[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                       AMERICAN ENERGY OUTLOOK: 

                 TECHNOLOGY, MARKET AND POLICY DRIVERS

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON ENERGY

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                      WEDNESDAY, FEBRUARY 13, 2013

                               __________

                            Serial No. 113-2

                               __________

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


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

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California         EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas                 ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR.,         DANIEL LIPINSKI, Illinois
    Wisconsin                        DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma             FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
PAUL C. BROUN, Georgia               DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi       ALAN GRAYSON, Florida
MO BROOKS, Alabama                   JOSEPH KENNEDY III, Massachusetts
ANDY HARRIS, Maryland                SCOTT PETERS, California
RANDY HULTGREN, Illinois             DEREK KILMER, Washington
LARRY BUCSHON, Indiana               AMI BERA, California
STEVE STOCKMAN, Texas                ELIZABETH ESTY, Connecticut
BILL POSEY, Florida                  MARC VEASEY, Texas
CYNTHIA LUMMIS, Wyoming              JULIA BROWNLEY, California
DAVID SCHWEIKERT, Arizona            MARK TAKANO, California
THOMAS MASSIE, Kentucky              VACANCY
KEVIN CRAMER, North Dakota
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS STEWART, Utah
                                 ------                                

                         Subcommittee on Energy

                  HON. CYNTHIA LUMMIS, Wyoming, Chair
RALPH M. HALL, Texas                 ERIC SWALWELL, California
FRANK D. LUCAS, Oklahoma             ALAN GRAYSON, Florida
RANDY NEUGEBAUER, Texas              JOSEPH KENNEDY III, Massachusetts
MICHAEL T. McCAUL, Texas             MARC VEASEY, Texas
RANDY HULTGREN, Illinois             MARK TAKANO, California
THOMAS MASSIE, Kentucky              ZOE LOFGREN, California
KEVIN CRAMER, North Dakota           DANIEL LIPINSKI, Illinois
RANDY WEBER, Texas                   EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas
                            C O N T E N T S

                      Wednesday, February 13, 2013

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

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

                           Opening Statements

Statement by Representative Cynthia Lummis, Chairwoman, 
  Subcommittee on Energy, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     7
    Written Statement............................................    12

Statement by Representative Eric Swalwell, Ranking Minority 
  Member, Subcommittee on Energy, Committee on Science, Space, 
  and Technology, U.S. House of Representatives..................    13
    Written Statement............................................    15

                               Witnesses:

The Honorable Adam Sieminski, Administrator, Energy Information 
  Administration (EIA), U.S. Department of Energy
    Oral Statement...............................................    17
    Written Statement............................................    20

Mr. Robert McNally, President, The Rapidan Group
    Oral Statement...............................................    61
    Written Statement............................................    63

 Ms. Lisa Jacobson, President, Business Council for Sustainable 
  Energy
    Oral Statement...............................................    68
    Written Statement............................................    70

Discussion.......................................................    83

             Appendix I: Answers to Post-Hearing Questions

The Honorable Adam Sieminski, Administrator, Energy Information 
  Administration (EIA), U.S. Department of Energy................   102

Mr. Robert McNally, President, The Rapidan Group.................   107

Ms. Lisa Jacobson, President, Business Council for Sustainable 
  Energy.........................................................   109


                        AMERICAN ENERGY OUTLOOK:


                 TECHNOLOGY, MARKET AND POLICY DRIVERS

                              ----------                              


                      WEDNESDAY, FEBRUARY 13, 2013

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

    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Cynthia 
Lummis [Chairwoman of the Subcommittee] presiding.


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    Chairwoman Lummis. Well, good morning. The Subcommittee on 
Energy will come to order. Welcome to today's hearing. It is 
entitled ``American Energy Outlook: Technology, Market and 
Policy Drivers.''
    Now, in front of you are your packets containing the 
written testimony, biographies, and truth-in-testimony 
disclosures for today's witnesses on our panel. So we will 
start with opening statements. And I recognize myself for five 
minutes.
    And I just want to again thank the witnesses this morning 
for joining us. I also want to congratulate Representative 
Swalwell on his appointment as Ranking Member of the Energy 
Subcommittee, and I am looking forward to working with you.
    Mr. Swalwell. Thank you, Madam Chair, and I look forward to 
working with you in this Committee.
    Chairwoman Lummis. Thanks. I also want to welcome all the 
Members of the Subcommittee, and I look forward to having a 
very productive Congress together.
    It is difficult to overstate the importance of energy to 
America's success. Abundant, affordable energy is arguably the 
single most important factor to enabling our prosperity, from 
our health and wellness to our national and economic security. 
Technology development impacts all components of a healthy, 
developed energy system, including exploration and production, 
transportation, and consumption. By providing the private 
market with the tools to innovate, our energy system can add 
new technologies to reliably provide affordable and abundant 
energy.
    The jurisdiction of this Subcommittee, which includes about 
$8 billion in research and development at the Department of 
Energy, provides us a unique opportunity to help share the 
direction and future of energy in America. This Congress, I 
hope we can work together to do just that.
    As a Congressman from Wyoming, I see the many benefits 
associated with energy production. Wyoming is the United 
States' second leading producer of total energy. It is the top 
producer of coal and uranium, third in natural gas, eighth in 
oil. Wyoming is also a national leader in renewable energy, 
generating significant energy from wind and geothermal 
resources as well. In fact, we are number one in wind energy 
resources, many of which are yet undeveloped.
    I am a strong supporter of an all-of-the-above energy 
strategy. And now, more than ever, Congress and the President 
must take real steps to advance such a policy.
    The timing has never been better. U.S. energy is in the 
early stages of a historic period of technology-driven 
transformation. Advancement in horizontal drilling and 
hydraulic fracking has unlocked vast amounts of oil and gas, so 
much that the International Energy Agency projects that by 
2020--that is just seven years from now--the United States will 
overtake Russia and Saudi Arabia to lead the world in oil 
production. The EIA also projects that coal will be the 
dominant energy source globally by 2030. While domestic use of 
coal declined last year, the global use of coal is increasing 
by leaps and bounds. Coal is abundant in America, and it is the 
only source of energy that can meet the scale of energy demand 
for those billions of people worldwide who have no electricity 
at all. And quite frankly, it is not our call to hold those 
people back by denying them the affordable resources to bring 
them into the 21st century.
    Throughout our languishing economic recovery, expanded 
domestic natural gas is a bright spot in the current economy 
and has the potential to revitalize America's economic engine. 
Increased production has created sorely needed jobs, stimulated 
local economies, and contributed to low unemployment in States 
like North Dakota and Wyoming. Additionally, affordable and 
abundant natural gas is poised to drive a revival in the 
American manufacturing sector, a sector we heard about a lot 
last night in the State of the Union speech.
    Perhaps less obvious, but equally significant, is the 
potential for increased energy production to help address the 
Nation's spiraling debt. As Wyoming's former State Treasurer, I 
can testify firsthand to the importance of mineral revenues to 
Wyoming's sovereign wealth and ability to provide quality K-12 
educations, as well as roads, sewers, and the infrastructure to 
have a vital, vibrant society.
    Last week, the Institute for Energy Research reported that 
increasing access to energy development would, in addition to 
growing GDP by $127 billion annually, increase federal revenues 
by $24 billion annually for the next seven years, and $86 
billion per year thereafter. Most of the options we have to 
address the budget crisis, cutting spending and increasing 
taxes, are difficult to achieve. Increasing energy production 
should be easy to achieve.
    Our great energy story here in the United States has not 
gone unnoticed around the world. The German Economic Minister 
recently expressed concern that German firms are relocating to 
the United States primarily due to lower energy prices. While 
President Obama often cites European energy policies as a model 
he would like to follow in the United States, statements such 
as these should provide a powerful reminder of the importance 
of affordable energy to our global economic competitiveness.
    I want to thank our distinguished panel for being here 
today and look forward to further discussions on how we can 
better encourage safe and responsible domestic energy 
production to make newfound visions of energy independence a 
reality. Thank you.
    And now, I would like to recognize the gentleman from 
California, Mr. Swalwell, for five minutes.
    [The prepared statement of Mrs. Lummis follows:]

            Prepared Statement of Chairwoman Cynthia Lummis

    I would first like to congratulate and welcome Representative 
Swalwell on his appointment as Ranking Member of the Energy 
Subcommittee. I look forward to working with you during the 113th 
Congress. I would also like to welcome all the Members of the 
Subcommittee and hope we have a productive Congress together.
    It is difficult to overstate the importance of energy to America's 
success. Plentiful and affordable energy is arguably the single most 
important factor to enabling our prosperity--from our health and 
wellness to our national and economic security. Technology development 
impacts all components of a healthy, developed energy system, including 
exploration and production, transportation, and end-use consumption. By 
providing the private market with the tools and incentives to innovate, 
our energy system can continue to integrate new technologies to 
reliably provide affordable and abundant energy.
    The jurisdiction of this Subcommittee, which includes roughly $8 
billion in research and development at the Department of Energy, 
provides us a unique opportunity to help shape the direction and future 
of energy in America. This Congress, I hope we can work collaboratively 
to do just that.
    As the Representative of the State of Wyoming, I see first-hand the 
widespread benefits associated with energy production. Wyoming is the 
United States' second leading producer of total energy. It is the top 
producer of coal and uranium, and ranks third and eighth in natural gas 
and crude oil production, respectively. In addition to being a major 
fossil fuel producer Wyoming is a national leader in renewable energy, 
generating significant energy from wind and geothermal sources as well.
    Needless to say, I am a strong supporter of an ``all of the above'' 
energy strategy. And now, more than ever, it is imperative Congress and 
President Obama take concrete steps to advance such a policy.
    The timing has never been better. The U.S. energy sector is in the 
early stages of an historic period of technology-driven transformation. 
The advancement and application of horizontal drilling and hydraulic 
fracturing technologies has unlocked vast amounts of oil and gas 
resources to economic production. So much that the International Energy 
Agency projects that by 2020--just seven years from now--the U.S. will 
overtake Russia and Saudi Arabia to lead the world in oil production. 
The IEA also projects that coal will be the dominant energy source 
globally by 2030. While domestic use of coal declined last year, the 
global use of coal is increasing by leaps and bounds. Coal is abundant 
in America, and it is the only source of energy that can meet the scale 
of energy demand for the billion people worldwide who live with no 
electricity at all.
    Throughout the languishing economic recovery, expanded domestic 
energy production and low natural gas prices are two of the few bright 
spots in the current economy and have the potential to revitalize 
America's economic engine. Increased production has created sorely 
needed jobs, stimulated local economies, and contributed to low 
unemployment in states like Wyoming. Additionally, affordable and 
abundant natural gas is poised to drive a revival in the American 
manufacturing sector.
    Perhaps less obvious but equally significant is the potential for 
increased energy production to help address the nation's spiraling 
debt. Last week, the Institute for Energy Research reported that 
increasing access to energy development would--in addition to growing 
GDP by $127 billion annually--increase Federal revenues by $24 billion 
annually for the next seven years, and $86 billion per year thereafter. 
Most of the options we have to address the budget crisis--namely, 
cutting spending and increasing taxes--are politically controversial 
and difficult to achieve. Increasing energy production shouldn't be.
    Our great energy story here in the U.S. has not gone unnoticed 
around the world. The German economic minister recently expressed 
concern that German firms are relocating to the U.S. primarily due to 
lower energy prices. While President Obama often cites European energy 
policies as a model he would like the U.S. to follow, statements such 
as these should provide a powerful reminder of the importance of 
affordable energy to our global economic competitiveness.
    I thank our distinguished panel for being here today, and look 
forward to further discussion on how we can better encourage safe and 
responsible domestic energy production to make newfound visions of 
energy independence a reality.
    Thank you and I now recognize the gentleman from California, Mr. 
Swalwell, for five minutes.

    Mr. Swalwell. Thank you, Madam Chair. I appreciate you 
holding this hearing today and I look forward to working with 
you on energy issues on this Subcommittee. And I also want to 
thank our panel for appearing today and I look forward to 
hearing each of your testimony.
    Appropriately, this hearing will serve as a stage-setter, 
an opportunity to get a snapshot of the current energy 
landscape in the United States and abroad. And we heard a 
little bit of that last night from our President. And I was 
encouraged as he talked about how our country in the last four 
years has started to bend the curve and the trend of other 
countries dominating in the clean energy industry. And I look 
forward to continuing to support that and U.S. innovation from 
this Committee.
    Today, we will hear more about the shipping dynamics in the 
energy marketplace. Far from being stagnant and hopeless, we 
are now seeing an unprecedented pace of change that was 
unpredictable even a few years ago. For instance, renewables 
are penetrating at a remarkable rate with growth in wind, as 
the President mentioned last night, alone outpacing natural gas 
in 2012.
    Our responsibility is to ensure that this country is 
prepared for whatever changes that the markets may experience. 
Overreliance on a limited range of technologies and finite 
resources is unsustainable and unreasonable. We know that the 
U.S. uses 20 percent of the world's oil but that we only have 
two percent of the world's oil reserves. Our strength will lay 
in our ability to transition to new, cleaner, more sustainable 
resources. Simply, we cannot drill our way out of this problem. 
However, we can innovate our way out of this problem and we can 
work to make our country more energy secure and help make a 
thriving economy.
    We must be competitive and not let ourselves get behind. As 
Washington bickers, our competitors are pulling out all of the 
stops to capitalize on the booming clean energy economy. It is 
time for us to get serious about creating a coherent green 
energy policy, a national policy to enable us to compete more 
so globally. We should be leading the world in a search for a 
better, safer, more affordable energy.
    The Pew Charitable Trusts estimate that between now and 
2018, annual revenue from clean energy installations will grow 
by about eight percent globally and by about 14 percent here in 
the United States. These profits, if we can make sure they are 
generated here in the United States--that the innovation is 
designed and manufactured here in the United States--will 
create new, good, well-paying, middle-class jobs for all 
Americans.
    Finally, we must recognize the impact that our energy 
choices have on public health and the global environment now 
and into the future. Addressing climate change--and I am glad 
the President talked about this also last night and in his 
inaugural remarks--is about global security. The ecosystems 
that feed us are public health and safety and our future 
economic well-being.
    From the outside I will say that I believe there is no one-
size-fits-all prescription or standardized test for the 
appropriate role of government in securing our energy future. 
In a field as complex as energy, we must be flexible and 
efficient when deploying taxpayer resources and rely on a mix 
of scientific expertise, market forces, common sense, and ways 
that we can identify gaps to inform our policy decisions.
    The President also talked last night about working to have 
businesses in homes. He challenged us to reduce energy 
consumption that we have in our businesses and homes. And I 
will--I believe there is an opportunity for us to work with the 
business community especially and residents to bring down their 
own energy consumption and work with the utility companies as 
well to find ways that we can do that and provide incentives 
because that also will bring down the amount of energy we 
consume and also create, I believe, new jobs for clean energy 
providers.
    Finally, we should engage our world-class scientific 
enterprise from universities to national laboratories to 
overcome fundamental scientific and technical challenges. Two 
national labs in particular, Lawrence Livermore National 
Laboratory and Sandia National Laboratory, are located in my 
Congressional District, and they are hard at work taking on the 
energy challenges of the future.
    Federal programs have a role to play in giving innovators, 
investors, and companies space to collaborate. We should do 
more to replicate public-private partnerships like IGATE--
Innovation and Green Advanced Transportation Excellence--that 
harness the creativity of our best and brightest in science and 
business and then transfer their technologies out to the 
private markets.
    We should also leverage equitable and innovative financing 
mechanisms where the market is not well structured to take on 
the often high technical and financial risks. Finally, where 
there is no tool to match the problem, we should have the 
courage to reinvent the way government does business. Programs 
like Advanced Research Projects Agency--Energy, ARPA-E and the 
Hubs showed us that this can be done.
    With scientific research, nothing is guaranteed and so we 
need to be willing to take risks. I come from the Bay area, 
which includes Silicon Valley, where risk-taking is critical to 
the region's economy. Taking risks means sometimes you will not 
succeed, but scientific progress in our country and 
internationally has never been a straight line. Only by taking 
risks and charging forward can we ever hope to reach goals 
which today may seem out of reach.
    The big energy challenges we face require big lead times to 
solve. We thus can't let bureaucratic inertia and partisan 
politics delay or get in the way of us making investments and 
encourage research, innovation, and competition. If the United 
States is to be the world leader in all aspects of energy, we 
must be willing to work together, compromise, and embrace 
innovation.
    Again, I want to thank Chairman Lummis for holding this 
hearing. I look forward to engaging in a discussion of these 
critical energy issues facing our country. I look forward to 
hearing from our witnesses.
    And with that, I yield back the balance of my time.
    [The prepared statement of Mr. Swalwell follows:]

      Prepared Statement of Ranking Minority Member Eric Swalwell

    Thank you, Madam Chair. I appreciate you holding this hearing 
today, and I look forward to working with you on energy issues on the 
subcommittee.
    I also would like to thank our panel for appearing today. I look 
forward to your testimony.
    Appropriately, this hearing will serve as a stage-setter, an 
opportunity to get a snapshot of the current energy landscape in the 
U.S. and abroad.
    Today we will hear more about the shifting dynamics in the energy 
marketplace. Far from being stagnant and hopeless, we now are seeing an 
unprecedented pace of change that was unpredictable even a few years 
ago. For instance, renewables are penetrating at a remarkable rate, 
with growth in wind energy alone outpacing natural gas in 2012.
    Our responsibility is to ensure that this country is prepared for 
whatever changes the markets may experience. Overreliance on a limited 
range of technologies and finite resources is unreasonable. We know 
that the U.S. uses 20 percent of the world's oil but has only two 
percent of world's oil reserves. Our strength will lay in our ability 
to transition to new, cleaner, more sustainable resources. We cannot 
drill our way to energy security and a thriving economy--we need to 
unleash the creativity of our scientists, engineers, and entrepreneurs 
to unlock our energy potential.
    We must be competitive and not let ourselves get left behind. As 
Washington bickers, our competitors are pulling out all of the stops to 
capitalize on the booming clean energy economy. It is time for us to 
get serious about creating a coherent green energy policy to enable us 
to compete globally. We should be leading the world in the search for 
better, safer, more affordable energy.
    The Pew Charitable Trusts estimates that, between now and 2018, 
annual revenue from clean energy installations will grow by eight 
percent, globally, and by 14 percent in the U.S. and this will amount 
to almost two trillion dollars in cumulative revenues in that 
timeframe. These profits, if we can make sure they are generated here 
in the U.S., mean good, middle-class, American jobs.
    Finally, we must recognize the impact that our energy choices have 
on public health and the global environment, now and far into the 
future. Addressing climate change is about global security, the 
ecosystems that feed us, our public health and safety, and our future 
economic well-being.
    From the outset I will say that I believe there is no one-size-
fits-all prescription or standardized test for the appropriate role of 
government in securing our energy future. In a field as complex as 
energy, we must be flexible and efficient when deploying taxpayer 
resources and rely on a mix of scientific expertise, market forces, and 
common sense to identify gaps and inform our policy decisions.
    First and foremost, we should engage our world-class scientific 
enterprise--from universities to national labs--to overcome fundamental 
scientific and technical challenges. Two national labs in particular, 
Lawrence Livermore and Sandia, located in my congressional district, 
are hard at work taking on the energy challenges of the future. Federal 
programs have a role to play in giving innovators, investors, and 
companies a space to collaborate. We should do more to replicate 
public-private partnerships like i-GATE (Innovation for Green Advanced 
Transportation Excellence) that harness the creativity of our best and 
brightest in science and business.
    We also should leverage equitable and innovative financing 
mechanisms where the market is not well-structured to take on the often 
high technical and financial risks. Finally, when there is no tool to 
match the problem, we should have the courage to reinvent the way 
government does business. Programs like Advanced Research Projects 
Agency-Energy (ARPA-E) and the Department of Energy's Hubs showed us it 
can be done.
    With scientific research nothing is guaranteed, and so we need to 
be willing to take risks. I come from the Bay Area, which includes 
Silicon Valley, where risk-taking is critical to the region's economy. 
Taking risks means sometimes you will not succeed, but scientific 
progress has never been a straight line. Only by taking risks and 
charging forward can we ever hope to reach goals which today may seem 
out of reach.
    The big energy challenges we face require big lead times to solve. 
We thus cannot let bureaucratic inertia and partisan politics delay or 
get in the way of us making investments that encourage research, 
innovation, and competition. If the U.S. is to be the world leader in 
all aspects of energy, we must be willing to work together, compromise, 
and embrace innovative ideas.
    Again, I want to thank Chairman Lummis for holding this hearing. I 
look forward to an engaging discussion of the critical energy issues 
facing our country. With that, I yield back the balance of my time.

    Chairwoman Lummis. Thank you, Mr. Swalwell.
    You know, my first job out of college was in what is now 
your district. I worked for Flying U Rodeo Company. It was 
based in Marysville, California. And we did a rodeo in 
Livermore. And I can remember jogging around the Lawrence 
Livermore plant before I got to work and it was the first time 
I ever experienced an earthquake, and that was very memorable.
    Mr. Swalwell. Yes, and they are our largest employer in the 
district.
    Chairwoman Lummis. Well, it is an enormous facility. It 
would be fun to go in it some time. I was just on the 
perimeter.
    There are so many things that Democrats and Republicans 
agree about when it comes to energy, and I think particularly 
in this Committee. When we are really going to be focused on 
the research and the science and the technology and the 
innovation, we will find a lot of areas of agreement. And I 
really, really mean that. I want to work with both sides of the 
aisle to achieve something significant. I didn't come here to 
just conduct hearings. I really want to get the work done. So 
let us make that our goal.
    Mr. Swalwell. Great. And you have an ally here----
    Chairwoman Lummis. Thank you.
    Mr. Swalwell. --that wants to do the same.
    Chairwoman Lummis. Fabulous.
    Do any Members wish to submit opening statements? If so, we 
will accept them now and they will be added to the record. 
Anyone? Okay. Well, we are good. At this point we will 
introduce our witnesses.
    Our first witness is Hon. Adam Sieminski, Administrator for 
the Energy Information Administration at the U.S. Department of 
Energy. Mr. Sieminski is responsible for collecting, analyzing, 
and disseminating independent and impartial energy information 
to promote sound policymaking, efficient markets, and public 
understanding of energy and its interaction with the economy 
and the environment. Prior to his appointment, Mr. Sieminski 
was Chief Energy Economist for Deutsche Bank working with the 
bank's global research and forecasting energy market trends.
    Our next witness is Mr. Robert McNally, President of the 
Rapidan Group. Did I pronounce that right? Okay. Mr. McNally 
has over 20 years of government and market experience as an 
international energy market consultant, investment strategist, 
and White House policy official. His background and expertise 
spans the convergence of energy with economic, security and 
environmental sectors from global oil market fundamentals to 
regulatory policies.
    And our final witness today is Lisa Jacobson, President of 
the Business Council for Sustainable Energy. Ms. Jacobsen has 
advised states and federal policymakers on energy, tax, air 
quality, and climate change issues. She serves as a private 
sector observer to the World Bank's Climate Investment Fund and 
is a member of the Department of Energy's State Energy 
Efficiency Steering Committee.
    As our witnesses should know, spoken testimony is limited 
to five minutes each, after which Members of the Committee will 
have five minutes each to ask questions. And although I am not 
a stickler on going over 15 seconds here or there, after that, 
I start getting squirmy, so just fair warning.
    Now, I recognize Mr. Sieminski to present his testimony. 
And we are so delighted you are here. Please proceed.

           STATEMENT OF THE HONORABLE ADAM SIEMINSKI,

        ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION

                (EIA), U.S. DEPARTMENT OF ENERGY

    Mr. Sieminski. Madam Chairman, thank you very much for that 
warm welcome and kind going through my background. I appreciate 
that.
    Ranking Member Swalwell, Members of the Committee, I really 
appreciate the opportunity to appear before you today to 
provide testimony on the U.S. energy outlook.
    The Energy Information Administration is the statistical 
and analytical agency within the U.S. Department of Energy. Our 
data, analyses, and forecasts are independent of the approval 
by any other officer or employee of the U.S. Federal 
Government. The views expressed in my testimony should not be 
construed as representing those of the Department of Energy, 
the Administration, or other federal agencies.
    What I would like to do today is summarize some key 
findings from our February Short-Term Energy Outlook, just 
released yesterday, as well as the 2013 Annual Energy Outlook 
Reference case that was issued in December. At this point, I 
would like to highlight that our short-term analysis 
incorporates the extension of the production tax credit for 
renewables and more recent trends in oil and gas production 
activity here in the United States.
    In the short term to 2014, the EIA expects crude oil prices 
to decline and gasoline and diesel fuel prices as well. Natural 
gas prices rise but remain below $4 a million BTU in 2013, '14. 
As natural gas prices rise relative to coal prices, EIA does 
expect a modest rise in coal-fired electricity generation. 
Generation from conventional hydropower will continue through 
the recent drought-driven decline into 2013 and then rebound 
slightly in 2014. Total electricity generation from renewables 
should increase through 2014. We expect wind generation to grow 
by 16 percent in 2013 and another eight percent in 2014. Solar 
generation is expected to grow by roughly 30 percent annually 
in both 2013 and 2014. Four large solar thermal plants in 
California, Nevada, and Arizona are expected to come online 
driving utility-scale solar increases 64 percent this year and 
another 47 percent in 2014.
    Turning to the long term, as outlined in the reference case 
for the Annual Energy Outlook, natural gas production increases 
throughout the projection period out to 2040, outpacing 
domestic consumption by 2020 and spurring net exports of 
natural gas. Relatively low natural gas prices facilitated by 
growing shale gas production spur an increase of 16 percent in 
the industrial sector to 2025 and ensure continuing growth in 
electricity generation. Natural gas also reaches new markets as 
a fuel for heavy duty freight transportation and as feedstock 
for producing liquid fuels through gas-to-liquids technology.
    Over the next three decades, electricity use is expected to 
continue to grow but only at a rate of less than one percent 
per year, as you can see in Figure 1 in my testimony. Slowing 
population growth, technological change, efficiency standards 
for equipment, and shifts in the economy towards less intensive 
industry are all factors. For example, just yesterday, EIA 
published a Today In Energy feature explaining that although 
newer homes are 30 percent larger, they only consume about the 
same amount of energy as older homes. As shown in Figure 3, 
energy use in the residential sector was relatively flat 
between 1993 and 2009 but used many more consumer electronic 
devices.
    EIA expects the recent shift and the fuel mix for power 
generation to continue with natural gas plants accounting for 
most of the new capacity added. Strong growth in hydro 
renewable generation is driven by a combination of state 
renewable portfolio standards and federal tax incentives that 
spur growth in the near term, as well as the increase in fossil 
fuel prices that shift the competitive markets.
    EIA projects no growth in transportation energy demand 
between 2011 and 2042 with declining light-duty vehicle energy 
consumption of over 1-1/2 million barrels a day out to 2040. 
The growth in heavy-duty vehicle demand also spurs some fuel-
switching to natural gas, as I mentioned earlier. Natural gas 
is projected to have a significant impact on heavy-duty vehicle 
energy consumption in relatively high travel applications such 
as tractor-trailers, which account for two thirds of all heavy-
duty travel.
    Finally, U.S. energy-related carbon dioxide emissions 
remain more than five percent below their 2005 level through 
2040 due to improved efficiency of energy use and a shift 
towards less carbon-intensive fuels.
    This concludes my testimony, Madam Chairman and Members of 
the Committee. I would be happy to answer questions that you 
might have as we proceed. Thank you.
    [The Statement of Mr. Sieminski follows:]
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                   Slides presented during testimony
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    Chairwoman Lummis. Thank you, Mr. Sieminski, and we look 
forward to asking you some questions.
    I now recognize Mr. McNally for five minutes to present his 
testimony.

                STATEMENT OF MR. ROBERT MCNALLY,

                  PRESIDENT, THE RAPIDAN GROUP

    Mr. McNally. Chairman Lummis, Ranking Member Swalwell, 
Members of the Committee, thank you for the opportunity to 
testify today on technology, market, and policy drivers of the 
American energy outlook. I approach the subject with 21 years 
of professional experience in analyzing global oil markets and 
energy policymaking. I am currently an independent analyst, 
don't represent any entity, and these views you hear today are 
my own.
    I would like to respectfully make 5 observations and 
suggestions as you set about your important work. First, as you 
mentioned, Madam Chairman, it is hard to overstate but often 
overlooked how much modern civilization depends on the 
continuous access to substantial flows of energy from producers 
to consumers. ``Energy,'' as Nobel chemist Richard Smalley 
noted in 2003, ``is the single most important factor that 
impacts the prosperity of any society.''
    Fossil-based energy, or hydrocarbons--oil, gas, and coal--
account for about 3/4 of our energy supply, and experts project 
that share will grow in coming decades. As a primary energy 
source, hydrocarbons are far superior to others, such as 
biomass or renewables, because they are dense, highly 
concentrated, abundant, and comparatively easy to transport and 
store. Our transportation food and electricity systems, among 
others, depend critically on hydrocarbon energy.
    Second, many major energy transitions take a very long 
time, measured in decades if not generations. Recognizing the 
overwhelming superiority of hydrocarbons, rapidly 
industrializing and urbanizing countries in Asia, the Middle 
East, and Latin America are making enormous investments in 
hydrocarbon energy production, transportation, refining, 
distribution, and consumption systems and devices. These could 
not be quickly replaced in any reasonable scenario. Energy 
transformations are more akin to a multi-decade exodus than a 
multiyear moon-shot. Pretending otherwise misleads citizens and 
distracts from serious debate about real circumstances and 
practical solutions.
    Third, just as history has humbled energy experts who make 
bold predictions about future energy trends, policymakers 
should be cautious and restrained when setting arbitrary, 
unrealistic, and aggressive energy targets, much less spending 
tax dollars on subsidies or grants in an attempt to reach them. 
The historical record is littered with failed policy targets 
and costly attempts by government to pick winners in the 
marketplace. Government can play a useful role in collaborating 
with industry in basic core scientific research, but only 
private sector companies and consumers responding to market-
based incentives can develop and deploy viable new energy 
resources and devices.
    Fourth, energy can deliver unwelcome surprises with no 
short-term solutions. For instance, our oil production is 
soaring but so are our gasoline prices. They are at record 
levels. The combination of rising oil production and prices can 
be befuddling. Moreover, large gasoline price swings have 
become more frequent in recent years and consumers are 
wondering why this is the case. Pump prices at home are 
determined mainly by crude prices set in a global oil market. 
Crude oil prices are rising mainly because global supply-and-
demand fundamentals are tight and geopolitical disruption risk 
is high. OPEC's spare production capacity--almost entirely held 
by Saudi Arabia and which in the past has been used as a buffer 
against disruptions or tight markets--is low.
    As we saw with Libya in 2011 and Iran in 2012, when the 
market is tight and fearful, even relatively minor disruptions 
or risks of disruption anywhere in the world can send our 
gasoline prices up fast. Unfortunately, there are no effective 
short-term policy options to counter the short-term crude and 
gasoline price volatility caused by fundamentally tight and 
fearful global oil market. A crucial step is to increase oil 
supply everywhere. In a tight market, every extra barrel 
counts.
    And this leads me to my fifth and final point. Not all 
surprises in energy are bad. The most pleasant surprise in 
energy, if not in our entire economy in the last few years, has 
been the ability of oil and gas producers to unlock vast 
previously unreachable resources through multistage hydraulic--
horizontal hydraulic fracturing of domestic oil and gas reserve 
trapped in deep shale formations. Last week, Dan Yergin 
testified before your colleagues in the House Energy Committee 
and called the boom in unconventional oil and gas production 
``the most important energy innovation so far in the 21st 
century.''
    Higher U.S. and hemispheric oil and gas production is great 
news for our economy and energy markets. If the investment and 
regulatory climate allows industry to realize its full supply's 
potential, it will mean more jobs, billions of dollars in 
revenue, improved resilience to supply disruptions, and a lower 
trade deficit. Our companies and workers will have 
opportunities to take advantage of these same techniques and 
technology to unlock unconventional oil and gas resources 
globally where there appears to be much potential.
    This happy surprise is just the latest in the energy 
industry's history of continuous improvement and innovation in 
technology. While we cannot predict or prescribe the future, we 
can be confident that our scientists and our engineers will 
rise to the challenge of finding and producing the abundant, 
affordable energy our Nation requires while protecting the 
environment and conserving natural resources.
    Thank you.
    [The prepared statement of Mr. McNally follows:]
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    Chairwoman Lummis. Thank you, Mr. McNally.
    And now I recognize Ms. Jacobson to present her testimony. 
Welcome.

           STATEMENT OF MS. LISA JACOBSON, PRESIDENT,

            BUSINESS COUNCIL FOR SUSTAINABLE ENERGY

    Ms. Jacobson. Madam Chairman, Ranking Member Swalwell, and 
Subcommittee Members, thank you for the opportunity to testify 
today.
    Over the past several years, we have seen real market 
penetration of a wide range of sustainable energy technologies 
and resources, and we have witnessed the results of policies 
and research and development that work. But our work is not 
done.
    To continue the momentum of growth in these sectors and to 
receive their co-benefits, long-term, stable policies will be 
needed to level the playing field and to provide market access. 
We will also need to continue to invest in energy research, 
development, and deployment to increase the efficiency of our 
energy generation and use and to spur new innovations. This is 
important to domestic economic growth and for U.S. 
competitiveness in the energy sector.
    I would like to share some of the findings from the 
recently released Sustainable Energy in America 2013 Factbook. 
The Factbook was researched and produced by Bloomberg New 
Energy Finance and commissioned by the Business Counsel for 
Sustainable Energy. It is a quantitative and objective report 
intended to be a resource for policymakers with up-to-date, 
accurate market information.
    Some of the most significant findings from the Factbook 
point to the dramatic changes underway in the U.S. energy 
sector over the past several years. The data shows that natural 
gas, renewable energy, and energy efficiency are on the rise. 
These changes are increasing the diversity of the country's 
energy mix, improving our energy security, cutting energy 
waste, increasing our energy productivity, and reducing air 
pollution and greenhouse gas emissions.
    In terms of the importance of policy, stable, long-term 
policies at state and federal levels are needed to sustain 
growth in clean energy sectors. Further, electricity market 
structures are evolving, and the U.S. power sector, long 
organized around large centralized systems, is considering 
distributed power options such as combined heat and power, 
waste heat-to-power, small-scale renewables, and fuel cells. Of 
note, ensuring ongoing grid reliability is a growing concern 
for electricity market operators and regulators. Dynamics 
contributing to this focus include changes in our energy mix, 
the impact of severe weather events, and increased presence of 
variable energy resources on the electricity grid.
    Yet other changes are occurring as well, including reduced 
electricity demand through energy efficiency, the introduction 
of smart grid technologies for improved grid management, a new 
focus on distributed generation, and the growing role for 
dispatch of all resources such as natural gas plants, 
hydropower, and demand response. They can all help the 
electricity industry address these challenges.
    Still, many market structures do not yet fully recognize 
the benefits of some of these technologies, including 
technologies offering new flexibility such as energy storage. 
Given these factors, research, development, and deployment 
investments are needed in the area to--this--needed in these 
areas to improve efficiency, demonstrate performance, and to 
spur the innovations that will be required to meet the evolving 
needs of the power grid.
    With regard to federal energy investments, the Business 
Council strongly supports the continued funding of basic and 
applied research for clean energy technologies. This must be 
balanced with work on commercialization, market transformation, 
and other efforts to ensure that products do not sit on 
laboratory or university shelves but are transferred to the 
private sector to achieve the intended public benefit.
    There are strong analytical findings that show the overall 
return on investment that have resulted from federal energy 
research, development, and deployment initiatives. For example, 
three decades of investment in extraction of natural gas from 
shale have led to low natural gas prices saving households and 
businesses money, attracting new industrial manufacturing 
opportunities in the United States, and helping to create U.S. 
jobs. In Wyoming, shale production is forecasted to bring 
23,000 jobs to the State by 2020.
    For energy efficiency, according to a report released last 
week by the Alliance to Save Energy's Commission on National 
Energy Efficiency Policy, private sector research and 
development budgets are limited in many energy efficiency 
sectors. In the Commission's Energy 2030 vision, it sets a goal 
of doubling U.S. energy productivity by 2030 and includes a 
call to support research, development, and deployment to meet 
it. Achieving the goal could save $327 billion annually and add 
1.3 million jobs.
    For renewables, the development of today's robust solar 
market and low costs in the United States can be attributed to 
smart investments in research and development at DOE and 
national laboratories over the last four decades. For wind, 
past investments in wind have resulted in significant 
improvements over the past 30 years such as increased output, 
improved reliability, and lower costs. Technology advances have 
enabled the typical modern wind turbine to produce 15 times 
more electricity than a typical turbine in 1990 but further 
improvements are needed.
    The value of federal investments in research, development, 
and deployment is essential given current market conditions. 
According to Bloomberg New Energy Finance, a near-term trend is 
reduced private sector investment from venture capital and 
private equity investors in early-stage clean energy companies.
    In closing, I would like to say council members look 
forward to working with this Committee and the Federal 
Government to ensure that any and all public investment in 
these sectors is highly leveraged, effective, and efficient in 
carrying out the intended policy aims of these investments. 
Thank you very much.
    [The prepared statement of Ms. Jacobson follows:]
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    Chairwoman Lummis. Well, I would like to thank all of our 
witnesses for your testimony and for staying around so we can 
ask some questions of you. Before we do that, I want to 
acknowledge that we have been joined by Committee Chairman 
Lamar Smith of Texas. He is the Chairman of the Full Committee.
    Mr. Chairman, thank you so much for joining us.
    And the Chairman Emeritus of this Committee, Mr. Ralph 
Hall, also of Texas. So I would like to welcome these two very 
distinguished Members.
    And I further want to remind Members that Committee rules 
limit questions to five minutes. And the Chair will at this 
point open the round of questions. So I recognize myself for 
five minutes.
    Mr. Sieminski, I would like to talk a little bit about coal 
and the technology improvements in that sector sometimes are 
overlooked. And I would like to ask--slide up. They knew I was 
going to ask some questions about this slide or make some 
points about this slide. If you look at the two gigantic dots 
in red, those are China and India and those are proposed global 
coal-fired plants. And then the United States' dot is on the 
far left in the middle of the screen, obviously, way smaller 
than what we are seeing in China and India, also smaller than 
what we are seeing in Vietnam, in Turkey.
    And so global demand and global growth in coal-fired power 
plants is going to, I believe, necessitate continued research 
and development of increasingly clean coal. And so I want to 
kind of focus on that for a minute.
    Mr. Sieminski, what are EIA's projections on coal export 
trends to meet this growing global demand? As you know, coal 
consumption in China grew more than nine percent, and I know 
you recently reported that China consumes nearly as much coal 
as the rest of the world combined. So going forward with China 
and India installing over 500,000 megawatts of coal generation, 
more than 25 times what is planned for the United States, we 
have got this huge coal resource available for export to those 
countries and we can also export our technology for them to 
burn it cleaner and more efficiently. So what do you see is the 
global demand and what does this mean for jobs and the economy? 
I also want to know what you see as barriers to increase in 
coal exports.
    Mr. Sieminski. Madam Chairman, we have coal demand growing 
very rapidly outside of the developed countries, so outside of 
the OECD. This accounts for, I think, the largest portion of 
growth in energy on a global basis. A lot of that, as you point 
out on your slide, is in China and India. For the United 
States, because we have electricity growth only increasing at 
less than one percent a year, .9 percent per year, the 
opportunities for almost any fuel going into the electricity 
markets are going to be somewhat limited in the United States. 
And the competition between natural gas and coal basically on a 
price basis has been moving more natural gas into electricity 
generation.
    In EIA's forecast out to 2040, we have the use of coal in 
the United States actually going up slightly in terms of tons. 
Although coal's market share is reduced somewhat as natural gas 
and renewables increase their market share, the actual amount 
of coal being used grows slightly. And the reason that we see 
that in the United States is that there are a number of 
relatively new cleaner plants that are running at below their 
maximum capacity utilization factors. And even with retirement 
of our older plants, we will see those utilization factors, if 
we are correct in our assumption that natural gas prices rise 
over time, creating a better competitive atmosphere for coal.
    As you said, Madam Chairman, the opportunity then for the 
United States to export coal does exist. We have been doing 
that. U.S. coal has been moving into European markets, for 
example, as those countries have higher natural gas prices than 
we do and some countries, including Germany, have talked about 
lowering the amount of nuclear-generated electricity that they 
have.
    On the R&D side, that is not really something that EIA has 
looked at, but I would be happy to provide to you for the 
record our detailed forecasts on all these numbers. We will be 
publishing the International Energy Outlook this summer and we 
will have, I think, some fairly decent data for you, Madam 
Chairman.
    Chairwoman Lummis. Well, thank you, Mr. Sieminski. And we 
would be most interested in having those figures for the 
record.
    I want to make sure that everybody gets a chance to ask 
questions of our witnesses, so at this point I would like to 
recognize Mr. Swalwell for five minutes.
    Mr. Swalwell. Thank you, Chairman Lummis. And I did want to 
go back to--as I mentioned in my opening remarks, I was 
interested by the President's challenge last night when he 
referred to how we can cut in half our energy consumption in 
our homes and our businesses. And before coming to Congress, I 
was a local city councilman and I worked very closely in local 
economic development projects. And I know that many commercial 
buildings--that the business owners did want to take measures 
to make their buildings more energy efficient so they could 
reduce their own costs and also help make the earth more 
healthy and our country less dependent on foreign sources of 
oil. But it would always have to pencil out. It would always 
have to make sense financially. And often times, not just in my 
district, but across the country, I have heard that commercial 
buildings and even homeowners have had a tough time connecting 
to the grid and working with public utilities.
    In the United States there are approximately 5 million 
commercial buildings, approximately 72 billion square feet of 
commercial buildings. And commercial buildings consume about 19 
percent of all energy in the United States. So my first 
question--and I will ask Mr. Sieminski--is there an opportunity 
for us to have commercial buildings working better with public 
utilities to connect to the grid where we can install clean 
energy-type technology on these buildings to make them more 
energy efficient, reduce their consumption, and also create 
more made-in-America jobs? So how do we approach that 
challenge? Is it something we should be considering as a 
national energy policy rather than region-by-region, state-by-
state if our President is issuing sort of this national 
challenge?
    Mr. Sieminski. I think there are lots of opportunities in 
the building sector for improvements in energy efficiency. And 
I like to think of it that way because it is something that 
consumers can do for themselves in terms of saving money on 
their energy purchases. The opportunities for improvements in 
the efficiency of heating and air-conditioning equipment is 
something that EIA has tried to build into our forecasts.
    Mr. Swalwell, we have a number of surveys that we do and 
EIA is the only group that is seriously undertaking to survey 
commercial buildings, residential buildings, and manufacturing 
facilities for their energy use. The Commercial Building Energy 
Survey that we are working on right now, and will be sending 
people out into the field in the next few months, will provide 
a baseline to be able to answer some of these questions that 
you have raised.
    It is a rather expensive part of what EIA's budget 
represents, but it is supported by numerous people in the 
private sector, including electric utilities and the commercial 
building owners themselves because they like to see how their 
numbers stack up against the averages. I think there are 
tremendous opportunities. Not just EIA but virtually every 
other research group that has ever looked at the opportunities 
finds that now that we have moved as rapidly as we have on 
light-duty vehicles, the next best place to find energy 
efficiency savings in the United States is likely in the 
buildings area.
    Mr. Swalwell. Great. And Ms. Jacobson, do you care to weigh 
in on this? I bet you could----
    Ms. Jacobson. Sure.
    Mr. Swalwell. --also inform us.
    Ms. Jacobson. Well, first of all, thank you for the 
excellent question. And I think data on commercial buildings is 
essential. And there is an initiative called the Better 
Buildings Initiative, which brings all of the players together, 
including utilities, building owners, financiers to come 
together to both increase awareness, discuss financing models, 
and try to overcome some of the barriers--the split incentives 
you are describing--that exist between building owners and 
building users.
    But I would like to point out that we have had some success 
due to increased building codes and standards both at the state 
level and federal action as well. ENERGY STAR's certified 
commercial building floor space has increased by 137 percent 
from 2008 to 2012. And the stringency of building air-
conditioning efficiency standards has increased by 34 percent 
since 2005. I mean clearly, there is more that we can do, but 
as you have said, there is tremendous potential here. And I 
think there is a real partnership between utilities, building 
owners, government, and data providers, as well as financiers 
to really unlock that potential.
    Mr. Swalwell. Great. And I believe not just to make us more 
energy efficient, which I think is our primary goal, but also 
to create local good-paying jobs in clean energy.
    Ms. Jacobson. Well, very much so. When you are talking 
about energy efficiency--I know people have used this saying--
but these jobs can't be outsourced----
    Mr. Swalwell. Right.
    Ms. Jacobson. --and a lot of the equipment is--we have an 
innovative edge and the United States on a lot of the building 
management technology, a lot of the equipment and significant 
insulation that is a manufactured here in the United States. So 
I mean the opportunities are abound.
    Mr. Swalwell. Great. Thank you.
    Chairwoman Lummis. Thank you so much, Ms. Jacobson. And 
thank you, Mr. Swalwell.
    I will now recognize the gentleman from Texas, Mr. Weber.
    Mr. Weber. Thank you, Madam Chair.
    Mr. Sieminski, a question for you. You have done a lot of 
calculations, a lot of discussion about coal. Has EIA done any 
calculations with improving clean coal technology? Have you 
factored out going into the future what the reduction in 
emmissions from those new clean coal technology plants?
    Mr. Sieminski. We have incorporated that into our estimates 
of energy use and including the numbers that we do on carbon 
dioxide emissions. We try to build in not leapfrogs in 
technology but the trends so that we are capturing the likely 
continuous improvement that we are seeing in areas like that, 
yes, sir.
    Mr. Weber. Second question would be, this may be above your 
pay grade to use a previous term, have you done any 
calculations when the Federal Government invests money in 
renewable technology, including, for example, the 500 million I 
think it was to Solyndra, what are we getting on a return in 
investment? In other words, we are investing a lot of money, 
but exactly how much is that increasing solar contributions to 
the grid? Have you calculated that out?
    Mr. Sieminski. EIA has not done such calculations. I am 
sorry.
    Mr. Weber. Right. I was afraid you would say that. The 
reason I ask is because, obviously, if you have building 
owners, and I was encouraged to hear Ms. Jacobson say that we 
have an innovative edge in. For example, I am an air-
conditioning contractor, so ENERGY STAR means something to me 
in power requirements. I am glad to hear we have an innovative 
edge, but I am also mindful that business owners should be able 
to take those energy savings and plow them back into another 
property, invest in more jobs and into the economy. That kind 
of return on investment I would be interested in hearing. I 
don't know who to ask. If the money that the Federal Government 
is spending in subsidies, what are we getting? How much bang 
for the buck? And then we would have to equate that, too, if 
private entrepreneurs took that money and reinvested it, it 
would mean more purchases of real estate, more jobs in their 
local economies. So I think we would want to look at that.
    That is just more of a statement than a question. And then 
finally for Mr. McNally, I did not see a footnote on the 2003 
quote by Richard Smalley. What is that source?
    Mr. McNally. Congressman Weber, that is an article he wrote 
called the ``Terawatt Challenge.'' And I would be happy to send 
that to you. I apologize.
    Mr. Weber. Yeah.
    Mr. McNally. I should have footnoted that.
    Mr. Weber. Yeah.
    Mr. McNally. I will send that to you----
    Mr. Weber. Would you send that to my office?
    Mr. McNally. Yes, sir.
    Mr. Weber. Thank you very much.
    And I yield back the balance of my time that I don't have.
    Chairwoman Lummis. Thank you, Mr. Weber.
    I will now recognize the gentleman from Massachusetts, Mr. 
Kennedy.
    Mr. Kennedy. Thank you, Madam Chair. And to our Committee 
Chairman as well, thank you, and our Chairman Emeritus, and the 
Ranking Member Mr. Swalwell, thank you for holding this 
hearing. To our witnesses, thank you very much for coming to 
testify.
    To begin, Ms. Jacobson, I was hoping you could just build a 
little bit on some of your comments about residential 
efficiency that we can build upon. I am from the Northeast. I 
lived in an apartment where in the winter I did not pay for 
heat. It was heated by the management company. It was so hot 
that I would often keep a window open throughout the entire 
course of the winter and often had a fan in the window because 
it would be about 85 degrees in the apartment. Many apartment 
buildings in the Northeast, old buildings, they don't have 
insulation. Do you have any idea of how many--the figures about 
energy loss that we are losing and how--some strategies, either 
state or federal, that we can start to implement that would 
help?
    Ms. Jacobson. Thank you very much for the question. 
Clearly, retrofitting buildings in the residential sector, as 
well as you are talking about apartments, are a significant 
challenge. In some ways, we are doing a little bit better with 
new construction because we can upgrade the codes and 
standards. But with the majority of our buildings living 30 to 
50 years or more, we have significant challenges to face.
    I don't have specific statistics on residential and 
efficiency across the board, an aggregate. Perhaps some of the 
other panelists would. But I can get it for you. I point you to 
one of our board Members, the Alliance to Save Energy, but I 
will take it upon myself to get you whatever data is available, 
either from the Alliance to Save Energy or the American Council 
on Energy Efficiency. They are really the key resources on data 
for energy efficiency.
    But I think your experience is so telling and I appreciate 
you mentioning it because that is kind of the real world 
reality that we are in. But you know, with more public 
awareness and by innovative actions by states through revolving 
funds to help support residential energy efficiency or the PACE 
program you might have heard of, which is facing some 
challenges, but those types of innovative models will get in 
front of more customers to help retrofit homes.
    Mr. Kennedy. I appreciate that.
    Mr. McNally, I had a quick question for you as well, sir. I 
represent a city called Fall River in southeastern 
Massachusetts, and there is a company there called TPI 
Composites that manufactures wind turbines along with other 
military and transportation equipment in their product lines. I 
spoke just last week with the CEO of TPI Composites and he 
expressed obviously the importance of the production tax credit 
for their business model and for facilities that continue to 
invest in wind energy despite loaded upfront costs that should 
thus bring an additional element of diversification to our 
American energy portfolio.
    So if we know that clean energy technology manufacturing 
can create high-quality jobs in Fall River, and we know that 
minimizing uncertainty about our federal investment can create 
a dependable landscape that encourages further private sector 
investment in these technologies, but we also recognize that 
renewable energy alternatives like wind are not yet priced 
competitive with other existing technologies and traditional 
fossil fuels, what, then, would your path forward be that you 
suggest? You testified a bit about the market-based incentives 
and the need to make energy security policy a priority. While 
fossil fuels are deeply entwined in our current way of life and 
our standard of living, federal investments like the production 
tax credit are industry-wide, that you are not picking 
individual winners and losers, I think have a value for adding 
renewables and other clean energy sources to the mix. I would 
appreciate your comments on this if you can, sir.
    Mr. McNally. Thank you, Congressman Kennedy, for that 
question. As I said in my remarks, in my view in general, and 
particularly during these times of stretched fiscal resources 
and difficult budget questions and constraints, the proper role 
for Federal Government is in the basic research area. I would 
rather shut down the production tax credit, which is really 
helping mature but uneconomic renewable energies, and take some 
of that money and maybe hire some more scientists to figure out 
how to produce batteries that can store and discharge 
electricity better than they can now with the idea being if 
they can figure that out, they may then--those findings can 
translate down into the commercial sector that are without a 
production tax credit or distorting mechanisms of any kind. 
Industry can take and deploy that.
    So again, I guess I would say in general but certainly in 
stretched budget times, let us focus the government's role in 
basic research--Ms. Jacobson said and I agree with very much--
stable, long-term investments in basic research would be my 
preference, sir.
    Mr. Kennedy. Thank you. I yield back.
    Chairwoman Lummis. Thank you.
    Our next questioner is the gentleman from Texas, Mr. Hall.
    Mr. Hall. And I do thank you, Madam Chairman.
    The hearing today is entitled ``American Energy Outlook,'' 
and I think that is one of the most important outlooks, besides 
prayer, energy is probably the most important word in the 
dictionary. The youngsters that are graduating from high school 
and going into college, they will be affected by how we treat 
and how we work with the energy people and people who are 
producing energy. Being from Texas, of course, I am sure Mr. 
Weber is a supporter of fossil fuels and coal and all of the 
above. And I am pleased to see young Kennedy on this Committee 
because of the Kennedy family, not just a famous family, but 
supporters of energy and invested in energy for our country, so 
I think he will be a a very good Member of this Committee.
    We ought to be selling energy and not buying energy. We 
have tried for years to drill on ANWR. We have certain groups 
here that any time you talk about drilling on ANWR they say oh, 
don't drill on little ANWR. We want to drill on about about 
2,000 acres up there out of 19 million acres. I doubt seriously 
that that would ruin little ANWR. And we have had previous 
bills, 22 bills at one time, that we sent to the Senate to 
drill ANWR particularly, and one got through. And President 
Clinton had some reason--maybe a good reason--to veto that 
particular bill.
    But the other bills never got through because we had a 
person running the Senate then who was a Republican, and 
Republicans had charge of the House, Senate, and the President, 
and he felt like a businessman. And when they would pull up one 
of those energy bills, some of those fellows would get up over 
there to filibuster and he would pull it down because he didn't 
want to waste the Senate's time. And those 20 bills languishing 
over there, any of the 20 could help us for 60 years of energy 
from there.
    Those are the things that I am interested in. And I guess I 
might ask Ms. Jacobson. There have been a lot of actions by the 
EPA onto their efforts to regulate or restrain production from 
hydraulic fracturing, and I would just like to ask you, in 
their effort to regulate or restrain production from hydraulic 
fracturing impact, does that impact not just energy production 
but our economy as a whole?
    Ms. Jacobson. Chairman Emeritus Hall, thank you very much 
for the thoughtful question. First, I would say our coalition, 
which is natural gas, renewable energy, and energy efficiency, 
believes in the abundancy and the need to tap into this 
unprecedented development we have had with natural gas in this 
country. And the key to that is public confidence and making 
sure that we have the regulatory frameworks in place so it is 
done in an environmentally sound fashion. And we believe that 
is very possible.
    I think what is interesting is what is happening at the 
state level. There is discussion over at the Senate Energy 
Committee yesterday from the Governor of Colorado about the 
models that they are taking into account with regards to 
regulation of shale production.
    So with regard to the Environmental Protection Agency or a 
state or other federal actions, I think we need to be careful 
and cautious and get the right data and make sure that the 
American public is confident so we can benefit from all the 
benefits that shale development can provide us.
    Mr. Hall. Yeah, their decisions ought to be a little more 
game on scientific background more so we think then they have 
done. The next gentleman to speak, Mr. Rohrabacher, is very 
knowledgeable on fracturing. And we have had a lot of hearings 
along that line. And I think that we need desperately, and I 
was here when we passed the Clean Air and Clean Water bills, 
and we kind of didn't create the EPA but I was in favor of the 
EPA being there. And being from Texas and of the oil and gas 
industry, I thought they needed some regulation and some 
support. And I thought the EPA was fine. I don't think they are 
so fine today.
    And the election didn't come out just exactly like I had 
hoped it would, but we might be doing something about that.
    But I thank all three of you and I know you know the 
importance of energy. It is a national defense issue for us. 
And I thank you for your answer. I might have one other 
question I want to ask you if I can find it here for Mr. 
McNally.
    Let me ask you this. In the last ten years, U.S. energy 
outlook has been transformed from what some refer to as an 
energy renaissance or revolution. Can you explain how various 
technological developments and advancements such as widespread 
adoption of the hydraulic fracturing have revolutionized the 
U.S. energy outlook?
    Mr. McNally. Thank you, Congressman Hall, for that 
question. Yes, I think you put your finger on the main one, and 
that is really in innovation and technology and the industry 
figuring out in the late 1980s in Texas and Oklahoma how to get 
at resources that are vast and that we have known are there. 
Now, we have known that there are vast amounts of oil and gas 
trapped in rock 10,000 feet below the ground for decades. And 
we haven't figured out how to get it.
    We have been using hydraulic fracturing some say since the 
Civil War throwing dynamite down a hole. The Federal Government 
reportedly looked at nuclear explosions underneath the ocean 
floor to stimulate wells by fracturing. But the real innovation 
came with going after the shale deposits and using hydraulic 
fracturing. And that turned what we call resources, which is 
the oil that we think is in the ground but we don't know how to 
get out, into reserves, producible by our companies. And we are 
having continuous improvement and how to frack those wells, how 
to do so more efficiently, to go horizontally and in multi-
stages, not just one straw into the ground.
    So really, it is a remarkable story of industry progress 
with some government involvement mainly at the core, basic 
research level we should note. But it is brought to us by the 
industry and it has smoothed out our supply curve not only for 
natural gas but also for oil to the point where, according to 
some forecasts, we will surpass in the near future Saudi Arabia 
in production.
    Mr. Hall. I thank you. I yield back.
    I am sorry, Madam Chairman. I took him over.
    Chairwoman Lummis. Thank you both, Mr. McNally and Mr. 
Hall.
    And I would like to next recognize Mr. Veasey. And Mr. 
Veasey, did I pronounce that correctly?
    Mr. Veasey. Veasey.
    Chairwoman Lummis. Veasey. It is Veasey.
    Mr. Veasey. Yes, ma'am.
    Chairwoman Lummis. And you are also a gentleman from Texas?
    Mr. Veasey. Yes, I am from Texas. Yes.
    Chairwoman Lummis. Well----
    Mr. Veasey. From almost the same area where Mr. Hall lives. 
I am a little bit west.
    Chairwoman Lummis. Could you name for our benefit a couple 
of communities in your district so we can help----
    Mr. Veasey. Yes.
    Chairwoman Lummis. --put you in a place?
    Mr. Veasey. Yes. I live in Ft. Worth----
    Chairwoman Lummis. Okay.
    Mr. Veasey. --and I also represent the City of Arlington 
and the City of Dallas.
    Chairwoman Lummis. Well, you are recognized and welcome.
    Mr. Veasey. Thank you very much. I appreciate that, Madam 
Chair.
    And I wanted to ask Mr. Sieminski specifically about a 
concern that I have with the flaring of natural gas. As you 
know in the Bakken, they are producing a lot of oil but I also 
know they do not have the pipeline capacity and so they are 
flaring quite a bit of natural gas. The Texas Railroad 
Commission does a really good job in Texas of keeping up with 
the number of permits that are given to operators, but I know 
in the Eagle Ford in particular and even some in my area, in 
the Barnett Shale, that there is some flaring going.
    I know you specifically talked a little bit earlier about 
the rising cost of natural gas as it goes worldwide 
particularly. If the Department of Energy decides to export 
liquefied natural gas, or LNG, is there any technology on the 
horizon that would make it where we wouldn't have to flare so 
much natural gas so we would have more in quantity? I mean I 
think that that should be one real environmental concern that 
we have, particularly when you start talking about drilling in 
remote places like Alaska where there would be a lot of 
associated gas produced with oil production that would have to 
be flared off.
    Mr. Sieminski. Congressman Veasey, thank you very much. 
Just to put some numbers on the flaring, although there is a 
significant amount of flaring taking place in the Bakken 
formation right now, I think the latest statistics from North 
Dakota suggest that it is actually coming down. It had been as 
high as 35 or 36 percent of the gas. It is now down slightly 
below 30 percent. This is usually indicative of infrastructure 
build-out needed in a new area. And the gas is associated with 
the oil production in North Dakota. I suspect that over time 
the pipeline networks will be built out in North Dakota and 
those numbers will come down even further.
    Although it seems like a lot of gas when you just look at 
the percentage in North Dakota, the amount in North Dakota is 
less than 1/3 of one percent, so less than 1/3 of one percent 
of total U.S. gas production. So it is actually a very small 
number. And you are correct, sir, that there actually has been 
some flaring in the Eagle Ford essentially for the same reason. 
Eagle Ford is in a part of Texas that is not heavily populated. 
It does not have the same pipeline infrastructure that you see 
in other parts of Texas. And it will just take a little bit of 
time--companies are working on that on the technology side. 
There has been an effort to look into small LNG liquefaction 
facilities that might be put in place in some of these remote 
areas where you could turn that natural gas that is being 
flared into a liquid, which would be easier to transport.
    So I think that there is a lot of thinking going on in the 
industry. And although those satellite pictures showing the sky 
at night and the amount of light being given off in some of 
these new producing areas seem startling, it is I think a 
relatively small proportion. It is fairly normal in the course 
of development in new areas.
    Very quickly, in Alaska there is a lot of gas that comes up 
in Alaska with the oil, but it is re-injected back into the 
formation. And so there is very little flaring taking place in 
Alaska.
    Mr. Veasey. And one more question about the rising prices, 
particularly if we end up exporting LNG. I know that some of 
our manufacturers and some of our plants of that are dependent 
upon the use of natural gas are concerned about those rising 
prices as they built them into their business models. Where do 
you see the appetite, particularly in Europe, for the 
production of natural gas, particularly as it pertains to 
fracturing and some of the other environmental things that we 
have talked about earlier? Because, as you know, particularly 
in my area in the Barnett Shale to where, you know, I mean I 
think that we have a gas lease on one of our properties 
literally in a single family setting I have a frack pond, 
pipelines like in the middle of Ft. Worth, you know, 700,000 
people.
    What do you see as far as the future is concerned, Europe's 
appetite for developing any formations? Because I would think 
that would be interesting. I don't know if they are even to a 
certain extent--can sometimes be even more environmentally 
sensitive to things than we are.
    Mr. Sieminski. There are a number of countries in Europe 
that are taking hydraulic fracturing very seriously. Poland, 
for example, Romania, the Ukraine, there is activity underway 
by industry there. The main thing that makes U.S. LNG exports 
so attractive to some companies and consumers in Europe, and in 
Asia as well, is that in most of the rest of the world, LNG 
prices are matched one-for-one to oil prices. In the United 
States it is a separate market. The models that we have run at 
EIA do incorporate the existing already-permitted facility in 
Louisiana that is going to export LNG, and we think that 
exports of LNG from the West Coast of Canada and possibly even 
Alaska into Asia would make economic sense, but there are 
policy issues, obviously, involved in making that decision.
    Chairwoman Lummis. Thank you, Mr. Veasey.
    I would like to now acknowledge--since the Bakken came up--
the gentleman from North Dakota, Mr. Cramer.
    Mr. Cramer. Thank you, Madam Chair, and Ranking Member. And 
thank you to all of the witnesses. This is quite enlightening 
and it has been hard for me to sit here and not answer half of 
these questions, quite honestly. But your answer was right on 
with regard to----
    Mr. Sieminski. I would welcome your testimony.
    Mr. Cramer. No, I spent the last ten years as a public 
utilities regulator in North Dakota prior to coming to 
Congress, and one of the things that oftentimes gets overlooked 
is that while North Dakota is in fact the second-leading 
producer of oil, largest producer of gas, we mine 30 million 
tons of coal, generate about 5,000 megawatts of electricity 
with that coal, export it to many States and provinces, we also 
enjoyed the lowest natural gas residential retail rates in the 
country.
    And I love, by the way, Mr. Sieminski, your service. I use 
it a lot. I always did use it a lot. And I am looking right now 
at the average retail price of electricity to ultimate customer 
users by end-use sector--that is one of my more common tables 
that I look up--and see that North Dakota continues to be among 
the three for lowest-priced electricity States in the country.
    And so when I hear, frankly, Ms. Jacobson, somebody talk 
about leveling the playing field for all forms of energy, what 
I really hear is manipulating the playing field to create an 
advantage where one doesn't exist when the playing field is 
level. And so I would be interested in public policy thoughts 
as to how we would properly incent the marketplace. My 
definition, of course, properly might not be the same as yours. 
But it truly creates the level as opposed to manipulation.
    The other thing, and then I will let Mr. Sieminski perhaps 
answer this question first and then we can get into the other 
stuff, but with regard to electricity prices and the use of the 
shift by policy from coal to natural gas, realizing that even 
in my short term on the Public Utilities Commission in North 
Dakota, the Public Service Commission, that I saw gas at $12 
and I saw gas at $2 and everywhere in between. Do we run the 
risk of tightening this demand-and-supply curve of natural gas 
even in this abundance to a point where we make ourselves 
dependent on a fuel source that is so volatile? How much of 
that do you consider when you consider the price and the 
outlook going forward?
    Mr. Sieminski. We try to take that into account by looking 
at the reserve base and ultimate resource base for the 
different fuels. We are fairly confident that the resource base 
for natural gas will allow for continuing increases in 
production in the United States, all the way out to 2040 with 
shale gas currently accounting for about one third of U.S. 
production reaching half of U.S. production by 2040. We think 
that the coal resource base is also pretty strong, and although 
the deepest research on that was done quite some time ago, one 
of the reasons that it hasn't been updated is because the 
resource base is actually so vast that it didn't make as much 
sense to concentrate on that.
    On the oil side, EIA does believe that there are some 
questions--and we do have tight oil production rising fairly 
sharply, reaching almost 8 million barrels a day by 2014, 
probably continuing to increase into 2020, but possibly coming 
back down again. What we would love to have, sir, is another 
two or three years worth of that on the oil side comparable to 
what we now have on the gas side to let us make a better 
judgment about the extent of the resource base therefore tight 
oil.
    Mr. Cramer. Thank you. You do a great job by the way.
    Mr. Sieminski. Thank you.
    Mr. Cramer. I appreciate the data.
    Mr. Sieminski. And we would be happy to work with your 
staff to show you some of the newer things that we are doing, 
including state mapping where any of you can go down to your 
Congressional District level and look at the energy 
infrastructure, including resources, power plant facilities, 
pipelines, and electric transmission lines and so on. It is a 
very useful thing, I think, for the entire Congress.
    Mr. Cramer. I want to allow Ms. Jacobson to respond to my 
comments earlier.
    Ms. Jacobsen. Mr. Cramer, thank you very much. And my 
organization supports a diverse energy mix, and all-of-the-
above strategy. Just let me start with that. But as you know 
very well, given your experiences, there are a range of 
decisions that go into energy procurement. Some of them 
interact with state and federal policy, some deal with 
technology, some deal with price. And clearly, the credits that 
have been given for energy efficiency or various renewable 
energy sources are attempts to lower the cost and make more 
competitive these resources for a range of reasons, whether 
they be economic, environmental, or technology innovation-
related.
    As you know as well, very well, looking at the history of 
government involvement in energy policy, it is a century deep. 
And I think that when we look at energy efficiency or renewable 
energy, or energy storage, or we could go down the line. There 
are times when strategic investments, whether it be on 
incentives, for purchase, or lowering the cost for consumers 
and businesses are in play, or opportunities to entice the 
private sector through new investments that they might make. I 
mean I think what we are looking for is balance and ensuring 
that all these technologies will be available in the future.
    So though certain incentives may be temporary versus 
permanent, we think all of them should be looked at critically 
to make sure that they are leveraging private sector 
investment, that they make sense for the public good, and that 
they are driving the objectives of this Committee and other 
Members of Congress.
    Mr. Cramer. Thank you. I yield back.
    Chairwoman Lummis. Thank you, Ms. Jacobson. Thank you, Mr. 
Cramer.
    We will go next to Mr. Lipinski. Before we do, Mr. Swalwell 
has had to leave for a Homeland Security meeting. He thanks the 
witnesses for your time and expertise this morning.
    So next, I will recognize the gentleman from Illinois, Mr. 
Lipinski.
    Mr. Lipinski. Thank you, Chairwoman Lummis. Thank you for 
holding this hearing today. Obviously, it is critical to get 
this overview right now and I look forward to the work that we 
are going to be doing on the Committee on this issue.
    I want to start out with a question for Mr. Sieminski. EIA 
projections have nuclear production increasing by--increasing 
15 percent by 2025, and by 2040, production is still projected 
to be up 14 percent. Now, these projections are made despite 
the relatively few orders for expansions of existing nuclear 
plants. I know that nuclear plant operations have made great 
improvements in the past to keep plants operating more 
efficiently and producing more electricity. But I want to ask, 
what is the source of these increases in projections? Is EIA 
projecting that most of these plants will have their operating 
licenses extended and that efficiency gains will continue? Or 
are these projected increases due to new production possibly 
from next-generation technologies?
    Mr. Sieminski. Thank you, Congressman Lipinski. We have a 
couple of new power plants built into the projections. There 
are several under construction right now. In addition to that, 
we are assuming some further efficiency gains in the industry. 
They call it up-rating where you get more power out of the 
individual plants. And on--the reason that the numbers do begin 
to trail off at the end of the time is that we are assuming 
that there will be some retirements, but in general, I think we 
have built in extensions of licenses in a number of cases for 
relicensing.
    The overall numbers that we have for the type of fuels used 
in generating electricity, the fastest growth that we see is in 
solar, percentagewise, as well as wind. The biggest from a 
standpoint of not the annual percent increases but the absolute 
numbers is in natural gas, and that comes back more to the 
continuing strong price competition that we see between natural 
gas and coal.
    Mr. Lipinski. Okay. I wanted to continue on a little bit on 
nuclear technology and how much might be gained from additional 
R&D into our nuclear energy. I just wanted to ask Mr. Sieminski 
but if you have additional comments here also. Do you think 
advanced concepts like small modular reactors and fast breeder 
reactors could change the conversation about nuclear to make it 
safer and easier to build while also helping to solve the waste 
issue? Or at a minimum, could it help extend the life of 
existing reactors with greater safety? Because what we are 
focused on here in this Committee is the R&D. So what do you 
think we can get from nuclear R&D? And what is the future for 
nuclear?
    Mr. Sieminski. I would be happy to come back to you for the 
record and provide you some background on the assumptions that 
we are making in that area.
    In general, as I said, our overall forecast generally 
assumes trend improvement and technologies but not major 
breakthroughs. We try not to predict changes in regulation, 
legislation, or huge changes in technology. The role that 
technology has played recently has been very strong. In Mr. 
Swalwell's district, the labs--Lawrence Livermore and Sandia--
as Mr. McNally said earlier, these labs played a strong role in 
providing research, particularly in 3-D seismic technology and 
in horizontal drilling that was instrumental in the Barnett 
Shale breakthroughs that took place back in the 1990s.
    Interestingly, there was also a Section 29 tax credit for 
shale gas--type gas at that time that also spurred things. I 
think that one of the more interesting aspects of that tax 
credit is is that it expired and it was allowed to expire so 
that we got the benefits of the R&D, little help from a tax 
credit that ultimately was no longer necessary once the 
industry was on its feet.
    Mr. Lipinski. My time is almost up. Does anyone else have 
any comments on nuclear R&D? All right. Thank you very much.
    I yield back.
    Chairwoman Lummis. Well, thank you, Mr. Lipinski.
    And I would note that Mr. Lipinski, Mr. Rohrabacher, and 
Ms. Lummis all have an interest in this issue. And so we may 
want to pursue that further with you, the notion of modular 
nuclear reactors, small nuclear reactors, very small-scale 
electricity production, in Texas, too. So I think that you are 
going to find that there is a spark on this Committee for that 
subject.
    Thank you.
    Thanks, Mr. Lipinski.
    Next, we will go to Mr. Hultgren. I might just for planning 
purposes tell you that, Mr. Hultgren, you are next. Mr. 
Rohrabacher, who has joined us as a Member of the Full 
Committee, will then have an opportunity to ask some questions. 
I want to recognize that Mr. Veasey has joined us in a capacity 
as Ranking Member. And then after that, Chairman Smith has 
asked me to ask a question on his behalf.
    Then, unless there is a burning desire on anyone's behalf 
to have a second round, which would be sort of an abbreviated, 
one-question-per-person round, if that is not the case, we will 
conclude the hearing. But I do want to put out the opportunity 
for Members to ask a second question. That preparation having 
been laid, I now yield to the gentleman from Illinois, Mr. 
Hultgren.
    Mr. Hultgren. Thank you, Madam Chair. Thank you all for 
being here as well.
    Our national competitiveness, our investment in basic 
research, and the critical role that each plays in enhancing 
the other, as well as the energy security of our Nation are 
very important to me and my constituents in Illinois.
    Mr. McNally, you have said in your testimony that too 
often, leaders and observers predict or prescribe unachievable 
targets when it comes to the energy future in this country. In 
his State of the Union address last night, President Obama made 
frequent references to research and development, something I 
find ironic coming from the President that cut high-energy 
physics, nuclear physics, manned spaceflight, and planetary 
science. I wondered, Mr. McNally, in your opinion, is the 
Administration's focus on cutting basic research in order to 
subsidize favorable companies in the alternative energy market 
going to speed up or delay our eventual adoption of cleaner 
technology in the future?
    Mr. McNally. Thank you for that question, Congressman 
Hultgren. In the interest of bipartisan open-mindedness, let me 
say that our energy predictions, our policymakers, are becoming 
more realistic. President Nixon kicked things off in 1973 by 
predicting we would be oil-import-free by 1980. President 
Carter said we would never consume more of a drop than we did 
in 1979. We are getting at least a little more realistic in our 
productions and prescriptions.
    But to your question, no, in my view it is not consistent 
with my testimony or my beliefs were we to shut down 
investments in basic, core research that then can be deployed 
by the private sector in a viable way that adds to wealth and 
adds to productivity without continual government support, that 
would be a mistake to end those kinds of activities and shift 
them towards the type of activities that, again, as I said in 
my testimony, there is a long record of failure. So that would 
not be my preference, sir.
    Mr. Hultgren. Well, I appreciated, as I was stepping out, I 
have got another Committee going on at the same time, so I 
apologize. Kind of jumping back and forth, but I had heard you 
mention a little bit earlier, again, of how important basic 
scientific research is and the fear of really undercutting 
that, of how that puts us at a disadvantage. The President 
seems to think that asking us to spend more money on these 
short-term items is really the only way to achieve clean energy 
future. He seems to have this sense that we can just buy an 
immediate change in our economy. My sense is that it is going 
to take maybe 20 years or even longer of long-term, basic 
research in the very subjects he is cutting--high energy 
physics, nuclear physics--in order to produce a change and 
really change our fundamental ability to produce energy in a 
cleaner and cheaper way.
    Again, Mr. McNally, I wondered if you could talk--what do 
you think the best use of limited resources at a time like this 
would be in order to best affect that?
    Mr. McNally. Well, thank you for the opportunity to respond 
to that, Congressman. I wanted to connect a dot. I don't think 
I did clearly enough with Representative Kennedy's question. 
The reason I thought that we would want to maybe invest in some 
research into batteries is because the reason--one of the main 
reasons wind is not economical is because you cannot store 
electricity. The wind blows in places where we don't need it 
and electricity, unlike oil and coal, cannot be stored. So if 
we can figure out ways to store and discharge electricity, we 
will make all renewable forms of electricity, solar and wind, 
more economic. And that is an example, I think, of the 
potential benefit of core research.
    Another one--and again, my wife calls me Mr. Worst-case-
scenario, so I am not known for flowery predictions about 
wonderful transformations, but I will say, as I said in my 
testimony, if you ask me what plausible transformative change 
is out there that could happen in our lifetimes that could 
completely upend in a positive way our energy outlook, and I 
would think that is--that we figure out how to get methane 
hydrate out of the Earth's crust. Like shale gas and shale oil 
of the day, we know it is there. We know the resources are 
enormous. Some estimates say there is 6 trillion TCF in the 
Gulf of Mexico. That is equal to total proved reserves in the 
world, conventional reserves. But we have not figured out yet--
and we and the Japanese and others are working on it and DOE is 
doing some good work here--is to get that methane hydrate out 
of the crust in a safe way that doesn't create methane burps if 
you will and emissions.
    So those are the kind of problems that humans can solve. We 
don't have to figure out how to make algae go into gasoline. We 
know how to use methane. We just have to figure out how to get 
it out of the crust. We did it with shale gas and shale oil. I 
think we can do it with the government's help in the core basic 
research area with methane hydrates.
    Mr. Hultgren. My time is winding down, but again, I really 
do appreciate each one of you being here. This is an important 
discussion to have. I do think, especially at a time like this 
where budgets are tight, resources are limited, we have got to 
focus where doing the work that only government can do, and I 
think that is basic scientific research. We have seen that 
industry can step in and apply what is discovered, but there 
are certain things that only we can do. So thanks for being 
here.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Lummis. Go ahead, Mr. Weber.
    Mr. Weber. Well, thank you. In the absence of the 
Chairwoman--oh, I see she is back.
    I do want to very quickly say, though, Mr. McNally, you can 
store direct-current electricity and maybe our tack needs to be 
at producing more appliances that actually operate off of DC as 
opposed to alternating current AC. But thank you for that.
    And Mr. Rohrabacher, the esteemed gentleman from 
California, you are recognized.
    Mr. Rohrabacher. It seems the lady is away just for a 
second and the guys have already taken over. What is going on 
here?
    Well, first of all, let me suggest that Madam Chairwoman is 
absolutely correct when she says that there is a keen interest 
in small modular reactors and new types of nuclear power, 
approaches to nuclear power. Let me note also that the 
Department of Energy is moving forward in building light water 
reactors, which is 60-year-old technology as part of their step 
forward in the research. I have been disappointed many times in 
my 24 years here when government research projects end up 
focusing on, because the companies that get involved in that 
research make a profit on what they already know rather than 
trying to push the envelope. I remember when they tried to get 
$500 million from us in research money in order to compete with 
the Japanese on high definition TV. And we ended up financing 
the development of high definition TV based on analog 
technology rather than digital technology. So I mean it is just 
examples.
    The human genome, which we also with this Committee 
financed, I will never forget it was going to take 20 years, 
and halfway through it, a private company said look, we can do 
this cheaper and we can get this done years in advance. Just 
give us the right to own this technology or this approach into 
the years that we are going to save it from when the government 
when it is going to be done. And it was a big debate about 
that.
    So I am hoping that if we do provide money for energy 
research, it is not for like light water reactors or analog, 
that we are literally pushing the envelope. And that is in 
terms of our, of course, science that is aimed at breaking new 
ground. Applied science and applied research I think that 
business could do pretty much on their own. Let us get to that.
    First of all, I would like to ask, a few years ago we were 
gloom and doom about peak oil and how we are going to be 
energy-wise, things are going to get worse and worse. What 
about peak oil and gas? Is that just a false alarm?
    Mr. Sieminski. Thank you, Congressman.
    The problem that I saw as an energy economist, the problem 
that I always had with the peak oil hypothesis was that it was 
entirely geology-based. The view assumes that the resource base 
is completely known, and once you produce half of it that you 
inevitably are on a downturn. I think that this Committee 
particularly understands that there is a role for both prices 
and technology to dramatically change our understanding of the 
resource base. And that is what we have seen.
    Mr. Rohrabacher. When you talk about price, which is one 
thing, we heard it earlier about the importance of efficiency. 
Well, assuming that mandates and regulations are what causes 
efficiency as compared to price, and when you allow the price 
to go up, there is going to be a great deal more efficiency. 
People will turn off their lights. Actually, we found that out 
in California. If indeed the price of electricity goes up, 
again, we go back to market-based solutions. Rather than having 
the government step in to try to mandate what direction we go, 
quite often, the market-based solutions actually get the job 
done better.
    Let me ask about fracking now. I understand that the 
fracking that has given us so much more energy and thus more 
national security, that this is mainly on private land. Has 
there been some type of stifling of fracking on public lands?
    Mr. Sieminski. There is hydraulic fracturing that takes 
place on federal lands. The Bureau of Land Management actually 
has issued some rules on hydraulic fracturing and how that 
should proceed. For the most case, the vast majority of what we 
see geologically as the type of flight oil and shale gas 
resource base is on private lands, and I believe that that is 
one of the main reasons the bulk of the development so far has 
been on private----
    Mr. Rohrabacher. But you wouldn't say that it is being 
stifled on public land? That is not an accurate charge then?
    Mr. Sieminski. That sounds like a policy question and I 
think I am going to stay away from policy questions.
    If the Chairwoman would allow me 30 seconds, some of the 
changes that we are seeing in technology are going to 
dramatically shift the public's concept of hydraulic 
fracturing. Right now, in Pennsylvania, for example, most of 
the water--produced water from hydraulic fracturing is being 
recycled and being used again. And the companies involved in 
the fracturing activity are finding ways to target the areas 
that they fracture so that, rather than fracturing the entire 
length of a horizontal wellbore, they are using 3-D seismic 
technology to pick where they want to fracture, which then 
reduces the amount of water and chemicals and the impacts that 
come from hydraulic fracturing. And I think it is technological 
breakthroughs like that that offer a tremendous opportunity for 
the public to be reassured that hydraulic fracturing can be 
done in a sound, safe manner.
    Mr. Rohrabacher. Thank you very much, Madam Chairman. And 
let me thank the Chairwoman for holding this hearing.
    Chairwoman Lummis. Thank you, Mr. Rohrabacher.And Mr. Weber 
had a question. Who developed that technology you were just 
talking about?
    Mr. Sieminski. That technology was developed in the private 
sector by a number of the companies active in oil services 
activity. A gentleman that I spoke to about the developments 
taking place comes from Schlumberger.
    Chairwoman Lummis. Does that track with what you recall?
    Mr. Weber. It does.
    Chairwoman Lummis. All right.
    Mr. Weber. Thank you, sir.
    Chairwoman Lummis. There is a little company in Wyoming 
called Well Dog that also was dropping computers down wellbores 
and gathering all kinds of information about whether there were 
commercial quantities recoverable in that wellbore, where they 
were. And so before they even case the well, they had all kinds 
of data. And so these technologies, even in the traditional oil 
and gas business, as you have pointed out, are just improving 
dramatically every year. So that will be a fun subject for this 
Committee to explore further in the months ahead.
    I do, with your indulgence, have a question from Chairman 
Lamar Smith for Mr. Sieminski. The Energy Information 
Administration's 2008 report called ``FederalFinancial 
Interventions and Subsidies in Energy Markets 2007'' included 
two very useful tables listing federal subsidies by energy 
source, as well as the amount of subsidy per unit of energy 
produced. Now, this information was not included in the EIA's 
updated report in 2011. Chairman Smith would like to request 
that EIA update the information contained in both tables and 
provide this to the Committee. Can you do this for me, Mr. 
Sieminski, so I can pass that information on to the Chairman?
    Mr. Sieminski. I understand that we have actually looked 
into that. We will come back with--to the best of our ability 
with some updates. What we found, Madam Chairman, is that the 
assumptions that you have to use to get to the useful 
comparable answers on which of our fuels are being subsidized 
in one extent or another are extremely complex. But we will 
come back to you with some numbers. Thank you.
    Chairwoman Lummis. Well, thanks, Mr. Sieminski. And we 
expect the information you give us will include appropriate 
caveats and an explanation of the complexity of the 
calculation. But we would like to see those basic facts on 
subsidies and energy production for the Committee.
    I would like to close. Mr. Weber, do you have any 
additional questions? Okay. This is great. Hey, I want to thank 
the witnesses for their valuable testimony, and I want to thank 
all the Members for their questions.
    Members of the Committee may have additional questions for 
you, and we will ask you to respond to those in writing. The 
record will remain open for two weeks for additional comments 
and written questions from the Members.
    With our great thanks, the witnesses are excused and this 
hearing is adjourned.
    [Whereupon, at 11:40 a.m., the Subcommittee was adjourned.]
                               Appendix I

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                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by The Honorable Adam Sieminski
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Responses by Mr. Robert McNally

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Responses by Ms. Lisa Jacobson

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