Summary of Hearings on Rising Oil Prices and Energy Policy (12-18-00)
  • Senate Energy and Natural Resource Committee, December 12, 2000: Natural Gas Markets: One Year After the National Petroleum Councilís Gas Report.
  • Senate Energy and Natural Resource Committee, September 26, 2000: Oversight hearing to consider the current outlook for supply of heating and transportation fuels this winter.
  • Senate Energy and Natural Resources Committee, September 14, 2000: Oversight hearing on the Alaska North Slope.
  • Senate Energy and Natural Resources Committee, July 26, 2000: Oversight hearing on Natural Gas Supply.
  • Senate Committee on Agriculture, Nutrition, and Forestry, July 20, 2000: Hearing on Energy and Agriculture.
  • Senate Energy and Natural Resources Committee, July 13, 2000: Hearing to examine whether deliverability, transportation, and refining/blending resources are adequate to supply America at a reasonable cost.
  • House Commerce Committee,  June 28, 2000: Summer Energy Concerns for the American Consumer.
  • Senate Energy and Natural Resources Committee, June 15, 2000: Hearing to receive testimony on the goals and specific legislative provisions of S.2557, the National Energy Security Act of 2000.
  • House Committee on Resources, April 12, 2000: Compromising Our National Security by Restricting Domestic Exploration and Development of Our Oil and Gas Resources.
  • Senate Energy and Natural Resources Committee, February 24, 2000: Hearing to examine energy supply and demand issues related to crude oil, heating oil, and transportation fuels in light of the rise in price of the fuels.



  • Senate Energy and Natural Resources Committee
    December 12, 2000

    Natural Gas Markets: One Year After the National Petroleum Councilís Gas Report.

    The Bottom Line
    The unusual lame-duck hearing provided senators the chance to preview natural gas and energy issues that are likely to come up early in the 107th Congress.  Senator Frank Murkowski (R-AK), Chairman of the Senate Energy and Natural Resources Committee, along with other members called on the next Congress and Administration to provide a national energy policy that is balanced and helps guard national security.

    Witnesses
    Dr. Mark Mazur, Acting Administrator, Energy Information Administration, Washington, D.C.
    Mr. Roger Cooper, Executive Vice President, Policy and Planning - American Gas Association, Washington, D.C.
    Ms. Deborah Schachter, Director, Governorís Office of Energy and Community Services, Concord, N.H. - Representing the National Association of State Energy Officials
    Mr. John Sharp, Vice President and Counsel, Natural Gas Supply Association, Washington, D.C.

    Chairman Frank Murkowski (R-AK) down played the partisan rhetoric that has marked this committee when it comes to energy policy, instead he commented on the need in the 107th Congress to look at the entire energy portfolio -- economics, national security, environment, federal and state regulations, and consumption.  In response to a colleague's bombast, Murkowski stated that the next Congress will need to work in a bipartisan manner and that it is the Senate's obligation to get the energy policy straight.  Other members of the committee commented on the current natural gas and home heating oil price spikes and the need to look at what actions should be undertaken by Congress and state governments to help bring the market back to equilibrium.

    Dr. Mazur explained that the current tight natural gas market, especially in the Northeast, is the result of a range of factors: relatively flat domestic gas production for the past several years, expectation of a colder winter that would result in greater demand, below normal gas storage levels, and tight supply conditions in alternative fuel markets.  The natural gas market is not expected to recover quickly from these problems in part because the future growth in natural gas demand is expected to rise sharply as new natural gas generators are added to the national electricity grid.  Combined, these factors mean that the long-term natural gas market is going to remain in the headlines.  The other witnesses agreed that the current market crunch is related to a series of events but that Congress should take action to help prevent this situation from occurring again.  Ms. Schachter suggested a short-term solution to the price spike was to increase funding for the Low Income Home Energy Assistance Program.

    Murkowski and others noted that the domestic natural gas resources could meet this demand but current federal regulations limit the accessibility and marketability of these resources.  Members agreed that one long-term action within congressional oversight was access to federal lands for resource development Ė as well as the actions suggested in the National Energy Security Act of 2000.

       - M.B.
    Senate Energy and Natural Resources Committee
    September 26, 2000

    Oversight Hearing to Consider the Current Outlook for Supply of Heating and Transportation Fuels this Winter

    The Bottom Line
    Similar to previous hearings on the volatility of fuel oils, the Senate Energy and Natural Resources hearing was used by members of the committee and witnesses as a soapbox.  The hearing provided another opportunity for Chairman Frank Murkowski (R-AK) and other members of the committee to highlight the Republican energy package, S. 2557.

    Witnesses
    The Honorable Bill Richardson, Secretary, Department of Energy
    Mark J. Mazur, Acting Administrator, Energy Information Administration, Department of Energy
    Paul Vermlen, President, Meenan Oil Co., Inc. on behalf of the Independent Fuel Terminal Operators Association
    John Huber, Vice President, Public Relations, Petroleum Marketers Association of America
    John C. Felmy, Director, Policy Analysis and Statistics, American Petroleum Institute
    Laurence W. Downes, President and CEO, New Jersey Resources Corporation on behalf of the American Gas Association
    Lee Fuller, Vice President of Government Relations, Independent Petroleum Association of America

    Falling on the heels of President Clinton's announcement to release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR), the Senate Energy and Natural Resources Committee hearing was a heated partisan platform for accusations and counter-accusations.  Committee Chairman Frank Murkowski (R-AK), along with other committee members, used the hearing to gain support for S. 2557, the Republican energy package bill that uses several incentives and programs to help increase domestic petroleum production and decrease the nation's dependency on foreign oil.  As has been the case for several months, the volatility of both the gasoline and heating oil markets has received wide-spread attention in the media and Congress. Witnesses discussed the current low inventories for heating oil, what has led to this situation, and what Congress should and can do to help.  Mazur, representing the Energy Information Administration, summarized the complexity of the current heating oil "crisis" by saying, "there are several factors contributing to this recent price run-up: US natural gas production has been relatively flat for the last couple of year; demand has been fairly high this year, especially from electricity generators using natural gas as a fuel; demand is expected to be high this winter, under normal weather assumptions' prices are high in the distillate and residual fuel oil markets, competitor fuels for natural gas, keeping natural gas demand up; and current working storage levels are low -- about 9 percent lower than their 5-year average levels for this time of year."  Written testimony of the witnesses is available on the Senate Energy and Natural Resources Committee website.
     

    - M.B.

    Senate Energy and Natural Resources Committee
    September 14, 2000

    Oversight Hearing to Consider the Transportation of Alaska North Slope natural Gas to Market

    The Bottom Line
    In Chairman Frank Murkowski's (R-AK) continuous attempts to help develop the North Slope for fuel production, he held a hearing that gave a comprehensive overview of the current activities around North Slope natural gas.  Representatives from the Administration, oil companies holding land in the region, organizations that have developed proposals for moving natural gas to market, as well as profession and trade groups discussed what can be done to develop the natural gas resources and the benefits of developing these fields.

    Panel I
    The Honorable T.J. Glauthier, Deputy Secretary, Department of Energy
    The Honorable James J. Hoecker, Chair, Federal Energy Regulatory Commission, Department of Energy
    The Honorable David Hayes, Deputy Secretary, Department of the Interior

    Panelists from the first group helped to give the historical setting that has led us to the current environment -- the establishment of the Trans-Alaskan Pipeline and the passing of several laws in the 1970s regarding Alaskan natural gas.  All three witnesses from the Administration stressed his respective agency's desire to help move Alaskan North Slope (ANS) natural gas to market and the importance of ANS gas to the future of domestic energy consumption.  Glauthier and Hayes commented on current proposals to move ANS gas to market, including plans to perfect the liquefication of natural gas and ideas of either building new pipelines or using the existing pipelines to transport the natural gas found in the northern fields to southern ports for further distribution.  Glauthier also discussed the "recent realignment of ownership" of ANS that splits the ownership almost evenly between ExxonMobil, BP, and Phillips -- simplifying some of the cooperation needed to bring ANS natural gas to market.  Full written testimony of the all the panelists from this hearing is available at the Senate Energy and Natural Resources Committee website.

    Panel II
    Robert Malone, REgional President for Western U.S., BP
    Kevin O. Meyers, President, Phillips Alaska Inc.
    K. Terry Koonce, President, ExxonMobil Production Company

    Representatives from the three stake holders in ANS development -- ExxonMobil, Phillips, and BP -- discussed actions these companies have already taken to look into the needed steps to bring ANS natural gas to markets in the lower 48 states and overseas.  Talking in general terms, the witnesses explained technologies in both Liquefied Natural Gas (LNG) and Gas to Liquids (GTL) as well as the cooperative work the three companies have started in figuring out possible routes for transporting natural gas from the northern fields.  Koonce commented on the need to balance the development of ANS natural gas with the continued health of the domestic gas market -- "At this time we do not know whether the Lower-48 gas market will support the major capital expenditures required for a pipeline and when such a pipeline could be built and be in operation."

    Panel III
    Robert L. Pierce, Chairman of Foothills Pipe Lines Ltd, and Chairman of the Board of Partners, Alaska Northwest Natural Gas Transportation Company
    Forrest E. Hoglund, Chairman and CEO, Arctic Resources Company, Ltd.
    Jeffrey B. Lowenfels, President and CEO, Yukon Pacific Corporation -- subsidiary of the CSX Corporation
    Dennis Roper, Special Assistant to the Mayor of the North Slope Borough, Office of Governmental Affairs
    Gary E. Carlson, Vice President for Alaska Forcenergy, Inc.

    Currently there are five major proposals for transporting ANS natural gas to markets both in the lower-48 and over seas, especially the Eastern Asia markets.  Panelist in the third portion were from each of the five plans.  One of the oldest plans that actually began construction in the 1980s is the Alaska Natural Gas Transportation System (ANGTS), which would connect natural gas fields in Alaska and northern Canada.  Much of ANGTS is already built and in use, but transporting ANS gas would require the completion of the northern section of the system.  Pierce said in his testimony, "given projected supply, demand, and price conditions, the Alaska Partnership and Foothiils are preparing to move forward to complete the project."  Hoglund, representing the Northern Gas Pipeline Project that would also connect canadian and alaskan gas fields, talked about the Arctic Resources Company (ARC) proposal and its unique funding mechanisms -- "Native American and Canadian Aboriginal groups residing along the route [would] own 100% of the pipeline" that runs through the region and ARC would "use 1005 investment grade, taxable revenue bond financing."  Lowenfels, representing a third proposal that would tie into ANGTS, discussed the Trans-Alaska Gas System (TAGS).  Like the other proposals, TAGS would deal with transporting LNG.  "The TAGS pipeline has been designed to accommodate future natural gas supplies for the unconstructed [ANGTS] project down to its take-off point near Delta Junction should that project materialize once TAGS is in operation."  Another proposal has been developed by a coalition of local governments in Alaska known as the Alaska Gasline Port Authority that would give ownership of the pipeline to this coalition.  Roper stated that "ownership of the pipeline by this type of organization will substantially reduce the effective coast of transporting gas from the North Slope to market and improve the economics of such a venture to the degree necessary to make the development of the North Slope gas resources financially viable."  The fifth plan, presented by Carlson, deals primarily with the technology aspects of gas to liquid (GTL).  According to his testimony, GTL would "(1) use Alaska's natural gas to produce synthetic diesel for West Coast markets, (2) support renewed gas development in Cook Inlet and the North SLope, and (3) recover gas currently reinjected into reservoirs."  Much of the panelists' written testimonies went into detail on the legal and regulatory issues as well as proposed pathways for these pipelines -- full written testimony is available at the Senate Energy and Natural Resources Committee website.

    Panel IV
    Roger Cooper, Executive Vice President for Policy and Planning, American Gas Association
    Jerald V. Halvorsen, President, Interstate Natural Gas Association of America
    Joseph Blount, President, Unocal Global Trade, on behalf of the Natural Gas Supply Association

    The final panel consisted of representatives from trade and professional organizations that deal with natural gas.  Unlike the first sections of the hearing that looked specifically at ANS gas and proposals to move these resources to market, the fourth panel focused on the future trends in domestic energy consumption and energy production.  Witnesses also addressed the connection between strengthening domestic energy resources, such as natural gas, and national security as well as the comparative "cleanness" of natural gas compared to other fossil fuels. Copper stated, "the American Gas Association believes that Congress should mark the start of the new millennium by taking action to increase the availability and use of domestic natural gas so that future generations will inherit a cleaner environment, improved national security, continued economic growth and greater conservation of energy resources."
     

    - M.B.

    Senate Energy and Natural Resources Committee
    July 26, 2000

    Hearing on Natural Gas Supply

    The Bottom Line
    Following the relative stabilization of gasoline prices, Congress turned its attention to predicted shortages of natural gas supply and potential price hikes this winter.  Currently, the price for natural gas is over $3.00 per thousand cubic foot.  The committee heard testimony from administration officials, the National Petroleum Council, and industry firms.  Most witnesses agreed that the nation has sufficient natural gas reserves to meet future demand; however, some questioned whether predictions underestimated the rate of demand increases.  Either way, the U.S. will require serious financial investments in the natural gas industry's infrastructure, personnel, and access to currently restricted federal lands. G. Warfield "Skip" Hobbs of the American Association of Petroleum Geologists (AAPG) also encouraged federal regulatory and tax reforms to promote natural gas industry growth.

    Members Present
    Frank Murkowski (R-AK), Chairman Jeff Bingaman (D-NM), Ranking Member
    Daniel Akaka (D-HI)

    Opening Statements
    Chairman Frank Murkowski (R-AK) called the oversight hearing to examine the state of U.S. natural gas supply.  He expressed concern that the nation has been pulling down its reserves faster than it can replace them.  Insufficient supply can lead to higher gas prices, potentially disrupting the utility industry and overall economic stability.  He inquired whether the gas industry's reserves and infrastructure can meet anticipated demand.  Once again, Murkowski criticized the Administration for not having a comprehensive energy policy and for increasing our dependence on foreign sources of petroleum. He continued to advocate opening the Arctic National Wildlife Refuge to resource development.  Finally, Murkowski stated that natural gas is not just an automatic alternative to foreign oil imports, but is only part of a balanced energy portfolio.

    Ranking Member Jeff Bingaman (D-NM) advocated the cooperation of all sectors to meet U.S. demands for an inexpensive, clean, out-of-site energy source.  He stated that he was looking for strategies to bring stakeholders together to create a "new energy paradigm."  Bingaman agreed that the energy industries need access to resources, and capital, but that there is a need for good environmental regulation.  He hoped that natural gas supply would not become a partisan or regional issue.

    Panel I
    The Honorable T. J. Glauthier , Deputy Secretary, Department of Energy
    The Honorable David Hayes, Deputy Secretary, Department of the Interior

    Glauthier cited the Energy Information Administration's figure for annual consumption of natural gas increasing from 21 trillion cubic feet (tcf) per year to almost 30 tcf by 2015.  With proper technology advancement and significant investments in infrastructure, Glauthier was "cautiously" optimistic that the growing U.S. demand could be met.  Double the number of current wells would also need to be drilled.  Although prices for natural gas are forecasted to remain high through the winter and into Spring of 2001, he predicted that if technology is developed fast enough, natural gas prices in a few years could be 44% lower than they are now.  Glauthier announced the creation of a Department of Energy (DOE) Strategic Center for Natural Gas whose mission it is to work with industry to promote research and development, policy, and technology advances.

    Hayes summarized the U.S. Department of the Interior's (DOI) role in issuing natural gas production leases for both onshore and offshore federal lands.  He lauded the success of the Outer Continental Shelf (OCS) program in awarding more than 7900 natural gas licenses, of which 94 percent are in the Gulf of Mexico and 1500 are productive.  Hayes also pointed out the Bureau of Land Management's (BLM) role in supporting drilling on land.  Balancing the interests of development with those of conservation and preservation requires a "continuing effort" on the part of the agency.  Responding to questions from Murkowski concerning the closure of the Rocky Mountain area by the Forest Service, Hayes replied that there was not enough evidence that the deposits were large enough to be economical.

    Panel II
    Mary Hutzler, Director, Integrated Analysis and Forecasting, Energy Information Agency, Department of Energy
    Paul Kelly, Senior Vice President, Rowan Companies, Inc., on behalf the National Petroleum Council
    G. Warfield "Skip" Hobbs, President, Division of Professional Affairs, American Association of Petroleum Geologists
    Matthew R. Simmons, President, Simmons & Company International
    Michael L. Johnson, Vice President and General Manager, Conoco Inc., on behalf of the Natural Gas Supply Association

    Hutzler explained that the current price of over $3 per thousand cubic feet is due to a tight domestic supply of natural gas.  She cited that underground storage levels are 19 percent below what they were a year ago.  The reason for expected increase gas demand is attributed to use in gas-fired electricity plants.  Hutzler agreed with previous witnesses that natural gas prices would drop in the next few years to something closer to $2.81 per thousand cubic feet (1998 dollars) because high prices are not "sustainable."   A report from the Energy Information Agency (EIA) on natural gas trends through 2020 predicted that imports, mainly from Canada, would rise to 16 percent.  She testified that the national resource base is adequate to meet U.S. demand, but that more pipelines are needed.

    Kelly agreed with Hutzler that the estimated U.S. natural gas resource base can meet increasing demand if it overcomes several hurdles.  These challenges to the supply and distribution system including access to lands, financial requirements, and technology development.  Regarding access to the resource base, Kelly testified that significant proportions of unproven resource areas are blocked from exploration and development and need to be opened in the future.  New supplies must come mainly from the Gulf of Mexico, but also from the Rocky Mountains, Arkansas, Louisiana and Texas.   The capital required through 2015 for industrial expansion to meet demand is almost $1.5 trillion (1998 dollars).  Since 75 percent of natural gas is produced by small independent firms, it will be challenging to raise this money.  He recommended that an interagency work group be formed to develop long-term natural gas strategies.  This workgroup is addressed in S. 2557, The National Energy Security Act of 2000 (for more information see the hearing on this page).

    Hobbs discussed the fact that only 10 percent of our natural gas resource is 'proven.' He stated that proven reserves have dropped 43 percent in the last 30 years and that while one can increase supply from those wells by "inserting more straws in the same tanks," that does not increase the overall known reserve base.  There has been very little exploration of unproven reserves although the natural gas estimates in closed or restricted areas like Alaska are enormous.  Hobbs confirmed that lower levels of gas storage in the northern states is a result of shipping supplies to meet the south's summer demands.  This supply shortage will most likely increase this winter's gas-heating prices in New England.  He testified that opening public lands, regulatory relief, and tax incentives would stimulate more natural gas exploration and production to help meet growing energy needs.

    Simmons warned that demand for natural gas may increase twice as fast as projected by the National Petroleum Council (NPC) and that the U.S. is not prepared to meet demand at that rate.  He predicted that consumption could rise to 30 tcf per year by 2010 -- 5 to 10 years sooner than cited in earlier testimonies.  He said that confusion abounds regarding the capability of dual fuel (gas or distillate oil) plants.  In order to meet demand needs, the electricity system would require at least 10 years to increase drilling and expand into restricted areas, or build new coal-fired and nuclear plants.

    Johnson agreed with the NPC report that natural gas demand will significantly increase in the future. He argued that more restricted lands need to be opened for gas exploration.  He also stated that gas being used for summer electricity was not being stored for winter uses.  Johnson testified that deregulation of the industry resulted in lower prices for consumers.  Improvements need to be made in communicating the minimal environmental risks and impacts associated with natural gas production.  He also stated that the industry is losing qualified geoscientists to "green" activities and the new information-based economy.

    Chairman Murkowski's closing statements expressed his concern that as demand increases, proper investments may not be made to meet it.  He stated that the hearing should be a wake up call to the Administration, under whose current policy 90 percent of OCS areas for natural gas development are off-limits.  Murkowski hoped that a strategic energy policy debates would figure into the presidential campaigns.

    -A.S.

    Senate Committee on Agriculture, Nutrition, and Forestry
    July 20, 2000

    Hearing on Energy and Agriculture

    The Bottom Line
    This hearing focused on the present domestic energy policy and if amendments to that policy are needed or appropriate.  The focus was less on high energy costs and its impact on American farmers and more on what agriculture can do for energy.  According to Chairman Richard Lugar (R-IN), "Our nation is facing an emerging energy crisis.  Demand for energy is rapidly increasing and supplies may not be emerging to meet that demand, even at high prices."  Lugar emphasized the need to develop a solid energy policy that addresses future supply needs.  Tom Harkin (D-IA) asserted that renewable fuels like ethanol and biodiesel have a tremendous opportunity to enhance U.S. energy security, improve the environment, increase farm income and create jobs and economic growth.

    Members Present
    Richard Lugar (R-IN), Chair
    Charles Grassley (R-IA)

     

    Tom Harkin (D-IA), Ranking Member 
    Kent Conrad (D-ND)
    Tim Johnson (D-SD)
    Robert Kerrey (D-NE)

    Individual Testimony
    Bill Richardson, Secretary of Energy, Department of Energy
    James Schlesinger, Former Secretary of Defense and Energy
    J. Bennett Johnston, Former Senator (D-LA), Johnston and Associates, LLC

    Energy Secretary Bill Richardson has testified at many hearings lately in response to rising energy costs and other recent energy challenges.  His response to such issues is grounded in the Clinton-Gore Administration's energy policy, that focuses much attention on ensuring energy security by the use of market forces and not artificial pricing, a diversity of supply, improving the production and use of traditional fuels through new technology, a diversity of energy sources with long-term investment in alternative fuels, increasing energy use efficiency, and maintaining and strengthening insurance against supply disruption.  A priority for U.S. policy makers, according to Richardson, is not only to lesson demand but also to ease America from its dependency on imported energy resources.  In order to do this, we need to boost domestic production, spur energy efficiency, and increase the use of alternative energy resources.  He stated that the passage of the Biomass Research and Development Act will help place bioenergy at the heart of an effort to ensure U.S. energy security.  But, he emphasized, although bioenergy resources already meet more than 3% of our nation's energy requirements, much more needs to be done to curb growing concerns for clean air, climate change, dependence on foreign energy supplies, and the sluggish agriculture economy.

    James Schlesinger argued that reliance on the free market system as a pricing mechanism for oil (of which over 50% is imported), coupled with environmental regulations mandating the quality and type of fuels to be burned, expose energy markets to unintended disruptions that seem likely to intensify in the future.  He stated that careful consideration and coordination is necessary between the EPA, DOE, USDA, and the president in order to help decrease future supply and demand problems, and that more flexibility is needed with environmental regulations.

    J. Bennett Johnston spoke on the issue of price gouging on the part of big oil companies and that the current Federal Trade Commission (FTC) investigation, the 17th since 1973, has thus far found no evidence of price gouging as concluded in previous investigations. Two investigations undertaken by the Energy Information Administration of the DOE on the issue of rising crude oil prices and another by the Congressional Research Service on the issue of Midwest gasoline price increases also found no evidence of oil company price gouging.  He stated the real problem lies in three related and relative aspects: supply, price, and volatility.  Oil imports constitute 56% of total supply and are projected to increase to 70% by 2020.  Crude oil prices have tripled, from $11 in 1998 to $34.13 on March 17, and natural gas has doubled within the same time period.  It should be noted however, that crude oil is less than one-half the $70 inflation-adjusted price of 1981 and natural gas is less than 15% of inflation.  But the biggest problem is the volatility of such prices.  Consumers have no way to anticipate and reflect fuel prices in their budgets, causing large economic disruptions and political turmoil.  In order to mediate the problem, competitive markets with limited government involvement are essential.  He then listed five things Congress could do to maximize domestic energy supplies to help prevent future supply, price, and volatility problems: 1) Drill ANWR (Why not drill in an area where no species harm and recreation damage will occur when we currently drill in the Gulf of Mexico where thousands of pounds of commercial fish are caught per day?); 2) extend the deep water royalties act; 3) restructure the electricity industry; 4) streamline citing requirements to reduce time; and 5) remove artificial barriers that prevent nuclear energy from competing in the market.

    Panel
    Keith Collins, Chief Economist, U.S. Department of Agriculture
    Hary S. Baumes, Ph.D., Senior Vice President, WEFA, Inc.
    Eric Vaughn, President, Renewable Fuels Association
    W. James McCarthy, General Manager, Government and Public Affairs, CITGO Petroleum Corporation
    Don Hutchens, Executive Director, Nebraska Corn Board
    R. Skip Horvath, President, Natural Gas Supply Association

    Full witness testimony can be found on the Senate Committee website.

    Keith Collins spoke of energy use in U.S. agriculture, increased agriculture energy efficiency, effects of higher energy prices on agriculture, and what the government can do to encourage bioenergy to remediate and help the farm sector at the same time decrease U.S. dependency on foreign supplies.  He mentioned that Executive Order 13134 and S. 935, sponsored by Richard Lugar, are both a step in the right direction in aiding U.S. farms and curtailing U.S. dependency on foreign oil.  He also stated that the USDA is currently in the process of implementing Section 769 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Act of 1999 to provide new authority to use Conservation Reserve Program land for pilot biomass projects.

    Harry Baumes iterated on four points in his discussion on energy use in the farm sector.  He spoke of the effects of direct and indirect usage of energy in production agriculture as well as the short-run and long-run implications of higher energy costs on U.S. agriculture.  Between 1996 and 1999, farmers have expended on direct energy expenses 5% of total production expenses on average.  As a result of the sudden rise in energy prices, the 2000 estimation of direct expenses is expected to increase to nearly 7% of total production expenses.  This sudden rise will allow farmers little if no opportunity to adjust for shocks due to the long-term and capital intensive nature of agriculture production.  But over the long-run, farmers will be able to respond to such input prices through less energy-intensive production activities and with the use of less energy-intensive inputs in production.

    Jim McCarthy discussed five key factors that have led to the recent situation of high prices for transportation fuels: 1) higher crude oil prices; 2) special fuel formulations; 3) low inventories; 4) operational problems; and 5) the patented RFG process.  Of special concern is the fact that the U.S. pipeline and distribution system was designed to handle six grades of gasoline.  Today, it has to cope with more than 36 grades of gasoline due to environmental and other reasons.  Such different blends require different modes of transportation and supply.  This is a problem across the country where local regulators create a patchwork of new and different gasolines, creating inflexibility for refiners to quickly shift supply to areas of greatest need, thus driving up prices.  He stated that the government can reduce the potential for such market volatility by making environmental regulations more reasonable and workable.

    Don Hutchens stated that U.S. agriculture producers will incur an additional $4 to $6 billion due to current higher energy costs.  Producers in irrigating states will use more energy in order to remain eligible for crop insurance under the Loan Deficiency Program, but those costs will not be passed on to consumers by the farmer but from others in the food chain.  He listed six key factors that Congress should do in order to help small family farmers under this current crisis and to prevent such problems in the future: 1) expand the market for ethanol; 2) expand the domestic production of natural gas; 3) expand the market for biodiesel; 4) expand tax breaks for farmers and ranchers' fuel needs and for adapting lower energy use standards; 5) reconsider the impacts of EPA's action on reducing sulfur content in diesel to 15 ppm versus 50 ppm; and 6) continued study and research on the impacts of carbon sequestration.

    Skip Horvath's written testimony was submitted for the record but no oral commentary was transcribed due to a special ruling requiring a two hour committee time limit at times where the Senate is in session.

    -N.M.

    Senate Energy and Natural Resources Committee
    July 13, 2000

    Hearing to examine whether deliverability, transportation, and refining/blending resources are adequate to supply American at a reasonable cost.

    The Bottom Line
    This oversight hearing provided a chance for witnesses from the administration and the petroleum industry to defend their reasons for the Chicago-Milwaukee gasoline prices spikes this summer.  In addition to the recent list of popular excuses, the focus was on the refineries' practice of keeping supplies low. Committee Chairman Frank Murkowski, citing evidence that the MTBE additive to gasoline has been found to pollute groundwater, demanded that it be removed in favor of ethanol.  He concluded the hearing with his often-spoken concerns about increasing prices of gasoline and natural gas, and condemned the Administration's lack of a coherent energy policy.

    Members Present
    Frank Murkowski (R-AK), Chairman
    Craig Thomas (R-WY)
    Conrad Burns (R-MT)
    Jeff Bingaman, (D-NM), Ranking Member
    Ron Wyden (D-OR)
    Evan Bayh (D-IN)

    Panel I
    Robert Perciasepe, Assistant Administrator, Office of Air and Radiation, Environmental Protection Agency
    Bob Slaughter, General Counsel, National Petroleum and Refining Association
    W.H. Eric Vaughn, CEO and President, Renewable Fuels Association
    Red Cavaney, CEO and President, American Petroleum Institute
    Richard Parker, Director, Bureau of Competition, Federal Trade Commission
    Lawrence Kumins, Specialist in Energy Policy, Congressional Research Service, Library of Congress
    John Cook, Director, Petroleum Division, Energy Information Administration, Department of Energy

    Full witness testimony can be found on the Senate website.

    Perciasepe asserted that all phases of EPA's reformulated gasoline (RFG) program have been successful.  He maintained that the cost of ethanol-blended RFG production is only 4-8 cents higher than conventional gasoline and that the situation in Chicago and Milwaukee was an anomaly.   He testified that in some parts of the country, conventional gasoline is actually priced higher than gasoline with the ethanol additive.  He defended against Murkowski's accusations that the EPA requires too many types of gasoline to be produced for different areas of the country and that this over-regulation contributes to local shortages and price hikes.  Murkowski then wanted to know why EPA has not requested emergency congressional action to remove MTBE from gasoline if  it is polluting groundwater.  Perciasepe cited refinery flexibility in choosing an oxygenate, and limited options for other additives beyond ethanol.  Sen. Evan Byah (D-IN) pressed Perciasepe to admit that an EPA ease on volatile organic compounds (VOC) standards might make the production and use of ethanol easier for refineries.

    Slaughter stated that the oil refining industry is in trouble.  It makes only 4-5% returns on its investments; at the same time it is spending more money on technology to meet strict environmental standards.  He said that "the pursuit of a number of individual environmental programs in a "piecemeal" fashion has stretched the US fuel refining and distribution system to its limit -- resulting in greater potential for tighter supplies and increased market volatility."  EPA's Clean Air Act forces states to make their own local standards.  He protested that not enough attention is being paid to energy supply in this country.   Under questioning from Murkowski and Senator Thomas (R-WY), he admitted that there are other additives beside the contaminating MTBE and ethanol, which could be used in the RFG program.

    Vaughn denounced the nation's energy policy as "energy crisis policy" and said that the only cause for the Midwest oil price hikes was a low gasoline supply kept by the oil refineries.  He stated, "When supplies are tight, market dynamics bid the price of gasoline higher than economic principle would dictate" and that this kind of mismanagement leaves consumers vulnerable to any disturbance to the market, such as pipeline problems.  Furthermore, the ethanol industry, attempting to limit its contribution to market volatility, has stockpiled nearly 45 days worth of the additive.  He cited numerous examples where prices in areas using ethanol were actually lower than those using MTBE-blended gasoline.  Murkowski hoped that as ethanol supplies decrease and the price goes up, government subsides can be discontinued.

    Cavaney argued that low inventories were only partially responsible for contributing to higher gasoline prices this summer.  He also included as factors: the production of RFG, pipeline disruptions, ethanol costs in the Midwest, and the onset of peak driving season.  He noted that crude oil makes up 60% of gasoline, and that its price has gone up 300% in the last 18 months.  He advocating letting the market right itself without any government intervention, as most of the disruptions were temporary.  On the issue of heating oil, Cavaney maintained that the crisis last winter was not due to short supplies but rather due to weather-affected transportation.  He stated that in 1973, the U.S. only imported 35% of its crude oil and that number is up to 60% now.  One obvious way, he argued, to lower the nation's over-dependence on foreign oil, is to open the Arctic National Wildlife Refuge (ANWR).  Caveney also explained that the reports of oil companies' 120% profits in the last three months are misleading given their losses when prices were so low last year.

    Parker spoke on the FTC's investigation into possible oil company violations of antitrust laws.  He said that subpoenas have been issued as the commission begins to look at whether the firms have been agreeing to raise prices, rather than competing with each other.  However, Parker stressed that the investigation is not a quick-fix to rolling back gasoline prices.  An interim report will be issued at the end of July, but the final report will take at least six months to complete.   He refused to include in the investigation Murkonwski's claims that the Administration drove up gasoline prices by making a deal with OPEC to lower production in order to gain Russian cooperation in Kosovo.

    Kumin began by updating the committee on the Midwest price spike, saying that the price of RFG in the Chicago-Milwaukee area has fallen below the price of RFG outside of it.  He noted that Americans are still consuming at the same rate they were last year despite recent higher prices for gasoline.  The witness testified that when OPEC capped the world supply of crude oil it caused the oil refineries to raise their bids to purchase some of that limited supply.  While these costs are passed on to the consumer, the overall crude and gasoline supply in the U.S. remains low.  He asserted that several other factors, like the new ethanol RFG blend, encouraged the high gasoline prices in the Midwest.

    Cook agreed with the other witnesses that "very low gasoline stocks, combined with a market short on crude oil, generates an environment ripe for price volatility."   He pointed out that the West Coast regularly experiences such volatility.  Although the industry has made the first transition to summer-grade gasoline, any other market disturbances could ignite new shortages.  He also addressed upcoming issues of winter heating oil, including lower than normal stocks entering into the season due to refineries' preoccupation with meeting summer gasoline and diesel needs.

    As has become typical for these hearings, Murkowski closed by warning of further increasing prices for gasoline and natural gas.  He denounced the public for increased consumption, and said that people will not wake up until all our energy reserves are depleted and they see the sequel to the Arab Oil Embargo of the 1970's.  He concluded by saying that this hearing had confirmed the Administration's lack of a coherent energy policy.

    -A.S.

    House Commerce Committee
     June 28, 2000

    Summer Energy Concerns for the American Consumer

    The Bottom Line
    The full Commerce Committee met to flesh out explanations for the ever-increasing price of gasoline across the nation, but specifically 50 cents higher in the Midwest.  They heard testimony from the heads of the Department of Energy, Environmental Protection Agency, and Department of Transportation, and the Chairman of the Federal Trade Commission.  Since President Clinton announced that the FTC would begin an investigation into rising oil prices, the wholesale price of gasoline has dropped precipitously, yet retail prices continue their climb.  Many members of the House feel that the gasoline price hike is a government-induced phenomenon for which the Clinton administration is entirely responsible.  They saw plenty of evidence of other reasons for soaring oil prices, but none for collusion among petroleum companies, and hence, no need for a FTC investigation. The federal agency officials defended their position that several federal-influenced factors, even combined, cannot account for the high oil prices in the Midwest.

    Members Present
    Thomas Bliley (R-VA), Chairman
    W.J. Tauzin (R-LA)
    Michael Oxley (R-OH)
    Joe Barton (R-TX)
    Fred Upton (R-MI)
    Cliff Stearns (R-FL)
    Christopher Cox (R-CA)
    Steve Largent (R-OK)
    James Rogan (R-CA)
    Heather Wilson (R-NM)
    John Dingell, (D-MI), Ranking Member
    Rick Boucher (D-VA)
    Bart Gordon (D-TN)
    Bobby Rush (D-IL)
    Bart Stupak (D-MI)
    Thomas Sawyer (D-OH)
    Albert Wynn (D-MD)
    Gene Green (D-TX)
    Bill Luther (D-MN)

    Opening Statements
    Rep. Thomas Bliley (R-VA), Chairman of the Commerce Committee, briefly introduced the hearing by emphasizing the importance of calling the full committee to discuss, not only summer energy concerns, but also consumer protection, the environment and tourism.  He stated that he wanted to "get to the bottom of what's causing price hikes for gasoline and what we in Congress can do about it."  Bliley also reasserted that his position on electricity regulation was that consumers deserve to have reliable and affordable electricity this summer and in the future, but the federal regulatory role should be limited.

    Panel I
    Bill Richardson, Secretary of Energy, Department of Energy
    Carol M. Browner, Administrator, Environmental Protection Agency
    Rodney E. Slater, Secretary of Transportation, Department of Transportation
    Robert Pitofsky, Chairman, Federal Trade Commission

    Richardson had no prepared testimony, but did respond at length to committee questions.  Specifically, Rep. W.J. Tauzin (R-LA) obtained an old DOE pamphlet on "understanding gasoline prices."  According to the publication, DOE had effectively predicted the Midwest gas price increase and charged that local gas shortages were government induced.   Tauzin said, "You predict the prices are going to go up, then you have this scapegoat investigation."  Richardson claimed that recent government regulations were not enough to explain the outrageous Midwest prices.  He advocated the development of alternative energy sources, energy efficiency and renewables, balanced with an increase in domestic petroleum production.  Richardson explained that increased domestic production, without the exploration of the Arctic National Wildlife Refuge (ANWR) - a decision supported by 70% of the people - could help reduce the nation's dependence on foreign oil sources.  Rep. Michael Oxley (R-OH) pointed out that these anti-ANWR supporters were probably polled before the gas price increases.

    Browner's statement focused on the history and defense of EPA's unpopular reformulated gas (RFG) program.  She testified that the use of cleaner burning gasoline (i.e. RFG) will have an effect on air pollution similar to taking 16 million cars off the road.  Furthermore, the EPA does not find that the additional cost of producing RFG Phase II (estimated to cost between 4 and 8 cents per gallon), the use of ethanol as a renewable additive, recent pipeline problems, the cost of replacing winter gas with the new summer blends, and some patent issues do not, even taken together, account for the increased gasoline prices in the Midwest.

    Some Michigan congressmen added that their districts are not in areas that were either affected by pipeline closures or were participating in the clean-burning gasoline (RFG) program, yet they are still experiencing highly elevated prices.  Rep. Bobby Rush (D-IL) suggested that since the Midwest petroleum industry was free to choose ethanol as its additive, and yet will not defend that choice now, it may be raising prices to get the public to reject it.  Browner stated that ethanol is a good domestic renewable, and while being used in other parts of the country, albeit not as heavily as in the Midwest, has not shown any serious influence on oil prices in those areas.

    Rep. Joe Barton (R-TX) accused the Administration of defining its energy policy "de facto" through EPA's policies.  Browner defended EPA's RFG Phase II June 1 start date as a deliberate target for reducing the season's smog and ozone problems.  Tauzin continued attacking the program as "inflexible and poorly timed" and blamed EPA for ruining thousands of Americans' summer vacations.

    Slater's opening statement discussed the Department of Transportation's response to recent pipeline failures, including the need to assess the safety of the pipelines that transport 60% of the nation's crude oil.  It also touched on the trucking of gas supplies and the development of more fuel-efficient vehicles.  He called for an end to congressional prohibitions on the review of the Corporate Average Fuel Economy (CAFE) standards.  His response to Rep. Bart Stupak's (D-MI) inquiry into the effect of removing the 18 cent excise tax was that it would not help to lower gasoline prices.

    Pitofsky summarized the reasons for the FTC investigation, citing the numerous theories circulating the hearing room.  He said that the report will address questions including which firms started the price increase and which followed, their levels of RFG and conventional gasoline at the times, the role of the RFG additives in price increases, the levels of production of RFG, and evidence of collusion.  Rep. Bill Luther (D-MN) stated that one federal entity, the administration or the departments, cannot be blamed for the gasoline price increases, but that a FTC investigation is needed to synthesize the numerous explanations.

    Panel II
    Justin D. Bradley, Director of Environmental Programs, Silicon Valley Manufacturing Group
    J.L. Frank, President, Marathon Ashland Petroleum, L.L.C.
    Marc Gerken, President, American Municipal Power, Ohio
    Ross Pillari, Group Vice President of Marketing Worldwide, BP Amoco
    Jerry Thompson, Senior Vice President, Citgo Petroleum Corporation
    Mark H. Brown, Executive Vice President, American Automobile Association
    Roger W. Gale, Senior Vice President, PHB Hagler Bailly
    David M. Nemtzow, President, Alliance to Save Energy
    Michael Ports, President, Ports Petroleum, Inc.

    The second panel's testimony is available at the House Commerce Committee web site.

    -A.S.

    Senate Committee on Energy and Natural Resources Hearing
    June 15, 2000

    Hearing to receive testimony on the goals and specific legislative provisions of S.2557,
    the National Energy Security Act of 2000.

    The Bottom Line
    The debates continued over S. 2557, the National Energy Security Act of 2000, the Republican leadership's broad energy policy bill.  Members of the committee heard testimony from former members of Congress, an administration official, and a number of nongovernmental witnesses.  The hearing provided another opportunity for majority members to voice their concerns over the current administration's energy decisions.  While witnesses mainly spoke in support of S. 2557 - to increase access to national resources, to maintain or develop emissions-free sources like hydroelectric and nuclear, and for better tax breaks for petroleum and gas development - several witnesses addressed about the ever-increasing transportation sector oil demands. Steve Plotkin, from Argonne National Laboratory's Center for Transportation Research, suggested that, in particular, even if  public lands are opened to exploration and production (E&P), decreased levels of oil consumption are necessary for the U.S. to meet future demand.

    Members Present
    Frank Murkowski (R-AK), Chairman
    Larry Craig (R-ID)
    Ben Nighthorse Campbell (R-CO)
    Craig Thomas (R-WY)
    Jim Bunning (R-KY)
    Jeff Bingaman (D-NM), Ranking Member
    Daniel Akaka (D-HI)
    Mary Landrieu (D-LA)

     

    Opening Statements
    Sen. Frank Murkowski (R-AK) began by expressing his concern that the U.S. needs a well-defined and balanced energy policy to promote energy security for the future.  He focused on Clinton-Gore's energy legacy of rising oil imports, decreasing domestic oil production, the predicted increases in gas and oil prices, as well as its opposition to the use of coal, nuclear, and hydroelectric power.  Sen. Jeff Bingaman's (D-NM) opening statement called for comments on S.1833, the Energy Security Tax Act of 1999, and S. 2557, noting that the latter did not attempt to reduce the demand for oil in the transportation sector that is responsible for more than two-thirds of total oil demand.  He expressed concern at the partisan tone of recent energy discussions, yet highlighted the positive aspects of the Administration's recent policies including supporting the OCS DeepWater Royalty Relief Act in 1995, and the privatization of the Elk Hills Naval Petroleum Reserve.

    Sen. Ben Nighthorse Campbell (R-CO) advocated the opening of federal lands for oil and gas development, and said that public and administrative support for the bill will increase if the price of gasoline rises above $3.00 per gallon.  Sen Craig Thomas (R-WY) suggested that the entire energy industry is over regulated and overtaxed.  Sen. Larry Craig (R-ID) said that although this energy bill may not be perfect, it at least has a clear goal.  Sen. Mary Landrieu (D-LA) praised and noted that both S. 2557 and S. 1833 provide impact assistance provisions for oil development areas.  Sen. James Jeffords, (R-VT) lauded the bill's provisions for home heating oil improvements, especially for the Northeast.  Sen. Daniel Akaka (D-HI) reaffirmed how important energy security is for the Hawaiian islands, but that environmental issues must be addressed in the plan for U.S. energy security.  Other opening statements were submitted for the record.

    Panel I
    Dr. Ernest Moniz, Undersecretary of Energy, DOE
    The Honorable J. Bennett Johnston, Johnston & Associates, Inc.

    Moniz stressed the need for a diversified portfolio of energy resources to attain U.S. energy security.  His testimony supported deregulation of electricity markets, reducing environmental impacts through the use of cleaner fuels and renewables, as well as new technology for the future.  He reiterated Bingaman's concerns over energy efficiency in the transportation sector, particularly in regard to better mileage for sport utility vehicles (SUVs).  In response to accusations from Sen. Murkowski that there has been no public process in the potentially altered status of federal lands, Dr. Moniz denied the DOE's knowledge of the Administration's plan to designate the Arctic National Wildlife Refuge (ANWR) a national monument.

    Johnston, a former democratic senator from Louisiana and former chairman of the Senate Energy and Natural Resources Committee, bashed the theme of  "let's pretend" that our current policies, such as those in the Gulf of Mexico, will not be as environmentally friendly on other U.S. properties.  He testified that Congress and the Administration should allow drilling in the ANWR, allow E&P activities in the Destin Dome area off the Florida panhandle, and extend the Deep Water Royalty Relief Act immediately to help the domestic oil industry.  He also recommended more competition in electricity restructuring, and an Early Action Program for Global Warming based on an efficiency approach where emission standards are set up for each industry.  He agreed with Senator Craig that the removal of four hydrodams on the lower Snake River would only serve to increase power shortages in the area, and increase transportation oil consumption, pollution, traffic and global warming.  Johnston also questioned the viability of the government's desire to raise the contribution of renewables to electricity production from 0.12% to 7.5%.

    Senator Murkowski closed the first panel by stating that "cheap gas is a thing of the past."

    Panel II
    Jerry Jordan, Chairman of the Independent Petroleum Association of America
    Paul Vermylen, President of Meenan Oil Co. Inc., representing the Independent Fuel Terminal Operators Association
    General Richard Lawson, USAF ret., President of the National Mining Association
    Jaime Steve, Director of Legislative Affairs, American Wind Energy Association
    Steve Plotkin, Transporation Systems Analyst, Argonne National Laboratory

    Jordan testified that his organization supports S. 2557, including the formation of additional federal oil reserves.  He stressed the need for industry to have greater access to capital through tax reforms such as a tax break for new drilling.  Jordan also argued that current federal environmental regulations are too stringent.

    Vermylen came to register his opposition to the federal heating oil reserve provision of the National Energy Security Act of 2000.  He testified that it would only serve to decrease supplies as the private sector would change their oil-buying habits knowing of its presence.  The reserve would also cost the government time, money, and endless regulations, and that the market economy should be left alone.

    Lawon advocated expanding Title IV of the bill, a provision to enhance the use of domestic energy resources and incentives.  He attested to the nation's dependence on coal, and offered up a new website for the Coalition for Affordable and Reliable Energy.

    Steve testified that investing in renewable resources is the way of the future.  He supported the tax credits for residential use of solar power but recommended adding the wind market to it.

    Steve Plotkin, from Argonne National Laboratory's Center for Transportation Research, was the first to suggest that decreased levels of consumption are necessary for the U.S. to meet future demand, even with the opening of federal lands to E&P.  He attributed the demand increase in part to a decline in fuel efficiency, and pointed out that the three major American car manufacturers have already promised to increase fuel efficiency by one-third or more for their European markets.

    -A.S.

    House Committee on Resources Hearing
    April 12, 2000

    Compromising Our National Security by Restricting Domestic Exploration
    and Development of Our Oil and Gas Resources

    The Bottom Line
    Members of the Committee heard testimony from a range of witnesses on how the current oil price affects their community. Testifying were members of Congress, administration officials, and a number of non governmental witnesses. American Association of Petroleum Geologists President Ray Thomasson provided the view of the petroleum geology community, noting that declines in domestic production of crude oil and flat levels of natural gas production are the result of declining opportunities for exploration but not because the resources are not there to be found.

    Members Present
    Don Young (R-AK), Chairman
    Elton Gallegly (R-CA)
    John Duncan (R-TN)
    Ken Calvert (R-CA)
    Richard Pombo (R-CA)
    Barbara Cubin (R-WY)
    Helen Chenoweth (R-ID)
    James Gibbons (R-NV)
    Bruce Vento (D-MN)
    Dale Kildee (D-MI)
    Peter DeFazio (D-OR)
    Eni Faleomavaega (D-AS)
    Adam Smith (D-WA)
    Chird John (D-LA)
    Mark Udall (D-CO)

    Chairman Don Young (R-AK) began his opening statement by saying,  "Essentially our energy policy consists of the Clinton-Gore Administration sending diplomats abroad to beg other nations for the oil necessary to supply our national demand. This Committee's jurisdiction relates to public lands, so our focus today will be on how public lands can play a meaningful role in protecting our national security by increasing domestic production and reducing our reliance on foreign sources of energy."  Decrying such "kneepad diplomacy," he continued in his opening remarks to assert the need for the Administration to open the Arctic National Wildlife Refuge (ANWR) to domestic exploration and production.  Because of the long list of panelists, opening statements were kept to a minimum and focused on partisan statistics and views on the current oil price debate.

    Panel I
    The Honorable Richard K. Armey (R-TX), Majority Leader
    The Honorable Tom DeLay (R-TX), Majority Whip
    The Honorable George W. Gekas (R-PA)
    The Honorable Steve Largent (R-OK)
    The Honorable Vito Fosella (R-NY)

    Most of the witnesses focused on the need for the United States to develop a long-term energy policy based on self reliance and current legislation in Congress to move toward this goal.  Representative Largent expressed in his testimony that the Clinton Administration has concluded twice that "imported oil poses a serious threat to our national security," but little has been done to help improve domestic production of energy, especially petroleum and natural gas.  Rep. Gekas talked primarily about H.R. 4035, the Natural Resource Governance Act of 2000, which was cosponsored by Young.  The bill would commission the review of the current domestic energy production and the development of a plan for the U.S. to become energy self-sufficient by 2010.  The panelist also elaborated on the Clinton Administration's trend of abusing the Antiquities Act and other presidential powers to limit the availability of public lands for exploration and production (E&P) activities.

    Panel II
    The Honorable J. Bennett Johnston, Johnston & Associates, Inc.
    David J. Hayes, Deputy Secretary, U.S. Department of the Interior
    Bob Gee, Assistant Secretary for Fossil Energy, U.S. Department of Energy

    J. Bennett Johnston, a former senator from Louisiana, testified that Congress and the Administration should allow drilling in the Arctic National Wildlife Refuge (ANWR), allow E&P activities in the Destin Dome areas off the Florida panhandle, and extend the Royalty Relief Act immediately to help the domestic oil industry.  He echoed the first panel's concern over how dependency on foreign oil, especially from politically unstable states, threatens national security.

    David Hayes gave testimony on the issue of E&P access to federal lands.  In his testimony, Hayes said, "The Administration believes that the best interest of the American people and the oil and gas industry is served by a balanced policy consisting of promoting exploration and development where appropriate, protecting our natural heritage, and fostering the development of conservation and alternative energy sources."  His testimony also outline activities at the Department of the Interior related to E&P.

    Assistant Secretary Bob Gee began his testimony by discussing the current energy policy developed by President Clinton and Secretary of Energy Bill Richardson -- a long-term plan based on "market forces,' improving efficiency, and "pursuing diverse sources of supply and strong diplomatic relations with energy producing nations.  He advocated for royalty crude oil normally delivered to the Strategic Petroleum Reserve to be diverted until "conditions are more favorable for putting crude oil in the Reserve," tax incentives for domestic exploration, development and production activities, and several other steps proposed by the Administration.

    Panel III
    Dr. M. Ray Thomasson, President, American Association of Petroleum Geologists
    Robert E. Ebel, Director, Energy Program, Center for Strategic and International Studies
    Jerry Jordan, Independent Petroleum Association of America
    Howard Geller, Executive Director, American Council for an Energy-Efficient Economy
    Gerald L. Hood, Secretary-Treasurer, General Teamsters Local 959, Anchorage, Alaska

    American Association of Petroleum Geologists President Ray Thomasson provided the view of the petroleum geology community, noting that declines in domestic production of crude oil and flat levels of natural gas production are the result of declining opportunities for exploration but not because the resources are not there to be found.  He also discussed the need for access to federal lands and the fear of future removal of federal lands, "especially by the sole action of the President of the United States." Thomasson ended his testimony by saying, "I am confident that the domestic petroleum exploration and production industry can deliver the oil and gas resources needed to help maintain this country on a course of continuing prosperity."  Jerry Jordan, representing the Independent Petroleum Association of America, echoed this sentiment and added that the federal government needs to do more to "improve capitol flow" into the industry.  Other panelists discussed the need for incentives to develop technology for more efficient use of energy and how the price hike has affected jobs.

    Panel IV
    Joseph H. Hegna, ARCO Alaska Inc.
    Dan Becker, Sierra Club
    Charles Bedell, National Ocean Industries Association
    Walter B. McCormick, Jr., President and CEO, American Trucking Associations
    Monica T. Surprenant, Chairwoman, Louisiana State Mineral Board

    The third panel was a hodge-podge representing the private industry, an environmental organization, a professional organization, and a state agency.  Hegna discussed the use of new technology to help reduce environmental impact, especially in the North Slop of Alaska, and ARCO's current activities.  Becker insisted that drilling should not occur in ANWR and said the long-term approach to stabilizing oil prices is through supporting energy efficiency.  McCormick echoed the sentiment of several hundred truckers who have converged on the Hill to express their frustration with the current diesel fuel prices.  Surprenant testified on technologies used in the outer continental shelf drilling activities off the coast of Louisiana to minimize environmental impact.

    -A.A.

    Senate Committee on Energy and Natural Resources Hearing
    February 24, 2000

    Hearing to examine energy supply and demand issues related to crude oil, heating oil,
    and transportation fuels in light of the rise in price of the fuels

    The Bottom Line
    This hearing gave the committee members a chance to vent their concerns about the Clinton Administration's policy regarding energy resources.  Witnesses expressed the opinion that the United States' dependence on foreign petroleum puts the country in a predicament when it comes to economic and national security concerns.  While the witnesses mainly discussed the commodities market, they also noted that the fluctuation in the cost of oil could be dampened by the production of more domestic petroleum.
     

    Members Present
    Chairman Frank Murkowski (R-AK)
    Sen. Pete Domenici (R-NM)
    Sen. Larry Criag (R-ID)
    Sen. Ben Nighthorse Campbell (R-CO)
    Sen. Craig Thomas (R-WY)
    Sen. Jim Bunning (R-KY)
    Sen. Peter Fitzgerald (R-IL)
    Sen. Conrad Burns (R-MT)
    Sen. Slade Gorton (R-WA)
    Ranking Member Jeff Bingaman (D-NM)
    Sen. Danial Akaka (D-HI)
    Sen. Ron Wyden (D-OR)
    Sen. Blanche Lincoln (D-AR)
    Sen. Tim Johnson (D-SD)
     
     

     

    The majority of the Senators present used their opening statement time as an opportunity to slam the Clinton Administration's lack of an effective national policy regarding domestic energy production.  Chairman Murkowski noted that since Clinton took office, domestic oil production has gone down 17% while consumption has gone up by 14%.  He blamed overly strict environmental policy that has closed many areas of the country to exploration and development as one of the causes of the decrease in national oil productivity.  Many senators identified the decreasing number of refineries and storage facilities as part of the cause of decreased domestic production and increased oil and gas prices.

    Most senators acknowledged that the price of oil was at an all-time low last year (see AGI website for details).  Sen. Wyden said that the government now has a double standard for their relationship with industry  --  "they intervene in situations such as this in order to help industry, but sit on their hands when it comes to helping the consumer."  Sen. Wyden also said that a number of small refineries have shut down because of the three large mergers in the oil industry  --  "the large companies are squeezing out the smaller producers."

    Sen. Slade Gorton took the opportunity to express his opinion about the effects of hydro-electric dams in the Northwest.  He noted that the Clinton Administration's "Alice in Wonderland" energy policies of foreign oil dependence are antithetical to dam removals in the state of Washington. "Trucks would replace river barges, putting 700,000 more trucks on the road.  It is arrogant to assume that we can use the rest of the world's oil."

    Sen. Johnson noted that the situation shows that there needs to be a greater focus on alternative energy sources.  Sen. Akaka said that the "Clinton Administration deserves nothing but praise" because they are trying to keep the country prepared through supplements to the Strategic Petroleum Reserves (SPR).

    Witnesses:
     James R. Schlesinger, Senior Advisor, Lehman Brothers
    Dr. John Cook, Petroleum Division Director, Energy Information Agency, Department of Energy
    Adam Sieminski, Director and Oil Strategist, Deutsche Banc Alex. Brown

    The first panel of witnesses seemed to agree that gas prices would go back down within the next several months.  The rise in prices was spurred by production cuts by the Organization of Petroleum Exporting Countries (OPEC), after the bottoming out of oil prices about a year ago.  The prices should go back down as the commodity market corrects itself (EEnews, 2/24/00).

    Schlesinger, a former cabinet member, noted that the present gas prices should serve as a "wake-up call" to the growing dependence of the United States on foreign energy resources.    He said that dependence on foreign oil threatens both the economic and national security of the United States.  On the economic side, the U.S. spends about $300 million a day on foreign oil, a major contributor to the massive trade deficit.  Schlesinger also noted that our dependence on foreign oil strongly inhibits U.S. foreign policy.  His solution is the opening of areas, such as the Arctic National Wildlife Refuge, that are currently closed to exploration and production.

    According to Dr. John Cook, the rising prices in crude oil have "encouraged refiners to constrain crude oil purchases, restrict product production, and draw down inventory to meet demand."  This has led to an increase in the price of both residential heating oil and retail diesel fuel.

    Sieminski predicted that oil prices,  now close to $30 a barrel, should go back down to close to $20 in the second half of the year.  He said that what happens depends on how Saudi Arabia and other OPEC nations respond to the current situation.

    -A.A.


     Sources: hearing testimony, Senate website, House of Representative website, and EENews.

    Please send any comments or requests for information to the AGI Government Affairs Program.

    Contributed by 1999-2000 AGI/AAPG Geoscience Policy Intern Alison Alcott, Margaret Baker, AGI Government Affairs; and 2000 AGI/AIPG Geoscience Policy Interns Audrey Slesinger and Nathan Morris.

    Posted February 29, 2000; Updated December 18, 2000