Summary of Hearings on Energy (11-22-06)
- November 16, 2006: Senate Committee on
Commerce, Science and Transportation Hearing on the Reauthorization
of the Pipeline Safety Program
- November 15, 2006: House Committee on
International Relations, Hearing on "North Korea's Nuclear
Test: Next Steps?"
- September 13-14, 2006: House Committee
on Government Reform, Subcommittee on Energy and Resources Hearing
on "Interior Department: A Culture of Managerial Irresponsibility
and Lack of Accountability?"
- September 13, 2006: House Committee
on Transportation and Infrastructure Hearing on "Low Pressure
Liquid Pipelines: In the North Slope Greater Prudhoe Bay, Alaska"
- September 7, 2006: House Committee on
Energy and Commerce, Subcommittee on Oversight and Investigations
Hearing on "BP's Pipeline Spills at Prudhoe Bay: What Went
- July 17, 2006: Senate Energy and Natural
Resources Committee, Subcommittee on Energy Hearing on "Hydrogen
Fuel Cell Research and Development"
- June 21, 2006: Senate Energy and Natural
Resources Committee Hearing on "The Enhanced Energy Security
Act of 2006"
- May 25, 2006: Senate Energy and Natural
Resouces Committee Hearing on "Coal-Based Generation Reliability"
- May 23, 2006: Senate Commerce, Science
and Transportation Committee Hearing on "Price Gouging"
- April 6, 2006: House Committee on Resources,
Subcommittee on Energy & Minerals, Oversight Hearing on
"The Role of the Federal Government and Federal Lands in
Fueling Renewable and Alternative Energy in America"
- March 14, 2006: Senate Committee on the
Judiciary Hearing on "Consolidation in the Oil and Gas
Industry: Raising Prices?"
- March 7, 2006: Senate Committee on Energy
and Natural Resources Hearing on "The Goal of Energy Independence"
- February 16, 2006: Senate Committee on
Energy and Natural Resources Hearing on the Energy Information
Administration's 2006 Annual Energy Outlook
- December 7, 2005: House Energy and Commerce
Committee, Subcommittee on Energy and Air Pollution, Hearing
on the Theory of Peak Oil.
- November 17, 2005: House Resources Committee,
Subcommittee on Energy and Mineral Resources, Hearing on the
"Outer Continental Shelf Natural Gas Relief Act"
- November 9, 2005: Senate Commerce Justice
and Science, and Senate Energy and Natural Resources Committees,
Joint Hearing on Energy Pricing and Profits
- October 27, 2005: Senate Energy and Natural
Resources Committee, Hearing on post-hurricane energy production.
- October 25, 2005: Senate Appropriations
Committee, Interior and Related Agencies Subcommittee, Hearing
to examine the oil and gas activities by the Bureau of Land
Management, including the impact of recently passed energy legislation.
- October 6, 2005: Senate Energy and Natural
Resources Committee, Hurricanes Katrina and Rita's Effects on
- September 21, 2005: Senate Commerce,
Science, and Transportation Committee, Hearing on "Energy
- September 14, 2005: House Government
Reform Committee, Energy and Resources Subcommittee, Hearing
on "Meeting America's Natural Gas Demand: Are We in a Crisis?"
- September 6 and 7, 2005: Two Related
Hearings on High Gas Prices and the Impact of Katrina, Senate
Energy and Natural Resources Committee and House Energy and
- July 26, 2005: Senate Foreign Relations
Committee Hearing on "Energy Trends in China and India:
Implications for the U.S."
- June 23, 2005: House Resources Committee,
Energy and Mineral Resources Subcommittee Hearing on "The
Vast North American Resource Potential of Oil Shale, Oil Sands,
and Heavy Oils"
- May 25, 2005: Senate Environment and
Public Works Committee Hearing on Permitting Issues of Energy
- May 19, 2005: House Resources Committee,
Subcommittee on Energy and Mineral Resources, Hearing on The
Impacts of High Energy Costs to the American Consumer
- April 26, 2005: Senate Energy and Natural
Resources Committee Hearing on the Nuclear Power 2010 Program
- April 19, 2005: Senate Energy and Natural
Resources Committee Hearing on Offshore Energy Production
- April 14, 2005: Senate Energy and Natural
Resources Committee Hearing on Domestic Oil Shale and Oil Sand
- April 6, 2005: House Government Reform
Subcommittee on Energy and Resources Hearing on America's Energy
Needs and Our National Security Policy
- March 16, 2005: House Resources Committee
Subcommittee on Energy and Mineral Resources Oversight Hearing
on U.S. Energy and Mineral Needs, Security and Policy:
Impacts of Sustained Increases in Global Energy and Mineral
Consumption by Emerging Economies Such as China and India.
- March 8, 2005: Senate Energy and Natural
Resources Committee Hearing on Power Generation Resource Incentives
& Diversity Standards
- February 16, 2005: House Energy and Commerce
Committee Subcommittee on Energy and Air Quality Hearing: "The
Energy Policy Act of 2005: Ensuring Jobs for Our Future with
Secure and Reliable Energy" Part II
- February 10, 2005: House Energy and Commerce
Committee Subcommittee on Energy and Air Quality Hearing: "The
Energy Policy Act of 2005: Ensuring Jobs for Our Future with
Secure and Reliable Energy" Part I
- February 9, 2005: House Science Committee
Hearing about Improving the Nations Energy Security: Can
Cars and Trucks Be Made More Fuel Efficient?
- February 3, 2005: Senate Committee on
Energy and Natural Resources Hearing about the 2005 Energy Outlook
Committee on Commerce, Science and Transportation
Hearing on the Reauthorization of the Pipeline Safety Program
November 16, 2006
Vice Admiral Thomas J. Barrett, USCG (Ret.), Administrator, Pipeline
and Hazardous Materials Safety Administration, U.S. Department of
Carl Weimer, Executive Director, Pipeline Safety Trust
Timothy Felt, President and CEO, Explorer Pipeline Company
Terry Boss, Senior Vice President, Environment, Safety and Operations,
Interstate Natural Gas Association of America
E. Frank Bender, Vice President of Gas Distribution and New Business
Division, Baltimore Gas and Electric Company
The Senate Committee on Commerce, Science and Transportation
convened on November 16, 2006 to examine S.3961, the Pipeline Inspection,
Protection, Enforcement and Safety Act of 2006, which would amend
and reauthorize The Pipeline Safety Act of 2002. Work on this legislation
has been ongoing in the 109th Congress, however, oil leaks in low-pressure
pipelines in Prudhoe Bay, Alaska and the shut-down of about half of
the pipeline system in the Bay by BP because of serious corrosion
have brought the issue of pipeline maintenance and safety to the forefront.
Indeed, because of the pipeline problems in Alaska, policymakers have
offered additional amendments to the bill to try to prevent the problem
Chairman Ted Stevens (R-AK) reported that the Pipeline
and Hazardous Materials Safety Administration (PHMSA) is responsible
for "160,000 miles of hazardous liquid interstate transmission
pipelines, 305,000 miles of natural gas transmission pipelines, and
1.9 million miles of natural gas distribution pipelines." The
states are responsible for much longer sections of pipelines that
run through their states, where state pipeline safety offices are
given authority from the Administration to monitor the safety of intrastate
pipelines and certain interstate pipeline programs. He reported that
for the most part pipelines are very safe and records have been slightly
improved. However, recent events in Alaska illustrate that "much
could be done" to improve the original Pipeline Safety Act. Chairman
Stevens indicated that he and Senators Daniel Inouye (D-HI), Trent
Lott (R-MS) and Frank Lautenberg (D-NJ) have introduced legislation
known as the Pipes Act to reauthorize and strengthen the federal pipeline
safety programs through the fiscal year 2007-2010. He expressed hope
to pass S.3961 during the first week of December and combine S.3961
with House bills, H.R.5782 and H.R.5678, which he stated have very
similar goals. Ranking Member Inouye pushed for progress in a bipartisan
fashion and echoed Steven's wish to pass this bill before recess.
"Time is of the essence," he said.
On the first witness panel, Vice Admiral Thomas Barrett
of the Department of Transit's PHMSA, outlined two issues of importance
- ensuring the safety of citizens through risk-based assessment and
damage prevention programs and raising the cap on grants provided
to state pipeline agencies to carry-out these programs and others
over the next six years.
Barrett stated his support for swift reauthorization
of the pipeline legislation. He reported that PHMSA favored a system-based
approach to assessing and managing safety-related risk because large
infrastructure systems change over time. Therefore, the provision
in the proposed legislation requiring mandated tests every seven years
should be adjusted to test instead on the basis of risk factors, according
to Barrett. In this way, attention and resources can be deployed "against
the greatest risks, worst first."
Furthermore, Barrett challenged the provision which
would impose stricter standards on low-stress lines. He stated, "We
have not determined yet whether covering more pipeline mileage and
imposing more requirements can be justified by cost/benefit analysis.
We have this matter under consideration and would appreciate having
flexibility for the Secretary to make an appropriate decision to maximize
protection of public safety, the environment and the reliability of
The second witness panel featured representatives from
the gas and oil pipeline industries and Carl Weimer, executive director
of Pipeline Safety Trust, a non-profit organization that provides
a voice for those affected by pipelines. Weimer outlined provisions
that his organization supports and those that it opposes. Weimer noted
his support of provisions in S. 3691 that would place all low-stress
lines under the same minimum federal standards as high-stress lines,
necessitate senior executive signatures on integrity management reports,
call for a one-year timeframe to develop distribution integrity management
standards, including the obligatory installation of excess flow valves,
demand electronically posted monthly summaries of pipeline enforcement
achievements and reauthorize technical assistance grants to states.
However, Weimer noted the need for more transparency
in the pipeline management process. He urged the committee to publicize
national pipeline mapping systems, make inspection findings accessible
and report on over-pressurization events. Lastly, he asked that the
current language which called for the development of criteria requiring
emergency safety valves be strengthened to employ the inexpensive
safety precaution immediately.
Tim Felt, president and CEO of Explorer Pipeline Company,
noted the success of the Pipeline Safety Improvement Act of 2002,
which has resulted in pipeline safety improvements. He urged committee
members to reauthorize the bill now so work that has gone into the
current legislation will not be lost and result in months if not years
Felt noted provisions within S. 3961 that he felt could
be improved, but stressed repeatedly that the passage of this bill
was far more important than its amendment. He stated his support for
regulating low-stress pipelines on the North Slope of Alaska with
the same rules as high-stress lines and urged that Section 13 of the
bill adopt the same language as House bill, H.R. 5782 to enforce this.
Within Section 6 of S. 2961, which would give DOT jurisdiction to
issue mandatory orders to pipeline operators, he suggested modifications
be made to allow operators the opportunity to confer informally with
DOT before calling a hearing in order to save time and legal costs
and improve safety sooner. Finally, he suggested that Section 9 of
the bill, requiring monthly informational updates on pipeline enforcement
actions, be treated under normal due process and confidentiality procedures.
He concluded, "Passage of compromise legislation is more important
than any concerns we have with individual provisions."
Terry Boss, senior vice president of Environment, Safety
and Operations Interstate Natural Gas Association of America, testified
in support of S. 3961 and noted that his association has made this
legislation a top priority, encouraging the committee to move the
bill forward as soon as possible. He did, however, note that the current
seven-year requirement for regulatory tests in the bill lacked any
basis in engineering and management and repeated Barrett's suggestion
for more risk-based assessment so that pipelines with higher need
could be tested more frequently and those that were sound and safe
could be tested less frequently.
E. Frank Bender, vice president of Gas Distribution
and New Business Division at Baltimore Gas and Electric Company, testified
on behalf of the American Gas Association and the American Public
Gas Association. He commended the committee for "putting together
a solid bill" and committed to working to provide feedback for
Congress so that it can secure passage of a final bill this year.
Full text of the witness testimony is available here.
Committee on International Relations
Hearing on "North Korea's Nuclear Test: Next Steps?"
November 15, 2006
Nicholas Burns, Under Secretary of State for Political Affairs
Prompted by North Korean missile launches on July 5, 2006 and a nuclear
test on October 9, 2006, the House Full Committee on International
Relations convened on November 15, 2006, after recess and midterm
elections, to discuss the future of foreign policy with North Korea.
Chairman Henry Hyde (R-IL) warned against assigning too much weight
to the Chinese position in the disarmament of its neighbor.
While he noted that Beijing has been surprisingly cooperative following
the tests, even cutting off oil flow to North Korea from the Yalu
River, he stated, "If Beijing becomes the key player in resolving
the North Korean nuclear issue while we are engaged elsewhere, I fear
potential long-term, dire consequences." Hyde did, however, caution
against the execution of naval inspections that China, Russia and
South Korea did not fully support.
Tom Lantos (D-CA) called for a "new and bold approach,"
because in his opinion, it is "abundantly clear" that efforts
thus far have failed. He suggested "forceful action and high-level
diplomacy" could provide a chance, though very slim, for a solution
to the problem. He echoed Hyde's stress on the importance of cooperation
with China and Russia and said a Security Council Resolution was meaningless
without it. Lantos also noted the need to address the extensive human
rights violations occurring in North Korea today.
Partisanship flared up during opening statements. Brad Sherman (D-CA),
stated that President Bush's assertion that "nuclear weapons
[were] out of enemy hands" was completely false given that North
Korea has many more than they did six years ago and suggested that
until the U.S. was willing to offer a non-aggression pact and secure
a firm linkage with China, the country could never be successful.
Even more pointedly, Gary Ackerman (D-NJ) stated that Bush's "internal
bickering and external dithering" had led directly to a North
Korean nuclear test "with more fizzle than bang" and stated
that it was "well past time for the president to cut to the chase."
Dana Rohrabacher (R-CA) retaliated, blaming the Clinton Administration
for originally putting the current foreign policies in place. He reported
that North Korea had received billions of dollars from the U.S. and
was one of the biggest recipients of foreign aid. He also pointed
to a report* from a bipartisan commission to review US-China economic
relations, which he said will be made public on November 16, which
states that China has helped North Korea in their nuclear proliferation.
The U.S., therefore, cannot rely on China at all, said Rohrabacher.
Witness Nicholas Burns, Under Secretary of State for Political Affairs,
testified on the U.S. response to North Korea's "objectionable
behavior." According to Burns, in order to succeed in its goals,
the U.S. must employ a two part strategy. First, Burns said, the UN
sanctions must be fully implemented in order to isolate the region
and second, multilateral negotiations must be pursued to return to
the Six Party Talks.
Burns reported that the U.S. has responded with force and diplomacy,
passing Resolution 1718 on October 14, 2006, which imposes harsh sanctions
on the North Korean government, while also pushing North Korea to
sign the September 19, 2005 Joint Statement which would lead to the
dismantlement of its nuclear weapons and programs.
He has also traveled to Japan, South Korea and China where he met
representatives from these nations and Russia in order to develop
a common position on sanctions and future diplomatic actions taken
towards North Korea. President Bush and Secretary of State Condoleezza
Rice are currently in China and will continue negotiations to "firm
up" an alliance. His written testimony reports that Japan, South
Korea and China are committed to implementing sanctions and all partners
support Resolution 1718. The next crucial step, according to Burns,
is a clear and unified implementation of the Resolution.
While, Burns supports multilateral negotiations, he stated that there
"can't be talks for talk's sake." North Korea must realize
the seriousness of purpose and the talks cannot be solely the responsibility
of the U.S.
James Leach (R-IA), Ranking Member and Acting Chairman of the latter
half of the hearing, challenged Burns' rejection of bilateral negotiations
explaining that while solely bilateral talks would be fruitless, they
should "complement" the Six Party Talks. Dealing directly
with North Korea could lead to a change in North Korean psychology.
Burns acknowledged the value of this suggestion and noted that direct
face-to-face talks between Assistant Secretary of State, Chris Hill,
and North Korean officials took place in July 2005.
Committee on Government Reform
Subcommittee on Energy and Resources
Hearing on "Interior Department: A Culture of Managerial
Irresponsibility and Lack of Accountability?"
September 13-14, 2006
Part I: Subcommittee on Energy and Resources, House Committee on
Earl E. Devaney, Inspector General, US Department of the Interior
Part II: House Committee on Government Reform
The Honorable P. Lynn Scarlett, Deputy Secretary of the Interior
The Honorable Johnnie Burton, Director, Minerals Materials Management
Service, Department of the Interior
A lack of price thresholds in leases between oil companies and the
Minerals Management Service (MMS) of the Department of the Interior
(DOI) will result in a loss of $10 billion in royalty revenue over
the life of the leases. In 1995, Congress enacted the Deep Water Royalty
Relief Act in order to encourage oil companies to undertake costly
deep water projects at a time when oil prices were low. Those with
eligible leases would be allowed to operate royalty-free until they
produced a certain volume of oil or until the market price for oil
reached a specified ceiling. However, leases from 1998 and 1999 lack
this addendum. Two of these flawed leases include the Outer Continental
Shelf (OCS) Gulf of Mexico region, where recent discoveries suggest
3 to 15 billion barrels of oil may exist. The House Committee on Government
Reform called a two-part hearing on September 13 and 14 in order to
examine the DOI and its irresponsibility and lack of accountability
on this issue.
On September 13, Chairman of the House Committee on Government Reform,
Tom Davis (R-VA) stated, "The Inspector General's Office found
in 2004 that forty-six percent of employees within the Department
believed that 'discipline was administered fairly only 'sometimes,'
if ever.'" He referenced his late grandfather's work on the Interior
and said, "I know [he] would also be disillusioned by the culture
of waste, fraud, and abuse at the Department and would echo my call
for immediate reforms." Davis hopes that the appointment of a
new Secretary of the Interior, Dirk Kempthorne, may provide a "bright
side at the Department of the Interior."
Chairman of the Subcommittee on Energy and Resources Darrel Issa
(R-CA) echoed Davis' concerns. "It is to define a job so narrowly
and limited in scope over time - no matter how senior the position
- that the person claims neither responsibility nor accountability
for fulfilling their basic duties," he said at Part I of the
hearing. "The only thing claimed is a paycheck."
At Part II of the hearing on September 14, Ranking Member of the
Full Committee Henry Waxman (D-CA) expressed concern "not only
that MMS is failing to act. MMS may be collaborating with oil companies."
Witness Earl E. Devaney, Inspector General of the DOI, testified the
previous day that no evidence exists yet supporting this statement,
though his investigation has yet to be completed.
Rep. Carolyn B. Mahoney (D-NY) conveyed frustration that since the
1998 and 1999 leases went into effect, the US has recovered just about
$50 million each year when previously royalties paid topped $176 million
annually. Mahoney called ethical breaches in the DOI "inexcusable."
On September 13, Inspector General Earl E. Devaney testified before
the Subcommittee on Energy and Resources stating that the DOI operates
under a code of "D's" - "Deny it happened, defend the
indefensible and if all else fails, delay."
"Simply stated, short of a crime, anything goes at the highest
levels of the Department of the Interior. Ethics failures on the part
of senior Department officials - taking the form of appearances of
impropriety, favoritism, and bias - have been routinely dismissed,"
He reported that the preparer of the leases was instructed to take
provisions on price thresholds out of the leases by the Economics
and Leasing Divisions of MMS. This individual passed a polygraph on
the issue. The Economics and Leasing Divisions denied doing so. One
of three employees provided a sworn statement, submitted to a polygraph
and passed. The second declined to provide any sworn statement, therefore
was not asked to take a polygraph. The third provided a statement,
but would not submit to a polygraph.
Commendably, Chevron testified previously as to mentioning the lack
of price thresholds in leases during a series of meetings in 1998
and 1999. The DOI still took no action. Devaney called this incident
"a classic example of bureaucratic bungling."
During Part II of the hearing on September 14, Interior Deputy Secretary
Lynn Scarlett and MMS Director Johnnie Burton disagreed with the Inspector
Genteral's "broad-brush characterization." Scarlett testified
on behalf of both officials stating that the Department is actively
working to resolve the situation. She said that the Department's 70,000
workers are dedicated to "strong work ethic
and a commitment
to accountability, efficiency, and effectiveness." Negotiations
with 10 companies involved in the leases are underway. However, Scarlett
said the complexity of the leases called for patience.
When questioned, Burton asserted that two of the companies involved,
BP and Chevron, are very close to an agreement with the DOI. Burton
discouraged the administration from violating the "sanctity"
of contracts by tampering with contracts that it is duty-bound to
uphold. Yet House and Senate Committees on Appropriations inserted
provisions into the FY 2007 Interior-Environment spending bill (H.R.
5386) which will prevent companies from acquiring other leases
in the future if they do not renegotiate their older leases. Furthermore,
the House passed an offshore energy bill H.R.
4761 written with language intended to collect lost revenue.
Committee on Transportation and Infrastructure
Hearing on "Low Pressure Liquid Pipelines: In the North
Slope Greater Prudhoe Bay, Alaska"
September 13, 2006
Vice Admiral Thomas Barrett, Administrator, Pipeline and Hazardous
Materials Safety Administration, US Department of Transportation
Lois Epstein, Senior Engineer, Cook Inlet keeper and the Pipeline
Safety Trust, Consultant, Pipeline Safety Trust
Steve Marshall, President, BP Exploration Alaska, Inc.
On September 13, the House Committee on Transportation and Infrastructure
convened in response to BP's pipeline shutdown on Alaska's North Slope.
Motivated by the industry's negligent maintenance practices that resulted
in over 5,000 barrels of oil spilled this year, Congress scheduled
a series of hearings to discuss the problem. Chairman Don Young (R-AK)
called this particular hearing to focus on newly proposed legislation
written for the prevention of future pipeline corrosion problems,
specifically the Pipeline Improvement Act of 2006 (H.R.
Currently the Code of Federal Regulations on pipeline integrity management
[Title 49 on Transportation and section 195 on Pipelines (49
CFR Part 195.452)] regulates the transportation of hazardous liquids.
However, only low-pressure pipelines in populated areas and under
navigable waterways are covered by the regulations. The Pipeline and
Hazardous Materials Safety Administration (PHMSA) proposed that low-pressure
pipelines in "unusually sensitive areas" be regulated as
well. This recommendation is included in H.R.
Chairman Don Young (R-AK) called the proposed bill a "good piece
of legislation" and would like to see it move forward in a timely
manner. Vice Chairman Thomas E. Petri (R-WI) also expressed hope for
the bill to be approved by the House before the end of September.
However, Democrats seemed skeptical that H.R.
5782 will be sufficient.
Ranking Member James Oberstar (D-MN) said that the problem necessitates
more frequent inspections on all pipelines regardless of whether they
are in a populated area or environmentally sensitive area. Oberstar
said that problem resulted because of a "corporate culture of
neglect." He stated, "When corporate workroom fails, federal
agency must be there to correct their failures."
Furthermore, Rep. Peter A. DeFazio (D-OR) doubted the bill's three-part
piecemeal legislation would be effective. Instead of having three
separate clauses for pipelines in populated, sensitive, and rural
areas, DeFazio called for an "understandable, comprehensive regime."
He also challenged the stipulation that only low stress lines within
a quarter of a mile from "unusually sensitive areas" be
regulated. His reasoning was that damage often extends much further.
Vice Admiral Thomas J. Barrett, administrator of PHMSA, testified
on the newly proposed plan which he called a "solid, risk-based
approach." He assured members that the prescribed regulations
would have prevented the BP spill from ever taking place. "While
corrosion is a threat to any line, a well maintained line can operate
indefinitely," he said. He addressed DeFazio's concerns indicating
that risk-based management was the most efficient since it targets
the areas with the greatest risks, for example those that threaten
water supply or endangered species. He also noted that the Department
of Transportation (DOT) personnel are in Alaska's North Slope supervising
BP's mitigation efforts, spot checking inspectors and comparing data.
The second witness, Lois Epstein, engineer for Cook Inletkeeper,
an environmental non-profit group emphasized the dire need for federal
oversight of pipelines based on the recent BP incident and a 1992
US DOT surveillance of unregulated low-pressure pipelines which found
that 84% of the lines were not operated in compliance with 49
CFR Part 195.452. She called the proposed bill "an incremental
sliver of the unregulated low-pressure transmission pipeline universe,"
faulting the plan for reducing 49
CFR 195.452 currently six pages long to one page in which smart
pigs, inspection devices that thoroughly check for pipeline corrosion,
"may" be used, but are no longer required. She recommended
a citizen's oversight group and strategies to harness new energy options
and reduce U.S. oil dependency.
5782 plans to cover 680 miles of rural low-stress lines, however,
as few as 5% of these lines would be regulated under the rule. While
Barrett said that around 4000 miles would be left out of federal jurisdiction,
Epstein stated that some surveys put the number at 15,000.
The final witness at the hearing, Steve Marshall, president of BP
Exploration Alaska, Inc., continued to assert, "No one pointed
to these lines as having problems. If they had we would have acted
on it." He called for routine use of pigs and DOT's Pipeline
Integrity Management Program on all lines. Marshall promised to determine
the exact cause of the spill and spend $150 million to replace 16
miles of pipelines.
For the full text of the witness testimony click
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
Hearing on "BP's Pipeline Spills at Prudhoe Bay: What Went
September 7, 2006
Robert A. Malone, Chairman and President, BP America, Inc.
Steve Marshall, President, BP Exploration Alaska, Inc.
Richard Woollam, Former Manager for Corrosion, Inspection and Chemicals
for BP Exploration Alaska, Inc.
Kevin Hostler, President and CEO, Alyeska Pipeline Service Co.
Dan Stears, Cathodic Protection Specialist, Coffman Engineers, Inc.
The Honorable Thomas J. Barrett - Administrator, Pipeline and Hazardous
Materials Safety Administration, Department of Transportation
Kurt Fredriksson, Commissioner, Alaska Department of Environmental
On September 7, 2006, the House Subcommittee on Oversight and Investigations
met to discuss the causes and impacts of BP's pipeline spills at Prudhoe
Bay. Over 200,000 gallons of oil spilled from a 34-inch pipeline in
Alaska, the nation's largest source of oil in March, followed by a
smaller leak, causing BP to shut down the entire Prudhoe Bay field
on August 6. This hearing met in bipartisan agreement to determine
what went wrong.
Acting Chairman Greg Walden (R-OR) said that while BP stands for
"beyond petroleum," these days it "could also stand
for broken pipeline." Walden credited BP for acknowledging the
mistakes it had made, but blamed BP for ignoring red flags along the
way. Rep. Jay Inslee (D-WA) said a number of investigations pointed
to the need for maintenance, including a 2001 consultant report which
was edited by BP to omit suggestions on corrosion precautions.
Chairman of the full Committee on Energy and Commerce Joe Barton
(R-TX) said, "If a company, one of the world's most successful
oil companies, can't do the basic maintenance needed to keep Prudhoe
Bay's oil field operating safely and without interruption, maybe it
shouldn't be operating the pipeline." A simple, inexpensive,
and effective process called pigging checks an entire pipeline for
corrosion. Although operating lines in Prudhoe Bay are equipped with
this maintenance equipment, BP had not pigged its eastern and western
pipelines since 1992 and 1998, respectively. Rep. Diana DeGette (D-CO)
chided BP on "environmentally-friendly and socially conscious
advertising" when in reality the company cannot even follow basic
"rudimentary pipe maintenance."
BP's chief pipeline inspection expert, Richard Woollam, pleaded the
Fifth Amendment, refusing to testify before the House subcommittee.
A 2004 investigation found that Woollam used intimidation tactics
in order to discourage workers from voicing safety concerns. He has
since been moved from Alaska and is on paid leave.
Robert A. Malone, chairman and president of BP America, Inc. said,
"We have fallen short of the high standards we hold for ourselves
and the expectations that others have for us." He reported that
advisers had been hired for counsel on ethics and safety.
Steve Marshall, president of BP Alaska, Inc. said that both spills
have been "fully cleaned up." There is also believed to
be "no lasting damage" from either spill. He assured House
members that BP's pipeline safety plan is comprehensive, covering
over 1500 miles of pipeline. Sixteen miles of pipeline are scheduled
to be replaced by the end of the year. Marshall told the subcommittee
that ten of these sixteen miles are in "good condition"
and production would begin as soon as safely possible. In response
to questions on BP's infrequent pigging practice, he claimed that
2004 and 2005 showed a corrosion increase in ultrasound testing and
that the company had commissioned a pig to run in 2006. "It is
my regret that it was too late," said Marshall.
Kevin Hostler, president and CEO of Alyeska Pipeline Service Company,
noted that the Trans-Alaska Pipeline System runs maintenance pigs
every 7-14 days and smart pigs every three years to ensure clean pipelines
free of sand, shale, and water, materials that lead to corrosion.
These "high stress" pipelines are required by federal regulations
to perform basic maintenance operations. However, "low stress"
pipelines, like those in BP's Prudhoe Bay field do not fall under
Last week the Department of Transportation announced that it would
begin creating regulations on low stress pipelines in delicate rural
areas. This summer the House Energy and Commerce Committee also considered
a discussion draft requiring the addition of regulations on low stress
lines. "We are going to, if necessary, change federal law to
do everything possible to minimize this happening again," said
Barton. However, legislation has yet to be introduced detailing what
these changes would look like.
Energy and Natural Resources Committee
Hearing on "Hydrogen Fuel Cell Research and Development"
July 17, 2006
David Garman, Undersecretary of Energy, U.S. Department of Energy
Donald Paul, Vice President and Chief Technology Officer, Chevron
Tim Leuliette, President and Chief Executive Officer, Metaldyne, Inc.
Byron McCormick, Executive Director, Fuel Cells Activities General
Jim Balcom, President and Chief Executive Officer, PolyFuel, Inc.
The Energy Subcommittee of the Senate Energy and Natural Resources
Committee held a hearing on July 17 to assess the progress of hydrogen
fuel cell development. Witnesses described how the hydrogen fuel cell
research process takes time and money, but will yield high rewards
for the U.S. economy when it becomes cost competitive. Throughout
the hearing, senators demonstrated general support and encouraged
financial support to move the research process along as quickly as
possible. Chairing the hearing, Senator Lamar Alexander (R-TN) opened
the hearing by saying, "This hearing should be interesting because
we're talking about the transformation from gasoline combustion engines
to hydrogen fuel cells." Senator Pete Domenici (R-NM) agreed.
"It is terribly exciting to hold a hearing about an initiative
that is so earthshaking in terms of where it can go," he said.
David Garman, Undersecretary of Energy at the Department of Energy
(DOE), described how DOE is fostering continued research and development
of hydrogen technology. The research is making significant progress.
The cost of producing hydrogen has been cut nearly in half, from $5
per gasoline gallon equivalent energy to under $3. The lifetime of
an automobile hydrogen storage cell has also been doubled, however,
the lifetime is not competitive with the lifetime of an automobile.
The most recently developed fuel cells have a lifetime of 2,000 hours,
significantly shorter than the 5,000 hours of life expected out of
a new automobile. "We have indeed made significant progress,
which we credit with the private sector, our colleges and universities,
and the congress
we must continue to move forward," said
Garman, praising research and development partnerships which are currently
researching hydrogen fuel cell technology.
Members asked a number of questions relating to the progress of hydrogen
and other alternative automotive fuels. Alexander inquired if the
research was classified as high risk. Garman responded that it is
high risk, as well as high reward. "Federal high risk research
and development is the sort of research one would not expect the private
sector to do alone, as there is no [immediate], short term payoff
is a high risk, high reward program," responded Garman. Senator
Jeff Bingaman (D-NM) was interested in creating a market suitable
to enable the mass production of plug-in hybrids. Mass production
should lower the cost of these cars. Bingaman suggested a program
to encourage federal agencies to purchase plug-in hybrids to help
stimulate mass production in the industry. Garman responded positively
to the idea, but added that the lithium-ion batteries did not yet
have the storage capacity most agencies would expect, and are still
quite expensive. The batteries are down to $1000 from $3000, but they
have to be around $500 each to be cost competitive. "I think
plug-in hybrids offer a tremendous opportunity, and the President
ultimately, [these technologies] have to be adopted
on a mass basis," said Garman.
Witnesses from the automobile industry explained their progress on
developing hydrogen fuel cell cars. Byron McCormick, on behalf of
General Motors, stated their progress was significant in hydrogen
and other alternative fuel cars. They have put two million E85-ready
cars on the road, and increased the efficiency of hydrogen fuel cell
cars by a factor of fourteen. "This is a critical time in the
history of the automobile industry," he said. "Hydrogen
fuel cell technology has the greatest potential." McCormick also
stressed implementing more federal incentives to reduce the cost of
mass-produced hydrogen fuel cell cars.
Donald Paul, the Vice President and Chief Technology Officer of Chevron
Corporation, explained the company's commitment to alternative fuels.
"Chevron is committed to diversifying the nation's energy supplies
there is no silver bullet, we are actively searching for new fuel
sources. We are going to need every form of energy, and need to research
[alternative fuels]," he said. He also voiced strong support
for hydrogen fuel cell technology. "Hydrogen can provide, in
the near term, viable transportation fuels, however, this is dependent
on solving key technological challenges," he said. Those challenges
include hydrogen fuel transportation and storage infrastructure, as
well as reducing costs to ensure hydrogen is a cost-competitive fuel.
The remaining witnesses described the development of hydrogen technology
in manufacturing. Byron McCormick, Vice President and Chief Technology
Officer of General Motors, described how GM sees hydrogen emerging
in the automobile market. "This is a critical time in the history
of the automobile industry," he said. He described how technology
is improving, but is not yet market competitive, and promoted the
use the hydrogen as the next primary automobile fuel. Tim Leuliette,
President and Chief Executive Officer of Metaldyne, also promoted
the change to a hydrogen economy. "A hydrogen economy is better
[it] can boost our economy and our environmental
quality," he said. Jim Balcom, President and Chief Executive
Officer of, PolyFuel, also concurred with the previous witnesses about
the current status of hydrogen technology development.
Energy and Natural Resources Committee
Hearing on "The Enhanced Energy Security Act of 2006"
June 21, 2006
The Honorable Evan Bayh, United States Senator, Indiana
The Honorable Norm Coleman, United States Senator, Minnesota
Alexander Karsner, Assistant Secretary for Energy Efficiency and Renewable
Energy, U.S. Department of Energy
Daniel Lashof, Science Director, National Resources Defense Council's
Climate Center, Washington DC
Steve Nadel, Executive Director, American Council for an Energy-Efficient
Economy, Washington DC
Kateri Callahan, President, Alliance to Save Energy, Washington DC
Members of the Senate Committee on Energy and Natural Resources met
on June 21, 2006 to discuss the "Enhanced Energy Security Act
of 2006" (S.2747).
The bill, sponsored by Senators Jeff Bingaman (D-NM), Evan Bayh (D-IN.),
Norm Coleman (R-MN), Lincoln Chafee (R-RI) and Joseph Lieberman (D-CN),
sets forth enhanced energy efficiency and conservation measures, including
a plan for saving 2.5 million barrels of oil per day in 10 years -
roughly the amount of oil the U.S. currently imports from the Middle
Senator Coleman explained in his testimony that the bill includes
"initiatives that will promote E85
fueling infrastructure and speed the development of cellulosic ethanol,
while investing in the development of efficient vehicle technologies
and assisting auto manufacturers' transition to fuel-efficient vehicle
production." Coleman advocates total independence from foreign
oil, something that Brazil has just accomplished this year through
government-mandated investment in the production of ethanol and flex
Kateri Callahan, President of the Alliance to Save Energy, urged
the committee to include a "feebate" program as part of
the S.2747 legislation. "The idea is simple," she said.
"Provide an incentive (rebate) to make and buy fuel-efficient
vehicles, and charge a premium (fee) on gas guzzlers." Callahan
explained that the total fees would pay for the rebates so that there
would be no net revenue or cost to the government. Steve Nadel, the
Executive Director of the American Council for an Energy-Efficient
Economy, also recommended that future legislative efforts focus more
on promoting energy efficiency. Nadel encouraged the establishment
of a national energy efficiency resource standard that would set "electric
and gas energy savings targets for utilities, with flexibility to
achieve the target through a market-based trading system."
Daniel Lashof, the Science Director of the Climate Center at the
Natural Resources Defense Council, supported the bill's national renewable
portfolio standard provision. Lashof argued against the state-specific
renewable portfolio standards that the Administration favors.
He explained that this policy is inequitable because it allows states
that do not have renewable portfolio standards to unfairly benefit
from lower gas and oil prices that result from the states that do
have these standards.
Only one witness, Alexander Karsner, the Assistant Secretary for
Energy Efficiency and Renewable Energy, was not overly supportive
of the proposed legislation. Karsner testified that the Administration
had not had enough time to review S.2747, and as of yet does not have
a formal position on the legislation. He noted that parts of the bill
appear to overlap with the Energy
Policy Act of 2005 and he suggested that these issues be resolved
in order to avoid duplicative legislation. Senator Bingaman criticized
the Administration and the Department of Energy for not taking the
time to review the bill, and complained that it was likely a sign
that the proposed bill was not being taken very seriously.
For the full text of witness testimony click here.
Energy and Natural Resources Committee
Hearing on "Coal Based Generation Reliability"
May 25, 2006
Robert McLennan, Vice President of External Affairs, Tri-State Generation
and Transmission Association
David Wilks, President of Energy Supply, Xcel Energy Services Inc.
Steven Jackson, Director of Power Supply, Municipal Electric Authority
Robert Sahr, Chairman, South Dakota Public Utilities Commission
Edward Hamberger, President and CEO, Association of American Railroads
The Senate Energy and Natural Resources Committee discussed the reliability
of shipping coal on U.S. railroads during a hearing on May 25, 2006.
Witnesses talked about shipping delays, low reserves at power plants,
as well as the railroad industry's efforts to maintain reliable service.
Members of the committee emphasized the importance of coal as an energy
resource and expressed their concern about the smooth operation of
coal-based energy generation.
Chairman Pete Domenici gave a brief opening remark and noted the
importance of coal in generating electricity. He mentioned that 50%
of the nation's electricity comes from coal, so barriers preventing
the operation of coal-based energy generation should be addressed.
He hoped to identify the cause of coal transportation delays and find
a way for the Committee to address them.
Robert McLennan, representing the Tri-State Generation and Transmission
Association, was the first witness to address coal transportation
problems. The high quality, low-sulfur coal required to meet emission
standards in the U.S. is largely mined from the Powder River Basin
in Wyoming, McLennan explained, and this coal must be transported
to coal-fired power plants throughout the country. For the past year,
traffic bottlenecks on the railways have slowed the rate of delivery
of coal from the source to the power plants. He acknowledged that
more coal was shipped last year than ever before, however, the railroads
still could not keep up with demand. When reserves cannot keep up
with demand, foreign coal is sometimes used to supplement domestic
supplies. When asked about how much coal the U.S. imports, McLennon
noted imports were barely 4% of total consumption and replied, "I
don't think we are headed to a situation with coal like we have with
David Wilks, the President of Energy Supply for Xcel Energy Services,
elaborated on the challenges energy companies were having with coal
delivery. Most of the plants operated by Excel had run less than their
recommended thirty-day reserve of coal and many had less than ten
days of reserves. Interruptions in coal supplies necessitate a switch
to natural gas, which is more costly to the energy supplier and the
consumer. He estimates that in 2006, 340 billion cubic feet of natural
gas will be needed to supplement coal power supplies, costing about
$2 billion. Later in the hearing, Robert Sahr, Chairman of the South
Dakota Public Utilities Commission made similar comments about low
reserves and shipping delays.
Steven Jackson, the Director of Power Supply for the Municipal Electric
Authority of Georgia, added that energy producers in Georgia have
imported coal from Indonesia to supplement reserve shortages. Domenici
expressed surprise at this, asking for clarification. "Let me
get this straight: even though we have a 250 year supply, we are importing
coal from Indonesia?" asked Domenici, interrupting Jackson's
testimony. Senators Conrad Burns and Craig Thomas also commented on
that statement, reflecting Domenici's surprise and expressing concern.
Edward Hamberger, President and CEO of the Association of American
Railroads responded to the allegations of the previous witnesses about
railroads becoming an unreliable way to ship coal. He began by saying
the railways have worked alongside the power industry for years to
meet their shipping needs and hoped further collaboration would solve
the issues at hand. He noted a spike in demand for coal shipments
in 2005 that the railroads did not have the capacity to handle; the
increased demand was from both the coal industry as well as other
industries utilizing rail travel. Coal shipments had declined from
2000-2004, so the rail industry had reduced capacity. Furthermore,
forces outside of the industry's control contributed to delays in
rail shipments. He mentioned the two Gulf hurricanes, as well as flooding
in Wyoming and Kansas as examples of natural disasters that caused
significant transit delays; there were also delays at mine loading
stops and power plant offloading stops. Hamberger mentioned that sometimes
rail cars have been delayed because they were waiting to be filled
with coal at the mines. Hamberger noted the more than $8 billion that
railroads were putting into their infrastructure to increase shipping
capacity. Unfortunately building this capacity takes time and Hamberger
concluded "We can't do it overnight".
The Senators pressed Hamberger with questions about the delays in
rail shipments. Several mentioned the irony of having 25% of the world's
supply of coal, yet still having to import small amounts of coal.
Hamberger also defended the need for coal imports, saying it is a
very small amount of coal, and that like all other products, as prices
climb, the consumer will look for new sources. Senator Thomas accused
the railways of purposefully removing competition, which allows them
to raise rates and reduce service. Hamberger quickly responded that
the railways reduced rates 30% from 1991 to 2004. He added that the
railways do have to compete with other modes of transportation as
well, even if the railroads do not have competition against each other.
Senator Mary Landrieu (D-LA) asked whether using barges on America's
waterways would be a way to stem a possible overburden of the rail
roads. Hamberger commented that waterway shipments may help, but inconsistent
funding of the locks and dams makes reliable shipping tough. Barge
shipping is also very limited to areas near major waterways and the
largest coal mine in the U.S., which is in the Powder River Basin,
is not near any major waterways.
Commerce, Science and Transportation Committee
Hearing on "Price Gouging"
May 23, 2006
The Honorable Deborah Platt Majoras, Chairman, Federal Trade Commission
Dr. Nariman Behravesh, Chief Economist, Global Insight
Mr. Robert Slaughter, President, National Petrochemical and Refiners
Mr. Mark Cooper, Director of Research, Consumer Federation of
The full Senate Commerce, Science and Transportation Committee
met on May 23rd to review allegations of gasoline price gouging
across the nation. Senator Inouye (D-HI) opened the hearing by
expressing his concern over alleged price manipulation by oil
companies. He noted how several gas stations in Atlanta sold gasoline
for nearly $6 a gallon after Hurricane Katrina struck the Gulf
Coast, and how actions such as this were not "legally or
Deborah Majoras, Chairman of the Federal Trade Commission (FTC),
introduced a report written by the commission regarding price
gouging. While she understands the concerns of consumers, Majoras
stated there was no evidence that any of the allegations were
true, and that the market influences of supply and demand had
the greatest influence on gasoline price. She added that the gasoline
prices reflected the FTC's predictions after Hurricane Katrina.
She referred the committee to the FTC report for more information
to support her statements.
Dr. Nariman Behravesh gave a similar testimony, saying that demand
growing faster than supply was a natural cause for a price hike
in gasoline. Bob Slaughter echoed these comments and noted that
there is no way for additional regulation to reduce the price
of oil because factors out of the control of American regulation,
such as OPEC and the hurricanes of last year, have a bigger impact.
Slaughter also noted the need for new refineries and the easing
of environmental regulations to reduce the cost to consumers.
Mark Cooper, the Director of Research at the Consumer Federation
of America, presented a different point of view. In an energetic
testimony, he told the committee that the industry is deliberately
keeping capacity and inventory low to maintain a high price for
oil products. Cooper explained that the FTC report failed to undercover
inept management of the industry, which was unable to adequately
respond to market forces to keep prices low.
Senators on the committee asked tough questions of the witnesses.
They criticized the FTC report during their allotted comment time.
Senator Byron Dorgan (D-ND) described the report as toothless
and condescending to anyone who reads it because of the FTC's
failure to venture outside of the petroleum industry for information
during their investigation. The committee was primarily disappointed
with the FTC's opinion that the market was the sole source of
price hikes. Senator Byron Dorgan said, "The market didn't
work well for the American people" in this case, and stated
"[The market] needs a referee." Senator Trent Lott (R-MS)
commented on how his constituents have been giving him tough questions
and demanding a solution: "The American people are agitated,"
he said. Senators Maria Cantwell (D-WA) and Barbara Boxer (D-CA)
commented on how the west coast has faced the highest gasoline
prices in the nation, despite what they describe as heavy concentrations
of refineries in the area. They both made comments on how the
proximity to refineries should result in lower prices for gas.
Committee on Resources
Subcommittee on Energy & Minerals
Oversight Hearing on "The Role of the Federal Government
and Federal Lands in Fueling Renewable and Alternative Energy
April 6, 2006
Wayne Arny, Deputy Assistant Secretary of the Navy for Installations
and Facilities, U.S. Navy
Leland Roy Mink, Manager of the Office of Geothermal Technology,
U.S. Department of Energy
Dr. Marcia Patton-Mallory, National Biomass and Bio-Energy Coordinator,
U.S. Forest Service
Brenda Aird, Ombudsman for Renewable Energy, Department of the
Ray Brady, Energy Policy Act Implementation Team Leader, Bureau
of Land Management
Jonathan Kolak, Associate Program Coordinator, USGS Energy Resources
Maureen Bornholdt, Chief of the Marine Minerals Branch, Minerals
On April 6, 2006, the House Resources Subcommittee on Energy
and Mineral Resources heard testimony on developments in renewable
and alternative energy resources on federal lands. Officials from
the Navy, the Department of Energy (DOE), the Forest Service,
and the Department of the Interior (DOI) presented lawmakers with
details of their agencies' efforts to increase alternative energy
use and development.
"The Department of Navy is committed to implementing a balanced
energy program that meets the goals of the Energy Policy Act of
2005," said Wayne Arny, deputy assistant secretary for Navy
installations and facilities. He detailed Navy investments in
wind, ocean, solar, and geothermal power, emphasizing the Navy's
unique geothermal plant at China Lake, California. Capable of
producing 270 megawatt capacity of electricity, the plant is the
only geothermal plant on Department of Defense (DOD) lands.
Lawmakers were surprised to learn that although the plant is
located on federal lands, it is owned by an independent private
contractor, who gives the Navy a share of the revenue generated
from the electricity sales. Representative Jim Gibbons (R-NV)
questioned the logic behind the Navy's decision to not use electricity
generated on-site. Arny explained that although laws have since
changed, when the plant was built in the 1980s, the Navy could
not legally own the electricity generated. He also noted that
the Navy's share of the revenue generated from the electricity
sales is used for energy development, education, and management.
Geothermal energy is an important resource on non-defense federal
lands as well, Roy Mink, a program manager for geothermal technologies
at DOE, told the subcommittee. "Geothermal energy is a developing
and sometimes overlooked domestic energy source," he said.
He noted a common misconception that geothermal energy is a resource
found only in California and Nevada. "It is feasible to capture
geothermal energy anywhere within the U.S."
DOI renewable energy efforts are being concentrated in wind energy,
concentrated solar power, geothermal power, and biomass management.
Brenda Aird, DOI Ombudsman for Renewable Energy, told representatives
that the Bureau of Land Management (BLM) currently manages 45
leases for active geothermal plants, generates 185 Megawatt-hours
of electricity from photovoltaic cells, and authorizes rights-of-way
for 22 wind energy production sites on public lands. 78 additional
rights-of-way authorizations are pending. Responding to questions
from Representative Steve Pearce (R-NM), Aird specified that each
pending wind energy plant can produce between 200 and 500 Megawatts
of electricity. DOI is also investing in the development of alternative
sources of fossil energy, including gas hydrates, oil shale and
tar sands. BLM is currently developing regulations for commercial
leasing of oil shale and tar sands, and the Minerals Management
Service is reassessing the potential quantities and environmental
impacts of gas hydrates on the Outer Continental Shelf.
Dr. Marcia Patton-Mallory, the biomass and bio-energy coordinator
for the Forest Service, noted two focal points for renewable energy
at the Forest Service: hydropower and energy from biomass. Fifteen
percent of all U.S. hydropower is generated on Forest Service
Lands. That number is unlikely to grow much, Patton-Mallory said,
because "most of the best locations for hydropower generation
have already been developed."
The energy generated from biomass, on the other hand, is a growing
resource. Patton-Mallory noted that a recent Forest Service-DOE
report estimates that the U.S. contains over 1.3 billion dry tons
per year of biomass potential, 400 million of which come from
forest lands. But Pearce accused the Forest Service of making
it difficult for private companies to develop that potential.
He cited two examples of the Forest Service refusing to give long-term
supply contracts to potential developers of biomass energy plants.
Representative Mark Udall (D-CO) emphasized the importance of
developing long-term agreements with contractors. For companies
to make the investment in biomass energy production, he said,
they need "stable, predictable feedstock." He also called
for increased funding for the President's Healthy Forests Initiative,
designed to prevent forest fires by clearing excess wood from
forests. "I know we're all going to fight to see if we can
fully fund Healthy Forests," he said.
For the full text of witness testimony, click
Committee on the Judiciary
Hearing on "Consolidation in the Oil and Gas Industry:
March 14, 2006
Joseph M. Alioto, Partner, Alioto Law Firm
Tom Greene, Senior Assistant Attorney General for the State of
Severin Borenstein, Professor of Business Administration and Public
Policy, UC Berkeley
Peg Lautenschlager, Attorney General for the State of Wisconsin
David Boies, Chairman, Boies, Schiller and Flexner LLP
Rex Tillerson, Chairman and Chief Executive Officer, Exxon Mobil
James Mulva, Chairman and Chief Executive Officer, ConocoPhillips
David O'Reilly, Chairman and Chief Executive Officer, Chevron
Bill Klesse, Chief Executive Officer, Valero Energy Corp.
John Hofmeister, President, Shell Oil Company
Ross Pillari, President and Chief Executive Officer, BP America,
The Senate Committee on the Judiciary held a hearing on March
14 to discuss whether mergers in the oil and gas industry are
contributing to high gas prices. Committee Chair Arlen Specter
(R-PA) opened the hearing by expressing frustration that while
consumers are faced with increasing gasoline prices, oil businesses
are earning record profits. In 2005, Exxon Mobil's profits reached
$36 billion, the largest corporate profit in U.S. history. Specter
attributed high prices to anti-competitive behavior resulting
from the recent spate of mergers in the oil and gas industry.
Four of the five experts on the first panel of witnesses supported
Specter's view that high gasoline prices are not solely the result
of tight supplies and increased global demand. Tom Greene, Senior
Assistant Attorney General for California, dubbed the oil industry
an "oligopoly" and affirmed that concentration in the
industry had allowed oil companies to come to "tacit agreements"
on price and supply decisions. Joseph Alioto Jr., an antitrust
lawyer, alleged that the agreements were hardly tacit. He told
senators evidence exists showing that top oil executives routinely
meet once a month to share information, discuss prices, and cooperate
through joint venture deals and shared refineries and service
Witness allegations also extended to the natural gas market.
David Boies, an attorney representing the Alaska Gasline Port
Authority, accused BP and Exxon Mobil of conspiring to block development
of a natural gas pipeline from Alaska's North Slope. Wisconsin
Attorney General Peg Lautenschlager detailed a study showing that
while tight supply and demand factors may explain the gradual
increase in natural gas prices, they cannot account for the observed
volatility in prices.
Oil executives testifying on the second panel denied the claims
that mergers were designed to decrease competitiveness and fix
prices. Rex W. Tillerson, Chief Executive Officer (CEO) of Exxon
Mobil, defended the mergers as necessary to compete in the global
oil market. "We need U.S. energy companies that have the
scale and financial strength to make the investments, undertake
the risks and develop the new technologies necessary to provide
Americans with greater energy access and greater energy security,"
he said. Testifying alongside Tillerson were CEOs and Presidents
representing some of the largest U.S. oil companies, including
Conoco Phillips, Chevron, Valero energy, Shell Oil, and BP America.
All attributed rising prices to increased global demand.
The sole witness to support the oil companies' claims was Severin
Borenstein, a professor of business administration and public
policy at the University of California at Berkeley. Borenstein
noted that wholesale gasoline currently costs $1.66 per gallon,
and that $1.43 of that is the cost of crude oil. At most, he said,
"only a few cents" of the remaining 23-cent refining
margin could be attributed to mergers. He added that the U.S.
is "a very small player" in the global oil market, and
that changes in antitrust legislation would likely have only minor
effects on gasoline prices.
Senators John Cornyn (R-TX) and Tom Coburn (R-OK), both from
oil-producing states, defended the oil executives. "It isn't
a crime to make a profit," Cornyn said. Nonetheless, Specter
was joined by committee Democrats as well Senator Mike DeWine
(R-OH) in criticizing the industry's anti-competitive behavior.
Specter has drafted amendments to current antitrust legislation
that would increase the difficulty of major oil and gas mergers.
Despite significant bipartisan interest in the legislation, Specter
is awaiting further comment before deciding whether to attempt
to push the amendments through Congress this year.
For the full text of witness testimony, click
Committee on Energy and Natural Resources
Hearing on "The Goal of Energy Independence"
March 7, 2006
R. James Woolsey, former CIA Director and Vice President, Booz
Susan Cischke, Vice President of Environmental and Safety Engineering,
Ford Motor Company
Frank Verrastro, Director and Senior Fellow, Energy Program, Center
for Strategic and International Studies
Amory Lovins, CEO, Rocky Mountain Institute
The Senate Committee on Energy and Natural Resources held a hearing
on March 7, 2006 to discuss the challenges of achieving of U.S.
energy independence from foreign oil. In his opening remarks,
Committee Chair Pete Domenici (R-NM) expressed the importance
of "being realistic about what is possible in the near-term"
while maintaining "energy and enthusiasm" about the
long-term possibility of energy independence. He added that while
he supports using science and technology to move towards energy
independence, it is critical that America use its available resources,
including oil resources in the Arctic National Wildlife Refuge
(ANWR). Ranking Member Jeff Bingaman (D-NM) noted the need to
bridge what he called "a major gap between the rhetoric of
the importance of energy independence and what we're actually
Former CIA Director R. James Woolsey testified that achieving
energy independence is "primarily an issue of oil" and
in particular its use for transportation. He noted that while
a number of major investments are targeting alternative forms
of electricity generation, these will have little impact on oil
markets due to the fact that very little of America's electricity
is oil-generated. The transportation sector, on the other hand,
is almost exclusively reliant on petroleum. Woolsey pointed out
that this dependence makes the U.S. economy vulnerable to terrorist
attacks, regime changes, and other political problems. He advised
senators to focus on addressing transportation policy and to promote
changes that can utilize the existing infrastructure, be made
quickly, and use waste products as source material. In particular,
he recommended offering incentives to increase the use of plug-in
hybrid vehicles, biofuels from cellulosic ethanol, and diesel
made from biological waste.
Susan Cischke, Vice President of Environmental and Safety Engineering
at Ford Motor Company, detailed the steps the automotive industry
is taking to decrease America's reliance on gasoline. In particular,
she spoke of increased production of hybrid vehicles, ethanol-powered
vehicles, and flexible fuel vehicles (FFVs) that can use various
combinations of ethanol and gasoline. Although she championed
the use of ethanol-based fuels, Cischke noted that the lack of
ethanol fueling stations limits the usefulness of ethanol technology.
She urged policymakers to create incentives for expanding ethanol
infrastructure and also to take an active role in educating the
public about fuel efficiency.
In his opening testimony, Frank Verrastro, Director of the Energy
Program at the Center for Strategic and International Studies,
presented a more pessimistic view of the feasibility of achieving
energy independence in the near future. "Conventional sources
will continue to dominate the landscape for at least the next
several decades," Verrastro said. He explained that while
energy demand is projected to increase 50 percent over the next
25 years, the shares of that demand being met by renewables, coal,
and nuclear sources are expected to remain flat. He recommended
thinking of "energy interdependence" and the role of
the U.S. in the global energy market rather than energy independence,
which he called a "misguided effort."
The final witness to testify was Amory Lovins, Chief Executive
Officer of the Rocky Mountain Institute, who labeled "the
oil problem" as "unnecessary and uneconomic." He
emphasized three goals that the U.S. must achieve to become energy
independent: making the domestic energy infrastructure resilient,
phasing out unstable facilities, and ultimately eliminating oil
imports. Like the other witnesses, Lovins emphasized the need
to focus on the transportation sector. "The key to wringing
twice the work from our oil is tripled-efficiency cars, trucks,
and planes," he said. He also noted that by producing more
efficient cars domestically, the U.S. can reduce imports of cars,
eliminate dependence on foreign oil, decrease costs and emissions,
and create a million new jobs.
Committee members raised a number of questions about the development
and use of ethanol-based fuels in the transportation sector. Senator
Craig Thomas (R-WY) asked about the costs of producing ethanol
fuels. Cischke responded that while production costs alone are
cheaper for ethanol than gasoline, ethanol fuels contain about
28 percent less energy. Senator Jim Bunning (R-KY) asked Cischke
to identify the limiting factor in transitioning from traditional
gasoline to E85, a fuel that contains 85 percent ethanol. Cischke
explained that ethanol fuels are supplied differently than oil
or diesel, and that to increase demand for E85 vehicles, the nation
must first develop the infrastructure to supply ethanol at fueling
Thomas also asked about the potential for increasing nuclear
power usage. Lovins replied, "I think it's died in the market."
He elaborated that the nuclear industry is less competitive than
other energy industries, and that the nuclear subsidies included
in the Energy Policy Act of 2005 would do little to reinvigorate
Senators Domenici and Lisa Murkowski (R-AK) raised the issue
of replacing foreign oil with oil from domestic sources, namely
by drilling in Alaska. Referring to a statement in Lovins' opening
testimony, Murkowski challenged Lovins' view that an Alaskan oil
pipeline would pose security risks. Lovins responded that a terrorist
attack on an oil pipeline could significantly disturb oil supply
to the continental U.S. He added that a natural gas pipeline would
pose fewer risks because it would not be located aboveground.
Domenici noted, "I can't imagine oil from Alaska is less
secure [than foreign sources]."
Domenici also asked each witness to identify the two most critical
policy changes that should be implemented to improve energy use
in the transportation sector. Woolsey emphasized expanding the
use of biofuels and plug-in hybrids, which could be accomplished
by introducing tax incentives and rebates. Cischke reiterated
her opinion that the top priorities were implementing tax incentives
for alternative vehicles and fuels as well as educating the public
on energy efficiency issues. Verrastro cited the need for supplemental
sources of fuel and improved technology that could increase fuel
efficiency. Finally, Lovins restated his view that American manufacturers
must triple the efficiency of cars, trucks, and planes.
For the full text of witness testimony, click
Committee on Energy and Natural Resources
Hearing on Energy Information Administration's 2006 Annual
February 16, 2006
Guy Caruso, Administrator, Energy Information Administration,
Department of Energy
Guy Caruso, Administrator of the Energy Information Administration
(EIA), appeared before the Senate Committee on Energy and Natural
Resources on February 16 to present the EIA's Annual
Energy Outlook (AEO) for 2006. The outlook, which for the
first time includes predictions through 2030, contains substantial
changes from last year's forecast.
The EIA's projections show oil prices decreasing slightly over
the next decade, reaching a low of about $47 per barrel in 2014
(in 2004 dollars). Predictions for the subsequent decade, however,
show an increase to $54 per barrel in 2025, $21 higher than last
year's prediction of $33 per barrel. Caruso explained the change
as a reflection of tighter investment opportunities, more volatile
world oil markets, and a smaller increase in oil productive capacity
in the Organization of Petroleum Exporting Countries (OPEC) than
previously projected. He also noted similar predicted trends in
natural gas prices, which will drop to roughly $4.50 in 2016,
then increase to nearly $6 in 2030.
Due to increasing oil and natural gas prices, the EIA projects
that the use of coal, renewable fuels, and nuclear energy will
grow over the next 25 years. "[Coal's] share of electricity
is expected to increase from about 50 percent
in 2004 to 57 percent in 2030," Caruso said. This is a significant
change from the 2005 AEO, which projected coal's share would remain
at 50 percent through 2025. Nuclear capacity is projected to grow
by 9 gigawatts over the next 13 years, reaching 109 gigawatts
by 2019. The majority of the nuclear increase can be attributed
to tax credits included in the Energy Policy Act of 2005. Consumption
of renewable fuel is also expected to increase from 6.0 quadrillion
Btu in 2004 to 10.0 quadrillion Btu in 2030. Tax credits from
the Energy Policy Act of 2005 account for some of the increase
in renewable use, however, the majority of the change comes from
renewable mandates currently in place in 23 states.
Following Caruso's presentation, Committee Chair Pete Domenici
(R-NM) and Ranking Member Jeff Bingaman (D-NM) raised questions
about the projected share of domestic oil. Referring to the President's
State of the Union address, Bingaman questioned whether the U.S.
is likely to reach the President's goal of decreasing Middle Eastern
oil imports by 75 percent by 2025. Caruso responded that based
on current policies, the EIA's forecast actually shows an increase
in imports from the Persian Gulf over the next 20 years. According
to the AEO, in 2025 the U.S. will import roughly 3.3 million barrels
of oil per day from the Middle East; whereas current imports total
approximately 2.5 million barrels per day.
Senator Lisa Murkowski (R-AK) raised concerns about the EIA's
assumption that Alaska's North Slope natural gas pipeline will
be in place by 2015. Noting that a full agreement about the development
of the pipeline has not yet been reached, she asked Caruso how
the projections will change if the pipeline is not in place by
2015. "All things being equal, the price of gas would be
higher without that project coming on stream," Caruso responded.
"If the project is hypothetically delayed until 2016, that
would mean one year of somewhat higher natural gas prices, and
so LNG imports would be a bit higher."
Murkowski also noted that the U.S. receives about 11 percent
of its oil imports from Venezuela, a country that is currently
experiencing political turmoil. Caruso concurred that a disruption
of oil from Venezuela would be difficult to offset using other
sources, and that such a disruption would almost certainly cause
an immediate price spike. The magnitude of the spike would depend
on the duration of the disruption.
For the full text of Senator Domenici's opening remarks and Mr.
Caruso's testimony, click
Energy and Commerce Committee, Subcommittee on Energy and
Hearing on the Theory of Peak Oil.
December 7, 2005
Representative Tom Udall (D-NM)
Representative Roscoe Bartlett (R-MD)
Kjell Aleklett, Professor, Department of Radiation Sciences, Uppsala
Robert Hirsch, Senior Energy Program Advisor, Science Applications
Robert Esser, Senior Consultant and Director, Global Oil and Gas
Resources, Cambridge Energy Research Associates
On December 7, 2005, the Energy and Air Pollution Subcommittee
of the House Energy and Commerce Committee met to discuss the theory
that oil production will peak sometime in the near future. In his
opening statement Subcommittee Chairman Ralph Hall (R-TX) expressed
some skepticism towards the idea of peak oil, but also said that
he would keep an open mind on the subject. Similarly, Representative
Gene Green (D-TX) pointed out that there have been many scares about
oil supplies running out in the past, but also acknowledged that
oil is not infinite, saying "the wolf does come in the end."
The subcommittee first heard from two fellow members of Congress,
Representatives Tom Udall (D- NM) and Roscoe Bartlett (R-MD), who
are the co-chairs of the Congressional Peak Oil Caucus. Both congressmen
made the case that oil production will peak in the next twenty years,
and that the government must initiate a major program, similar to
efforts to develop the atomic bomb or send humans to the moon, to
promote oil conservation and efficiency and develop alternative
fuels. Bartlett was particularly passionate about the coming end
of the "age of oil", which he said was a major national
security issue and threatened the United States' high standard of
living. "We are like children who found the cookie jar,"
he said, describing Americans unending demand for oil. "We
show no restraint."
Most of the subcommittee members refrained from asking questions
of their colleagues, but Representative John Shimkus (R-IL) took
issue with Udall and Bartlett's assertion that Congress needed to
take action on peak oil, saying that he thought that free markets
could develop new fuel technologies without government intervention.
Bartlett responded by saying, "We have deified the marketplace,
but there are some things that even the deity can't do. None of
the alternatives have the potential of being ramped up quickly enough."
The second panel featured three experts with different perspectives
on peak oil. Kjell Alklett, who represented the Association for
the Study of Peak Oil and Gas, claimed that peak oil "is a
reality, not a theory", and gave a series of examples that
indicated global oil production would begin to decline within the
next decade. Robert Hirsch, from Science Applications International
Corporation (SAIC), asserted that there is a high level of uncertainty
in predicting the peak of oil production, in large part because
Saudi Arabia's reserve estimates are a closely guarded secret. Hirsch
punctuated his testimony with the phrase "Think Risk",
and he strongly urged Congress to act quickly, since by his estimates
it will take about 20 years for the United States to adequately
prepare for declining oil production.
Robert Esser, from Cambridge Energy Research Associates (CERA),
presented a less pessimistic picture than his fellow panelists,
arguing that a great deal of new areas would begin producing oil
in the near future. "The world is not running out of oil imminently
or in the medium term," he said. Instead, Esser predicted that
global oil production would head into an undulating plateau, probably
beginning around 2030, before gradually declining in the second
half of the century. Despite their differing prognoses, however,
all three witnesses agreed that surging global demand and slowing
production growth would lead to major fuel price increases over
the next 25 years. "I don't take comfort in the undulating
plateau," Esser said.
While some subcommittee members expressed doubts as to the validity
of the peak oil theory, most of the discussion during the hearing
focused on potential solutions to a fuel crisis. Subcommittee ranking
member Rick Boucher (D-VA) suggested that converting coal to liquid
fuel might be the best solution, since the United States has over
250 years worth of coal reserves. Boucher also mentioned that a
South African company had come up with a commercially viable coal
to liquid conversion process. Esser said that he had not heard of
any developments in this area, however, while Representative Bartlett
said that Boucher's statement was misleading. The 250 years of coal
reserves shrinks to 85 years if consumption increases by only 2%
per year, he said, and coal will be used even more quickly if we
convert it to liquid fuel. The potential of hydrogen fuel was similarly
called into question by Hirsch, who said that major breakthroughs
in fuel cells and on-board storage were needed before it would be
Esser was more optimistic about the potential of oil sands from
Canada to relieve pressure on conventional petroleum supplies. "That
is the highest intensity oil production place in the world right
now," he said, pointing out that Canadian oil sand fields had
the potential to produce 6 billion barrels a day. Bartlett, however,
was less hopeful about oil sands, and pointed out several times
during the hearing that the oil sands have a negative energy profit
ratio, meaning it takes more energy to produce the fuel than it
provides. Currently energy companies are using natural gas to derive
petroleum from oil sands, which may be a problem as natural gas
prices continue to climb. Esser, in turn, pointed out that there
were major undeveloped gas fields in Iran and other parts of the
Middle East, and that converting gas to liquid fuel represented
another viable solution. Both Alklett and Representative Shimkus
advocated the development of biofuels technology, but Bartlett urged
caution on this as well, saying that both food shortages and topsoil
loss would limit energy production through agriculture.
Aleklett suggested that the best solution would be for the United
States to reduce its per capita oil use, which is the highest in
the world. Several committee members took issue with his comments,
saying that Aleklett was not familiar with the long driving distances
necessary in many parts of the United States. "I would guess
that I have to drive a lot further to go to the supermarket or my
children's' school than you do," said Representative Heather
Wilson (R-NM). While the hearing did not produce a consensus on
what should be done about peak oil, it seemed clear that most subcommittee
members took the issue seriously and were open to taking action
to reduce the United States' dependence on petroleum. "It doesn't
matter when we peak," said Representative Udall. "The
focus we should have is what we should be doing."
For witness testimony and other information on the
Resources Committee, Subcommittee on Energy and Mineral
Hearing on the "Outer Continental Shelf Natural Gas
November 17, 2005
Geoffrey Hunt, Senior Vice President, Osram Sylvania
David Bradley, Executive Director, National Community Action Foundation
Jack Gerard, President, American Chemical Council
Keith Oellig, President, Dauphin County (PA) Farm Bureau
Michael L. Bennett, President and Chief Executive Officer, Terra
On November 17, 2005 the House Resources Subcommittee on Energy
and Mineral Resources held a hearing to discuss the Outer Continental
Shelf Natural Gas Relief Act (HR
4318), which proposes to allow natural gas drilling in areas
more than 20 miles offshore. The bill, which is cosponsored by Representatives
John Peterson (R-PA) and Neil Abercrombie (D-HI), is seen by some
as a more heavy-handed approach to offshore energy development than
a bill introduced by Resources Committee chairman Richard Pombo
(R-CA) that would let states opt-out of a current offshore drilling
moratorium for both oil and gas development.
Both Peterson and Abercrombie were present to promote the bill.
Peterson emphasized that natural gas shortages were a "problem
caused by government" since the Clinton administration had
promoted the use of natural gas without allowing the development
of offshore supplies. Peterson said he was promoting offshore development
because it is the easiest way to deliver gas to those who need it
and because it has no onshore environmental impact. Abercrombie
pointed out that his presence alone indicated that the issue is
not a partisan one, and he said the bill's opponents were "missing
a genuine opportunity to make a difference."
The witnesses presented the views of several of the industries--including
manufacturing, chemicals, fertilizer, and agriculture--that rely
on natural gas and face major problems if prices continue to rise.
Jack Gerard from the American Chemical Council predicted especially
dire consequences. "Winter is coming. Home heating bills will
climb by as much as 70 percent. Factories will be forced to close
or cut back operations. Jobs will be lost. The economy will contract,"
he said. "What will it take to finally pass legislation to
permit more access to new supplies of energy in deep-sea waters?"
David Bradley from the National Community Action Foundation, emphasized
the concern that the poor are particularly vulnerable to the high
cost of natural gas for home heating. The Outer Continental Shelf
Natural Gas Relief Act would provide ten percent of new natural
gas leasing revenues to low income home energy programs.
The prospect of jobs and factories moving overseas to countries
with cheaper natural gas, in particular China, loomed over the hearing.
At one point Peterson warned the committee that Hershey foods, which
is based in his district, might soon be making its chocolate outside
of the United States. Abercrombie asked the panel about China's
policy on offshore drilling for gas. Gerard replied that while China
imported most of its gas, it was looking at increasing its domestic
onshore and offshore supplies. He also reminded the subcommittee
of the often repeated fact that "the United States is the only
country in the world that restricts access to energy resources."
Subcommittee members were also interested in hearing the witnesses'
ideas on how to increase public awareness of this potential crisis
and overcome widespread opposition to offshore drilling. Gerard
told the committee that "a lot of people who are environmentally
in tune accept this issue." Abercrombie said his experience
did not agree with that assessment though. "I've been put in
the village stocks by the environmental groups," he said. Bradley
predicted that "once the heating bills hit in January, a lot
of people are going to support policies that directly impact these
costs." Several witnesses suggested that media campaigns to
encourage energy conservation could also be used to educate people
on natural gas supplies.
Overall the witnesses expressed a great deal of anxiety over the
effects of rising natural gas costs, and emphasized it was important
for Congress to act as quickly as possible. Geoffrey Hunt, who represented
lightbulb manufacturer Sylvania, said his company had gone as far
as it could with energy conservation, and he urged the subcommittee
members to help him keep Sylvania factories open. "I'm not
looking for a handout," he said. "I'm looking for free
market economics to work." Gerard told the committee there
was still some hope to reverse negative impacts on American industries,
since opening offshore areas would send a market signal that would
moderate gas prices immediately, even if new production would take
several years to come on line.
Commerce Justice and Science and Senate Energy and Natural
Resources Committees, Joint Hearing on Energy Pricing and
November 9, 2005
Lee Raymond, chairman and CEO, Exxon Mobil Corporation
David O'Reilly, chairman and CEO, Chevron Corporation
James Mulva, chairman and CEO, ConocoPhillips
Ross Pillari, president and CEO, BP America Inc.
John Hofmeister, president and U.S. country chairman, Shell Oil Company
Deborah Majoras, chairof the Federal Trade Commission
Peter Harvey, New Jersey Attorney General
Henry McMaster, South Carolina Attorney General
Terry Goddard, Arizona Attorney General
On November 9, 2005 the Senate Committees on Commerce
Justice & Science and Energy & Natural Resources held a rare
joint hearing to question major oil company executives about energy
prices and record profits. The hearing room was full of protesters
wearing "Exxpose Exxon" t-shirts, and the discussion among
the committee members took a hostile tone from the beginning. When
Chairman Ted Stevens (R-AK) announced the executives would not have
to give testimony under oath, a practice used regularly by some committees
in congress, Senator Maria Cantwell (D-WA) asked that the joint committee
hold a vote on whether or not the witnesses would be sworn in. Stevens
answered, "There will be no vote. It's the decision of the chairman,
and I have made that decision." When Cantwell and Senator Barbara
Boxer (D-CA) persisted in calling for the witnesses to be sworn in,
Stevens said,"I intend to be respectful of the position that
these gentlemen hold."
The five oil company executives -- representing Exxon
Mobil, Chevron, ConocoPhilips, BPAmerica, and Shell Oil USA-- all
delivered similar testimony that stuck to two major themes. First,
each executive maintained that the high prices and profits were a
natural part of the energy sector and that government intervention
would have a negative effect. "The petroleum industry's earnings
are at historic highs today. But when you look at our earnings per
dollar of revenue - a true apples-to-apples comparison - we are in
line with the average of all U.S. industries," said Lee Raymond,
the CEO of Exxon Mobil. Raymond and other executives argued that windfall
taxes and other punitive measures are not the best solution for increasing
the affordability of energy for consumers. Such measures imposed on
the industry in the 1970's hindered reinvestment into industry infrastructure,
The second major theme was that oil companies are currently
reinvesting profits in order to increase supply. "Today the industry
can offer the prospects of profitable growth as it steps up investment
in huge, complex energy projects. We feel confident that this response
will lead to a moderation of prices and increased energy security,"
said James Mulva, the CEO of ConocoPhillips. Several of the executives
argued that domestic investment was difficult, however, due to restrictions
on drilling on public lands and on the continental shelf.
Many of the senators on the two committees appeared
to be convinced by the executives' arguments that their profits were
justified. "From what I heard today, I can't say they earned
it unfairly," said Energy and Natural Resources Committee Chairman
Pete Domenici (R-NM). Some, however, were less willing to accept that
market manipulation was not occurring. "I'm hard pressed to feel
good about defending these types of increases," said Senator
Gordon Smith (R-OR), who pointed out that in western states energy
markets are fully integrated and prices at the pump are controlled
by the major oil companies. Senator Ron Wyden (D-OR) asked the executives
whether they agreed with President Bush when he said that high profits
indicated that oil companies did not need the tax breaks included
in the Energy Policy Act of 2005. The CEOs said they agreed with the
president, and Wyden then said "Then you'll agree with me tomorrow"
when he would try to repeal those tax breaks. The CEOs said they did
not agree with that strategy. Senator Boxer took the executives to
task for their high salaries, contrasting their compensation with
pay for average workers who have to pay high prices for gasoline.
Chairman Stevens told Boxer to take down a chart showing the CEOs
salaries, saying it was solely for publicity.
In the afternoon the joint committee heard from regulatory
authorities, including the chair of the Federal Trade Commission (FTC)
and three state attorney generals. The three attorney generals related
their experiences with price gouging law enforcement, and the New
Jersey and Arizona attorney generals called for a federal price gouging
law to aid in those efforts. South Carolina Attorney General Henry
McMaster, however, said, "I see no need for additional federal
legislation on these points." FTC chair Deborah Majoras explained
the commission's role in enforcing fair energy pricing, saying, "No
other industry's performance is more deeply felt, and no other industry
is so carefully scrutinized by the FTC." She also cautioned,
however, that gouging legislation could inhibit honest price increases.
Senator Jeff Bingaman called this a "specious" argument,
saying fair prosecution could be done at the federal level if it could
be done at the state level.
An archived webcast of the hearing along with opening
remarks and testimony are accessible on the Commerce, Science and
Justice Committee's website.
Energy and Natural Resources Committee
Hearing on Post-Hurricane Energy Production
October 27, 2005
Gale Norton, Secretary of the Interior
Samuel Bodman, Secretary of Energy
On October 27, 2005 the Senate Energy and Natural Resources
Committee met with key administration officials to discuss ongoing
efforts to solve energy shortages caused by hurricanes Katrina and
Rita. Chairman Pete Domenici (R-NM) spent much of his opening statement
talking about the importance of energy conservation. Domenici made
it clear, however, that his first priority remained increasing energy
supply, saying, "Conservation is like a diet on our demand, but
without supply our nation will end up skinny in any event." Overall
it was the consensus of the committee that low energy supplies represent
a major problem and that the federal government needs to do more to
address the issue. "There is no reason for bureaucracy to grind
on during a crisis," said Senator Larry Craig (R-ID), who also
asked that key federal officials testify before the committee about
the progress they are making on a quarterly basis.
During her testimony Interior Secretary Gale Norton
recognized the need to increase supply, and made it clear that "energy
diversification is a key goal of the administration." Norton
summarized the extensive damage to offshore oil and gas infrastructure
caused by the hurricane, and praised the oil industry for the prevention
of oil spills in the Gulf despite this damage. The Secretary also
mentioned that the Minerals Management Service was in the midst of
creating its next five year leasing plan for offshore areas, which
would likely include leasing the 181 area off the coast of Florida
and Alabama. Energy Secretary Samuel Bodman went over a timeline of
Department of Energy activities following the hurricanes and pointed
out that steps taken to increase supplies after hurricane Katrina
helped to reduce a potentially larger disruption following Rita. Bodman
also said that in addition to encouraging energy conservation the
federal government would "lead by example" and reduce its
own energy consumption.
Much of the subsequent discussion in the hearing focused
on plans for offshore leasing, particularly the 181 area. Several
senators questioned why this area, which had been approved for leasing
by the Clinton administration, was not included in the five year plan
covering 2002 to 2007. Domenici was particularly adamant about the
need to open the area, saying, "I believe 181 has to be done.
Five year plans are not very important." Norton said that under
current law the area could not be leased until the latter half of
2007, but that if Congress ordered that the area be leased it could
happen sooner. The most heated moment in the hearing came when Senator
Mary Landrieu (D-LA) declared that she would oppose leasing any new
areas for production until Louisiana and other states that currently
produced oil received a greater share of revenues. "Opening new
areas without sharing revenues is an insult to the people of my state,"
Energy conservation also received significant attention,
with several senators stating that they supported an increased effort
to save energy. Senator Lamar Alexander (R-TN) suggested that oil
companies use their windfall profits to fund a conservation advertising
campaign, while Senator Craig (R-ID) said, "I suggested that
they put the President in a sweater and put him on TV," a reference
to former President Jimmy Carter. Ranking Member Jeff Bingaman (D-NM)
asked whether the Department of Energy needed additional funding for
public campaigns on conservation, but Bodman said that there were
no plans to increase the budget for the program. Senator Ken Salazar
(D-CO) asked Bodman's opinion on legislation that would mandate a
decrease in federal government energy consumption. Bodman said the
federal government was doing its best to conserve, but that mandates
would not be helpful. "When you start to mandate you may be interfering
with the functioning of some government agencies," he said.
Appropriations Committee, Interior and Related Agencies Subcommittee
Hearing to examine the oil and gas activities by the Bureau
of Land Management,
including the impact of
recently passed energy legislation
October 25, 2005
Kathleen Clarke, Director, Bureau of Land Management
Logan Magruder, President, Independent Petroleum Association of Mountain
Paul Cicio, Executive Director, Industrial Energy Consumers of America
Ford B. West, President, The Fertilizer Institute
On October 25, 2005 the Interior and Related Agencies
Subcommittee of the Senate Appropriations Committee met to examine
oil and gas activities on Bureau of Land Management (BLM) lands. Opening
the hearing, Subcommittee Chairman Conrad Burns (R-MT) suggested that
the current focus on increasing offshore oil and gas production was
misplaced. "It takes a long time to build a platform," he
said. "There are trillions of cubic feet [of natural gas] onshore,
where pipelines are already in place." Senator Larry Craig had
harsh words for the BLM, claiming that the agency had not risen to
the challenge of meeting the nation's growing energy demand. "I'd
like to know who's asleep at the switch," he said.
BLM Director Kathleen Clarke attempted to answer this
criticism with her testimony, pointing out that the BLM had rapidly
increased the number of drilling permits it approved during her tenure.
This year the agency approved 7000 Applications for Permits to Drill
(ADPs) she said, double the amount it approved in 2002. Clarke also
praised some provisions of the Energy Policy Act of 2005, particularly
the establishment of pilot offices to streamline permitting, but pointed
out that the law does not address environmental regulations that are
a major stumbling block to increased energy development. Logan Magruder,
from the Independent Petroleum Association of Mountain States, testified
that the backlog of ADPs had increased dramatically over the past
few years, and agreed with Clarke that environmental regulations were
a major reason behind this. At one point Magruder pointed to a convoluted
chart that represented the steps necessary for complying with the
National Environmental Policy Act (NEPA). Two other witnesses, Paul
Cicio and Ford West, who represent industries that rely on natural
gas, testified as to how high natural gas prices are hurting these
industries, and in many cases forcing the closure of fertilizer and
Both Cicio and West partly blamed the high price of
natural gas on the increasing use of the fuel to produce electricity.
Senator Robert Bennett (R-UT) suggested that the Energy Policy Act
had addressed this problem, saying that it promotes "nuclear
for electricity, and gas for industry." West, however, said,
"The problem is only going to get worse, since there are new
gas electric plants being built." Senator Pete Domenici (R-NM)
asked what the panel thought of gradually reducing the percentage
of natural gas that utilities were allowed to use. Cicio said the
industries he represents wouldn't support that because it was a government
mandate. Instead he suggested that Congress amend the Clean Air Act
in order to encourage the use of coal for electricity.
Another subject that prompted discussion during the
hearing was the effect of winter regulations on drilling activity.
In response to a question from Domenici, Clarke said the BLM was legally
required to "accommodate sensitive or game species needing habitat
during certain seasons." Magruder said he was sensitive to concerns
about elk hunting, but also pointed to anecdotal evidence of drilling
being interrupted for up to five months due to habitat restrictions.
Burns agreed that this was an issue that needed further discussion,
saying, "I'm not an expert, but I've never seen wildlife out
there in the dead of winter. This winter issue is bigger than we thought."
Clarke also mentioned that there is a pilot program in the Pinedale,
Wyoming BLM office testing the effect of winter drilling on wildlife
Most of the hearing was focused on natural gas, but
Senator Wayne Allard (R-CO) was eager to discuss the development of
oil shale, which is abundant in his state. Clarke said the BLM had
received about 20 proposals for research and development permits involving
oil shale, and that the agency would finish issuing those permits
in the spring.
Energy and Natural Resources Committee
Hurricanes Katrina and Rita's Effects on Energy
October 6, 2005
Red Cavaney, President and CEO, American Petroleum Institute
Kevin Curtis, Senior Vice President for Programs, National Environmental
Christopher Helms, President, Nisource Inc. Pipeline Group, on behalf
of the Interstate Natural Gas Association of America
Curtis Hebert, Executive Vice President, Entergy Corporation
Andrew Liveris, Dow Chemical Company and American Chemistry Council
The Senate Energy and Natural Resources Committee convened on October
6, 2005 to hear an update on Hurricanes Katrina and Rita's effects
on energy infrastructure. Committee Chairman Pete Domenici (R-NM),
along with Senators Jeff Bingaman (D-NM) and Daniel Akaka (D-HI) had
just returned from a tour through Baton Rouge to view some of the
damage. Domenici reported that loss of electricity accounted for much
of the supply setbacks and stressed the need "to ensure a redundant
and robust power grid." He also highlighted the need to bring
down natural gas prices, recounting that, at the DOW chemical facility,
every $1 increase in the cost of natural gas translates to $35 million
a year in additional fuel costs.
"We are not just responding to this disaster, we are living
it," said Red Caveney of the American Petroleum Institute. He
and other witnesses representing Texas- and Louisiana-based petroleum,
pipeline, chemical and power industries expounded on the burdens and
challenges they are facing in the aftermath of the storms. Caveney
explained that the tracks of Hurricanes Katrina and Rita ran side-by-side,
impacting an "unprecedented" geographical range of facilities.
As of October 6, 68% of the Gulf's total oil production and 69% of
the Gulf's gas production remained shut down. Twenty percent of the
Gulf Coast's refining capacity was also offline. Curtis Hebert of
Entergy, the largest electricity provider in the Gulf Coast, described
the seemingly impossible task of restoring electricity to 1.8 million
customers in Louisiana.
Each witness supplied the committee with specific recommendations
to stabilize electricity rates, reduce natural gas prices, and promote
energy conservation. To retain business, Entergy's Hebert asked for
direct and indirect federal assistance to protect privately-owned
utilities and to compensate the power industry for direct costs and
incremental losses caused by the hurricanes. Dow Chemical's Andrew
Liveris listed four key ways to protect industry from rising gas prices:
pursue outer-continental shelf supplies; open the highly coveted and
restricted "Area 181" off the coast of Alabama and Florida;
declare a national emergency that mobilizes the public to conserve;
and ensure that electricity not derived from natural gas is dispatched
to the grid first.
Representing environmental interests, Kevin Curtis of the National
Environmental Trust disagreed with the suggestions of the other panelists.
Nevertheless, he delivered strong recommendations that emphasized
the country's "golden opportunity" to practice conservation
and rebuild the Gulf Coast incorporating lessons learned and sustainable
practices. He challenged the committee to lead the way in implementing
higher automobile fuel efficiency standards, a policy Domenici plans
to include in upcoming legislation, along with offshore drilling proposals.
Curtis also criticized House Energy and Commerce Chairman Joe Barton
(R-TX) for rolling back Clean Air Act and other regulatory requirements
as part of a plan to increase refining capacity. "New refineries
should stand out as models," he said.
While committee members were receptive to encouraging conservation,
they were most impressed and concerned by Liveris' testimony about
the outsourcing of manufacturing jobs as a result of high natural
gas prices. Many questions explored how to secure states' rights in
offshore drilling and economic dispatch policies, which may infringe
upon or economically favor some states over others. At the end of
the hearing, Chairman Domenici asked Liveris to repeat his recommendations
one more time as a closing note. "I am very, very worried,"
Domenici said of the natural gas crisis.
Commerce, Science, and Transportation Committee
Hearing on "Energy Pricing"
September 21, 2005
Robin West, Chairman of the Board, PFC Energy Team
Odd-Even Bustnes, Energy and Resource Services, Rocky Mountain Institute
John Seesel, Associate General Counsel for Energy, Federal Trade Commission
Jim Wells, Director, Energy, Resources, and Science Issues, Government
U.S. Senator Ron Wyden (D-OR)
Robert Slaughter, President, National Petrochemical and Refiners Association
Tyson Slocum, Research Director, Energy Program, Public Citizen
Guy Caruso, Administrator, Energy Information Administration
Ronald W. Kosh, V.P. Public Policy and Government Affairs, American
Automobile Association-Mid Atlantic
On Wednesday September 23, 2005, the Senate Commerce, Science and
Transportation Committee held a hearing investigating the rise in
energy prices following Hurricane Katrina. In their opening statements,
several senators mentioned that rising gasoline and natural gas prices
are a major concern for their constituents and they had been asked
to do something about it. Senator Maria Cantwell (D-WA) announced
that she had introduced legislation to create a federal statute to
investigate and prosecute predatory fuel pricing. Senator Gordon Smith
(R-OR) also mentioned that he had introduced legislation, The Post-Disaster
Consumer Protection Act, that would make price gouging for oil or
other essential products illegal for thirty days following a declared
In the first round of testimony two energy consultants offered their
recommendations for solving the problem of high gasoline and other
fuel costs. Robin West, from PFC Energy, suggested that the best strategy
was to increase supply and decrease demand. He specifically recommended
relaxing regulations on new refineries and warned the committee that
price caps would only lead to market distortions. Odd-Even Bustnes
from the Rocky Mountain Institute claimed that the U.S. could dramatically
reduce its use of oil by using existing technologies to create more
efficient vehicles and replace fossil fuels with cellulosic biofuels.
This could be achieved, said Bustnes, through modest policy innovations
including rebates for efficient vehicles.
Most questions focused on short term gas prices. Senator George Allen
(R-VA) asked whether or not it made sense to limit the number of fuel
blends refined for air pollution non-attainment areas, which West
said was "an excellent idea." Senator Barbara Boxer (D-CA)
objected to West's suggestion that New Source Review regulations be
eliminated to refineries, saying, "if you're going to pollute
more, you need to clean it up." West agreed that refineries needed
to be held to a high standard to reduce air pollution, but that there
are "other ways to manage it". In response to a question
from Senator Mark Pryor (D-AR) about OPEC's role in rising prices,
West said, "OPEC has blown through their price band and right
now they are along for the ride. They are not controlling the market."
In the next panel, representatives from two different federal agencies
offered their perspectives on rising prices. John Seesel, from the
Federal Trade Commission (FTC) said that the commission had begun
a detailed investigation into price gouging and unusual price movements
following Hurricane Katrina. Jim Wells of the Government Accountability
Office discussed the factors controlling gasoline prices. According
to Wells, about half the price paid at the gas pump is due to the
price of crude oil, while one quarter is due to refining costs and
the remaining quarter is due to other factors including marketing,
transportation, labor and profit margins. During questioning Senator
Ben Nelson (D-NE) demanded that the FTC produce a less thorough study
on price gouging more quickly, and said he would introduce legislation
to that effect.
After a break, the afternoon session of the hearing began with testimony
from Senator Ron Wyden (D-OR). Wyden said he had extensively investigated
this issue and that consumer protection was primarily an issue of
political will. "The Federal Trade Commission can get results
for the consumer when they sincerely want to. We saw that specifically
with the Do Not Call program," he said. Wyden called for a "Do
Not Gouge" program that would force the FTC to act when price
Following Wyden, a final panel of witnesses presented wide-ranging
views on fuel prices. Robert Slaughter, President of the National
Petrochemical and Refiners Association, echoed Robin West's views
that the government should not interfere in pricing and that refinery
regulations were limiting fuel supply. Public Citizen's Tyson Slocum
made the claim that both oil company mergers and commodities markets
played a large role in rising fuel prices and urged that regulatory
agencies increase their scrutiny of vertically integrated companies
and commodity traders. Guy Caruso from the Energy Information Agency
reported a timeline of gas prices before and after Katrina, while
Ronald Kosh from the Mid-Atlantic AAA related the specific experience
of motorists in his region, where prices have been particularly high.
Kosh told the committee that an oil industry executive had told Maryland
state legislators that high prices were due to Maryland's reliance
on a pipeline, while in Delaware oil company officials said prices
were high because the state received oil by ship and not from a pipeline.
Senator Pryor asked Slaughter whether there was any truth to theories
that oil companies had intentionally shut down refineries in order
to raise prices. Slaughter said this was completely false. "The
industry has steadily invested in refinery capacity for the past twenty
years," he said. "The problem is that demand growth has
exceeded expanded capacity." Slocum, however, maintained that
oil companies were engaged in selective withholding and would prefer
to sell less gas at a higher price than more gas at lower price. "We
need to enforce competitive markets because that is what makes America
great," he said.
Government Reform Committee, Energy and Resources Subcommittee
Hearing on "Meeting America's Natural Gas Demand: Are
We in a Crisis?"
September 14, 2005
Rebecca Watson, Assistant Secretary for Land and Minerals Management,
Department of Interior
Guy Caruso, Administrator, Energy Information Administration, Department
Michael Zenker, Senior Director, North American Natural Gas, Cambridge
Energy Research Associates
Logan Magruder, President, Independent Petroleum Association of
Tyson Slocum, Research Director of Energy Programs, Public Citizen
On September 14, 2005, the Government Reform Subcommittee,
chaired by Representative Darrell Issa (R-CA), revisited measures
to alleviate the burdens of escalating natural gas prices on consumers
and businesses. The committee heard testimony from administration
officials, industry representatives and consumer advocates on the
status of the natural gas crisis in the aftermath of Hurricane Katrina.
Discussion also included the virtues and limitations of the new
Energy Policy Act of 2005, and recommendations for additional, more
According to Guy Caruso of the Energy Information
Administration, natural gas prices peaked at $13 per thousand cubic
feet (tcf) following Hurricane Katrina, up from $10 per tcf, which
was already over double 2004 prices. According to Rebecca Watson,
Assistant Secretary of Land and Minerals Management, 35% of Gulf
Coast natural gas supply, meaning about 7% of the nation's total
natural gas supply, remained shut down as of the hearing, as industry
continued to repair damage to onshore support facilities. While
both officials remained optimistic about recovery, Caruso said that
the near-term outlook for price stability would depend heavily on
the timing and pace of the effort and that, even if heating prices
recovered before this winter, prices of petroleum-based products
would remain high for a long time thereafter. Assuming a "medium"
rate of recovery, the EIA expected residential heating gas prices
to be 46% higher than last winter on average, or 71% higher in some
areas of the northern Midwest.
In his opening statement and throughout the hearing,
Chairman Issa stressed the negative impact that persistent high
natural gas prices have on U.S. competitiveness, as manufacturing
industries struggle to keep up with the global market. Although
Issa called the recently passed energy bill "a step in the
right direction," he added that events such as Hurricane Katrina
"have caused a reexamination of policies and practices in terms
of domestic production." Namely, Issa called for revisiting
possibilities such as year-round onshore drilling, increased outer-continental
shelf production, and more liquefied natural gas terminals.
In contrast, the committee's ranking member, Diane
Watson (D-CA), zeroed in on the possibility of market manipulation
and how it may be impacting prices. She also stressed the importance
of facilitating long-term as well as short-term solutions as the
nation recovers from the immediate crisis. Similar to the energy
crisis in California, she said, supply shocks like the post-Katrina
situation are in part attributed to the kind of "shortsighted
planning" included in the energy bill, and exacerbated by price
gouging among energy companies.
Witnesses tended to side with the views of either
Chairman Issa or Representative Watson as they delivered their recommendations.
Secretary Watson and Logan Magruder, President of the Independent
Petroleum Association of Mountain States, pressed hard for expanded
access to natural gas supplies on federal land and the outer-continental
shelf, especially the 139 tcf trapped in the intermountain region
of the western United States. Watson said that, while the Energy
Policy Act of 2005 gave the Interior Department mandates to increase
permits to drill, legal battles have increased 4-fold over the last
four years, placing further pressure on the supply market. Magruder
agreed, calling for an overhaul of the National Environmental Policy
Act (NEPA), which he said is primarily responsible for slowing development.
Also pushing for supply diversification, Mike Zenker from Cambridge
Energy added that there would be no feasible way to meet the nation's
growing demand without increasing imported liquefied natural gas.
On the other end of the spectrum, Tyson Slocumb from
Public Citizen, a consumer advocacy group, pushed for better regulatory
oversight of energy companies and an emphasis on conservation. "Strengthening
transparency empowers market participants and makes for more efficient,
competitive markets, which in turn lead to fair prices for consumers,"
he said. One policy he emphasized to curb demand, conceived by the
American Council for an Energy Efficient Economy (ACEEE), would
reduce natural gas demand by 10% by 2020.
During the question and answer period, witnesses and
members disagreed further about where the energy bill failed to
meet the nation's needs, and what Congress should focus on now.
Representative Brian Higgins (D-NY) agreed with Slocumb that subsidies
for energy industry contained within the energy bill dwarfed the
bill's conservation measures, asserting that "the energy bill
provides just enough incentives for alternative energy sources to
say we're doing something." Secretary Watson disagreed with
this assessment, arguing that the bill contained several meaningful
measures. She declared that the focus of congress should be on public
education rather than creating new environmental and other regulatory
Related Hearings on High Gas Prices and the Impact of Katrina
Senate Energy and Natural Resources Committee and House Energy
and Commerce Committee
September 6 and 7, 2005
Senate Energy and Natural Resources Committee
September 6, 2005
Guy Caruso, Administrator, Energy Information Administration
James A. Overdahl, Chief Economist, U.S. Commodity Futures Trading
Rebecca Watson, Assistant Secretary for Land and Minerals Management,
Department of Interior
Robert L. Darbelnet, President & CEO of AAA
Bob Slaughter, President of the National Petrochemical &
John Dowd, Senior Research Analyst at Sanford C. Bernstein &
William Shipley III, CEO of Shipley Stores, LLC, Representing
the National Association of Convenience Stores and the Society
of Independent Gasoline Marketers of America
House Energy and Commerce Committee
September 7, 2005
David K. Garman, Undersecretary for Energy, Science and Environment,
Department of Energy
Guy F. Caruso, Administrator, Energy Information Agency
John H. Seesel, Associate General Counsel for Energy, Federal
Kenneth P. Moran, Acting Director, Office of Homeland Security,
Enforcement Bureau, Federal Communications Commission
Daniel A. Lashof, Science Director, Climate Center, National
Resources Defense Council
Haley Barbour, Governor of Mississippi
Scott A. Angelle, Secretary, Louisiana Department of Natural
Red Cavaney, President, American Petroleum Institute
Bob Slaughter, President, National Petrochemical and Refiners
James Newsome, President, New York Mercantile Exchange
Mr. Benjamin S. Cooper, Executive Director, Association of Oil
Bill Douglass, Representing the National Association of Convenience
Stores and Society of Independent Gasoline Marketers of America
William Smith, Chief Technology Officer, BellSouth Corp.
Mark Cooper, Research Director, Consumer Federation of America
Less than a month after President Bush signed an $18 billion energy
bill into law, the crisis of skyrocketing oil and natural gas prices,
which were further exacerbated by supply disruptions in the aftermath
of Hurricane Katrina, motivated congress to revisit more aggressive
measures to alleviate the problem. Congressional hearings held on
September 6 and 7, 2005 revealed that committee leaders in both the
House and Senate were reconsidering several measures that didn't make
it into the final energy bill, particularly policies to expand domestic
oil and gas production and refining capacity. New policies would hopefully
provide more immediate relief to consumers, who are paying over $3
a gallon on gasoline nationwide and who are expected to pay 47-70%
more on their heating bills this winter.
The Senate Energy and Natural Resources Committee convened on September
6th to examine the impact of Hurricane Katrina on gasoline supply
along with background factors already contributing to high prices,
including constraints on refinery capacity and the potential for price-gouging
by oil companies, distributors, and retailers. In his opening statement,
Committee Chairman Pete Domenici (R-NM) said, "Hurricane Katrina
exposed a harsh reality that we have been skirting," referring
to the nation's dependence on Gulf of Mexico oil and gas. "Issues
not politically possible two months ago are still before us,"
At both hearings, Guy Caruso of the Energy Information Administration
(EIA) reported that much of Hurricane Katrina's impact came from damage
or supply disruption at onshore facilities, including power outages
to pipelines and otherwise-working refineries. For both offshore and
onshore facilities, "damage assessments are ongoing but still
incomplete," Caruso said. According to EIA, the Gulf Coast contains
8 million barrels per day (mmb/d) of refining capacity, 47 % of the
nation's total, and it receives 60% of the nation's crude oil imports.
Fifteen oil refineries were forced to close or reduce their operations,
removing 12% of the nation's total gasoline supplies from the market
in the immediate aftermath of the storm. As of September 6th, half
of the 1.8 million barrels of oil per day taken offline after the
hurricane was back online, with 58% of the Gulf's daily oil production
and 42% of its gas production still shut in. Although damage to refineries
was not yet fully assessed, three major pipelines from the Gulf Coast
were again operating.
In an opening statement, Senator Domenici threw his support to oil
and gas exploration in the outer continental shelf, higher fuel efficiency
standards, waivers for the blended, "boutique" fuels requirements,
and more aggressive incentives to increase refining capacity. During
the House Energy and Commerce Committee hearing the following day,
Domenici's counterpart, Chairman Joe Barton (R-TX), brought back to
life his controversial "refinery revitalization act," a
discarded energy bill proposal to ease regulations on refinery licensing
in economically distressed areas. The energy bill currently includes
two provisions to encourage refining investments, including a tax
deduction and a technological assistance program to help states offer
incentives. Jeff Bingaman (D-NM), the Senate committee's ranking member,
and other Democrats urged congress to gain a better understanding
of whether these provisions would have any positive near-term impact
before adopting new measures.
Witnesses representing the Society of Independent Gasoline Marketers
at both House and Senate hearings commended congress for relieving
some of the pressure on the refining industry in the energy bill by
restricting the use of boutique fuels, repealing the reformulated
gasoline oxygenate requirement, and by providing federal tax incentives.
For futher action, they recommended prompt implementation of these
provisions, streamlining the permitting process for expanding existing
refineries, and adopting additional tax incentives, particularly to
spur redevelopment of roughly 50 abandoned facilities.
Price gouging questions also took center stage at each hearing, where
officials from the Federal Trade Commission (FTC) and representatives
from the petroleum and petrochemical industries battled with members
of congress over whether current gasoline prices reflect manipulation
of the market. Among these witnesses there was a prevailing consensus
that gas prices, though high, were still within the bounds of an open
market, and that the industry was closely monitored. Barton asked
his witnesses, which in his words represented "the full panoply
of the oil and gas industry" to describe in detail how price
was set at each stage of the process. They assured the committee in
their responses that the industry operated with efficiency and transparency.
But several members of congress, particularly during the Senate hearing,
pressed that an increasingly concentrated and vertically integrated
domestic oil industry allowed companies more freedom in setting gasoline
prices. "It is about as far from a free market as anything I
know," said Senator Byron Dorgan (D-ND), who cited that the industry's
$100 billion net income in 2005 represents massive windfall profits.
Senator Ron Wyden (D-WA) also challenged James Overdahl from the U.S.
Commodity Futures Trading Commission (CFTC) over why the federal government
had not begun to investigate reports showing companies to be collecting
record profits on gasoline price spikes. Overdahl maintained that,
even if such an investigation was called for, it was not under the
During the weeks following Katrina's devastation, Congress quickly
acted on the possibility of market manipulation by introducing several
bills to increase FTC's enforcement authority. On September 15th,
the Senate also succeeded in moving a measure ordering an FTC investigation
of gasoline pricing practices among fuel wholesalers with receipts
of at least $500 million in 2004. The provision was a part of the
larger fiscal year 2006 spending bill for Commerce, Justice, Science
and Related Agencies, and, if agreed to in conference, it will direct
the FTC to file an initial report of their findings within 30 days.
Foreign Relations Committee
Hearing on "Energy Trends in China and India: Implications
for the U.S."
July 26, 2005
Anthony Wayne, Interim Undersecretary for Economic, Business and Agricultural
Affairs, State Department
David Garman, Undersecretary for Science and Environment, Energy Department
Mikkal Herberg, director, Globalization & Asian Energy Security
Program, The National Bureau of Asian Research
Randall Schriver, partner, Armitage International
Sumit Gangulym, director, Indian Studies Program, Indiana University
The Senate Foreign Relations Committee held a hearing
on July 26, 2005 to discuss the trends in the energy markets in China
and India and what implications these trends hold for the United States.
China and India have rapidly expanding economies. As Anthony Wayne,
an official at the State Department, stated, "In China, for example,
the economy has grown an astounding nine percent per year for the
past 25 years. The Indian economy has grown by five percent annually
during this same period." As these countries continue to expand
their economies, a dramatic increase in global energy consumption
The primary source of energy in these countries is coal. Both India
and China rely on coal to supply over 50% of their energy supply.
However, oil has become an ever more prominent energy resource, with
China replacing Japan as the world's second largest petroleum user.
Wayne reported that currently China is consuming 6.4 million barrels
of oil a day, one-third less than what the U.S. consumes. About 40%
of the oil China uses is imported. India, which imports 66% of its
oil, is consuming about 2.4 million barrels of oil daily, a figure
that is supposed to double over the next few years.
David Garman, director of the Globalization & Asian Energy Security
Program, reported in his testimony that the daily global oil demand
and consumption has increased by 4.5 million barrels between 2003
and 2004. China, who increased consumption over this period by 1.5
million barrels per day, will significantly impact increased oil consumption.
According to Wayne, an International Energy Agency report showed that,
"overall demand for energy in China and India is projected to
approximately double by 2030, whereas US demand is expected to grow
by only 35-50 percent."
As India and China are increasing oil consumption, they are also
increasing the amount of oil they import. The growth of oil demand
in China and India threatens U.S. security because all three nations
are competing for ever more limited resources, demand is outpacing
supply and China and India are importing oil from volatile nations
such as Iran and Sudan. China's and India's interactions with Sudan
and Iran have complicated interpretations of U.S. laws and policies,
but on a greater scale, have upset global stability, according the
Wayne. Energy Secretary Samuel Bodman launched a comprehensive energy
dialogue with India in May, 2005. The dialogue focuses on strengthening
energy security by increasing information, trade and investments in
oil and gas, advancing understanding of efficient generation, distribution
and use of electricity distribution and use of electricity, investing
in clean energy technologies, and enhancing the understanding of coal-related
issues. The U.S. has also had exchanges with China and China is interested
in expanding cooperation with the U.S. on renewable and clean energy
The global use of renewable and cleaner energy sources are crucial
because increased oil consumption will exacerbate greenhouse gas emissions.
According to Wayne, currently 4% of global carbon dioxide emissions
come from India, while China emits 14% of the global emissions. By
2025, these emissions are expected to increase to 5% and 18% respectively,
which will almost equal the emissions of the U.S., which is currently
responsible for 25% of global oil consumption. These numbers are based
on data from the Energy Information
For the written testimonies of the witnesses from this hearing, please
Resources Committee, Energy and Mineral Resources Subcommittee
Hearing on "The Vast North American Resource Potential
of Oil Shale, Oil Sands, and Heavy Oils"
June 23, 2005
Mr. Mike Godec, Vice President, Advanced Resources International Inc.
Mr. Jack Savage, President and CEO, Oil Tech Inc.
Mr. Terry O'Connor, Vice President, External and Regulator Affairs,
Shell Unconventional Resources Energy
Mr. Greg Stringham, Vice President, Markets and Fiscal Policy, Canadian
Association of Petroleum Producers (CAPP)
Mr. Russell George, Executive Director, Colorado Department of Natural
Mr. Michael J. McKee, Commissioner, Uintah County, Utah
On June 23, 2005, the House Resources Subcommittee on Energy and Mineral
Resources held a hearing on "The Vast North American Resource
Potential of Oil Shale, Oil Sands, and Heavy Oils." In the first
panel, representatives from the oil industry described new technologies
that they said would lead to economic production of unconventional
oil resources, provided that sufficient government support exists.
Then in the second panel, Colorado and Utah government officials reported
how these states are promoting environmentally and economically sound
oil shale development. An additional hearing later in June will include
testimony from federal government representatives.
In his opening statement, Subcommittee Chairman James Gibbons (R-NV)
noted an increasing U.S. dependency on foreign oil and suggested that
unconventional oil could help to wean the U.S. off of imports. Chairman
Gibbons said that the U.S. is the "Saudi Arabia of oil shale"
with over 2 trillion potentially recoverable barrels of oil. Gibbons
stated that the benefits of developing new domestic oil supplies would
include more U.S. jobs as well as less economic dependence on hostile
or unstable countries.
Oil shale in the Green River formation of Colorado, Utah, and Wyoming
was the main focus of the hearing. Mr. Jack Savage of Oil Tech Inc.
testified that, despite its name, there is "not one drop of oil
in oil shale." He explained that oil is produced from oil shale
rock by heating it until naturally occurring organic kerogen is converted
to usable oil products. In the previous oil shale boom in the early
1980's, the rock was mined in large open pits and then heated to produce
oil, creating significant negative environmental effects. Testimony
from Savage and from Mr. Terry O'Connor of Shell Unconventional Resources
emphasized that the new technology would be more cost effective and
environmentally friendly than it was in previous decades. Oil Tech
has developed a technique that involves using modular production units
with sealed heating chambers to process the oil shale without creating
emissions; Savage emphasized that the technology is scalable and transportable,
thus lessening boom-bust development cycles. Shell is demonstrating
a technology that uses heaters suspended down deep wells to heat the
rock for up to four years, after which it is extracted in a conventional
manner as a liquid.
While Savage and O'Connor testified that they believed their processes
were currently or would soon be economical, some members of the subcommittee
expressed skepticism, perhaps wary of claims made in the 1970's and
1980's about the potential of oil shale. Asked by Rep. Steve Pearce
(R-NM) why the companies are not commercially producing oil from oil
shale when oil prices are wavering near $60 per barrel, Savage said
that Oil Tech was a startup company that was hoping to start commercial
production soon and O'Connor said that Shell was still evaluating
its research before making a capital expenditure decision. Both offered
recommendations for federal policy to encourage oil shale development,
suggesting that Congress should change outdated mining law to allow
for multiple leases by individual companies, set initial government
royalties on federal leases low enough to spur development, ensure
that permitting is as efficient as possible, and clarify ambiguities
in tax law.
While local and state government representatives on the second panel
concurred with many of the recommendations made by Savage and O'Connor,
they also emphasized that oil shale production must be economical
to prevent another bust and environmentally sound to prevent local
degradation. Mr. Russell George of the Colorado Department of Natural
Resources testified that Colorado intends "that technology and
environmental oversight be rigorous, that development use the best
available practices to minimize impacts, that state and local needs
are anticipated and funded, that development on public land be prioritized
by resource and by region, and that the cumulative impact of mineral
and energy development on both public lands and private lands be mitigated."
Mr. Michael McKee, Commissioner of Uintah County, Utah, testified
that "Uintah County fully supports the development of oil shale
and is very concerned that the mistakes made in past efforts not be
Some members of the subcommittee expressed support for oil shale
but urged caution about rushing into developments that could potentially
be harmful to the environment. Subcommittee ranking member Raúl
Grijalva (D-AZ) said in his opening statement that "impacts should
be assessed before the Bureau of Land Management (BLM) launches into
a full-scale leasing program."
While most of the focus of the hearing was on oil shale, the prospects
of oil sands in the U.S. and in Canada were discussed. Mr. Michael
Godec of Advanced Resources International testified about the domestic
potential in heavy oil and oil sands: "The U.S. still has very
large volumes of undeveloped heavy oil and oil sands (sometimes called
'tar sands'), estimated at 180 billion barrels originally in-place."
However, Godec estimated that only 30 billion barrels are recoverable
given foreseeable advances in technology. Godec was optimistic about
the potential of "zero emissions" production, in which oil
recovered using carbon dioxide gas injections would be turned into
steam, hydrogen, and electricity, with additional carbon dioxide by-products
being used to stimulate further oil production. In submitted written
testimony, Godec concluded "Not only would this provide a positive
energy balance, but it would provide one more 'market-based' technology
option for reducing carbon dioxide emissions to the atmosphere."
Mr. Greg Stringham of the Canadian Association of Petroleum Producers
emphasized the growing commercial production of crude oil from oil
sands in Canada and told the subcommittee that oil sands are "not
unconventional anymore". Stringham said that Canada is producing
over 1 million barrels per day from its oil sand deposits and that
soon over half of Canadian oil production may be from oil sands. He
also suggested that Canada may serve as a model for how to successfully
develop unconventional oil sources: "The key to unlocking the
vast potential of the Alberta oil sands has been sustained and cooperative
industry and government research and development." Many of the
recommendations offered by the other witnesses on the panels were
modeled after Canadian policies.
Senate Environment and Public Works Committee
Hearing on Permitting Issues
of Energy Projects
May 25, 2005
J. Mark Robinson, Director of Federal Energy Regulatory Commission
Dennis Duffy, Vice President of Regulatory Affairs, Cape Wind
Sharon Buccino, Attorney, Natural Resources Defense Council (NRDC)
Ronald E. Hogan, General Manager, Questar
On May 25, 2005, the Senate Environment and Public Works Committee
heard testimony from local and federal regulators, environmentalists
and industry representatives on the permitting issues facing wind
and natural gas energy projects off America's coasts. Witness testimony
focused on approaches to expedite the permitting process while minimizing
environmental concerns and maximizing national security.
Federal Energy Regulatory Commission (FERC) director Mark Robinson
opened the discussion by explaining his concerns for FERC's current
permitting system and offering a new federal strategy. Although the
natural gas permitting processes was developed to address the best
interests of the public, Robinson said that local opposition to energy
infrastructure projects prevents the necessary facilities from being
built, causing a negative impact at the regional scale. Robinson called
for a more "rational" siting process that would increase
the efficiency and effectiveness of siting all types of energy infrastructure,
including wind and natural gas terminals. The three-pronged plan would
designate one lead agency to have exclusive authority over siting
projects; require that all agencies with authority over an aspect
of the project develop a single federal record from which all agency
decisions would be made; and create one federal appeals process.
Dennis Duffy, who represents a major wind energy facility, spoke
about the Cape Wind project and how it will supply 75% of the total
energy to Cape Cod and Nantucket by constructing 130 wind turbines
offshore, offering a new source of clean, renewable energy. Like Robinson,
Duffy hopes that the review process for new energy infrastructure
can be accelerated so that the nation's growing energy needs can be
Senator John Warner (R-VA) announced plans to offer an amendment
to the energy bill that would limit federal permitting for offshore
wind farms by requiring wind energy producers to pay royalties similar
to the system established for offshore oil and gas producers. Earlier
this month, Warner collaborated with Lamar Alexander (R-TN) to propose
legislation that would also restrict funding to wind energy developments.
Warner characterized environmentalists as having a "hear no evil,
see no evil, speak no evil" attitude when it comes to wind farms,
which according to his views, would have a great negative aesthetic
impact for a relatively small amount of energy. Although he didn't
express opposition to developing wind energy, he said "if it's
going to be done, do it right."
Testifying on behalf of the National Resource Defense Coucil, Sharon
Buccino urged Congress to "enhance the public's voice, not silence
it" as they consider legislation to streamline energy permitting.
She said laws should uphold the National Environmental Policy Act
(NEPA), which is the foundation of the regulatory process. Buccino
warns that Congress is currently veering away from NEPA because the
House has eliminated the NEPA process in Section 2055 of H.R. 6, and
has weakened the framework of NEPA in other sections of H.R. 6. According
to Buccino, the current legislation is not supporting our best public
and environmental interests, so we need NEPA now more than ever.
In an abbreviated testimony, Questar general manager, Ronald Hogan
expressed that the natural gas producer, is trying to lower environmental
impacts while increasing worker safety and providing a boost to local
economies. However, this has become a challenge for Questar because
they are faced with numerous jurisdictions and regulations that "simply
defy logic," slowing down the permitting process. Hogan's testimony
showed how natural gas producers are suffering from current policies
and he encouraged the formulation of new policies that incorporate
the environment, the community and the nation so that domestic natural
gas can be distributed more efficiently in the U.S..
House Resources Committee Subcommittee on Energy and Mineral
Hearing on "The Impacts of High Energy Costs to the American
May 19, 2005
James C. May, President and CEO, Air Transport Association of America
Paul Cicio, Executive Director, Industrial Energy Consumers of America
Theresa Schmalshof, board member, National Corn Growers Association
Robert D. Bessette, President, Council of Industrial Boiler Owners
Robbie M. Hyde, President and CEO, Mill Hall Clay Product Inc.
Carol Clements, chair person, National Fuel Funds Network (NFFN)
Katherine Morrison, staff attorney, U.S. Public Interest Research
On May 19, 2005, the House Subcommittee on Energy and Mineral Resources
from witnesses on how high energy costs impact agriculture, manufacturing,
transportation and low-income consumers. Chairman Jim Gibbons (R-NV)
opened with comments on the astronomically high natural gas prices
and how these prices cause important divisions of the economy to close
and downsize. Gibbons expressed his interest in using the American
National Wildlife Refuge (ANWR) and our nation's plentiful natural
gas resources to combat high energy costs. Throughout the hearing,
the committee considered proposed solutions addressing how to lower
energy costs, increase capital investments, secure jobs and ensure
energy and economic stability in the future.
James May discussed how the high oil prices have affected commercial
airlines and their employees. The industry faces oil prices reaching
a 12-month projected average of $51 per barrel, or $1.55 per gallon.
With industry consuming roughly 18.6 billion gallons of oil per year,
every penny spent on a gallon of jet fuel increases the industry's
annual spending by $186 million. Every dollar increase in the price
of a barrel of oil threatens 5,500 jobs. According to May, U.S. air
carriers will remain at the mercy of OPEC and the federal government
if oil prices continue to soar. Consequently, the airline crisis will
persist nationally and internationally, due to the relative weakness
of the dollar. May contends that although the industry has made efforts
to improve oil consumption and efficiency, the market will only recover
with more oil production.
Paul Cicio of IECA, a nonprofit organization that promotes the interests
of domestically and globally competitive manufacturing companies,
indicated that the U.S. has the most restrictive offshore policies
in the world, where "approximately 85% of the lower 48 state
offshore acreage has been placed under congressional and executive
moratoria." Cicio believes America's best interests lie in the
use of our own domestic gas supply rather than imported natural gas
and he also noted that natural gas was a cleaner fuel than oil or
coal. Because the offshore production of natural gas has a good environmental
record, Cicio asserts that the U.S. must remove the moratoria and
exploit our offshore natural gas resources to combat the growing energy
Theresa Schmalshof explained how high natural gas prices have affected
America's farmers. Elevated natural gas prices affect the costs of
producing fertilizers, irrigation, grain drying, feedstock and ethanol
production. Like Cicio, Schmalshof contested that we must tap domestic
resources and formulate new environmental policies that do not constrict
the production of natural gas. Schmalshof emphasized that Congress
must issue a policy that promotes natural gas production on the outer
continental shelf and Alaska's north slope, the construction of new
coal and nuclear facilities, and the conversion of agricultural and
industrial facilities to environmentally friendly coal gasification
Robert Bessette, offered a different perspective, calling for a coordinated
environmental and energy policy. Bessette expressed his concern for
protecting the environment, reporting that an effective linkage between
environmental and energy policies could increase natural gas production
and energy efficiency, opening the door for considering alternative
fuels like biomass and waste coal.
Carol Clements from the National Fuel Funds Network explained how
high energy costs have impacted consumers with low incomes. Clement's
organization manages funds from the federal Low Income Home Energy
Assistance Program (LIHEAP). She claims that, although more people
are applying for LIHEAP, there are inadequate funds to support the
declining eligibility of the low income families. In her testimony,
Clements urged the Subcommittee to consider her proposed solutions
for battling the impacts of high energy costs on low income consumers.
Her recommendation included increased funding for LIHEAD, strengthening
the federal Weatherization Assistance Program, and the formation of
a working group among the Departments of Energy, Housing and Urban
Development, and Health and Human Services. Strengthening these federal
programs would improve energy efficiency and conservation in public
and Section 8 housing, which is a program passed by Congress in 1974
that allows tenants to pay for housing on a sliding-scale basis.
Katherine Morrison critiqued the House energy bill (H.R. 6) passed
in April. Morrison believes that the supply-based proposals for oil
production presented by President Bush and Congress will not solve
the problems associated with high oil prices. Instead, Morrison believes
the solution lies in fuel efficiency, noting recent technology developed
by the National Academy of Sciences (NAS) that could economically
increase auto fuel efficiency from 20.8 to 40 miles per gallon. "Congress
has wasted four years on an energy policy that won't help consumers
or reduce our dependence on oil," Morrison stated boldly, "Congress
should reject the energy bill." According to Morrison, H.R. 6
is aimed at lowering oil consumption costs, a fact which President
Bush admitted "wouldn't change the price at the pump today."
Morrison urged the committee to focus on fuel conserving technologies
that will ultimately save consumers money.
In the question and answer portion of the hearing, Thelma Drake (R-VA)
requested that each of the witnesses supply the Subcommittee with
a letter addressing what the Subcommittee is doing right and what
they are doing wrong. John Peterson (R-PA) agreed with the majority
of the witnesses that there needs to be a linkage between environmental
and energy policies, saying that "natural gas is an island to
itself in this country." In closing, Drake challenged Morrison's
testimony, stating that stricter fuel efficiency standards would only
render American car manufacturers less competitive. According to Drake,
the federal government should not be in the business of making choices
for the American consumer regarding automobile size and style, calling
fuel-efficient vehicles small and unpopular.
Energy and Natural Resources
Hearing on the Nuclear Power 2010 Program
April 26, 2005
Jeffrey Clay Sell, Deputy Secretary, Department of Energy (DOE)
Hon. Nils J. Diaz, Chairman of the Nuclear Regulatory Commission (NRC)
The Senate Energy and Natural Resources Committee convened on April
26, 2005 to hear testimony
regarding the status of the Department of Energy's Nuclear Power 2010
Program. The program, unveiled on February 14, 2002, aims to provide
new base-load nuclear generating capacity in order to meet the Administration's
objectives to expand energy supply diversity.
Funded at $50 million in FY 2005, with a Presidential request for
$56 million in FY 2006, Nuclear Power
2010 is a federal 50/50 cost-sharing initiative between industry
and government to develop new plant sites, bring advanced nuclear
technologies to market, and demonstrate the Nuclear Regulatory Commission's
(NRC) new combined construction and operation licensing process. Construction
of at least one new reactor is expected within the next decade. So
far, DOE is pursuing applications to finance three licensing demonstration
projects: two new reactors at the North Anna site in Virginia, led
by a consortia of five energy companies; a feasibility study for an
advanced boiling water reactor at the Tennessee Valley Authority's
Bellefonte site in Alabama; and a third research and development project
for light-water nuclear reactor designs, led by the NuStart Energy
Committee Chairman Pete Domenici (R-NM) offered the committee's "dedicated
and firm" commitment to the emerging "global renaissance
in nuclear energy," a phrase Domenici borrowed from an April
26th Washington Post editorial by the World Nuclear Association's
director general. Although he was optimistic about the three projects,
Domenici listed three major obstacles to address, including the lack
of progress surrounding the Yucca Mountain repository, high up-front
capital costs that challenge nuclear power's feasibility in the U.S.,
and NRC's untested regulatory scheme, which could potentially put
a drag on nuclear development.
Senator Lamar Alexander (R-TN), Jeff Bingaman (D-NM), and Larry Craig
(R-ID) raised other concerns, including funding and staffing needs,
the role of judicial review within the licensing process, and expected
timelines for completing the current projects. NRC Chairman Nils Diaz
testified that the agency is fully prepared, in terms of personnel
infrastructure and resources, to handle new applications, predicting
that processing new license applications would require roughly $20
million in 2006 and 2007 if industry support remains strong.
Clay Sell, Deputy Secretary of Energy, added his optimism that, as
long as the licensing process remained sound and efficient, the certainty
of completing plants and putting them online is very high. Compared
to the life-cycle cost of new clean coal or natural gas plants, he
said, DOE has concluded with "considerable confidence" that
nuclear plants are competitive. He suggested that Congress should
thus be less concerned with providing construction incentives and
more focused on strengthening regulatory certainty.
According to Sell, the Nuclear Power 2010 program runs through 2011,
and DOE expects to certify two of the demonstration projects within
the next two years, and begin the combined license process in 2008
or 2009. Diaz also reported that in addition, the majority of the
existing nuclear fleet in the U.S. have the capability add a new reactor
site, which raises the potential for a substantial increased domestic
nuclear capacity while dodging the expense of lengthy appeals processes.
Senator Ken Salazar (D-CO) asked Sell to address the challenges posed
by recent delays, scandals and political flare-ups surrounding the
planned Yucca Mountain nuclear waste repository. Sell responded that
DOE remains resolute about moving forward with the repository and
confident about overcoming roadblocks, adding, "we are confident
in the science that underpins the decision
[but] political difficulties
have proved great."
Energy and Natural Resources
Hearing on Offshore Energy Production
April 19, 2005
Admiral James Watkins, U.S. Navy (Ret.), Chairman of the U.S. Commission
on Ocean Policy
Johnnie Burton, Director of the Minerals Management Service, Department
of the Interior
Dr. Robert Thresher, Director of the National Wind Technology Center,
National Renewable Energy Laboratory
Scott Angelle, Secretary of the Louisiana Department of Natural Resources
Hon. Frank Wagner, Virginia State Senator
Charles Davidson, Chairman, President and CEO of Noble Energy, Inc.,
Debbie Boger, Deputy Legislative Director, Sierra Club
The Senate Energy and Natural Resources Committee, chaired by Senator
Pete Domenici (R-NM), met to consider whether any significant policy
changes would make energy development in the outer continental shelf
(OCS) more viable. Hearing testimony and discussion focused primarily
on a bill introduced by Senator Lamar Alexander (R-TN) that would
allow states to inventory and lift restrictions on their own offshore
resources. The committee also considered the potential of offshore
renewable generation, such as wave and wind energy.
Domenici called offshore energy "tremendously important,"
to increasing domestic energy supply, as the OCS contains an estimated
70 trillion cubic feet of untapped natural gas, however, he remained
sensitive to the explosive politics surrounding any language that
may lead to lifting moratoria in the OCS. Senator Alexander echoed
these sentiments. His bill aims to facilitate greater flexibility
for states who wish to develop their resources while protecting those
states that don't, by extending state boundaries onto the shelf, allowing
states to petition the Department of Interior to develop inventories,
and offering states royalties exclusively for marine and coastal conservation
efforts. Neighboring states could veto operations that are within
view of their coastlines.
These proposals received mixed responses from his coastal-state colleagues
on the committee. Senator Mary Landrieu (D-LA) asserted off-shore
resources could be promising when well managed and environmentally
sound, while Mel Martinez (R-FL) expressed adamant opposition to development
which might interfere with Florida's marine environment and tourism
industry. Senator Richard Burr (R-NC) also preferred to honor the
offshore moratoria as long as North Carolina citizens remain opposed
to drilling, but added that he didn't want to preclude other states
from exploring their own resources.
James Watkins, Chairman of the U.S. Commission on Ocean Policy, reported
the Ocean Commission's recommendations for managing offshore energy
opportunities. He testified that a lead federal agency should be named
to manage prospects for both hydrocarbon and renewable energy development
offshore. The report also calls on the federal government to increase
funding for science and technology research, particularly full funding
for the Minerals Management Service's Environmental Studies Program,
or risk losing credibility. The report also suggests establishing
an ocean policy trust fund to set $4 billion in oil and gas revenues
aside for conservation projects.
Alexander and Landrieu asked Watkins to better clarify the trust
fund concept, wary that the fund would not offer states the resources
that they need or fairly distribute revenues. Alexander said that
$2 billion offered to states annually through his bill's conservation
royalty provision would sustain states better because it would avoid
the appropriations process, whereas the trust fund would be subject
to adjustments under the budget.
Alexander's bill also explores the possibility of providing separate
leases and permitting guidelines for natural gas resources, that are
easier, safer and cleaner to develop. But Johnnie Burton, Director
of the Minerals Management Service, said regulations must be carefully
crafted in order to address circumstances in which oil could be produced
inadvertently during a natural gas operation.
Regarding offshore wind and wave energy generation, Robert Thresher,
Director of the National Wind Technology Center, compared American
and European research and development efforts, reporting that while
the EU has launched a concerted effort to sponsor major technological
development, the U.S. has not expanded its federal renewable energy
program offshore. Thresher testified that technological advancement
in the area of offshore wind turbines is "on par with the space
program," and deserves public investment. Watkins agreed that
the U.S. public perspective is far behind: "while the technology
Energy and Natural Resources
Hearing on Domestic Oil Shale and Oil Sand Resources
April 14, 2005
Thomas Lonnie, Assistant Director for Lands and Minerals, U.S. Bureau
of Land Management
Mark Maddox, Principal Deputy Assistant Secretary for Fossil Energy,
Department of Energy
Dr. Ted Barna, Assistant Deputy Undersecretary of Defense, Nuclear,
Biological, Chemical Technology, Department of Defense
Russell George, Executive Director, Colorado Department of Natural
Steve Mutt, Shell Oil Company
Jim Evans, Executive Director, Associated Governments of NW Colorado
Steve Smith, The Wilderness Society
The Senate Energy and Natural Resources Committee convened to discuss
opportunities for developing the nation's vast oil sand and oil shale
resources. The supplies are trapped within the Green River Formation,
which lies under northwestern Colorado, northeastern Utah and southeastern
Wyoming. Members heard testimony from federal agency officials and
Shell Oil Company in order to address legislative and administrative
actions necessary to encourage industry investment in safe and commercially
viable development. Committee Chairman Pete Domenici began the hearing
by referring to the Senate's version of the comprehensive energy legislation
which is still being drafted, but should include language that "must
move us towards new, non-conventional sources of fuel."
Domenici invited Senators Orrin Hatch (R-UT) and Wayne Allard (R-CO)
to kick off the hearing with their enthusiastic endorsement of oil
shale development within their states. "We simply cannot ignore
any potential fuel source for this country," offered Senator
Allard. Hatch noted that, despite his state's vast resources, Utah
imports most of its oil from Canadian sources, most of which derive
from tar sands in Alberta. Both Senators reported strong public support
in their states, save for a few "environmental extremists."
One consortium of public interest groups in southern Colorado, called
"Club 20," has drafted a resolution in support of environmentally
sound, economically secure extraction efforts. Hatch and Allard, said
they are planning to cosponsor legislation, with Senators Ken Salazar
(D-CO) and Robert Bennett (R-UT), that will "benefit all sides"
including local communities, the regional economy, and national security
According to Mark Maddox, who heads the Department of Energy's Office
of Fossil Energy, the U.S. estimates a total of 1.8 trillion barrels
of oil trapped within the Green Mountain Formation, 80% of which is
within federal land. Even if partially developed, Maddox said the
resource could provide 2-3 million barrels per day for decades. If
extraction technology became commercially viable, he said, "100
billion barrels of oil from domestic oil shale could be reclassified
as proven reserves."
Senators Jeff Bingaman (D-NM) and Salazar challenged the Administration's
commitment to oil shale development, referring to the budget proposal
for fiscal year 2006, which eliminates oil and gas research programs.
In defense of DOE's plan, Maddox upheld the position that there was
sufficient capital and interest within the private sector to provide
the necessary research and development. Bingaman called this notion
"unrealistic," and other members were skeptical that without
long-term federal research and development funding, oil shale commercialization
would succumb to a boom-and-bust cycle due to the volatile price of
oil. Oil shale efforts collapsed after oil prices dropped in the early
1980s, devastating the regional economy.
Maddox conceded that a full commitment by all stakeholders would
be necessary to prevent a similar scenario, but industry interests
are in a better position than they were 30 years ago. In his view,
the federal government should offer regulatory policy that would allow
industry greater access to federal lands. But Chairman Domenici, most
interested in the Canadian tax policy that has encouraged wide-spread
oil shale development, called for federal tax incentives, as well
as new investment in a demonstration project, under either DOE or
the Defense of Department.
Current federal activities include research within the Defense Department,
which plans to use its large fuel purchasing budget to develop the
oil for jet fuel. The Department of Interior has also set in motion
plans to lease public land for development. Thomas Lonnie, Assistant
Director for Lands and Minerals at the Bureau of Land Management (BLM),
testified on the progress of the Oil Shale Task Force, which is currently
reviewing 32 public comments to inform leasing policy. Among the comments
is a popular recommendation to suspend royalty payments during the
research and development phase of oil shale production projects.
Steve Mutt from Shell Oil, which has played a leading role in private
sector oil shale research, testified on the progress of Shell's field
research program. Mutt reported that Shell is making significant progress
in in-situ conversion technology, which uses electric heaters to extract
oil underground, rather than bringing the rock to the surface. The
company plans to conduct an integrated test in order to make the extraction
method commercially viable by 2010. To be successful, Mutt said the
government should build a research partnership through its National
Laboratories in addition to providing tax incentives and royalty relief.
Government Reform Subcommittee on Energy and Resources
Hearing on America's Energy Needs and Our National Security
April 6, 2005
Hon. R. James Woolsey, Former CIA Director, Speaking on behalf of
the National Commission on Energy Policy
Robert E. Ebel, Chairman of the Energy Program, Center for Strategic
and International Studies
Robert D. Hormats, Vice Chairman, Goldman Sachs (International)
Hon. Clay Sell, Deputy Secretary, U.S. Department of Energy (DOE)
Chairman Darrel Issa (R-CA) called this hearing to address rising
global demand for energy, particularly oil, and to consider how national
energy policy will affect national security concerns. The recent skyrocketing
demand for oil in China, in particular, has led to new alliances and
"a shift in energy geopolitics," Issa said. In addition,
Issa emphasized in his opening statements that price volatility for
oil is largely demand-driven. "To a certain extent we are victims
of our own success, in that worldwide economic growth and development
are raising living standards but also dramatically increasing energy
Energy policy specialists from the Center for Strategic and International
Studies (CSIS), Goldman Sachs (International), the National Commission
on Energy Policy, and the Department of Energy all offered their concerns
Clay Sell, the newly appointed Deputy Secretary of Energy, summarized
the President's plan for national energy independence, which favors
a tax incentive approach to promote wind, ethanol and biomass power
as well as technologies that allow consumers to be more aware of their
energy use. The policy fundamentally stresses increased liquefied
natural gas imports, domestic oil and gas exploration, improvements
in refining capacity, nuclear energy generation, and clean coal power.
In the long term, the President's Hydrogen Fuel Cell Initiative would
devote $1.2 billion through 2010 to lay the foundation for a hydrogen
In contrast with the President's agenda, Jim Woolsey, former CIA
director, presented his views along with those of the National Commission
on Energy Policy, who issued their final report, "Ending
the Energy Stalemate" last December. Woolsey's solutions
tried to address several reasons why dependence on petroleum, particularly
in the transportation sector, is dangerous. Among these, the current
fuel infrastructure allows no short term substitutes for petroleum;
thus policies should emphasize increased fuel efficiency, hybrid technology,
and alternative fuels such as waste-derived cellulosic ethanol and
biodiesel. Investments in hydrogen, he said, "will not have an
effect on oil consumption" in the short term.
Specifically, Woolsey recommended a boost in fuel economy standards
(known as CAFE standards), with an added component
of flexibility that would allow auto makers to trade fuel economy
credits, under an industry-wide cap of 55 mpg (for comparison, European
standards average 42 mpg, Japan requires 47 mpg, and the U.S. averages
a fuel economy of 20 mpg ). He suggested that plug-in hybrids that
supplement their power from grid electricity, would most effectively
meet these caps, adapt easily to the infrastructure, and reduce the
price of gasoline dramatically.
From a security perspective, Woolsey cautioned that one attack on
a major refinery could remove 6 billion gallons from the market, nearly
doubling the current price of oil. He also emphasized that wealth
transfers from oil production have historically been used to fund
"terrorism and it's ideological support." According to Woolsey,
Saudis have contributed an estimated $85-90 billion since the 1970s
to the spread of Wahhabi beliefs, which form the basis for some Islamic
In discussing historical trends, geopolitical concerns, and future
solutions, witnesses questioned the willingness of Americans to take
responsibility for conserving their own energy needs. Robert Hormats
of Goldman Sachs stated that the oil embargo of 1973 "was not
as much a wake-up call as it should have been." While there has
been a lot of rhetoric to develop comprehensive energy legislation,
he said, there has been no consensus, no action, and very little new
investment in alternative fuels and efficiency. As a result, our oil
dependence and that of our major trading partners, is even more pronounced.
Robert Ebel of CSIS also suggested, "the public needs to understand
that there is no energy option, and that includes renewable forms
of energy, that can be described as being risk or cost-free."
Ebel blamed a pervasive "NIMBY" ["Not In My Back Yard"]
mentality for the nation's energy reliance and legislative inactivity.
This obstacle is particularly relevant to the Presidents' proposed
expansion of domestic nuclear power. Woolsey agreed with Ebel's assessment.
There was little time for a question and answer period, but Chairman
Issa seemed to affirm some of the Commission's policy recommendations,
such as a new approach to fuel economy standards. Ebel and Woolsey
supported federal incentives for technologies such as hybrid vehicles
in order to begin the transition from internal combustion to fuel
cell automobiles. Woolsey said that the costs for plug-in hybrids,
such as the cost of battery replacement, is negligible compared to
the costs required to getting fuel cell vehicles online.
Similar energy policy hearings regarding national security and geopolitical
concerns took place early this year under the House Resources Subcommittee
on Energy and Mineral Resources on March 16th
and the Senate Energy and Natural Resources Committee on February
Resources Committee Subcommittee on Energy and Mineral Resources
Oversight Hearing on U.S. Energy and Mineral Needs, Security
and Policy: Impacts of Sustained Increases in Global Energy
and Mineral Consumption by Emerging Economies Such as China
March 16, 2005
The Honorable Guy F. Caruso, Administrator for the Energy Information
Dave Menzie, Chief, International Minerals Section of USGS
Jeffrey Logan, China Program Manager for the International Energy
Milt Copulos, President of the National Defense Council Foundation
Alan S. Hegburg, Senior Fellow, CSIS Energy Program/The Scowcroft
International energy experts warned the Energy and Mineral Resources
Subcommittee on Wednesday, March 16, 2005 that Chinese energy demand
is rising sharply and is one of the factors contributing to recent
high crude oil prices. And China's state-owned oil companies are shoring
up supplies around the world, which could pose future problems for
Strong demand from the United States, China and India has stretched
global production capacity to the limit, Guy Caruso, head of the Energy
Information Administration, told the subcommittee members. "The
only pressure relief valve is prices," he said, noting the current
crude price of $55 per barrel.
Currently, U.S. economic growth is outpacing growth in energy demand,
Caruso said. For every 3 percent increase in economic growth, energy
use is rising only 1.5 percent. Until the late 1990s, China was on
a similar growth path, with energy consumption only growing half as
fast as its GDP, added Jeffrey Logan, senior energy analyst and China
program manager with the International Energy Agency. But since 2000,
energy use in China has skyrocketed, somewhat unexpectedly. Energy
use in China is growing by 1.5 percent for every 1 percent gain in
economic output, Logan said, leading analysts to question the validity
of earlier energy data from China.
"In order to sustain this economic growth, emerging economies
such as China and India will need more and more supplies of energy
and minerals," said the chairman of the subcommittee, Rep. Jim
Gibbons (R-NV). "The United States must take a serious look at
its energy and mineral supply strategy for the long-term."
Chinese consumers are purchasing more cars and trucks, which is a
primary reason for increased demand. And Chinese businesses are using
more oil for petrochemical feedstocks and to power backup power plants
when coal-fired plants are unable to meet electricity demand. Overall,
oil demand in China rose 16 percent in 2004 to 6.4 million barrels
per day. By comparison, North America currently uses 25 million barrels
per day, Environment and Energy Daily reported.
The Chinese government is taking several approaches to address energy
supply concerns, Logan explained. The country has designated four
sites as strategic petroleum reserves, similar to the U.S. system.
On the demand side, the Chinese will tighten fuel economy standards
starting in 2008. On the supply side, Chinese state-run oil companies
are making a major push to lock down new supplies around the globe,
largely in areas where major multinational companies fear to tread.
More than half of Chinese-owned oil production abroad comes from Sudan,
Logan noted. Due to instability in that nation, China has stationed
several thousand troops there. "A key strength of Chinese [national
oil company] activity abroad is their ability to package complete
investment deals in producing countries," said Logan. "In
exchange for ownership of oil resources there, they can offer associated
economic development packages, investment opportunities in the lucrative
Chinese market, and potential military transactions." But there
are some indications that the Chinese may be backing off that approach,
as policymakers realize it makes more sense to rely on markets, strategic
petroleum reserves and demand-side changes, then to buy up oil supplies.
"It seems likely, therefore, that the overseas purchasing binge
will soon slow," Logan said.
Still, other energy analysts testifying yesterday raised a red flag
about the potential intersection of Chinese and U.S. oil interests.
"The competition for oil could lead to armed conflict -- particularly
with China," said Milton Copulos, president of the National Defense
Council Foundation. "Lest this statement seem alarmist or far-fetched,
I would note that the Chinese are, for the first time, developing
a blue water navy capable of operating beyond their shores,"
a development some analysts say is aimed at securing passage for oil
tankers, he added. China is also negotiating with "traditional
U.S. suppliers," Copulos said. In January, the Chinese signed
an agreement with Canada -- the country that the United States imports
most from -- to develop uranium mines and oil reserves. China has
also shown interest in developing Canadian oil tar sand deposits in
Alberta and potentially building a 720-mile pipeline from Alberta
to British Columbia on the west coast. The Chinese are also working
on agreements with Venezuela and Mexico, two other top exporters to
the United States, Copulos said, as he advocated more domestic energy
production in the United States to offset reliance on imports.
Subcommittee ranking member Eni Faleomavaega (D-American Samoa) noted
that India wants to build a $4 billion pipeline from Iran through
Pakistan, which could have implications for U.S. foreign policy in
the Middle East. Beyond oil concerns, panelists said Chinese natural
gas use is on the upswing as well, as Chinese officials look to address
severe air pollution issues in many of their cities. Last year, government
officials built a 3,900 kilometer, $24 billion pipeline which will
transport 12 billion cubic meters of gas annually, Logan said. The
government is building two liquefied natural gas terminals, and there
are plans for a dozen more.
Still, the higher cost of natural gas as compared with coal is a
major barrier, as is the lack of incentives for natural gas plant
construction. That means air pollution and carbon dioxide (CO2) emissions
will remain a major concern since China is currently burning 2 billion
tons of coal per year, mostly in outdated, inefficient power plants.
"We see increasing amounts of air pollution travelling across
the Pacific Ocean and even reaching U.S. territory," Logan said.
Subcommittee members called for further development of natural gas
supplies in the United States as the best response to rising oil prices
and increased demand from Asia. Rep. John Peterson (R-PA) said it
is unlikely LNG imports will increase rapidly in the next decade,
due to concerns about terminal siting. Peterson said natural gas development
is where the U.S. policymakers should be focusing their efforts, since
it is the one fuel that could easily bridge to the hydrogen economy.
"We have adequate reserves to drill out of our gas problem,"
Energy and Natural Resources Committee
Hearing on Power Generation Resource Incentives & Diversity
March 8, 2005
David Garman, Assistant Secretary, Department of Energy Office of
Energy Efficiency and Renewable Energy
Wayne Brunetti, Chairman and CEO, Xcel Energy
Ryan Wiser, Scientist at Lawrence Berkeley National Laboratory
Richar Morgan, Commissioner, District of Columbia Public Service Commission,
National Association of Regulatory Utility Commissioners
Sonny Popowsky, Pennsylvania Office of Consumer Advocates
Don Furman, Senior Vice President, PacifiCorps
Kerry Bowers, Manager of Customer Technologies, Southern Company
Alan Nogee, Director of the Clean Energy Program, Union of Concerned
Brian O'Shaughnessy, president and CEO, Revere Copper Products, on
behalf of the National Association of Manufacturers
The Senate Energy and Natural Resources Committee considered arguments
for and against the use of a federal renewable portfolio standard
(RPS) as a means of promoting energy diversity. Senator Jeff Bingaman
(D-NM), the Committee's ranking member, continues to propose, for
this year's energy bill, a 10% RPS by 2020. According to Environment
and Energy Daily, Committee Chairman Pete Domenici (R-NM), who will
introduce the Senate version of the energy bill this spring, opposes
a federal standard, but recognized the wide support Bingaman's proposal
received in the Senate last year. In this hearing, the committee questioned
witnesses on national distribution of renewable resources, current
state RPS programs, and the possibility of including clean but non-renewable
sources in a federal RPS.
David Garman, Assistant Secretary at the Department of Energy's Office
of Energy Efficiency and Renewable Energy, spoke for all who oppose
a federal RPS when he said it "could create winners and losers
among regions of the country." He and others said that regions
lacking in sufficient renewable resources would suffer unfair costs
and penalties. Kerry Bowers from the Southern Company listed the reasons
why southeastern states would not be able to produce commercially
viable wind, solar, or biomass resources. Alan Nogee, from the Union
of Concerned Scientists, refuted this claim, noting that fear of high
costs ignores the fact that most states today pay handsomely for fossil
energy imported from other states and countries. He and Ryan Wiser,
a Scientist at Lawrence Berkeley National Laboratory, testified that
a federal RPS could significantly relieve demand on fossil fuels and
help lower natural gas prices, according to a recent
Lawmakers and witnesses alike recognized that federal policies should
account for the fact that renewable resources are unevenly distributed
throughout the country. But several witnesses and Senators in support
of a federal RPS insisted that it would not necessarily inhibit the
flexible use of a state's unique resources. Don Furman, Senior Vice
President of PacifiCorps, testified that a well crafted, federal RPS
could strike a reasonable balance between national consistency and
regional maximum efficiency if it involved a trading system by which
states could buy and sell efficiency credits. States working by themselves,
he said "will never achieve ideal efficiency." A national,
market-based approach would achieve better energy diversity and efficiency
goals than federal subsidies, he said, because it would not depend
solely on tax schemes, which are uncertain and unstable.
Regarding specific energy resources, Alexander revealed his skepticism
about the viability of wind energy, asking whether a federal RPS should
designate certain landscapes off-limits to construction of turbines
for aesthetic reasons. Salazar also asked Garman which renewable resources
currently show the most potential to offset consumption of conventional
resources. Garman listed wind first, reporting that DOE is developing
new designs to allow turbines to be located in less aesthetically
sensitive locations, such as urban areas and offshore. He identified
a good long term prospect for competitive solar energy, for which
the department expects prices to reach 6 cents per kwhr by 2020. Ethanol
would have more potential, Garman said, if researchers and producers
thought beyond corn, which has barely offset the use of fossil fuels.
Adding other sources such as municipal waste, he said, could make
a sizeable 40-50 percent dent in gasoline consumption.
Energy and Commerce Committee Subcommittee on Energy and Air
"The Energy Policy Act of 2005: Ensuring
Jobs for Our Future with Secure and Reliable Energy"
February 16, 2005
Red Cavaney, President of the American Petroleum Institute
Bob Dineen, President and CEO of the Renewable Fuels Association
Bob Slaughter, President of the National Petrochemcial & Refiners
Erik Olson, Senior Attorney for the Natural Resources Defense Council
Lee O. Fuller, Vice President of Government Relations, Independent
Petroleum Association of American Geological Institute
Laurnence M. Downes, Chairman of the American Gas Association
Gerald Norlander, on behalf of the National Association of State Utility
David Hamilton, Director of the Global Warming and Energy Programs,
Donald F. Santa, Jr., President of the Interstate Natural Gas Association
John Kane, Senior Vice President of Government Affairs, Nuclear Energy
Navin Nayak, U.S. Public Interest Research Group
James H. Hancock, Jr., Chair, Legislative Affairs Committee, National
Andrew Fahlund, Vice President for Restoration and Protection, American
John E. Shelk, Senior Vice President, Government Affairs, National
Alan Nogee, Director of the Clean Energy Program, Union of Concerned
Rhone Resch, President of the Solar Energy Industries Association
A continuation of the hearing of February 10th on the discussion
draft of the energy bill, the subcommittee launched straight into
testimony from 19 witnesses, the first panel focusing heavily on the
contentious provision to grant liability protection for producers
of the gasoline additive methyl tertiary butyl ether (MTBE).
Energy and Commerce Committee Chairman Joe Barton said he was "interested
in finding a compromise" on MTBE contamination. Representatives
of the petrochemical industry, such as Bob Slaughter, President of
the National Petrochemcial and Refiners Association, argued for a
repeal of the 2% oxygenation requirement under the 1990 Clean Air
Act, which he says forced industry into using MTBE to increase octane
in gasoline. He and others offered strong support for the liability
protection provision in the current energy bill draft, advocating
that industry should not be penalized for doing something that the
government originally mandated. When corrected that the rule remained
neutral about what oxygenate to use, industry representatives countered
that no alternative oxygenate was available to meet the regulations
in time and thus stood as an equivalent of a MTBE mandate. Erik Olson,
on behalf of the National Resources Defense Council, called the MTBE
waiver "unfortunate," and retorted that liability is not
the result of misplaced blame for using the chemical, but "comes
from industry knowing the risks and not reporting leaks and contamination
Bob Dineen of the Renewable Fuels Association reported on the growth
of ethanol production and its potential as an effective fuel additive
in place of MTBE. According to Dineen, ethanol displaces 400,000 barrels
of oil per day, and production is growing at such a rate that the
bill's renewable fuel standard of 5 billion gallons per year by 2012
could be realistically much higher. Contrasting this testimony, however,
Slaughter testified that using ethanol as a replacement for MTBE would
simply yield other environmental consequences.
Other renewable resources took the stage as well. Rep.
Allen (D-ME) asserted that the current energy bill draft does not
do enough to "bend the demand curve down" for U.S. consumption
of fossil fuels, citing evidence that the U.S. automobile industry
is lagging behind other countries in developing fuel cell or other
fuel-efficient vehicles. On fuel cell technology, Donald Santa of
the Interstate Natural Gas Association testified that the transition
to hydrogen would "require significant research and development"
and would still depend heavily on natural gas from either the Gulf
of Mexico or from increased liquified natural gas (LNG) imports.
Energy and Commerce Committee Subcommittee on Energy and Air
"The Energy Policy Act of 2005: Ensuring
Jobs for Our Future with Secure and Reliable Energy"
February 10, 2005
The Honorable David K. Garman, Assistant Secretary of the Department
of Energy Office of Energy Efficiency and Renewable Energy
Ms. Cynthia Marlette. General Counsel, Federal Energy Regulatory Commission
Mr. Luis Reyes, Executive Director for Operations at the Nuclear Regulatory
Mr. Guy F. Caruso, Administrator, Energy Information Administration
The Honorable Marilyn Showalter, President of the National Association
of Regulatory Commissioners
The Honorable Frank H. Murkowski, Governor of the State of Alaska
The Honorable Victor Carrillo, Chairman of the Railroad Commission
of Texas on behalf of the Interstate Oil and Gas Compact Commission
Mr. Thomas R. Kuhn, President of the Edison Electric Institute
Ms. Lynne H. Church, President of the Electric Power Supply Association
Mr. Alan Richardson, President and CEO of the American Public Power
Mr. Ed Hansen, General Manager of the Snohomish County Public Utility
District on behalf of the Large Public Power Council
Mr. Glenn English, CEO of the National Rural Electric Cooperative
Ms. Kateri Callahan, President of the Alliance to Save Energy
Mr. Marty Kanner, President of Kanner & Associates, on behalf
of Consumers for Fair Competition
Mr. Mark Cooper, Research Director at the Consumer Federation of America
Mr. Steven Nadel, Executive Director of the American Council for an
The House Energy and Air Quality Subcommittee held the first of two
hearings on the discussion
draft of this year's comprehensive energy bill in an effort to
speed the bill through the House. Energy and Commerce Committee Chairman
Joe Barton (R-TX) declared, "this is the bill that will not die,
and I hope it can be a bipartisan bill because this is the Congress
where we are going to pass comprehensive energy legislation."
Although the hearing was intended to include discussion on the President's
DOE budget request, little discussion was devoted to budget-related
Members placed particular emphasis on a written correspondence
that took place earlier in the month between Ranking Member John Dingell
(D-MI) and FERC Chairman Pat Wood on FERC's suggestions to improve
energy reliability. At the hearing, FERC repeatedly came under fire
for a provision that would give the agency primary regulating authority
over the siting of Liquified Natural Gas (LNG) terminals and electric
transmission lines. Democratic members of the Subcommittee, Gov. Frank
Murkoswki of Alaska, and Marilyn Showalter, President of the National
Association of Regulatory Commissioners, all voiced concern that such
provisions are attempts to override state law. According to Rep. Louis
Capps (D-CA), FERC would be granted "unambiguous control"
over "controversial and complicated projects, involving subjects
not covered by FERC's expertise," such as public health, homeland
security, and environmental concerns. Cynthia Marlette, representing
FERC, said that one federal record and one lead agency for LNG projects
would simplify the permitting process, but would not allow the agency
to seek pre-emptive federal permits or diminish the ability of states
to enforce environmental laws. Guy Caruso of the Energy Information
Administration testified that under current law, 10 new LNG terminals
would be needed to meet the demand for natural gas by 2025; Rep. John
M. Shimkus (R-IL) pointed out the challenges in gaining public support
for new terminals.
David Garman, Assistant Secretary of DOE's Office of Energy Efficiency
and Renewable Energy, called for increased, diverse domestic fuel
production, which must include an expansion of domestic oil and gas
resources in addition to nuclear energy, fuel cells, provisions for
energy conservation and for "next-generation" technology.
Garman testified that opening the coastal plain of the Arctic National
Wildlife Refuge would provide sufficient resources to fill the deficiency
in the Alaska pipeline's capacity. He also emphasized that clean and
safe coal and nuclear technologies are "fully developed"
and simply "need to be brought across the finish line."
Reporting on DOE research and development programs, he added that
by 2020, fuel cell vehicles will appear in showrooms and the price
of solar energy will have dropped to a competitive 6 cents/ kwhr.
In response to accusations by Rep. Edward Markey (D-MA) suggesting
Garman's department has fallen short of its responsibilities to institute
fuel efficiency rules, Garman blamed a law established under the Clinton
Administration that was aimed at improving transparency, but, according
to Garman, has greatly complicated the rulemaking process.
On challenges facing the Yucca Mountain nuclear waste facility, Garman
testified that the administration has requested sufficient funds and
is "supportive of the repository." According to Garman,
the Nuclear Regulatory Commission has not obtained a license for the
facility due to delays in the EPA "radiation protection standard"
rulemaking. The FY06 budget request includes $651 million for the
repository to cover liscensing costs, down from the $880 allocated
for FY05 and far below the $1.2 billion DOE previously estimated it
would need for FY06.
Improving the Nations Energy Security: Can Cars and Trucks
Be Made More Fuel Efficient?
February 9, 2005
William Reilly, co-chairman, National Commission on Energy Policy
Paul Portney, chairman, National Research Council's Committee on the
Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
K.G. Duleep, transportation managing director, Energy and Environmental
Michael Stanton, vice president of government affairs, Alliance of
David Greene, corporate fellow, National Transportation Research Center
We need more stringent CAFE [Corporate Average Fuel Economy]
standards and we need them now, said Science Committee Chairman
Sherwood Boehlert (R-NY) in his opening remarks for this hearing.
Fuel economy is not just an energy issue, its not just
an environmental issue, it is, first and foremost, a national security
issue. We are doing next to nothing to reduce our reliance on foreign
oil. About 60 percent of the oil we consume each day is used for transportation;
45 percent of it just for cars and light trucks. We cannot reduce
our oil consumption meaningfully unless we address transportation.
That is a simple, unarguable fact.
And yet while many areas of the economy have become significantly
more energy efficient over the past three decades or so, our nations
fuel economy is worse than it was 15 years ago. That ought to be unacceptable.
It ought to be especially unacceptable intolerable, really
when we have the technology to improve fuel economy without
reducing safety, without harming the economy, and without reducing
the options people have in the automobile showroom.
Former EPA Administrator William Reilly, who co-chaired the National
Commission on Energy Policy, testified on behalf of the National Commission,
which regards a major fuel economy push as the best way to reduce
domestic oil consumption. Via Reilly's testimony and previously-released
documents, commission members urged lawmakers to raise CAFE standards
significantly between 2010 and 2015. When pressed to clarify, Reilly
said fuel economy was a "particularly contentious issue"
for commission members and they were unable to recommend a specific
increase. Upon further questioning and pressure to be more specific,
however, and Reilly said that National Commission members felt that
a 10 mpg increase in CAFE standards would be feasible and would also
have a "significant" effect on domestic oil consumption.
K.G. Duleep, managing director of transportation at Energy and Environmental
Analysis Inc., told lawmakers that with existing technologies, automakers
could feasibly increase fleetwide fuel economy to 33 mpg. Using more
hybrid and clean diesel systems, efficiency could be set as high as
36 mpg by 2015, he said. Currently, automakers meet standards of 27.5
mpg for passenger cars and 20.7 mpg for light trucks and sport utility
Reilly noted that regulatory changes to the CAFE program could lower
the cost that automakers face in meeting CAFE standards. Adding a
credit trading system, for example, could lower compliance costs by
17 percent. With trading, if one company exceeded its fuel economy
requirements, it could bank fuel economy credits for later usage,
or potentially sell those credits to a company falling short of the
Paul Portney, president of Resources for the Future, described the
findings of a 2001 National Academy of Sciences (NAS) study on the
CAFE program's effectiveness. The NAS report, which was overshadowed
by energy bill debate and the events of Sept. 11, 2001, when it was
released, found that the CAFE program led to major fuel economy improvements,
but also had severe adverse effects. Because automakers had to make
improvements to efficiency in a relatively short period of time, they
primarily worked to make their vehicles lighter, a change that caused
between 1,300 and 2,600 more auto fatalities than would have occurred
without the program, NAS estimated. During the question-and-answer
portion of the hearing, though, all of the witnesses agreed that the
technology exists today to significantly increase the fuel economy
of cars and light trucks (such as Sport Utility Vehicles, or SUVs)
without reducing safety.
Portney stressed that any changes made to the CAFE program should
give automakers a long lead time, between 10 and 15 years, so that
manufacturers have time to phase in new technologies, rather than
just lowering the weight of vehicles. Portney also noted that lawmakers
should consider the fact that as fuel economy increases, consumers
tend to drive more, partially offsetting any fuel savings from CAFE.
Michael Stanton, vice president of government affairs at the Alliance
of Automobile Manufacturers, said automakers support tax incentives
included in the energy conference report last year. Those incentives
would provide up to $4,000 in tax credits for consumers who purchase
hybrid or clean diesel vehicles. Stanton noted that Rep. Dave Camp
(R-MI) introduced a bill (H.R. 626) on February 8, 2005 that would
provide those same types of tax incentives.
For their part, committee members came to the hearing with strong
views. "We need more stringent CAFE standards and we need them
now," said Chairman Sherwood Boehlert (R-NY). "But the exact
level and timing of the standards and how the CAFE program should
be administered, that's all up for grabs."
Ranking member Bart Gordon (D-TN) urged other panel members to consider
whether any new regulations would adversely affect the automotive
industry, but said he would be open to discussion of tax incentives
and changes to the structure of the CAFE program. Other committee
members, including Rep. Ehlers (R-MI) suggested that automakers need
to spend more time understanding consumer habits and creating marketing
and advertising campaigns that would help car buyers understand the
benefits of better fuel economy, even if they pay a little more for
it up front.
Committee on Energy and Natural Resources
2005 Energy Outlook
February 3, 2005
Guy Caruso, Administrator, Energy Information Administration
Jeffrey Logan, China Program manager, International Energy Agency
Frank Verrastro, Energy Program director and senior fellow, Center
for Strategic and International Studies
Andrew Slaughter, senior economist, Shell Exploration & Production.
The Senate Energy and Natural Resources Committee invited testimony
from the Energy Information Administration (EIA), Shell Exploration
& Production, and the Center for Strategic International Studies
to discuss current and future U.S. energy needs, and how they might
be affected by global trends in energy production and consumption.
Guy Caruso, EIA Administrator, presented the Annual Energy Outlook
2005, to be released later in the month.
Caruso's testimony included projections of domestic energy consumption,
production, prices, and carbon dioxide emissions through 2025, highlighting
an increase in U.S. imports, natural gas demand, and oil production
in the Gulf of Mexico. He testified that under current law, there
is little opportunity for energy consumption to switch from oil due
to the domination of the transportation sector, and that by 2025 nuclear
generation and renewable power would still maintain a 9% combined
share of the energy market.
Regarding the International Outlook, Caruso and Jeffrey Logan, EIA's
China Program Manager, noted that Canada's oil depletion rates would
continue to climb, affecting markets in North American and Asia. The
testified that Asia's growth rate would double energy consumption
in 20 years, wielding significant implications for greenhouse gas
emissions, global markets, and national security. They recommended
U.S. policy should engage China on energy issues and encourage the
use of natural gas.
Andrew Slaughter of Shell Co. offered insight through presenting
theoretical future scenarios for global energy security, each representing
a different balance economic efficiency, social cohesion and security.
He urged congress to "consider and be prepared for multiple possible
outcomes and to build bridges to international markets through infrastructure
development and international cooperation." Calling climate change
the "wild-card" for scenarios; "what if the world accepts
tomorrow that we can no longer afford to take a free rider on nature
and must internalize the external costs by for example sequestering
CO2?" he asked.
Because the AEO report was based on laws and regulations in effect
as of October 31, 2004, and did not incorporate pending or proposed
measures, committee members asked witnesses to speculate on the potential
impacts of supporting nuclear, clean coal, and hydrogen fuel cell
technologies. In response to a question posed by Chairman Pete V.
Dominici (R-NM), Caruso reported that without legislative action,
capital costs would have to drop to $1450/kW for nuclear power to
become a big player in the market by 2015-2025. Slaughter recommended
that a long-term energy vision should consider a mixed energy supply,
long-term projections, and how public debate would influence the private
sector. One suggestion was to encourage and open market by supporting
pilot clean-coal plants.
Sources: Environment and Energy Daily; Washington Post; New York
Times; House Science Committee; Senate Commerce, Justice, and Science
Committee; Senate Committee on Energy and Natural Resources; Senate
Committee on the Judiciary; Hearing testimony.
Contributed by Katie Ackerly and Emily Lehr Wallace, AGI Government
Affairs Staff; Amanda Schneck, 2005 AGI/AIPG Summer Intern; John Vermylen,
2005 AGI/AIPG Summer Intern; Peter Douglas, 2005 AGI/AAPG Fall Intern;
Jenny Fisher, 2006 AGI/AAPG Spring Intern; Timothy Donahue, 2006 AGI/AIPG
Summer Intern; Jessica Rowland, 2006 AGI/AIPG Summer Intern, and Rachel
Bleshman, 2006 AGI/AAPG Fall Intern.
Please send any comments or requests for information to AGI
Government Affairs Program.
Last updated on November 17, 2006