Summary of Hearings on Energy (7-23-04)
- February 13, 2003: Senate Energy and
Natural Resources Hearing on Oil Supply and Prices.
- February 25, 2003: Senate Energy and
Natural Resources Hearing on Natural Gas Supply and Prices.
- June 10, 2003: House Committee on Energy
and Commerce Hearing on Natural Gas Supply and Demand Issues.
- June 19, 2003: House Committee on Resources
Subcommittee on Energy and Mineral Resources Hearing on Domestic
Natural Gas Supply Shortages.
- June 24, 2003: House Committee on Resources
Subcommittee on Energy and Mineral Resources Hearing on The
Ability of Federal Lands to Meet our Energy Needs.
- June 24, 2003: House Committee on Energy
and Commerce Subcommittee on Energy and Air Quality Hearing
on Future Options for Generation of Electricity from Coal.
- July 10, 2003: Senate Committee
on Energy and Natural Resources Oversight Hearing on Natural
- July 22, 2003: House Resources Subcommittee
on Energy and Mineral Resources Hearing on H.R. 2772, the "The
John Rishel Geothermal Steam Act Amendments of 2003."
- May 12, 2004: Senate Environment and
Public Works Full Committee Hearing to Examine the Environmental
and Regulatory Procedures Affecting Oil Refining and Gasoline
- May 19, 2004: House Science Committee
Subcommittee on Energy Hearing on "The Impact of Federal
Energy Efficiency and Renewable Energy Research and Development
- May 20, 2004: House Science Committee
Subcommittee on Energy Hearing, "An Examination of H.R.
3890, a Bill to Reauthorize the Metals Program at the Department
- June 15, 2004: Senate Energy and Natural
Resources Full Committee Hearing, "What Drives Fuel Prices?"
- June 15, 2004: Senate Commerce, Science
and Transportation Full Committee Oversight Hearing on Pipeline
- June 17, 2004: Senate Energy and Natural
Resources Full Committee Hearing, "The Environmental Management
Program at the Department of Energy: Issues Associated with
- July 8, 2004: House Energy Subcommittee
Hearing, "Forecasting Our Energy Future: Why Do We Get
Different Answers to Our Questions on Natural Gas?"
- July 15, 2004: House Subcommittee on
Energy and Mineral Resources Oversight Hearing: "Advances
in Technology: Innovations in the Domestic Energy and Mineral
- July 15, 2004: House Subcommittee on
Energy and Air Quality Hearing: "The Status of the U.S.
- July 20, 2004: House Energy and Commerce
Subcommittee on Energy and Air Quality hearing on Pipeline Safety
anc Commerce Committee
Energy and Air Quality
Hearing on Pipeline Safety
July 20, 2004
The Honorable Samuel G. Bonasso, Deputy Administrator, Research and
Special Programs Administration, Department of Transportation
Katherine Siggerud, Director, Physical Infrastructure Issues, Government
The Honorable Kenneth Mead, Inspector General, Department of Transportation
Earl Fischer, Senior Vice President, Atmos Energy Corporation; representing
Barry Pearl, President and CEO, TEPPCO Partners, L.P.; representing
Association of Oil Pipe Lines and the American Petroleum Institute
Breean Beggs, Executive Director, Center for Justice; representing
Pipeline Safety Trust
Paul Koonce, Chief Executive Officer, Dominion Energy; representing
Interstate Natural Gas Association of America
Robert Kipp, Executive Director, Common Ground Alliance
The Energy and Commerce Subcommittee on Energy and Air Quality met
with Department of Transportation and the Government Accountability
Office (GAO) officials, energy industry representatives, and pipeline
safety advocacy groups to discuss the issue of pipeline safety. In
2002, Congress passed the Pipeline Safety Improvement Act (PSIA) (H.R.3609),
which calls for a risk-based approach to pipeline safety management,
called the Integrity
Management Program (IMP). In this program, pipeline operators
identify "high consequence" areas and prioritize these in
their safety inspections. PSIA also calls for increased public education
and access to information about pipeline safety and strengthens federal
and state pipeline safety programs.
The GAO released a preliminary report on the Department of Transportation
Office of Pipeline Safety's (OPS)
actions toward implementation of the PSIA. Katherine Siggerud, Director
of Physical Infrastructure Issues at GAO, testified that although
the OPS has had some success implementing the IMP aspect of PSIA,
the number of accidents involving death, injuries, or property damage
of $50,000 or more has not fallen. Siggerud said that OPS needs to
develop clear program goals and an achievement strategy for enforcing
pipeline operator compliance with PSIA. She said that no conclusions
could be made at this time regarding the effectiveness of OPS enforcement
Samuel Bonasso of the Department of Transportation testified to the
successes of OPS recent actions to raise standards for pipeline safety,
improve technology, increase enforcement of standards, and improve
state, local, and inter-agency coordination. He said that the OPS
is "aggressively responding" to the mandates of PSIA in
several ways, most importantly by finalizing the regulations of IMPs.
He said that the OPS will finalize rules on technical assistance grants
to local communities within a year.
Kenneth Mead, Inspector General of the Department of Transportation,
testified that the OPS has made significant progress complying with
PSIA mandates. He also said that too many interests have the ability
to block progress on pipeline relocation or repair, causing the failure
of OPS to comply with some mandates. He suggested that the roles of
agencies such as the Department of Homeland Security, Department of
Transportation, and Department of Energy, should be specifically outlined.
Siggerud agreed with this idea. He expressed frustration that although
natural gas transmission pipeline operators are required to have IMPs,
natural gas distribution pipeline operators are not required to have
IMPs although the distribution lines still pose serious risks to human
Earl Fischer, on behalf of the American
Gas Association and the American
Public Gas Association, testified that natural gas distribution
lines are sufficiently regulated by federal and, more importantly,
state authorities. Fischer and Paul Koonce, of the Interstate
Natural Gas Association of America, outlined the actions the natural
gas industry is taking to comply with PSIA. Fischer, Koonce, and Barry
Pearl of the Association of Oil Pipe
Lines and the American
Petroleum Institute testified in support of streamlined repair
permitting and increased coordination among stakeholders and federal
Breean Beggs of the Center for Justice and the Pipeline Safety Trust,
said that he would like to see mandated testing of a greater portion
of pipelines than required in the IMP rules, a stronger enforcement
of regulations by OPS, and an increased financial responsibility of
oil and gas companies that have pipeline accidents. He contends that
energy companies who contract out to seperate pipeline companies can
evade responsibility for accidents while pipeline companies go bankrupt.
Robert Kipp of the Common
Ground Alliance described the ways in which pipeline safety stakeholders
are working together to improve pipeline safety through research,
public awareness, and coordination of interested parties.
and Air Quality Subcommittee
"The Status of the U.S. Refining Industry"
July 15, 2004
Guy Caruso, Administrator, Energy Information Administration, Department
The Honorable Jeffrey Holmstead, Assistant Administrator for Air and
Radiation, Environmental Protection Agency
Jim Wells, Director, Natural Resources and Environment, Government
William Kovacic, General Counsel, Federal Trade Commission
Gene Edwards, Senior Vice President, Supply, Trading and Wholesale
Marketing, Valero Energy Corporation
Arjun Narayana Murti, Managing Director, Goldman, Sachs & Co.
Mark Cooper, Director of Research, Consumer Federation of America
Bob Slaughter, President, National Petrochemical and Refiners Association
Blakeman Early, Environmental Consultant, American Lung Association
Red Cavaney, President, American Petroleum Institute
Eric Schaeffer, Director, Environmental Integrity Project
Bill Douglass, CEO, Douglass Distributing
The House Energy and Air Quality Subcommittee met on July 15th to
address the state of the oil refining industry in the United States,
which has been a popular topic due to elevated gas prices and speculation
that those prices will continue to rise. Fifteen representatives were
present for the hearing and were eager to gain a better understanding
of how the oil refining industry is affecting the price of gasoline.
In their opening statements, members shared their mixed opinions over
whether or not new refineries should be built. Gene Green (D-TX) argued
in favor of building new refineries, pointing to the fact that it
would be easier to drill and produce oil in the U.S. than bring peace
to Middle East. John Shimkus (R-IL) was also in favor of building
new refineries, citing statistics that showed most refineries are
running at 98% capacity and no new refineries have been built in 28
years. On the other hand, Henry Waxman (D-CA) and Lois Capps (D-CA)
expressed their disapproval of H.R.
4517, the United States Refinery Revitalization Act of 2004, saying
it would compromise the health of the environment and provide an inadequate
solution to increasing gas prices and dependence on fossil fuels.
Billy Tauzin (R-LA), former chair of the Committee, was invited to
speak by current Committee Chair Joe Barton (R-TX). Rep. Tauzin informed
the Committee that it doesn't make sense to refine oil overseas, which
is the inevitable consequence of rising demand and diminishing refinery
capacity in the U.S. He also stressed the importance of getting past
the Republican/Democrat divide on this issue and thinking as Americans
Witnesses cited several causes of elevated gas prices. Guy Caruso,
Administrator of the Energy Information Administration (EIA), explained
the EIA's analysis of the refinery situation reveals petroleum prices
would still be high even if more refining capacity was available,
but increasing capacity would most likely reduce price volatility.
He also shared that expanding existing refineries has been more economically
advantageous than investing in the construction of new facilities,
which the EIA projects will continue to be the case as the demand
for petroleum prices continues to rise. Jim Wells testified to the
Committee on a recent Government Accountability Office (GAO) report
that analyzed the effect of mergers on the refining industry. The
report shows high gas prices are the result of many factors, including
mergers, which have lead to increased market concentration, specialized
gasoline blends that are more difficult to produce, and refineries
running near maximum capacity, which diminishes their flexibility
to respond to increased demand. Dr. Cooper, testifying on behalf of
the Consumer Federation of America, agreed with the findings of the
GAO report, saying the concentration of supply into a few companies
and consequent lack of competition is the main cause of high gas prices,
not crude oil availability or refining capacity. He suggested promoting
a more competitive industry as well as increasing efficiency on both
the supply and demand side to increase market flexibility and ultimately
lower prices. Jeffrey Holmstead from the Environmental Protection
Agency (EPA) defended the environmental regulations placed on oil
refineries, stating that steep increases in crude oil prices have
been the cause of higher gasoline prices, not environmental regulations.
He also said gasoline blends ("boutique fuels") and the
permitting process for refineries were not significantly influencing
gas prices or preventing an increase in refining capacity, but were
necessary to meet clean air requirements. Eric Schaeffer, Director
of the Environmental Integrity Project, told the Committee that, due
to the steady increase in U.S. refining capacity reported by the EIA,
there is no crisis in the refining industry. Therefore, he argued
that H.R. 4517 was unnecessary and would give the Department of Energy
(DOE) too much regulatory authority over the states. Additionally,
he presented the Committee with a list of 14 petroleum refineries
with outstanding notices of violation, showing enforcement of current
regulations has not been adequate.
and Mineral Resources Subcommittee Oversight Hearing
"Advances in Technology: Innovations in the Domestic
Energy and Mineral Sector"
July 15, 2004
William F. Whitsitt, President, Domestic Petroleum Council
Bernard Padovani, Vice President, Compagnie Generale de Geophysique
Vello A. Kuuskraa, President, Advanced Resources International, Inc
Bill Griffin, Vice President, Onshore & Offshore Divisions, El
Paso Production Company
Timothy S. Collett, U.S. Geological Survey, Denver Federal Center
Sam Enfield, Vice President of Development, Atlantic Renewable Energy
Bob Lawrence, Bob Lawrence & Associates, Inc.
Brook Phifer, NiCo Resource, LLC
Subcommittee on Energy and Mineral Resources held an oversight
hearing on July 15th to discuss technological advances that will help
domestic energy production. Chairman Barbara Cubin (R-WY) was very
optimistic that developing technologies will allow the US to have
energy security as well as a clean environment. Representative Richard
Pombo (R-CA) praised the US for having the most advanced technology,
toughest standards, and best workforce in the world. All witnesses
also testified to the encouraging role technology will play in securing
our energy future and benefiting the environment. They pointed out
that the process of finding and producing energy has dramatically
changed in the past twenty years - what was once thought impossible
is now reality in a relatively short time period. Vello Kuuskraa,
President of Advanced Resources Internationl, Inc., reported that
traditional oil recovery methods only extract one third of the oil
in a field; recent technology has helped to increase this figure.
Technology has also advanced environmentally sound energy production
by minimizing impacts and enhancing mitigation and restoration techniques.
Whitsitt, President of the Domestic Petroleum Council, testified
that well pad size has been significantly reduced from an average
of six acres to 1.5 acres in some areas as a result of new technology.
Padovani from the Compagnie Generale de Geophysique explained
to the Committee that advances in deep seismic imaging has greatly
reduced the number of wells drilled unnecessarily. Technology will
also enable renewable energy sources to contribute to energy production
in the US. Several witnesses detailed the progress wind, geothermal
and gas hydrate research has made toward developing these sources
into a major component of the US energy portfolio. The Committee agreed
with a 1999 Clinton Administration report
that emphasized energy production, environmental progress, and economic
vitality all go hand-in-hand.
"Forecasting Our Energy Future: Why Do We Get Different
Answers to Our Questions on Natural Gas?"
July 8, 2004
Mary Hutzler, Director of the Office of Integrated Analysis and Forecasting
at the Energy Information Administration
Dr. Donald Hanson, Program Manager for the Argonne Multi-sector Industry
Growth Assessment (AMIGA) model at Argonne National Laboratory
Harry Vidas, Modeling Team Leader for Energy and Environmental Analysis
Dr. Stephen DeCanio, Professor of Economics at University of California,
Richard Munson, Executive Director Northeast-Midwest Institute
The House Energy Subcommittee met July 8th to discuss
economic models and their accountability when applied to predicting
natural gas prices. The discussion was spurred by Chairman Judy Biggert's
(R-IL) concern over natural gas prices, which have nearly tripled
since 2000, from $2 to $6 per million BTU. Economic models have been
increasingly used as tools for making policy, but the fact that none
were able to accurately predict the current spike in natural gas prices
raised questions about their effectiveness. The discussion revealed
that natural gas prices have been difficult to predict due to the
complex nature of models and the variations in the underlying assumptions
of the various models, which are often biased and unclear. Weather
is the most unpredictable of these assumptions, but factors such as
liquefied natural gas (LNG) production and imports, crude oil prices,
and production capacity can all drastically change the output of the
models. Currently, oil prices have risen $10, which is putting pressure
on natural gas supplies as power plants are turning to this resource
for energy, consequently raising natural gas prices. Representative
Ehlers (R-MI) was especially concerned that the models were unable
to account for the diminishing availability of natural resources,
particularly natural gas, and instead assumed that, as long as there
was demand, we could find the supply either domestically or overseas.
Dr. DeCanio, an economics professor at U.C. Santa Barbara,
explained to the Committee that physical models, such as climate change
models, were much more reliable than economic models, which do not
follow the laws of nature. The large volume of variables makes them
very complex, and he argued that care should be exercised when using
them for something as important as policy. Mary Hutzler from the Energy
Information Administration (EIA) commented that the models are only
as good as the data used to create them, stressing that investing
in the collection of quality data was necessary to help the models
be more useful to policy makers when predicting gas and oil prices.
As an answer to the current dilemma of high natural gas prices, Dr.
Hansen from the Argonne National Laboratory suggested focusing on
using hybrid technologies to relieve the pressure on natural gas resources
until technology, which has an unpredictable rate of development,
has a chance to improve the efficiency with which natural gas is used
and extracted. The National Energy Modeling System (NEMS), developed
by the EIA, found that there is no statistically significant relationship
between research and development investment and technology advancement,
showing that research alone is not the best answer to the problem.
The models were also unable to factor in the developing LNG industry
as well as safety issues accompanying this global industry. The models
do, however, include calculations for greenhouse gas emissions and
other pollutants. Hutzler reported that the models have been recently
used to asses the economic effects of the Clear Skies Initiative and
the McCain-Leiberman climate change proposal.
and Natural Resources Full Committee Hearing
"The Environmental Management Program at the Department
of Energy: Issues Associated with Accelerated Cleanup"
June 17, 2004
The Honorable Jessie H. Roberson, Assistant Secretary for Environmental
Management, Department of Energy
Gregory H. Friedman, Inspector General, Department of Energy
Glen S. Podonsky, Director, Office of Security and Safety Performance,
Department of Energy
The Senate Energy and Natural Resources Committee met June 17th to
discuss the Department of Energy's (DOE) nuclear waste accelerated
cleanup program. One hundred fourteen sites are being cleaned up through
the program, which costs $7.4 billion or one third of the DOE budget.
There are some critics of the program, such as Senator Ron Wyden (D-OR),
who said that accelerated cleanup is "just walking away faster."
The committee heard testimony
from Jessie Roberson, the Assistant Secretary of Environmental Management
at the Department of Energy, who has been in charge of the program
since 2001. Two federal investigators also testified
regarding DOE compliance with worker safety at the Hanford site in
Roberson testified to the successes of the DOE program including
increased speed and efficiency of contaminated site cleanups. She
cited several specific examples of progress at sites including Savannah
River in South Carolina, the Idaho
National Laboratory, and the Hanford
site in the state of Washington, noting many instances where work
is being completed ahead of schedule. She said that both state and
federal regulators review the sites and contended that accelerated
cleanup has been an effective, proactive cleanup strategy.
Pacific Northwest Senators Ron Wyden and Maria Cantwell (D-WA) questioned
Roberson regarding the cleanup of the Hanford Site. They said they
had been informed that the DOE intends to clean up only 90 percent
of residual waste in underground tanks, although the DOE had previously
agreed to clean up 99 percent of the waste. After being pressed by
the Wyden and Cantwell, Roberson affirmed that the DOE will remain
committed to cleaning up 99 percent of the waste. Roberson said she
would submit that commitment in writing, although she did point out
that the DOE is legally required to continue to explore other cleanup
The committee also discussed some aspects of the Department of Defense
authorization bill, which awaits final vote by the Senate and allows
the DOE to reclassify Savannah River high level waste mixed with grout
to be reclassified low level waste. Senators Lindsey Graham (R-SC),
Mike Crapo (R-ID), Larry Craig (R-ID) recently led the passage of
an amendment that will prevent any precedent from being set by the
authorization bill in states with nuclear waste sites such as Idaho,
Washington, and Oregon. The amendment also calls for intensified study
of waste treatment techniques.
Senator Bingaman (D-NM) raised the question of whether the DOE or
the Nuclear Regulatory Commission (NRC)
should have jurisdiction in the classification of waste. The NRC sets
waste classification standards, although currently the DOE has the
authority to interpret the standards--for example, high level waste
mixed with grout may be reclassified by the DOE as low level waste.
Roberson said that the DOE collaborates closely with the NRC when
classifying waste and would readily comply if the NRC were to be given
the sole authority to classify waste.
Bingaman also enquired about the new Office of Future Liabilities
proposed in the DOE FY 05 budget request. Roberson said that the office
would be created to put together a comprehensive timeline of site
cleanups and prevent the drainage of resources away from actual cleanup
Roberson expressed continued support of the Yucca Mountain repository,
saying that it is a vital part of the DOE nuclear waste management
plan. During an emotional moment she also said that she is astounded
by the amount of work the DOE and its partners have accomplished in
moving the waste cleanup program forward. She will resign from her
position in July.
Science and Transportation
Full Committee Oversight Hearing on Pipeline Safety
June 15, 2004
Samuel Bonasso, Acting Administrator, Research and Special Programs
Administration, U.S. Department of Transportation
The Honorable James L. Connaughton, Chairman, Council on Environmental
The Honorable Ken Mead, Inspector General, Department of Transportation
Kate Siggerud, Director, Physical Infrastructure Issues, U.S. General
The Honorable Mark Spitzer, Chairman, , Arizona Corporation Commission
Lois Epstein, P.E., Senior Engineer, Cook Inlet Keeper
Barry Pearl, President and CEO, TEPPCO Partners, LLC, on behalf of
the Association of Oil Pipelines
R. Earl Fischer, Senior Vice President, Utility Operations, Atmos
Energy Corporation, on behalf of the American Gas Association and
the American Public Gas Association
Robert T. Howard, Vice President and General Manager, Pipeline Operations,
Gas Transmission Northwest Corporation, on behalf of the Interstate
Natural Gas Association of America
On June 15th, Senator McCain (R-AZ) presided over the full committee
hearing on pipeline safety. Senator Lautenberg (D-NJ), Senator Cantwell
(D-WA), and Senator Murray (D-WA) were also present. Testimony was
given by eight witnesses on the implementation of the Pipeline Safety
Improvement Act of 2002 (H.R.
3609). This act was originally proposed by Senator Lautenberg
in 1994 in response to a deadly natural gas pipeline explosion in
New Jersey. The aging pipeline infrastructure in the U.S. has lead
to concern over the safety and environmental hazards they present.
Pipes are a critical component of our economy; roughly 63% of U.S.
energy is transported through these pipelines which are a safer, more
efficient mode of transportation compared to barge or truck transportation.
Additionally, the threat of terrorist attacks has heightened the need
for Federal assistance in maintaining the safety of the pipes.
In the past two years, the Office of
Pipeline Safety (OPS) has attempted to implement the rules and
regulations defined by this act concerning oil and natural gas pipelines.
The general consensus of the witnesses was that OPS has done a good
job overseeing the repair and improvement of the pipelines and the
act overall is working well. But, they also point out that it is still
too early to truly know its effectiveness and there is still much
improvement needed. Components of the act that received praise included
the three-digit emergency number, standardization of operator regulations,
pipeline mapping, and inspection procedures. Funding for research
and development projects has also increased from $2.7 million to $9
million, increasing the number of research projects from 1 in 1999
to 22 today.
Progress has been made with the implementation of the Integrity Management
Programs, which are responsible for assessing the risks associated
with pipelines. The phases of this program are expected to be completed
by 2009 and 2012, but several witnesses commented that the industry
is ahead of schedule. The pipelines have been ranked according to
whether or not they pose a "high consequence" risk, defined
as pipes located in environmentally sensitive or densely populated
areas. Roughly half of the 41,000 total high consequence pipes have
been thoroughly inspected. The inspections process, although much
more thorough, has come at a much higher cost than previously calculated.
Improved technology has made it easier to monitor these pipes, but
this technology has also revealed that there are more problems with
the pipes than originally anticipated. Senator Cantwell expressed
concern over whether or not the pipes that have already been inspected
have since had any leaks or explosions. None of the witnesses had
an answer to this question. Lois
Epstein, of Cook Inlet Keeper, who was more doubtful of the act's
success, said the occurrence of incidents has only decreased by 3.5%
in the last three years.
Each of the witnesses also expressed several concerns about the act.
One, brought up by Ken
Mead of the Department of Transportation (DOT), dealt with the
inadequate permitting process. Although the act provides for timely
repairs of high consequence pipes, many projects are still required
to obtain anywhere between 8 and 40 permits before they can proceed.
He cited the explosion of a pipe in California last April that had
been identified as a high risk, but the permitting process prevented
its relocation before the accident happened. Many other witnesses
concurred that the act has insufficiently improved the permitting
Kate Siggerud, from the U.S. General Accounting Office, explained
that the civil penalties for not complying with the new regulations
needed to be higher to act as a better deterrent. Some regulatory
gaps were also discussed. Senator Lautenberg and Ken Mead agreed that
the security roles of the DOT, Department of Energy (DOE), and Department
of Homeland Security (DHS) were not clearly defined, making the act
less effective, especially when it came to the threat terrorism poses
on pipelines. Enhanced communication between agencies was also stressed,
as well as the importance of monitoring rural pipelines.
Additionally, several witnesses were concerned about the effects
implementing these regulations would have on consumer prices of natural
Howard, speaking on behalf of the Natural
Gas Association of America, explained that repairing pipes will
most likely affect natural gas prices due to the increased demand
and limited pipe capacity as repairs are made, making several of the
deadlines hard to meet.
Although not mandated by the act, all witnesses were in opposition
of the proposed move of OPS to the Federal Railroad Administration
(FRA), claiming it was unnecessary and would only hinder the forward
momentum of the act. Senator McCain said he would write a letter discouraging
this action, following with legislation if the letter was not sufficient.
and Natural Resources Committee
Full Committee Hearing "What Drives Fuel Prices?"
June 15, 2004
Guy F. Caruso, Administrator, Energy Information Administration, Department
Red Cavaney, President, American Petroleum Institute
John Kilduff, Senior Vice President, Energy Risk Management Group,
Fimat USA, Inc.
David Berry, Vice President, Swift Transportation, on behalf of the
American Trucking Association
The Senate Energy and Natural Resources Committee met June 15th to
discuss the causes of recent high fuel prices. Guy
Caruso of the Energy Information Administration at the Department
of Energy told the committee that oil prices have dropped in the last
three weeks, and should continue to drop to $35 per barrel from the
current $37.50 cost by the end of the year absent any major disruptions.
Republican committee members urged passage of the Senate energy bill
throughout the hearing, while Democrats continued to argue in favor
of other solutions to current energy problems.
One solution offered by Democrats is the opening of the Strategic
Petroleum Reserve (SPR). Democrats Charles Schumer (NY), Ron Wyden
(OR), and Byron Dorgon (ND) pressed the issue of the reserve during
the hearing, arguing that it can be used as a tool to pressure Organization
of Petroleum Exporting Countries (OPEC) to lower crude oil prices.
Schumer recently proposed releasing 1 million barrels of oil per day
from the SPR for 30 days. Proponents of this action claim that the
effects of opening up even a small portion of the oil in the reserve
will be compounded in favor of the United States as OPEC adjusts to
a decrease American demand. John
Kilduff of the Energy
Risk Management Group said that the continuing addition of oil
to the SPR is contributing high oil prices, and agrees with the proposal
to release some oil. American
Petroleum Institute president Red
Cavaney said that the oil that could potentially be released from
the SPR will not provide a long-term solution to energy problems,
and that other steps such as refinery deregulation would be more effective.
Some Democratic committee members questioned the witnesses regarding
the possibility that recent price spikes are the result of corporate
market manipulation. Committee member Maria Cantwell (D-WA) alluded
to the possibility of a future federal investigation of oil company
profits and exporting activities. Caveny said that the petroleum industry
does not have the type of control over industry markets seen in other
business sectors. Senator Wyden also released a report
at the hearing called "Campaign of Inaction: The Federal Trade
Commission's Refusal to Protect Consumers from Consolidation, Cutbacks
and Manipulation in America's Oil and Gasoline Markets".
The hearing also featured some debate about the role of risk factors
in determining oil prices. Kilduff said in his testimony that "the
greatest factor determining prices is the perceived uncertainty or
vulnerability of future crude oil and gasoline supplies," and
that "there is a lot of air in the price [of oil] right now as
a result of troubles around the world." Caruso and Caveny continued
to argue that the most important factors causing price spikes are
increased demand, high crude oil prices, and refining capacity, and
that risk factors play only a small role in price changes. Committee
Chairman Pete Domenici (R-NM) agreed that risk factors have a strong
influence on oil prices. He used this point to illustrate the need
for comprehensive energy legislation, arguing that the U.S. should
work for solutions on issues it does have some control over such as
Caruso stated in his testimony that tight refinery capacity is a
contributing factor to high gas prices. Caveny said that a new refinery
would cost $2 to $3 billion and four years to build. "There are
other places people put their money," he said, noting the comparatively
low percentage of return (6.9% vs. 7.5% for other industries) gained
on refinery investments. He cited regulations that cost money and
lead to uncertainty as reasons for low interest in the current refining
business. To read a summary of a May 2004 hearing on the oil refineries,
Berry, representing the American
Trucking Association, focused his testimony on "boutique"
fuels, or fuels specific to localities and states. He said that
boutique fuels are subjected to little competition, driving prices
up in states such as California. He advocates the creation of a single
type of fuel for the nation to avoid price spikes in certain localities.
Senator Bingaman (D-NM) said that he believes the current count of
110 different fuels in the nation is excessive and should be reduced.
Berry said the situation is getting worse for trucking companies and
that he is unaware of any EPA action to lower the number of fuel types
in the nation. He could not say whether standardization would lead
to an overall price increase or decrease.
Discussion was also initiated by Alaskan Senator Lisa Murkowski (R)
regarding the Arctic
National Wildlife Refuge. She argued in favor of oil exploration
and noted the irony of $5.00 per gallon pump prices in her state.
Subcommittee on Energy
Hearing: "An Examination
of H.R. 3890, a Bill to Reauthorize the Metals Program at the
Department of Energy"
May 20, 2004
Douglas L. Faulkner, Principal Deputy Assistant Secretary for Energy
Efficiency and Renewable Energy, U.S. Department of Energy
Richard A. Shulkosky, Vice President for Sales, Marketing, and Product
Development, Integ Process Group
Lisa A. Roudabush, General Manager of Research, U.S. Steel Corporation
Dr. Ronald Sutherland, Consulting Economist and Adjunct Professor
of Law, George Mason University School of Law
The House Science Subcommittee on Energy met May 20th to discuss
3890, a bill to reauthorize the Metals Program at the Department
of Energy (DOE). The bill was introduced by Melissa Hart (R-PA) in
March in an effort to ensure continued funding of the DOE program
that works with the metals industry in the research and development
of efficiency technologies. The program was established in 1988 and
may be facing cuts as its official appropriations expired in 1997.
In her opening statements, Subcommittee Chair Judy Biggert (R-IL)
said that the Metals Program has economic, environmental, and national
security benefits. The newest version of the bill includes provisions
to help industries reduce greenhouse gas emissions.
Faulkner of the Department of Energy stated that the steel industry
alone accounts for about 2% of U.S. energy consumption, but this number
could be reduced by 20 to 30% by research conducted under federal-industrial
partnerships. He cited an independent study by the National Academy
of Sciences claiming that investments in metals industry efficiency
projects produced twenty times their return in benefits. Richard
Shulkosky of Integ Process Group and Lisa
Roudabush of U.S. Steel Corporation argued that since industrial
participants in the program contribute a significant portion of project
funds, they have incentive to develop efficiency technologies successfully.
Roudabush referred to several examples of past DOE partnerships which
led to decreased energy consumption, such as the development of an
advanced high strength steel that increases vehicle safety while decreasing
The most significant criticism of H.R. 3890 came from Dr.
Ronald Sutherland, an independent consulting economist from George
Mason University School of Law. He emphasized the difference between
"energy efficiency" and the "efficient use of energy
resources", claiming that the DOE's focus on the former is a
misguided policy goal and does not necessarily produce benefit to
taxpayers. He argues that the technologies developed in the past through
the program are not economically viable and tend to die out when funding
The subcommittee and the witnesses agreed that energy efficiency should
not be the only goal of the program. They all said that new technologies
should provide direct and indirect benefits to taxpayers and increase
Subcommittee on Energy
Hearing on "The Impact of Federal Energy Efficiency
and Renewable Energy Research
and Development Programs"
May 19, 2004
Mr. Steve Nadel, Executive Director, American Council for an Energy
Mr. Paul Knove, President, Carolina Country Builders of Chatham County,
Ms. Vivian Loftness, Head, School of Architecture at Carnegie-Mellon
Mr. Peter Smith, President, New York State Energy Research and Development
Authority, New York State
Mr. Daniel L. Sosland, Executive Director, Environment Northeast
On May 19th, House Science Subcommittee on Energy met to examine
the potential contribution of energy efficiency and renewable energy
to the nation's energy needs. In her opening statement, Subcommittee
Chair Judy Biggert (R-IL) discussed rising oil prices and high foreign
dependency as reasons to invest in alternative technologies. She and
several of the witnesses, all experts in a field of efficiency or
renewable technology, emphasized that these technologies are likely
to improve quality of life at sustained or lowered energy consumption
levels. Testimony of the witnesses provided a description of the current
state of efficiency and renewable technologies and their impacts on
the economy. Witnesses unanimously recommended increased investment
by the federal government in the research and development of these
technologies. The Bush administration's FY '05 budget proposes a 10%
cut in funding for efficiency research and development programs. House
Science Committee Chairman Sherwood Boehlert (R-NY) and John Carberry
of DuPont acknowledged that research projects are likely to lose momentum
and effectiveness if their budgets are cut.
The panel discussed the various benefits of government investment
in efficiency and renewables research and development. Carberry contended
that the research will eventually lead to a decreased dependence on
natural gas, which will help lower the fuel's cost. Witnesses cited
environmental and health benefits, lower predicted operating costs
of industry, and increased competitiveness in global technology markets
as benefits of efficiency investments.
Vivian Loftness, head of the School of Architecture at Carnegie-Mellon
University, pointed out that only 2% of federally funded R&D is
spent on building research, while the building sector comprises a
much more significant part of the U.S. economy and energy usage. She
also argued that federal and state energy efficiency standards should
be implemented and that the market will not force changes toward efficiency.
In communication with AGI's Government Affairs Program following the
hearing, she said that although efficiency technologies have "amazing"
returns on investments, advertising, lack of education, and lack of
governmental initiative cause many people to ignore their benefits.
Steve Nadel of the American Council for an Energy Efficient Economy
expressed concern that a disproportionate amount of federal resources
are put into fuel cell and hydrogen technologies, while efficiency
research is being neglected.
Boehlert requested that the witnesses to quantify and submit in writing
estimates of the potential impacts of the proposed cuts on efficiency
and Public Works
Full Committee Hearing to Examine the Environmental and
Affecting Oil Refining and Gasoline Policy
May 12, 2004
Mr. Bob Slaughter, President, National Petrochemical & Refiners
Mr. A. Blakeman "Blake" Early, American Lung Association
Mr. Michael Ports, President of Ports Petroleum Company, Inc., on
behalf of the Society of Independent Gasoline Marketers of America
and The National Association of Convenience Stores
Dr. Mark Cooper, Director of Research Consumer Federation of America
Mr. John Dosher, Director, Jacobs Consultancy
The Senate Environment and Public Works Committee met with a panel
of interested parties May 12th to discuss the impacts of environmental
regulations on oil refineries and gas policy. Most of the discussion
was framed around surges in gasoline prices faced by consumers in
recent months, heightened by both increasing demand and an increasingly
expensive foreign supply. Proponents of refinery deregulation such
as Sen. Allard (R-CO) argued that environmental regulations are "roadblocks"
that cause dependence on foreign oil, and noted the enormous capital
required invest in the industry. Opponents of refinery deregulation
referred to a number of health hazards associated with refinery pollution
and also contended that decreasing cost of refining would not necessarily
benefit the American consumer. No new refineries have been built in
the United States since 1976, and the total number of refineries has
decreased to less than half the 1981 number to 149.
In his opening statements, Chairman Inhofe (R-OK) emphasized the needs
for decreased dependency on foreign sources of oil and an increase
in the number of domestic refineries. He attributed the reduction
in the number of refineries in the United States to tightened environmental
regulations. However, Dr. Cooper cited a lack of economic incentives
as the cause for the decreased number of refineries.
Mr. Slaughter, Chairman of the National Petroleum and Refineries Association,
claimed that an effective way to lower prices for consumers is to
decrease cost of the domestic process of refining oil by loosening
environmental regulations such as emission oxygenation requirements.
He stated that 20% of the price of gasoline can be attributed to the
cost of the refining process, and that although foreign dependence
is a problem, lawmakers should take steps to reduce costs in domestic
processing where they can. Sen. Wyden (D-OR) and Sen. Boxer (D-CA)
pointed out that major oil companies are experiencing both increasing
profits and record exports, indicating the high cost of oil is not
simply a reflection of environmental regulations but of a market controlled
mostly by a small number of corporations. Mr. Slaughter refuted claims
of oil company profits as only a "snapshot" of the situation,
and pointed out that the United States is a net importer of oil. However,
testimony from Sen. Reid (D-NV) states that "It's clearly
documented by the California Energy Commission and the DOE Energy
Information Administration that refinery margins have doubled and
tripled. The oil companies . . . now make 50 to 75 cents for every
gallon of gasoline. The debate ended in partisan disagreement regarding
the interpretation of oil company quarterly reports.
House Committee on Resources
Subcommittee on Energy and Mineral Resources
Hearing on H.R. 2772, the "The John Rishel Geothermal Steam
Act Amendments of 2003"
July 22, 2003
Patricia Morrison, Deputy Assistant Secretary Land and Minerals Management,
Department of the Interior
Jeanne Connelly, Vice President for Federal Relations, Calpine
James Witcher, Professor, New Mexico State University
Karl Gawell, Executive Director, Geothermal Energy Association
On July 22, 2003, the Resources Subcommittee on Energy and Mineral
Resources held a hearing to discuss Rep. Jim Gibbons' (R-NV) recently
introduced bill, H.R.
2772, the John Rishel Geothermal Steam Act Amendment of 2003.
The bill has been named in honor of John Rishel, a geologist and long-time
Resource Committee staffer, who played a key role in this legislative
issue. Rishel passed away suddenly on May 9, 2003.
In his opening statement, Gibbons said that we are facing an energy
crisis and "America is not making full use of its geothermal
potential because we don't have adequate incentives to attract needed
capital investments to geothermal energy projects." He said that
H.R. 2772 addresses some of these shortcomings. The bill will make
geothermal leasing market-driven through competitive bidding, promote
uniform ownership of resources, provide a uniform royalty structure,
and address the current backlog of leasing permits. Under H.R. 2772,
leases will need to be "cleared within one year and applications
could pay up-front for the work needed to complete the application."
The bill also calls for a "review of moratorium and withdrawals
from geothermal leasing on federal lands and it directs the US Geological
Survey (USGS) to complete a new national geothermal resource assessment."
Most of the witnesses were in favor of H.R. 2772. Patricia Morrison
that the Bureau of Land Management (BLM) and the Department of the
Interior (DOI) have not had enough time to make a statement on the
bill, but she agreed with Gibbons that a new geothermal assessment
needs to be done. She said the last assessment was done in the 1970's.
Morison also said that BLM is addressing the leasing backlog. She
said BLM has competed 100 applications in the last 12 months but there
are 230 leases that are still on backlog.
Senate Committee on Energy and Natural Resources
Oversight on Natural Gas
July 10, 2003
Alan Greenspan, Chairman, Federal Reserve System
David Garman, Assistant Secretary for Energy Efficiency and Renewable
Energy, Department of Energy
Richard Grant, President and CEO, Tractebel LNG North America
Brian Ferguson, Chairman and CEO, Eastman Chemical
Bruce Thompson, Executive Director, Industry and Public Affairs, Forest
On July 10, 2003, the Senate Committee on Energy and Natural Resources
held a hearing to discuss natural gas supply and demand and its effect
on the economy. Alan Greenspan's testimony,
which was similar to the statement he gave to the House Transportation
and Commerce Committee a month ago, dominated the hearing. Greenspan
said that the nation's economy has not yet seen a significant effect
from the current natural gas price increases. He also said that it
is hard to predict what the total effects will be.
Greenspan also said that the US needs a consistent energy policy.
He said we cannot push industry to use natural gas but not advance
our liquefied natural gas (LNG) importing capabilities. Greenspan
said that LNG facilities would act as a safety valve, giving the US
the option of increasing imports to offset market fluctuations. The
committee was interested to hear Greenspan's thought on LNG, but many
of them were concerned about the safety dangers of LNG facilities.
Richard Grant replied saying that LNG is as safe, if not safer, to
transport and store than most other fuels.
The witnesses also mentioned other solutions to mitigate
the current supply shortage: clean coal technology, nuclear power,
coal bed methane, tight sand gas, additional gas pipelines, and conservation
and efficiency. A push for conservation and energy efficiency came
from David Garman. Garman said that the Department of Energy is promoting
programs that raise appliance efficiency standards and encourages
more efficient methods of insulating. On the pipeline issue, Greenspan
was asked for his opinion on whether the government should provide
subsidies to promote a gas pipeline from Alaska. Greenspan said there
is no need for the government to encourage this idea. He said that
profitability will bring the pipeline to the lower 48 states.
House Committee on Energy and Commerce
Subcommittee on Energy & Air Quality
Future Options for Generation of Electricity from Coal
June 24, 2003
George Rudins, Deputy Assistant Secretary for Coal and Power Systems,
U.S. Department of Energy
Frank Burke, Vice President, Research and Development, CONSOL Energy
Hank Courtright, Vice President, Power Generation & Distributed
Resources, Electric Power Research Institute
J. Brian Ferguson, Chairman and CEO, Eastman Chemical Company
Charles Black, Vice President, Energy Supply, Engineering, and Construction,
Tampa Electric Company
Randall Rush, Power Systems Development Facility Director, Southern
Richard Olliver, Group Vice President, Global Energy Inc.
Larry E. McDonald, Director, Design Engineering & Technology,
The Babcock & Wilcox Company
David G. Hawkins, Director, Climate Center, Natural Resources Defense
Roe-Han Yoon, Director, Center for Advanced Separation Technologies,
Frank Alix, CEO, Powerspan Corp.
On June 24, 2003, the House
Energy and Commerce Subcommittee on Energy and Air Quality held
a hearing to explore the future of coal power production. Chairman
Joe Barton (R-TX) began with a frequently repeated theme: cleaner
coal technologies are very important for America's energy needs because
coal is the nation's most abundant energy resource, and coal will
drop in price as natural gas prices rise. Barton touted the energy
bill passed by the House of Representatives, H.R.
6, for its provisions on clean coal. He pointed out that the hearing
would likely have a major impact on the final energy legislation.
Rep. Edward Whitfield (R-KY) cited the Clean
Coal Power Act of 2003 (H.R. 1213), which he is sponsoring, as
an example of the needed federal investment in clean coal technology.
The practical concerns of moving the nation toward cleaner coal plants
were a major focus of testimony
and discussion. Coal gasification and pulverized coal were the chief
present-day technologies under scrutiny. Much attention was also paid
which Deputy Assistant Secretary of Energy George Rudins called the
"Holy Grail" of coal power. This public/private initiative
announced earlier this year by the Department of Energy promises an
emission-free source of electricity and hydrogen and is to be developed
out of existing coal gasification technology.
Many of the questions centered on industry requests from the federal
government in order to implement cleaner technology. Panelists generally
agreed on the need for:more research and development money, for both existing clean coal
technology as well as the FutureGen project
additional tax incentives to lower risks or perceived risks
federal leadership or a "roadmap" to help overcome the
long time-frame before the technology is profitable
predictable environmental regulations, particularly decisions regarding
carbon dioxide and mercury emissions
Panelists did not agree on whether carbon dioxide (CO2) emissions
are related to climate change. Dr. Frank Burke stated that neither
he nor his company believed that carbon had been scientifically shown
to cause warming. David Hawkins, responding to Whitfield's skepticism
on this question, contended that transferring the existing reservoir
of 5 trillion tons of carbon stored in coal to the atmosphere without
slowing the rate of consumption would have disastrous effects on climate.
Despite denying that coal burning is affecting the climate, Burke
agreed with other panelists that the coal industry has a strategic
interest in developing technology to sequester carbon emissions. Hank
Courtright asserted that affordable sequestration technology would
be needed to keep all fossil fuel burning viable into the future.
Hawkins argued that CO2 capture and storage must be accelerated, and
that the government must send industry a clear message on CO2 if the
country hoped to increase its use of coal power. While other panelists
called for better and cheaper sequestration technologies, Hawkins
stated the Natural Resource Defense Council's position that the next
generation of coal technology must aim for zero carbon emissions.
He termed the Bush Administration's refusal to regulate CO2 as a "policy
disconnect." Hawkins noted that the aging of existing coal plants
and the increasing coal capacity needs of countries such as China
and India present a giant opportunity to lead the world toward zero-CO2
coal technology while capturing a lucrative market.
Several witnesses agreed that coal gasification is superior to pulverization
if CO2 sequestration were necessary. Although they noted that it is
easier to remove CO2 from the more concentrated waste stream produced
by coal gasification, panelists also pointed out that higher capital
costs are involved.
On the issue of mecury emissions, Representative Henry Waxman (D-CA)
asked Burke about the accuracy of an American Coal Council report
stating that existing technology is suitable for retrofitting coal
plants to meet stringent mercury regulations. Burke refused to acknowledge
the credibility of either the source or the report, claiming that
the findings resulted from short-term pilot tests rather than commercial-scale
operations. Noting that coal burning releases about a third of all
mercury emissions, Rep. Ted Strickland (D-OH) asked the panel how
the industry was likely to respond to new mercury regulations anticipated
in 2004. Hawkins responded by pointing out that technology-based Clean
Air Act regulations are unlikely to disrupt the industry because
existing technology has been shown to remove up to 90% of mercury
from emissions, with limited cost. He suggested that the world would
follow a U.S. move to restrict the release of the dangerous neurotoxin,
as it did in the case of lead in gasoline. (Additional information
about mercury policy is available in AGI's mercury
Prospects for the near-term future seemed mixed. Richard Olliver,
whose claim that his company's gasification facility is the cleanest
coal plant in the world went undisputed, announced the intention to
build two more such plants. Randall Rush, however, stated that his
company would opt to build pulverization facilities under current
conditions. A self-proclaimed proponent of coal gasification, Rush
lamented that the technology is not yet competitive with pulverization.
When asked about the time-frame for FutureGen, Rudins anticipated
that a commercial-scale example plant could be ready in 10 years,
and that the technology could be totally viable in an additional seven
House Committee on Resources
Subcommittee on Energy & Mineral Resources
The Ability of Federal Lands to Meet our Energy Needs
June 24, 2003
Rebecca Watson, Assistant Secretary of the Interior for Land and Minerals
Management, Department of the Interior
Jeffrey Eppink, Vice President, Advanced Resources International,
Art Johnson, Chairman & CEO, Hydrate Energy International
Debra Knopman, Associate Director, RAND Science and Technology, RAND
Dru Bower, Vice President, Petroleum Association of Wyoming
On June 24, 2003, the House
Resources Subcommittee on Energy & Mineral Resources held
a hearing on the availability of oil and gas resources on federal
land. The witnesses' testimonies are available on the committee's
website. The members in attendance heard testimony on two recent
studies: the Energy Policy and Conservation Act (EPCA)
Inventory that was produced by the Department of the Interior (DOI)
and an economic
assessment that was produced by RAND.
The EPCA inventory focused on determining the amount of technically
recoverable oil and gas resources on federal lands. The RAND study
determined the amount of economically recoverable resources in the
Green River Basins. The two studies produced different conclusions
on whether to pursue oil and gas "plays" in certain basins.
The members in attendance asked the panel to elaborate on the differences
between technological and economical recoverable resources. The witnesses
testified that economic recoverability is based on profit. The profit,
however, is just a "snapshot" in time because it is making
assumptions using today's prices and available technology. Technically
recoverable resources are based on the amount of oil and gas that
can be produced using existing technology. Technically recoverable
resources do not address economic ability to produce the oil and gas.
The members in attendance were also concerned about the permitting
process to lease federal land. They heard testimony today and in previous
hearings on how these permits delay and halt many projects. Rebecca
Watson testified that the process is very complex because there are
many aspects for each case that needs to be examined, such as compliances
with tribal regulations, National Environmental Policy Act, and Clean
Water Act. She continued by saying that litigation has played a major
role in delaying the process. Watson also said that administratively
DOI is addressing the problem and trying to increase their efficiency.
House Committee on Resources
Subcommittee on Energy & Mineral Resources
The Domestic Natural Gas Supply Shortage
June 19, 2003
Michelle Michot Foss, Director, Energy Institute, University of Houston,
College of Business Administration
Steve Brown, Director of Energy Economics, Federal Reserve Bank, Dallas
Ed Kelly, North American Gas & Power Consulting, Wood Mackenzie
Al Christopherson, President, Minnesota Farm Bureau Federation
Calvin (Cal) K. Jones, President & CEO, Wyoming Sugar Co., LLC
Bill Jewell, Vice President, Energy, The Dow Chemical Company
Keith Rattie, Chairman, President, and CEO, Questar Corporation
William R. Prindle, Deputy Director, American Council for an Energy-Efficient
On June 19, 2003, the House
Resources Subcommittee on Energy & Mineral Resources held
a hearing on, "The Domestic Natural Gas Supply Shortage."
The witnesses' testimonies are available on the committee's
website. The hearing's expressed goal was to discuss a solution
to the domestic natural gas shortage; however, the committee members
deviated from this goal to debate the issue of domestic gas production
versus imported liquefied natural gas (LNG). The LNG buzz started
last week in a House Energy and Commerce Committee hearing when Alan
Greenspan testified that the US should increase its LNG imports. Subcommittee
Chair Barbara Cubin (R-WY) and other witnesses stated that natural
gas resources are available in the US, especially in the Rockies and
on federal lands. Several of the witnesses said that there is a need
to increase drilling and gas pipelines in the west. They also noted
that there was a need to lift the moratorium on federal lands and
off-shore drilling. Other supply solutions mentioned were increased
conservation and efficiency, clean coal technology, and alternative
fuels. On the LNG front, most of the witnesses agreed that importing
LNG would take time and increased investments. The witnesses, however,
did not agree on its effects on the market. Some felt LNG would not
be a good investment because of the large capital cost it is only
profitable when gas prices are high and it would increase the US's
foreign energy dependence. Other witnesses testified that LNG could
be profitable at moderate gas prices.
House Committee on Energy and Commerce
Natural Gas Supply and Demand Issues
June 10, 2003
Guy F Caruso, Administrator, Energy Information Administration
Donald L. Mason, Commissioner, Public Utilities Commission
Richard J. Sharples, Senior Vice President, Anadarko Petroleum Corporation
Carl L. English, President and Chief Executive Officer, Consumers
Robert C. Liuzzi, President and CEO, CF Industries Inc.
Forrest E. Hoglund, Chairman and CEO, Arctic Resources Company
Harold N. Kvisle, President and CEO, TransCanada Pipelines Limited
Jeffrey R. Currie, Managing Director, Goldman, Sachs & Co.
Alan Greenspan, Chairman, Federal Reserve Board
On June 10, 2003, the House Committee
on Energy and Commerce held a hearing entitled, Natural Gas Supply
and Demand Issues. The witnesses' testimonies are available on the
website. The members in attendance heard testimony on the natural
gas market outlook. For the short-term outlook, the panelist said
that the market is very volatile and there will be price spikes. The
market volatility is due to an economic "domino effect:"
colder winter temperatures drove gas consumption up, increased consumption
caused lower gas reserves, and finally low gas reserves are presently
causing the market volatility. For long-term market outlook, the panelists
had many views on how to steady the market: increase the amount of
pipelines to transport the gas to the needed market areas, lift the
moratorium from federal lands to increase drilling production, demand
destruction as well as to explore clean coal technology, liquefied
natural gas (LNG), methane hydrate, and tight-sand gas. The most surprising
comment was made by Alan Greenspan when he said that the US needs
to increase the amounts of imports of LNG. Greenspan's presence at
the hearing reflected the impact of natural gas prices on the economy.
The members present were interested in all the ideas, but some of
them made it clear that they would not support drilling in national
Committee on Energy and Natural Resources
Hearing on Natural Gas Supply and Prices
February 25, 2003
Guy Caruso, Administrator, Energy Information Administration
Robert Best, President, Atmos Corporation
Keith Rattie, Chairman, President, and CEO, Questar Corporation
David Welch, President and CEO, BP Alaska-Canada Gas
The full Senate Energy and Natural Resources Committee held a hearing
to examine the supply and prices of natural gas. The complete testimonies
of the witnesses can be found on the Committee web site. The witnesses
agreed that the recent increase in natural gas prices is due to a
harsh winter, a flattening of supply, and considerable growth of power
plants using natural gas. While prices are likely to remain volatile
in the short-term, high prices are expected to trigger an increase
in drilling, which will eventually return prices to a more acceptable
level. In order for market self-correction to occur, the witnesses
said Congress needs to encourage construction of new infrastructure,
provide access to natural gas supplies on federal lands, spread the
word that natural gas is abundant and environmentally friendly, and
fund collaborative research.
The Gulf of Mexico, which has historically been one of the highest
producers of natural gas, has recently experienced a flattening in
production rates, despite an increase in drilling because new deep-water
sites have surprisingly proven to contain mostly oil. This discussion
prompted Senator Pete Domenici (R-NM) to question whether increasing
accessibility to federal lands is reasonable given that it is unknown
if they actually contain the large quantities mentioned. The panel
agreed that the possibility for abundant sources on federal lands
is high, especially within Alaska, the Rocky Mountains (specifically
sedimentary sections below 1500ft), the Gulf of Mexico (specifically
deep drilling in shallow waters), and the Mackenzie Delta. The San
Juan Basin, coalbed methane, and liquefied natural gas (LNG) imports
were also mentioned to a lesser degree.
Committee on Energy and Natural Resources
Hearing on Oil Supply and Prices
February 13, 2003
Matthew Simmons, Chairman and CEO of Simmons & Company International
Robert Ebel, Director for the Center for Strategic and International
Red Cavaney, President of the American Petroleum Institute
James May, President and CEO of the Air Transport Association
On February 13, 2003, the Senate Committee on Energy and Natural
Resources conducted a hearing to examine oil supply and prices. The
witnesses, who's complete testimonies
can be found on the Committee website, testified that recent increase
in oil prices are due to a combination of factors, including a cold
winter, the strike in Venezuela, flattening of the global supply,
and low stock prices. Short-term recovery will be difficult, but an
increase in supply diversity could aid long-term energy security.
Senator Pete Dominici (R-NM) began the questioning by inquiring how
much of federal lands are available for oil and natural gas exploration.
Cavaney replied that 30% of federal lands (located in Alaska, mountain
states, the outer continental shelf, and most significantly on coastal
areas) were available for oil and 40% of these lands for gas. Also,
Cavaney commented that permitting was a greater obstacle to gaining
access to these lands than leasing.
Senator Jeff Bingaman (D-NM) commented that only 15% of federal lands
are completely unavailable for oil exploration and 12% for
gas, further these lands contain little oil and gas. He then asked
the witnesses to comment on whether it would be appropriate to tap
the Strategic Petroleum Reserve (SPR). Simmons replied that it would
be dangerous to prematurely use the SPR as it could send market forces
elsewhere. Ebel disagreed; saying the release of the SPR would create
a calming effect, though it does depend on the situation. Cavaney
replied that the president should exercise his authority on the SPR
when there appears to be supply crisis, not a price crisis. He agreed
it could have unintended consequences. May reiterated from his testimony
that frequently a release from the SPR occurs too late to have a significant
effect. Senator Ron Wyden (D-OR) stated he strongly supported an SPR
Senator Jim Bunning (R-KY) asked the witnesses if they support exploration
for resources in Alaska. Simmons replied that drilling in Alaska would
pose less of an environmental risk than importing oil in leaky single-hulled
tankers across the ocean. Ebel stated that it would be "a shame
if that resource potential is never put to use." Cavaney believes
we should explore whatever "makes sense" to increase our
energy security. Senator Bunning further inquired if Russian oil could
help alleviate the instability of the Middle East oil supply. Cavaney
said Russia needs first to improve its infrastructure and also that
the U.S. should be looking towards a diverse oil source, not only
from Russia but also West Africa and around the Caspian Sea.
Senator Lisa Murkowski (R-AK) commended Simmons' previous comments
about the relative environmental risks of leaky tankers and drilling
in Alaska. She said that if drilling was permitted in the Alaska's
Arctic National Wildlife Reservoir (ANWR), the oil could be transported
from Alaska to the continental U.S. via double-halled tankers, thereby
reducing environmental accidents.
Senator Craig Thomas (R-WY) requested the panel comment on where
to start in developing a national energy policy. Simmons suggested
beginning with convincing Americans that energy is the single most
important part of society. Ebel called for an increase in political
will to understand and help the public understand the complexity of
how energy is produced, and not just concentrate on price and availability.
Cavaney recommended working towards a comprehensive solution, while
May proposed repealing the jet fuel tax.
Senator Mary Landrieu (D-LA) called for more domestic drilling and
conservation. Also, she agreed with previous comments that tankers
are probably more of an environmental problem than pipelines. She
asked the witnesses whether more production would help lower oil prices.
Simmons said there is no evidence that domestically produced energy
is cheaper, but tanker capacity is almost at its maximum. Therefore,
an increase in transportation cost could make domestic energy cheaper.
Ebel observed that the U.S. does not stand in isolation in the oil
market; therefore the U.S. cannot be protected from changes in the
Senator Lamar Alexander (R-TN) requested the panel offer their thoughts
on a comprehensive energy policy. Ebel replied that he believes demand
will fall before supply runs out due to new energy sources, such as
hydrogen. Simmons said for a long-term solution the US should invest
more in research and development, such as nannotechnology and more
efficient diesel engines, similar to those in Europe. Cavaney called
for increasing the role of alternative sources of energy such as solar
and wind. May also called for more research and development.
Sources: Hearing testimony, personal communication.
Contributed by Charna Meth, 2003 Spring Semester Intern; Deric R.
Learman, AGI/AIPG Summer 2003 Intern; Brett Beaulieu, AGI/AIPG Summer
2003 Intern; Bridget Martin, AGI/AIPG Summer 2004 Intern; and Ashlee
Dere, AGI/AIPG Summer 2004 Intern..
Please send any comments or requests for information to AGI
Government Affairs Program.
Last updated on July 23, 2004