a panacea here
because we expand ours. Maybe if we got that cheap West Texas
oil to Philadelphia, they wouldn't be closing their refineries.
Mr. Chairman, I know I am out of time but obviously I have
a lot of other questions.
Mr. Whitfield. Thank you. At this time I recognize the
gentleman from Kansas, Mr. Pompeo, for 5 minutes.
Mr. Pompeo. Great. Thank you, Mr. Chairman.
Mr. Hamm, it wasn't very long ago that there was peak oil,
we are about out of the stuff. All of American energy policy
really for the last 25, 30 years under both parties was
premised on that notion. Any validity to the fact that you are
wrong, that what we have heard from these economists today is
wrong and that we do have this challenge in front of us in the
near term?
Mr. Hamm. There are several believers in peak oil. I wasn't
in that group. You know, there are still some people, I guess,
that maybe are talking about peak oil. But, you know, frankly
it is supply and development and we are seeing so many other
oil plays across the United States today that, you know, it is
almost too many to quantify at this time. But the big ones that
we have, of course the Bakken and Eagle Ford, and that is
adding so much supply here in the United States, plus natural-
gas production across the United States brings a lot of liquid
with it as well.
Mr. Pompeo. You bet. Don't forget the Mississippi shale in
Kansas 4th Congressional District.
Mr. Hamm. That is correct. Mississippi is a big play.
Mr. Pompeo. Absolutely.
Mr. Purcell, I heard you talk about the wind Production Tax
Credit created 37,000 jobs and you talked about an expectation
of its continuation. I find that very surprising. We have known
for a long time when this thing was going to expire. It is a
date certain that is in current law. Do you regret having built
your business model on the assumption that politicians would
extend that Production Tax Credit? Because now you are talking
about laying folks off, and you turn it back to us and say
gosh, you all need to extend that so my people don't get laid
off. Well, you made the decision to hire those folks based on
law you knew was expiring so I am interested in whether you
have any regrets about having built your business model around
that.
Mr. Purcell. No, quite the contrary. It has served us very
well. We have been able to grow our company in other ways.
Quite frankly, you know, I sit here before you with regard to
the Production Tax Credit but our company services other
industries that are being talked about as well today, and we
are actually greenfielding a plant south of Fort Worth, Texas.
We are going to spend $10 million down there developing in that
area for both wind, oil and gas. So, you know, specific to the
Production Tax Credit, yes, there is an expectation that that
would be continued to allow the wind industry to continue the
work that we are doing but the turbines are getting more
efficient. The towers are getting taller, which is good for me,
more steel under the turbine. The blades, the technology is
getting better. A lot of things with regard to siting and
wildlife are getting better. So everything that we are doing in
the wind industry I feel is beneficial. However, much like
going back to 1916, we talked about subsidies for oil, it took
a long time for the country's oil to get as well, so it is
something that we feel like we just need a few more years on.
Mr. Pompeo. I appreciate that. I went back and looked at
the record from the 1980s and 1990s. The industry has said just
a couple more years for an awfully long time.
Mr. Mills, you talked about policies we could do to exploit
this enormous renaissance. What is the most important thing we
could do as a Federal policy matter? We have now got 10
agencies investigating fracking. The last time 10 agencies
investigated something and did nothing, none of us were here.
So we know the Federal Government is on the march. What is the
most important thing we could do as a policy matter so that we
do continue this incredible economic opportunity for our
country?
Mr. Mills. That sounds like the hardest question to me in
terms of the most important thing that Congress can do.
If I might just briefly add on your question about peak oil
because it is a very interesting one, the abundance of oil
production and natural gas in the United States is not a
consequence of us suddenly discovering that there is oil or gas
here, as you well know. We didn't find a new planet or a
country; we got new technology. And what is interesting with
the technology aspect of this is, technology unleashes the
resources, not finding the resources per se, and it is an
indicator of what the future holds, the idea whether this is a
peak or not. We can look at patents as sort of a forward-
looking indicator of what is emerging. So we did some research
and looked at the last 5 years the numbers of patents issued in
non-hydrocarbons, about 60,000. The number of patents issued in
the same 5 years in the hydrocarbon fields is 150,000. So this
is a permanent shift in the technological revolution.
I have a lot of people in industry ask this question you
asked me, and the answer is almost always the same, and I know
this committee has heard this in other hearings from other
witnesses, everyone says almost universally those who make
things can build things. We don't mind accommodating
regulations but you have to back off, Washington, you have got
to help us out here. It is not that we don't want to do things
safely and in environmentally sensible way, every businessman I
talk to in every industry is on board with this. This is the
21st century. But they are literally crushed by the quantity,
the diversity, the complexity and slowness of regulations. So
the regulatory process has evolved and grown in a chaotic way.
They are asking for help and for relief, not to have no
regulations but to make sense out of them. My sense is that
with 21st century information technology, we ought to be able
to fix this thing.
Mr. Pompeo. Thank you.
Mr. Chairman, I yield back.
Mr. Whitfield. Thank you. At this time I recognize the
gentlelady from Florida, Ms. Castor, for 5 minutes.
Ms. Castor. Well, thank you, Mr. Chairman. I want to thank
you for calling this hearing to highlight the great successes
in the energy sector during the Obama administration. Really,
the testimony here from the experts is quite remarkable, and I
am glad to hear from Raymond James. They are headquartered in
my area in Tampa Bay, and people all across the country trust
your advice, and you were kind enough to do kind of a bullet-
point presentation. It is very helpful. The United States can
become energy independent by 2020 under current policy. Before
the end of this decade, the United States will become the
largest oil producer in the world. That is astounding. America
has added more barrels to global oil supply from 2008 to 2011
than any other country despite the deepwater drilling pause
necessitated by the most devastating offshore blowout in
history, the Deepwater Horizon.
On the demand side, good news. Petroleum imports have
declined by 3.8 million barrels per day. Since 2005, oil demand
has fallen every year. Oil demand is forecasted to decline and
the main factors that are driving this decline in demand are
the policies that the Congress in past years and the Obama
administration has put in place. They include fuel economy, the
CAFE standards and changing consumer preferences and a decline
in miles traveled.
Citigroup identifies a minor industrial revolution that is
happening in the American heartland. Even the chairman was a
little bit excited about that. Mr. Mills stated there are
millions of jobs on the way. That is good news. Mr. Hamm also
heralded that America is now number one in natural-gas
production. This is all very positive, and it is interesting--
and Mr. Weiss, I would be interested, I see you smiling on
this. These market conditions really do belie the Republican
messaging that has been going on when it comes to energy, that
the American energy sector is stagnant. How do you commend on
that?
Mr. Weiss. Well, I think the reports from Raymond James and
Citi GPS are very encouraging because they say we can continue
to grow our oil industry without expanding into currently
protected places that are owned by all Americans, and I think
that is very important.
Ms. Castor. I consider the Florida Everglades as one.
Mr. Weiss. Yes.
Ms. Castor. Boy, that has gotten people's attention.
Mr. Weiss. And in fact, one of the things that is so
disturbing is there is a recent proposal. Mr. Hamm heads up Mr.
Romney's policy shop for energy. The Romney energy plan would
allow States to decide whether or not to drill in federally
owned lands, and one of the places there are already oil
holdings, oil leases held in National Park units includes the
Everglades along with the Flight 93 Memorial. So conceivably,
the State of Florida could allow oil drilling in the Everglades
under the plan that Mr. Romney has put together, and that would
put a very important ecological and economic resource at risk
because, as we know, even drilling done as safely as possible
as, you know, lots of environmental impacts including roads,
spills, benzene pollution, all kinds of stuff.
Ms. Castro. Yes, it is off base and it is not needed, and
that is what a lot of the reports through the testimony here
today demonstrate.
But one other important element of maintaining a diverse
approach to America's energy policy, it is devoid from a lot of
the Congressional hearings that we have had this year, it is
devoid from the Romney plan, and that is focusing on technology
and creating jobs through clean energy, helping Americans save
money and American businesses save money, put money back in
their pocket.
And I wanted to highlight a press report today that is also
very positive. There is a revolution happening in solar power.
Big-box retailers, large chain stores are installing rooftop
solar power to help meet their energy needs but to save them
money. Walmart, Costco and Kohl's, commercial installations
with solar power have increased sharply in recent months. More
than 3,600 nonresidential systems were activated in the first
half of 2012, bringing the number of individual solar electric
systems to 24,000. Almost half of the top 20 commercial solar
customers are major retailers like Bed, Bath and Beyond, and
Staples. Ikea, one of the chains in the top 20, plans to have
solar arrays on almost all of its furniture stores and
distribution centers by the end of the year, so that begs the
question, Mr. Hamm, why in the Romney energy program and policy
is it completely devoid of creating jobs through technology and
clean energy? It is so one-sided to oil and gas.
Mr. Hamm. Well, there is a lot of technology in the oil and
energy sectors, we know that, and it ought to be market-based,
and that is what it comes down to, is what the market can
afford and will afford and will sustain. We are talking about
sustainable jobs going forward, and energy that is produced
that is twice as high as anything else may not be there, you
know, so it has to come back to what the market can afford.
You made a comment, I think, on Federal land restrictions,
you know, we are not talking--nobody is talking here about
Federal parks and monuments. We are talking about the 40 acres
out there and the 1280 that it takes 10 months to get a permit
to drill under, not on, out there in North Dakota. So there is
a lot of restrictions out here that something has got to be
done about it.
Ms. Castor. Thank you.
Mr. Whitfield. The gentlelady's time has expired. At this
time I recognize the gentleman from Louisiana, Mr. Scalise, for
5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
having this hearing, and I think a lot of us have been pushing
to get North America energy independence within a decade. It is
clearly a goal that we can achieve, but it is also clearly a
goal that can't be achieved under the current policies of
President Obama, and you know, while some people want to
reinvent history and reinvent current policy in trying to
change the record, you know, I always find it intriguing when
you hear President Obama bragging that production has never
been higher when first of all, if you look where production is
up, because in some areas production is up and in some areas
production is down, ironically, production is down in the areas
where the President has control, on Federal lands, and
production is up in the areas where he currently does not have
control, on private lands, but where he and his administration
are trying to go shut it down. So he is bragging about
something he doesn't create. I know he has got a good history
of trying to blame other people for things that happened under
his watch but in this case he is actually trying to take credit
for things that he is actually trying to shut down. Production
is lower on Federal lands, and that is not disputed by his own
Energy Information Administration.
I do want to correct the record before I get into a few
other things. Early on Mr. Rush was, I guess, questioning Mr.
Weiss as to why he thinks that some of us feel that the Obama
administration has been hostile towards American energy, and I
think Mr. Weiss's comments were to try to blame it on the
Macondo well as if some of us don't want to address that
problem. Clearly, you know, we pushed hard to see that--and we
have seen a dramatic advance in the technology just in the last
2 years for responding to a disaster like we had, but at the
same time what a lot of us were concerned about, that still
makes us hostile today is, number one, the President went in
and shut down production, shut down exploration and drilling
for 6 months when his own advisors--the President put together
a taskforce of experts of scientists and engineers to look at
safety, and his own safety experts said it would be a bad idea
and actually reduce safety in the Gulf to have a moratorium,
and the President went and doctored the report and put the
moratorium in place anyway, tried to blame it on his scientists
and engineers and they said wait a minute, we think it is a bad
idea because you are going to lose your best workers, you are
going to lose your best rigs, and that reduces safety, and in
fact, that is what has happened. I mean, we have been tracking
since Macondo. We have been tracking the rigs that have left
the Gulf of Mexico not to go to other parts of the United
States, to go to other countries, and you look at where these
assets have gone, each one of these represents about a billion-
dollar investment and about a thousand American jobs that we
have lost because of the President's hostility towards American
energy. They go to places like Nigeria, Sierra Leone, Egypt. I
mean, think about what is going on in Egypt just this week and
yet there are companies that say they would rather take a
billion-dollar investment and a thousand jobs and they feel it
is better to do business in Egypt with their crazy climate than
in the United States of America because of the President's
hostility towards American energy production. That is what is
going on. That is the record of this administration and yet he
wants to brag that production has never been higher when he is
trying to shut it down. He has been successful in shutting it
down to some degree in the Gulf.
Mr. Freeman, I want to ask you about that because, you
know, if look at where production is up and where it is down,
where is it in the Gulf of Mexico right now?
Mr. Freeman. Yes, you know, you have got over 80 percent of
your production growth recently, and through 2015, coming from
three areas. It is the Bakken shale in North Dakota, the Eagle
Ford shale in South Texas and the Permian in West Texas. The
offshore, obviously prior to Macondo, the offshore Gulf of
Mexico was under sort of a renaissance. We had actually started
to grow supply there, started to go to more deeper waters and
supply was up about 250,000 barrels a day in 2009. Last year,
supply was down in the Gulf of Mexico nearly 250,000 barrels a
day. So we are growing despite the fact that we have got the
Gulf of Mexico as sort of a drag.
Mr. Scalise. Production is down on Federal lands there in
the Gulf of Mexico. Of course, we want to see increased safety.
Companies that had a great safety record today can't even get a
permit. And so those jobs are leaving our country. That makes
us less secure. That kills jobs in America. It kills money that
is coming in the Federal Treasury. One of the reasons President
Obama runs up trillion-dollar-plus deficits every year he has
been in office, you know, that is billions of dollars not
coming in the Federal Treasury when he sends those jobs to
Egypt. He is sending jobs and assets to Egypt because of his
policies.
Let us not forget that the President himself said he wanted
to see electricity prices skyrocket. His Energy Secretary said
he wanted to see gas prices go to the levels they are in
Europe. And let us also not forget that one of President
Obama's top EPA officials said they want to crucify energy
companies. So you wonder why there is a hostility towards
President Obama's anti-American energy policies? It is because
of President Obama's record. We just want him to live up to the
words that he says. And yet his policies are destroying energy.
And I want to leave on this, Mr. Hamm, because I know you
have been very active in the energy industry where it is
growing. If you can share with us some of the things that you
have seen and when you are making decisions on where to go and
explore for energy. Do you look on Federal lands or do you look
on private lands and do these policies have a factor in that?
Mr. Hamm. Actually, it has been Continental's policy as
much as possible to avoid Federal lands just due to the delay.
You know, we are a growth company and----
Mr. Scalise. Due to the policies of the administration?
Mr. Hamm. Well, due to the policies and restrictions on
Federal lands. I mean, we have seen permits take as much as 2
to 3 years, and you know, it is just impossible that you can do
business in that regard, so we steer clear of them, and you see
the companies that, you know, are not growing very fast, they
are involved in Federal lands.
Mr. Scalise. Thank you. I yield back the balance of my
time, Mr. Chairman.
Mr. Whitfield. The gentleman's time is expired. At this
time I recognize the gentleman from Maryland, Mr. Sarbanes, for
5 minutes.
Mr. Sarbanes. Thank you, Mr. Chairman. I appreciate it.
Thank you all for your testimony.
There is a lot of rhetoric on this topic. I sat through
many, many meets of the Natural Resources Committee, which I
served on previously. We had great debate over whether this
administration, the Obama administration, is hostile to energy
production on land, offshore and on Federal lands, etc., and
the argument that that is the case is not supported by the
facts. In the last 3 years, production on Federal lands is
actually increased compared to the last 3 years of the Bush
administration. Despite all the efforts of certain members of
the Natural Resources Committee to argue that a de facto
moratorium had been placed on offshore oil production by the
conduct of the newly organized agency that oversees that, in
fact, the timing for obtaining permits has been expedited even
with building in the new safety standards, which are absolutely
appropriate after the tragedy that occurred. So I think a fact
check would show that there has been very strong support from
this administration with respect to offshore oil and gas
development as well as with respect to on Federal lands, and we
had a lot of good testimony that showed that the industry holds
leases and permits with respect to Federal lands that they are
not taking advantage of and there never seems to be an adequate
explanation for that.
I had a couple of questions, observations. You know, there
are two lenses you can bring to this revolution with respect to
the abundance of resources, energy resources that it is going
to offer the country going forward, and you can look at it
through a lens of energy independence and, you know, the
inexpensive availability of energy, and if you look at
exclusively through that lens, it looks wonderful. I mean, I
grant you that, and obviously we want to move towards energy
independence. Projections of that being able to occur by 2020,
which is what I am hearing, are quite exciting.
But if you add to the lens of this opportunity the issue of
impact on the environment and pollution and so forth, it
doesn't look as great, one has to concede, so the question is,
how do we kind of blend those perspectives and come up with an
approach that makes sense because when you talk about oil, you
talk about--I mean, I think the three energy sources that were
noted were oil, natural gas and coal in terms of significant
energy production in this country. Well, they all have issues
with respect to the environment, as we know, and natural gas is
a cleaner opportunity and that has been discussed at length,
but as compared with renewable-energy sources like wind and
solar and so forth, which are much better for the environment,
those things if you look at it through that particular lens
don't maybe look as great.
So that has to be part of this discussion, and one of the
questions I have is, it must be the case that with this new
abundance, this new revolution that we are talking about, it
gives us more opportunity to both explore the environmental
concerns and make sure we are doing that right as well as
continue to pursue a highly diversified energy post office
which includes a significant amount of investment in renewable-
energy sources as versus a situation where you are so dependent
on overseas and it is a much more competitive situation. So can
somebody speak to that? Maybe I will start with you, Mr. Weiss,
and I think I am going to run out of time here, but if you
could respond to that?
Mr. Weiss. Well, you know, there are lots of opportunities.
As you noted correctly, according to CRS, oil production on
Federal lands is up slightly in 2011 compared to 2007. So
claims that under President Obama oil production on Federal
lands is down is false.
In addition, as you also noted, there are consequences to
this great abundance that we have. For example, the New York
Times reported last year that in North Dakota ``every day more
than 100 million cubic feet of natural gas is flared this way.
This flared gas spews at least 2 million tons of carbon dioxide
into the atmosphere, which is about as much as almost 400,000
cars.'' So there are costs to this as well, and that is why we
have to have a system where we make sure that we expand the
development of these resources in a way that benefits our
economy and our security but also doesn't threaten our economy
and our security with climate impacts and other health impacts
that can be even more expensive.
For example, the drought that we are facing today across
America is going to cost at least $5 billion in crop damage,
and that is the kind of event that is going to occur with more
frequently if we don't address the climate piece of energy
production and use.
Mr. Sarbanes. Thank you.
Mr. Whitfield. The gentleman's time is expired. At this
time I recognize the gentleman from West Virginia, Mr.
McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman.
Let us stay on that, Mr. Weiss, just for a minute. When
they go back and they study the--the scientists go back and
study the Dust Bowl of the 1930s, I find it curious in my
reading that they blamed the temperature of the oceans, the
instability of the oceans, the change in the temperature
between the Pacific and the Atlantic. I never hear them talk
about carbon discharge, and these are all retroactive studies.
These are taking today's standards and reapplying them back
into that period. Can you explain in very short why?
Mr. Weiss. I have not looked at the Dust Bowl aspect but I
will tell you this----
Mr. McKinley. The Dust Bowl is probably the----
Mr. Weiss. I understand, it is the worst drought in
America. I understand that.
Mr. McKinley. But none of the climatologists and the
scientists blame climate change. They are talking about what
has happened with the Pacific and the Atlantic Ocean and the
jet stream. I am troubled. I am troubled. Let me just
characterize. I get a kick out of you. You have been here
several times before our committee. Remember that show, ``Bat
Masterson''? Do you remember that, ``Have Gun, Will Travel''?
Mr. Weiss. A little bit before my time, Mr. McKinley.
Mr. McKinley. Well, perhaps it may be, but he was brought
in when they needed someone with a gun, and you show up all the
time to attack the carbon fuel industry and you do a pretty
good job of it, but it is based on, I think, a lot of ideology
and not on the facts. You go back to be able to prove some of
this information that in the past, they just don't--you are
pushing an issue that just doesn't hold up.
I am just curious, do you support the idea of us shipping,
exporting coal and gas out of America?
Mr. Weiss. I believe that resources--and this is me
speaking personally, not for the Center for American Progress
Action Fund--I believe that resources that are developed from
public lands which are owned by every American in this room and
all across the country ought to be used for Americans so that
we are expanding----
Mr. McKinley. Just generally across the board, should we be
able to export? I don't know, once gas gets in a pipeline, I
don't know whether it has come from public lands or private
lands. So when we are trying to ship natural gas out of this
country, you know, LNG to sell it, you are opposed to that?
Mr. Weiss. I believe that----
Mr. McKinley. Just yes or no, please.
Mr. Weiss. Well, it is not a yes or no question. I believe
that----
Mr. McKinley. Yes, it is. Then if you are not----
Mr. Weiss. Resources produced from our lands should be kept
here.
Mr. McKinley. Do you think America can afford to be having
higher utility bills?
Mr. Weiss. No, we need to make sure that----
Mr. McKinley. You don't think we can afford it?
Mr. Weiss. Remember, there are other prices included in the
cost of burning coal than just the price of the coal and the
land and the facility itself. For example, the health care
costs from air pollution--mercury, soot, toxic chemicals,
cancer-causing agents--is in the billions of dollars a year
and----
Mr. McKinley. The EPA----
Mr. Weiss [continuing]. The EPA rule says----
Mr. McKinley. You are just a hired gun here. You are
already saying that the worst air is air that is indoors, not
our outdoor air. Even the EPA says it is 96 times worse indoors
than our outdoor area.
Mr. Weiss. But we ought to address indoor air pollution as
well, but that doesn't mean we ought to spew thousands of
pounds of mercury, which is a known neurotoxin----
Mr. McKinley. And as you well know that there is more
mercury in a can of tuna fish than there is a can of fly ash.
So----
Mr. Weiss. And where did the mercury get into the tuna
fish? It came from air pollution.
Mr. McKinley. We eat the tuna fish. We don't eat the fly
ash.
Let us go on to this thing that--so what percent are you
trying to get to in terms of fossil fuels? Where do you want to
take us when you come in with these kind of testimonies? Do you
want us down to eliminate coal or are you trying to get us down
to 20 percent? What is your vision that you think would be
right for America?
Mr. Weiss. I think what is right for America is to use our
resources in a way----
Mr. McKinley. Percentage-wise.
Mr. Weiss. I won't give you a figure but I think we ought
to use our resources in a way that allows us to also not have
kids have asthma attacks, not have pregnant women----
Mr. McKinley. You don't know whether the asthma attack is
caused by the outdoor air or the indoor air quality.
Mr. Weiss. No, we do know that. We don't know whether
asthma is caused by that but there are studies by Harvard
University and other medical schools that show that asthma
attacks increase with the frequency of air pollution. We are
not saying it causes asthma but it causes asthma attacks.
Mr. McKinley. You don't know whether that asthma attack has
been caused by dust mites, aerosols or formaldehyde sprays in
your house, so----
Mr. Weiss. I will be happy to provide some studies to you
for the record.
Mr. McKinley. Do you have some other information that
indicates that anything other than the fact that the CO2
emissions now in this country are the lowest they have been in
20 years?
Mr. Weiss. I don't believe that is accurate, sir. I believe
that they have gone down in recent years but 2005----
Mr. McKinley. The EIA just published that.
Mr. Weiss. Well, I will double-check that.
Mr. McKinley. Read up before you come here to testify
again. I yield back.
Mr. Weiss. And who was Bat Masterson's top opponent?
Because you are quite a worthy one, sir.
Mr. Whitfield. I don't know his name, either. Mr. Sullivan,
you are recognized for 5 minutes.
Mr. Sullivan. Thank you, Mr. Chairman.
Mr. Weiss, it was interesting when you were discussing in
one of your comments earlier. You said that the oil and gas
industry gets this handout, subsidy. I think you are referring
to intangible drilling. And I was wondering, you have worked
for the Center for American Progress, and you have worked there
a while, I am sure. Do you ever travel around the country at
all to go to conferences or anything like that? Yes or no.
Mr. Weiss. Well, that is a two-part question. Yes, I travel
around the country. No, I generally don't attend conferences.
Mr. Sullivan. But you travel for your job?
Mr. Weiss. Several times.
Mr. Sullivan. And when you do that, you have meals and
hotels and lodging. Does your company pay for that? Do you send
it back to them, they pay that? Do you get expensing on that?
Mr. Weiss. Yes.
Mr. Sullivan. OK. It is a cost of doing business, isn't it?
Right?
Mr. Weiss. Yes.
Mr. Sullivan. Do you think that is a handout subsidy
giveaway to your group?
Mr. Weiss. Well, first of all----
Mr. McKinley. Is it or not? Yes or no.
Mr. Weiss. No, it is not because we are a nonprofit, tax-
exempt organization.
Mr. Sullivan. OK. I would like to ask Mr. Hamm. Mr. Hamm,
intangible drilling is important to the industry. Now, they
don't hand you a check and give you just a check. The
government is not handing you a check. Now, Mr. Hamm drills
wells that sometimes don't come in, unfortunately. He has lost
money. Oil prices have been down very low in the past. A lot of
people aren't--the President even said this is an industry of
yesterday. How are we going to get young people in the business
when he says something like that? Because of the ups and downs
of the business in the past. So he gets expensing. He doesn't
drill it, he doesn't get it. You don't travel, you don't get it
for your group. Now I would like Mr. Hamm to comment on how
important that is to this industry.
Mr. Hamm. Well, it is very important. It would cut 35 to 40
percent of our activity, you know, if we weren't able to
expense the cost for labor, and that is what it comes down to.
I drill 17 dry holes in a row, and there is no subsidy in this
business, I guess I went up to the wrong window. Nobody handed
me a check. So, you know, we take a lot of inherent risk in
this business and we certainly have to have some room to try
and fail. If it wasn't for that, we would not be having this
revolution in energy that we have today. You know, it took 16
years, you know, in the Barnett to break the code. You know, it
took 18 un-commercial wells in the Bakken to break the code. So
it is a very expensive process.
Mr. Sullivan. A lot of research and development, a lot of
money went into that, and it is expensing, and you know, right
now we import a lot of oil, it has gone down somewhat, but we
are importing oil into this country. We have oil here in the
Bakken, for example, a tremendous amount. It is mind-boggling.
And, you know, we need to get that out. Why not produce that?
And if we took this away, this expensing, not a handout, not a
giveaway, not a subsidy, it is not that, 30 percent reduction,
and that is asinine to do that. And we would just bring more
oil into this country. We can produce oil here in the United
States of America, American-made energy right under our feet,
God has given a great resource, let us use it. And we have
people that don't want to do that, but it is just mind-boggling
to me. I don't understand that and I guess I never will.
Mr. Weiss. Mr. Sullivan, may I respond?
Mr. Sullivan. Yes.
Mr. Weiss. Very briefly. The point I was trying to make is,
the Production Tax Credit for wind energy is similar to the
intangible drilling cost rule that Mr. Hamm uses for his
business. It helps provide certainty. It helps provide support.
It helps keep their business growing, especially this is an
industry that is in teenage years as opposed to----
Mr. Sullivan. Well, this industry, with all due respect,
wouldn't survive without the PTC.
Mr. Weiss. Mr. Hamm said his industry----
Mr. Sullivan. Mr. Hamm's industry would go down 30 percent,
and right now we need to have as much oil produced here in the
United States as possible. I think it is ridiculous to send a
billion dollars every single day overseas to buy foreign oil
and have that money bounce around other economies and subsidize
other nations and their economies, and we have people hurting
here and it can bounce around our economy, have a dynamic
economic effect here. It makes perfect sense.
And Mr. Freeman, my next question is to you. In your
testimony, you cite aging workforce as one of the challenges
facing the oil and gas industry. Do you think young people are
encouraged to enter this sector when their President, President
Obama, refers to it as yesterday's industry?
Mr. Freeman. It is obviously the perception of the oil and
gas industry--is one that for quite a while that has been
difficult to attract a younger population to. I think you
generally had to see, like I mentioned earlier, the average age
of a petroleum engineer is this country is 50 years old. So you
are constantly having to ask them to work longer and longer
because we are having a very difficult time attracting younger
people to this industry despite all of its upside and how
dynamic the industry is. It is unfortunate the perception that
is out there is not a positive one.
Mr. Sullivan. Wouldn't it better for our leaders to promote
this industry as a good place to work in that we can produce
more American-made energy as a national security issue to
lessen our dependence on foreign oil, get more young people
involved in this energy renaissance and have American-made
energy? Isn't that a better idea?
Mr. Freeman. Absolutely. There is a reason the highest-paid
undergraduate job coming out of college is petroleum engineer.
You can make six figures.
Mr. Sullivan. So it is not yesterday's industry. In your
testimony also, you explained that between 2008 and 2011, the
United States added more barrels to global supply than any
other country despite the Obama administration's moratorium
because of onshore production. Five years ago, wasn't the Gulf
of Mexico supposed to be the major growth area for domestic oil
production?
Mr. Freeman. Do you want me to respond?
Mr. Sullivan. Yes, sir.
Mr. Freeman. That is correct. It wasn't that long ago that
the Gulf of Mexico was one of the few sources of growth.
Obviously, as has been talked about in this hearing, the
renaissance that first took place in natural gas has
transformed itself to oil. Just to name one play that may be
interesting and then I will wrap up. I know that we are out of
time. You know, the Eagle Ford shale in South Texas wasn't
producing a barrel of oil just 3 years ago and now you are
producing over 500,000 barrels a day. It is that sort of
development that has put this country in the position it is in.
Mr. Whitfield. The gentleman's time is expired. Ms. Capps
from California is recognized for 5 minutes.
Mrs. Capps. Thank you very much, Mr. Chairman.
Mr. Weiss, I understand you weren't able to complete your
answer to Mr. McKinley, and I would like to give you a couple
seconds to respond, but I do have questions for you and also
Mr. Purcell so I----
Mr. Weiss. I will take the questions. I was finished with
Mr. McKinley. Thank you.
Mrs. Capps. Anyway, then I will proceed. You have suggested
investing more Federal funding for clean energy as a benchmark
to target for the United States staying competitive. You have
argued this would support the government's partnerships in
innovation with the private sector and would also help give the
private sector greater access that it needs to develop, deploy
and commercialize clean-energy technologies. I think you would
agree, we already have many cleaner energies all ready to go.
We just have to get them into the marketplace. Do you have any
suggestions for us on ways to get these technologies deployed
and how they would make us more energy self-sufficient in this
Nation? Would freeing up Federal funds be helpful? I think you
have suggested removing fossil-fuel production subsidies to be
a possible solution.
Mr. Weiss. I have two quick examples. First, as Mr. Purcell
talked about, extending the Production Tax Credit for wind
energy will help that industry continue to grow. We have
doubled wind energy production in the last 4 years, and right
now wind is equivalent of over 20 nuclear-power plants, I think
that is right, or is it 11? Something like that, a lot of
energy. So let us continue that. And it is expanding in States
like Texas, and Oklahoma is a growing wind energy State as
well.
Second, Representative Biggert and Representative Markey
have a bill that would invest a small amount of money in a race
to the top to build recharging stations for plug-in hybrid
vehicles or electric vehicles. Let us do that so that way
people will have recharging stations. In fact, Congress has
just agreed to put in recharging stations on both the House and
Senate side for their members and staff who drive plug-ins or
electric vehicles. I think we ought to do that in communities
as well. And the Biggert-Markey bill would cost, like, $400
million. It is a very small amount in a race to the top to help
build the infrastructure to give people certainty to drive
these vehicles that use little or no gasoline.
Mrs. Capps. But actually, to follow on, Mr. Weiss, we have
seen recent legislative proposals which would undermine these
very standards. For example, a bill to overturn lighting
efficiency standards policy that would result in our foregoing
the need for 30 additional large power plants and consumers
which would collectively save more than $10 billion consumers
would on their electricity bills each year. And next week we
might have legislation on the floor to delay or block EPA
standards that when fully implemented will save lives and
improve public health and encourage clean-energy job creation
and economic growth.
So Mr. Weiss, what is the real impact of delaying or
blocking standards that will encourage innovation and more
investments in clean energy? Would you say that stopping these
standards would hurt America's chances of achieving energy
independence?
Mr. Weiss. Delaying the standards won't affect our ability
to produce more oil, domestic oil or natural gas. What it will
do is, delaying standards on pollution from power plants,
boilers, and cement kilns would increase the number of
premature deaths to something like 24,000 people annually,
thousands of hospitalizations and tens of thousands of asthma
attacks, and it would cause, I believe, close to $200 billion a
year in additional health care costs and lost productivity.
Delaying those standards: a huge human cost, huge economic
cost, no impact on producing more oil and gas.
Mrs. Capps. OK. And finally, Mr. Purcell, I am one of many
bipartisan supporters in this Congress of the wind energy PTC,
the Production Tax Credit. Many of us have companies in our
Congressional districts that have benefited from the PTC.
Clipper Wind, for example, which laid off 170 employees last
month in Iowa, is headquartered in my Congressional district.
They tell me that the uncertainty about the PTC being extended
is the reason that we have seen now a slowdown in this industry
just when it is, as you said, Mr. Weiss, just taking off like
the wind, as you could say. I think that point has been pretty
well made already, but I want to ask you about the importance
of extending the PTC not only to provide certainty to your
industry but as a long-term extension, I would argue, wouldn't
this lead to even more innovation within the industry if you
have that certainty of getting those tax credits?
Mr. Purcell. Yes, in my opinion, it would. I do know that
because of the uncertainty, there have been huge commitments
for research and development centers by the major wind turbine
manufacturers canceled in the United States in places like
Massachusetts and Texas and Colorado where these research and
development facilities were planned to continue the development
for wind energy productivity and efficiency that will allow it
to stand on its own. And I might add, if I will, to Mr.
Pompeo's comment about consistently asking for Production Tax
Credit renewal, the last time that we had a major extension, we
felt like it was a bridge to a Federal renewable electricity
standard, which we were very close to, if you remember in 2008
right before the financial crisis, which steered the country in
a different direction. So we felt like the Production Tax
Credit was a way to a Federal long-term stable policy to help
us finish the job and become competitive and provide a long-
term solution for clean energy. So the Production Tax Credit is
what we need today. It is the most viable thing to continue the
work we are doing. However, there are some other vehicles we
think would also be helpful for future including a renewable
electricity standard.
Mrs. Capps. Thank you very much.
Mr. Whitfield. At this time I recognize the gentleman from
Virginia, Mr. Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman.
Mr. Mills, could you go over those patent numbers again? I
wasn't able to write them down fast enough for the new patents
in the hydrocarbon field and the new patents in the
alternative-energy field.
Mr. Mills. Yes, sir, I would be happy to. In fact, as I
mentioned, the reason we looked at patents was as a forward-
looking indicator of where innovation has been happening and
where it is going to go. The aggregate total patents issued,
and not filed, so the issuances are the measure that matters,
in all the alternative-energy domains, so this was a very broad
sweep, 60,000 patents issued, roughly. In hydrocarbon
technologies, all flavors, coal, oil and gas, that industry has
issued 150,000 patents over the same 5 years, the innovators
and engineers in that business.
Mr. Griffith. All right. Thank you very much. And if I can
paraphrase what I think I heard your testimony, reading between
the lines, was that we are at a turning point in our country.
If we choose to use the God-given resources, the natural things
that are here, the energy sources that we have, we can remain
the number one nation economically in the world for many, many
years to come. It is a choice we have to make. If we choose not
to use them, you see us perhaps not being the number one
nation, say, 20, 30, 40 years from now. Is that correct?
Mr. Mills. That is a fair assessment. Other countries will
supply the fuels but, importantly, the industries in this
country that pioneered this technology will go to the other
countries to produce the fuels.
Mr. Griffith. Instead of making us rich?
Mr. Mills. Correct.
Mr. Griffith. Let me shift, because I only have a certain
amount of time.
Mr. Freeman, I noticed in your written testimony you said
that we were number one in natural gas and in a few years we
would be number one in oil production but that we are number
two in coal. Who is beating us in coal production?
Mr. Freeman. China.
Mr. Griffith. And that is not an unexpected answer on my
part. I have to say, that has not always been the case, has it?
They have not always beaten us in coal?
Mr. Freeman. No, that is a very recent phenomenon.
Mr. Griffith. And it is important because we heard earlier
about some, you know, jobs being lost, and any job being lost
is bad but I will tell you that in my district, we lost 620
coal jobs. A plant was idled within the last several weeks. And
over the summer in the central Appalachian region, we have lost
more than 2,000 jobs, and so that is extremely important.
You know, I was struck by some of the testimony,
particularly the testimony of Mr. Weiss, that implied that
those of us who advocate for North American energy independence
are advocating to drill in our national parks. I don't think
anyone here is advocating that we drill in the parks. You state
in your testimony that parks would be vulnerable to Federal
oversight of energy on public lands is eliminated in favor of
more relaxed State regulations. I have to say, I have got it
right here in the Romney energy plan, it speaks to States being
empowered to establish processes to oversee the development and
production of all forms of energy on Federal lands within their
borders, but it specifically--that Romney plan, what most of us
would be for, specifically excludes lands that are designated
as off limits. When we talk about getting North American energy
independence, we aren't talking about drilling in the parks, we
are talking about leasing more than 3 percent of the Nation's
Federal lands, which are quite substantial, taking--setting up
government policies which would make it so, you know, it takes
less than 6 years to get a permit to drill in Federal lands. I
think Mr. Hamm talked about the length of time it takes if you
are on Federal land to get a permit and allowing pipelines like
the KXL Keystone pipeline to help bring millions of barrels of
secure oil from our friends and neighbors in Canada, and I just
wanted to make sure that I got the record set straight on that
because I think it is important that we recognize that nobody
is planning on drilling on the site where the Flight 93
crashed. That is not a part of anybody's plan, and you have
said that several times, and I have to tell you, I am a little
offended by that implication that anyone in this Congress or
that any Presidential candidate would plan on putting an oil
well at a sacred site like that. So I wanted to get that out
and felt very strongly about it.
Mr. Mills, I noticed in your written testimony and in your
oral testimony you said, you know, you had drill, dig, build
and ship, and I have to tell you that I have the four D's which
the first two are the same, drill and dig. I then have
deregulate and discover. Deregulation means we have our
universities trying to find ways, whether it be wind energy,
algae, I don't care. I am a true all-of-the-above, that we move
forward in that direction. And one of the problems that I have
seen with what I think is going on in this administration,
although sometimes it is hard to figure out, is that they see
the alternatives as the next great step forward, and it may
very well be but I find with some interest, and I wonder if you
agree with me, that in all the previous revolutions on energy
when we went from wood to charcoal and then we went from, you
know, charcoal and wood to using oil and natural gas and coal,
that each step that we have made, we didn't cut the legs out
from under the older industry, we continued to use those
industries, and it seems that this administration wants to
eliminate the previous energy sources with, you know, we are
going to use all of the above but it has to be one of the
energy sources we like because the Sierra Club has beyond
natural gas now. They used to have beyond coal. They have now
made us second to China. Do you agree with that general
assessment?
Mr. Mills. Yes, I think the assessment is correct. We have
always used the trailing technology, so to speak. But we
importantly have made them better, cheaper, cleaner by using
new technologies on the old fuels. So that was the whole point
of my patent research is that there is enormous opportunity for
solar and wind around the world. There is no question about it.
And if 20 or 30 percent of the world's energy came from
alternatives, that would be marvelous--I expect it to happen--
or more. But it still leaves the rest of the number, which is
the 60 or 70 percent which has come from or will have to come
from hydrocarbons using advanced technologies. Absolutely
correct.
Mr. Whitfield. The gentleman's time is expired.
Mr. Griffith. Thank you, Mr. Chairman.
Mr. Rush. Mr. Chairman?
Mr. Whitfield. Yes, Mr. Rush.
Mr. Rush. Would it be out of order if we had just another
round for one question?
Mr. Whitfield. Sure.
Mr. Rush. One question apiece?
Mr. Whitfield. That is a good idea. I will ask mine first.
Mr. Howard, you are the President and CEO of the Canadian
Energy Research Institute. I would just like to know, what was
the reaction when the Keystone pipeline permit was denied and
is it the intent of Canada to at least explore building a
pipeline to the west for export? Would you mind just giving me
your personal impressions about all that?
Mr. Howard. Simply put, when it was first rejected or
delayed, pretty much nobody knew what to do. That was the very
first time in Canadian history that an oil pipeline had been
turned down. As far as moving forward, I think the attitude in
Canada is when it happens, great, but we are not going to wait.
As far as Canada exporting crude outside of the country, it
is a position that the Federal and provincial governments, the
industry is on board with. We are pursuing looking for other
markets. That is becoming a challenge. The Northern Gateway
pipeline is similar to the Keystone XL in the sense that the
environmental pushback is more significant than anybody ever
imagined. The Trans Mountain expansion is a little different
because it is an expansion system. I personally think that will
go ahead. The potential for moving bitumen from west to east to
feed the eastern refineries, the eastern Canadian refineries, I
think is an option. As far as if Keystone XL does not get
built, I think crude or bitumen could still reach the Gulf of
Mexico by tanker by going out through the St. Lawrence Seaway.
Mr. Whitfield. At this time I will recognize the gentleman
from Massachusetts for 5 minutes, Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much.
Mr. Hamm, the oil industry gets $4 billion a year in tax
breaks from the Federal Government. The wind industry gets
about $4 billion a year in tax breaks for the Production Tax
Credit for wind. Do you think that is fair? Do you think we
should keep both tax breaks on the books?
Mr. Hamm. No, I think that our industry should be able to
expense our labor costs just like any other industry.
Mr. Markey. No, I am asking about the wind. Do you think
the wind tax breaks should stay on the books?
Mr. Hamm. I don't know. My business is not wind, and
certainly I don't consider what we are getting as a tax break
when it is the same as all others so, you know, what goes on
with wind is a whole other business.
Mr. Markey. No, I got you. That is the problem that we have
with the Romney tax break, you know, that Romney is going to,
if he becomes President, allow the wind tax break to expire at
the end of this year. Amazing, huh? And the industry says that
40,000 people will be laid off next year because of Romney's
wind policy. And you know what I think? I think the fear is
that the Republicans are so tied to the oil industry, you know,
that they can't give up those tax breaks while at the same time
maintaining a commitment to saving the taxpayers money over in
the wind sector, which is going to actually install 12,000 new
megawatts of wind this year, dwarfing coal, dwarfing oil,
dwarfing the nuclear industry, and really, it is frightening to
the fossil-fuel industry and so this completely biased oil-
above-all policy, tax breaks for the oil industry and nothing
for wind, that is not all of the above, that is oil above all.
Oil above all. Look at all these great jobs here. These jobs
are just as great as the jobs Mr. Hamm was just talking about
but they can't care about these jobs, just the oil jobs. Not
oil jobs? We don't care about them. And that is the kind of
dual standard that the Republicans want us to accept even as
oil has dropped from 57 percent imported to 45 percent imported
since Bush walked out the door in January. That is arithmetic,
57 percent under Bush, imported, 45 percent today. That is a
good record for Obama. That is a ``drill, baby, drill'' Obama
administration and it is continuing to go down, 50 percent more
rigs drilling in the Gulf of Mexico today than before the BP
spill. Fantastic. Record highs in natural gas, wind, solar, and
what do the Republicans have as their platform? Kill wind, you
know, kill these renewables. That is a disaster for our
country. That is the single largest domestic source of energy
in our country, wind and solar, 20 and 30 years from now.
Fantastic.
What else does Romney say? Romney says he doesn't like the
fuel economy standards. Now, what would those fuel economy
standards do on the vehicles that we drive? Fifty-four point
five miles per gallon. I know because I authored the language
here in the House of Representatives. That is 3 million barrels
of oil per day. Where is he going to make that up from? Well,
Romney says he wants to drill off the beaches of Massachusetts
and California rather than have just the vehicles be more
efficient while the industry is having a complete revival. This
whole Romney industry plan, whoever put it together, it is a
complete mess. It is upside down. It is the craziest upside-
down energy policy I have ever heard, whoever put it together.
It ignores the reality of what is really working and it wants
to go over to kind of this age-old policy where you have to
subsidize stuff that is not working. Do you agree with me, Mr.
Hamm?
Mr. Hamm. I don't agree with you at all. I think it ought
to be market-based, and that is what I said earlier.
Mr. Markey. Subsidies for oil and no subsidies for wind is
market-based? I don't think so. I don't think so. How can that
be market-based? Adam Smith would spin in his grave and quality
for an energy tax break, he would be so agitated that you can
maintain that is market-based that oil gets a tax break and
wind doesn't.
You know, when the President went down--not when the
President went down. When Romney went down to Houston just 3
weeks ago and had his oil-baron summit with all those oil
company CEOs, he raises $6 million from them and then says I am
going to get my energy policy from them, crossing the t's and
dotting the i's on my policy, he says, and then on Thursday,
just 2 days later, he has a press conference, you know. And
what is his press conference? Oil above all, and he doesn't
support tax breaks for wind after leaving an oil-baron summit,
Mr. Hamm. So how can the American people trust that energy
policy to really be all of the above instead of oil above all?
Mr. Whitfield. The gentleman's time is expired.
I might ask the gentleman from Massachusetts, since your
party controls the White House, the House and the Senate for 2
years just 2 years ago, why didn't you extend the Production
Tax Credit for the wind industry? You had the power to do it.
You had the authority to do it.
Mr. Markey. We did. We extended it.
Mr. Whitfield. And you didn't do it.
Mr. Markey. We did extend it.
Mr. Whitfield. Well, you could have extended it longer than
the expiration at the end of this month--December. Why didn't
you take that action? Romney has nothing to do with this.
Romney is not in power right now.
Mr. Markey. Romney is letting it expire.
Mr. Whitfield. By the way----
Mr. Rush. Mr. Chairman.
Mr. Whitfield [continuing]. Your energy department gets
$538 million to----
Mr. Rush. Point of order, Mr. Chairman.
Mr. Whitfield [continuing]. For the President.
Mr. Rush. Point of order, Mr. Chairman.
Mr. Markey. Look at coal. Coal was 51 percent of----
Mr. Whitfield. And you are not interested in coal jobs, are
you?
Mr. Markey. That is because of natural gas. Natural gas is
killing coal in the free market. Natural gas is killing----
Mr. Whitfield. You had the opportunity to extend the
Production Tax Credit.
Mr. Rush. Mr. Chairman.
Mr. Whitfield. Mr. Rush, I am going to recognize you for 5
minutes.
Mr. Rush. I don't need 5 minutes.
Mr. Mills, what do you think about this? Let me just--Mr.
Mills, I do have a question for you. You had some very
interesting testimony and I am really kind of inclined to lean
your way, but I am interested in why there has been no mention
from you as it relates to environmental concerns. What do you
think of the climate-change speed bump on this expressway that
the industry is headed down? How much should we pay toward the
environmental concerns or should we just ignore environmental
concerns altogether?
Mr. Mills. Thanks for the question, Mr. Rush, and I do want
to make a very quick observation that I thought Congressman
Markey's visual aids were the best of the hearing so far. Thank
you, sir.
I would say that I know that I personally, but all the
people I talk to in the industry on the broad environmental
issues, there is support for safety in environmental metrics.
You don't find pushback from the industry. The issues that are
looked for are consistency and simplicity and adherence to
standards of time, which is one of the biggest complaints I
hear from industry practitioners that the deadlines aren't met.
The climate industry is an interesting one, an
extraordinarily tough challenge for everybody on both sides of
the aisle. I recognize that. But I would just say this as a
practical matter: the fact is that we know that all the energy
growth in the world is occurring outside of the United States,
so if the United States ceases to exist tomorrow or consumed no
energy at all or had all of its energy from non-hydrocarbons,
the consumption of hydrocarbons in the world is going to go up
significantly, probably by double over where it is today. So
the proposition I am putting on the table is independent of
whether those hydrocarbons emit carbon dioxide by definition;
they do. I am simply saying that other people will supply those
hydrocarbons to the world market. We can do it and make money
and create jobs. We can do it cleaner and more efficiently than
anybody else in the world. That is an opportunity we have
inside of a reality that is locked in. The demographic reality
of the rest of the world is simply locked it. More are going to
be used globally. So I would love to see America be the leader
in supplying those fuels for economic reasons, social reasons.
It will generate all kinds of wealth which we can fund all
kinds of R&D and frankly geopolitical reasons: we will have
more control over world markets.
Mr. Rush. Mr. Chairman, I yield back.
Mr. Whitfield. The gentleman yields back, and there seems
to be no one else here to ask questions, and I think Mr. Markey
is gone. Oh, Mr. Griffith. I am sorry. You are recognized.
Mr. Griffith. Mr. Purcell, you make steel from coke. Can
you make steel better with natural gas or coke from coal?
Mr. Purcell. We actually use the steel for the towers that
we make out of scrap metal and add the--so we are not using
traditional coal and iron at the steel plant that we make the
steel, but yes, there are steel mills in Indiana that are near
us that do use coal, sir, and a lot of natural gas as well.
Mr. Griffith. But the best stuff is still made from coke,
is it not?
Mr. Purcell. For certain steel makers, they still use an
awful lot of it, yes, sir.
Mr. Griffith. So when we are being beat in the world market
and I lose 620 jobs in the metallurgical coalmine, that means
we are doing something wrong, I would submit to you.
You know, it has been an interesting hearing and we have
heard a lot of things. The bottom line is, is that we can put
up all the charts we want. Apparently the wind industry has
lost 1,752 jobs already yet as you heard the testimony--Mr.
Markey wasn't here to hear the information I put in earlier--in
my region alone, we have lost 2,000 coal jobs just this summer.
So, you know, I believe in all of the above. I believe in
trying to make sure that we have everything on the table and I
believe that we need to make the government responsive and
understand that if we just get out of the way of people like
Mr. Hamm, I think that we have a very bright future in this
country. We have the best workers in the world and we have the
greatest supply of energy, but if we continue to throw more
regulations on and more regulations on like wet blankets on the
fire of enterprise, we will be doing our Nation a disservice
and my children and everybody else's children and grandchildren
will have a lesser America.
Thank you, Mr. Chairman. I yield back.
Mr. Whitfield. The gentleman yields back, so that is the
end of today's hearing. I want to thank you panel members for
being very patient and we appreciate your testimony very much
and look forward to working with all of you as we move forward
to address these issues, and we will keep the record open for
10 days, and thank you once again. That concludes today's
hearing.
Mr. Rush. Mr. Chairman, I would just like to ask one
question of you.
Mr. Whitfield. Yes, sir.
Mr. Rush. Can't we all just get along?
Mr. Whitfield. Thank you.
[Whereupon, at 12:29 p.m., the subcommittee was adjourned.]