[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

SUPPORTING AMERICAN JOBS
AND THE ECONOMY THROUGH
EXPANDED ENERGY PRODUCTION:
CHALLENGES AND OPPORTUNITIES OF
UNCONVENTIONAL RESOURCES TECHNOLOGY
=======================================================================

HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND
ENVIRONMENT
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

----------

THURSDAY, MAY 10, 2012

----------

Serial No. 112-84

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

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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR., EDDIE BERNICE JOHNSON, Texas
Wisconsin JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas LYNN C. WOOLSEY, California
DANA ROHRABACHER, California ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri BEN R. LUJAN, New Mexico
RANDY NEUGEBAUER, Texas PAUL D. TONKO, New York
MICHAEL T. McCAUL, Texas JERRY McNERNEY, California
PAUL C. BROUN, Georgia TERRI A. SEWELL, Alabama
SANDY ADAMS, Florida FREDERICA S. WILSON, Florida
BENJAMIN QUAYLE, Arizona HANSEN CLARKE, Michigan
CHARLES J. ``CHUCK'' FLEISCHMANN, SUZANNE BONAMICI, Oregon
Tennessee
E. SCOTT RIGELL, Virginia
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
------

Subcommittee on Energy and Environment

HON. ANDY HARRIS, Maryland, Chair
DANA ROHRABACHER, California BRAD MILLER, North Carolina
ROSCOE G. BARTLETT, Maryland LYNN C. WOOLSEY, California
FRANK D. LUCAS, Oklahoma BEN R. LUJAN, New Mexico
JUDY BIGGERT, Illinois PAUL D. TONKO, New York
W. TODD AKIN, Missouri ZOE LOFGREN, California
RANDY NEUGEBAUER, Texas JERRY McNERNEY, California
PAUL C. BROUN, Georgia VACANCY
CHARLES J. ``CHUCK'' FLEISCHMANN, VACANCY
Tennessee VACANCY
RALPH M. HALL, Texas EDDIE BERNICE JOHNSON, Texas

C O N T E N T S

May 10, 2012

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

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

Opening Statements

Statement by Representative Andy Harris, Chairman, Subcommittee
on Energy and Environment, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 16
Written Statement............................................ 17

Statement by Representative Paul D. Tonko, Acting Ranking
Minority Member, Subcommittee on Energy and Environment,
Committee on Science, Space, and Technology, U.S. House of
Representatives................................................ 17
Written Statement............................................ 19

Panel One Witnesses:

Hon. Charles McConnell, Assistant Secretary for Fossil Energy,
U.S. Department of Energy
Oral Statement............................................... 22
Written Statement............................................ 24

Ms. Anu Mittal, Director, Natural Resources and Environment, U.S.
Government Accountability Office
Oral Statement............................................... 28
Written Statement............................................ 30

Discussion 46

Panel Two Witnesses

Ms. Samantha Mary Julian, Director, Office of Energy Development,
State of Utah
Oral Statement............................................... 59
Written Statement............................................ 61

Mr. Jim Andersen, Chief Executive Officer and President, U.S.
Seismic Systems, Inc.
Oral Statement............................................... 64
Written Statement............................................ 66

Mr. Cameron Todd, Chief Executive Officer, U.S. Oil Sands, Inc.
Oral Statement............................................... 73
Written Statement............................................ 75

Mr. Tony Dammer, Member, Board of Directors, National Oil Shale
Association
Oral Statement............................................... 79
Written Statement............................................ 81

Discussion 90

Appendix: Answers to Post-Hearing Questions

Hon. Charles McConnell, Assistant Secretary for Fossil Energy,
U.S. Department of Energy...................................... 101

Ms. Anu Mittal, Director, Natural Resources and Environment, U.S.
Government Accountability Office............................... 115

Ms. Samantha Mary Julian, Director, Office of Energy Development,
State of Utah.................................................. 119

Mr. Jim Andersen, Chief Executive Officer and President, U.S.
Seismic Systems, Inc........................................... 124

Mr. Cameron Todd, Chief Executive Officer, U.S. Oil Sands, Inc... 126

Mr. Tony Dammer, Member, Board of Directors, National Oil Shale
Association.................................................... 131

Appendix 2: Additional Material for the Record

Letter from Members of Wyoming House of Representatives to Bureau
of Land Management............................................. 134

``Water on the Rocks'': A Presentation by Western Resource
Advocates...................................................... 137

Letter from Denver Board of Water Commissioners to Subcommittee
on Interior, Environment, and Related Agencies, Committee on
Appropriations................................................. 152

Letter from Rocky Mountain Farmers Union to Subcommittee on
Interior, Environment, and Related Agencies, Committee on
Appropriations................................................. 154

Oil Shale Fact Sheet from the Wilderness Society................. 155

Utah's Economic Development Plan from Governor Gary R. Herbert... 157

Energy Initiatives and Imperatives: Utah's 10-Year Strategic
Energy Plan.................................................... 185

Draft Programmatic Environmental Impact Statement: Possible Land
Use Plan Amendments for Oil Shale and Tar Sands (May 4, 2012)
(Utah)......................................................... 233

Oil Shale: A Century of Failure; Report by Checks and Balances
Project, April 2012............................................ 279

Not Ready for Prime Time: Prepared by Checks and Balances Project 288

Resolution of Mesa County, State of Colorado..................... 295

Mesa County News Release, April 19, 2012, and Resolution No.
2012-12........................................................ 300
Economic Impact of Failure to Implement Legislative Mandates of
Sec 369, Energy Policy Act 2005, a White Paper by Anton Dammer,
M.S., and James Bunger, Ph.D................................... 306

Letter to the Subcommittee from Dr. Dag Nummedal, Director,
Colorado Energy Research Institute, and Dr. Jeremy Boak,
Director, Center for Oil Shale Technology and Research,
Colorado School of Mines....................................... 315

U.S. Department of Energy, Office of Naval Petrolum and Oil Shale
Reserves, November 2008, ``Strategic Plan: Unconventional Fuels
Development Within the Western Energy Corridor''............... 320

SUPPORTING AMERICAN JOBS

AND THE ECONOMY THROUGH

EXPANDED ENERGY PRODUCTION:

CHALLENGES AND OPPORTUNITIES OF

UNCONVENTIONAL RESOURCES TECHNOLOGIES

----------

THURSDAY, MAY 10, 2012

House of Representatives,
Subcommittee on Energy and Environment,
Committee on Science, Space, and Technology,
Washington, DC.

The Subcommittee met, pursuant to call, at 9:33 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Andy
Harris [Chairman of the Subcommittee] presiding.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Chairman Harris. The Subcommittee will come to order.
Good morning, and welcome to this morning's hearing
entitled ``Supporting American Jobs and the Economy Through
Expanded Energy Production: Challenges and Opportunities of
Unconventional Resources Technology.''
Two weeks ago, the Science, Space, and Technology Committee
heard from expert witnesses about America's vast untapped
unconventional energy resources. The amount of energy under own
soil is striking. With continued technological advances and the
right policies to enable access to these resources, America
could become the global leader in energy production for the
next generation and beyond.
For example, the Green River Basin located in Colorado,
Utah, and Wyoming may contain up to three trillion barrels of
oil--more potential oil than the rest of the world's current
oil reserves combined. If this energy, which is overwhelmingly
on federal lands, is made available, I am confident American
ingenuity will find ways to responsibly explore and produce
this resource.
Portions of the United States are already experiencing the
significant economic benefits of unconventional energy
production. North Dakota's unemployment rate is now the lowest
in the Nation due to the shale oil revolution. The State's top
economic challenge is not job creation, but rather finding
workers to fill the thousands of job openings created by the
energy boom--a problem most States would love to have. The
Federal Government should afford other States the opportunity
to replicate this success story through aggressive pursuit of
leasing, permitting, and technological opportunities.
Unfortunately, when it comes to unconventional energy,
President Obama talks the talk more than he walks the walk.
Beginning with his State of the Union speech earlier this year,
the President has touted the historical contributions of the
Department of Energy's fossil energy research programs, while
his annual budget request to Congress repeatedly calls for
elimination of the very same program. And while the President
regularly boasts of his support for an ``all of the above''
energy strategy, his Administration appears more focused on
producing new regulations and restrictions than it is on
producing more oil and gas. For example, the President has
unleashed 10 different federal agencies in pursuit of potential
regulations on hydraulic fracturing.
Similarly, the President's campaign Website includes an
``all of the above'' energy page that neglects to even
acknowledge the fuel providing 45 percent of the United States'
electricity: coal. It is clear the President continues to pick
his preferred energy technologies at the expense of the free
market and consumer need and choice.
Perhaps most incredibly, just three days after his State of
the Union speech declaring his commitment to this all of the
above energy strategy, the President's Interior Department
effectively reduced lands available for oil shale development
by 75 percent, putting over 1.5 million acres off limits not
only to exploration and production, but also to research and
development.
This morning, I am interested in examining the impact of
the Administration's anti-fossil fuel policies, as well as
exploring what targeted research questions DOE can and should
address to facilitate the further development of America's
unconventional energy resources.
I also look forward to hearing how innovative companies are
enabling more efficient and environmentally sound development
of America's unconventional oil and gas resources.
I thank the witnesses for appearing before the
Subcommittee.
[The prepared statement of Mr. Harris follows:]

Prepared Statement of Subcommittee Chairman Andy Harris

Good morning and welcome to this morning's hearing entitled
``Supporting American Jobs and the Economy Through Expanded Energy
Production: Challenges and Opportunities of Unconventional Resources
Technology.''
Two weeks ago, the Science, Space, and Technology Committee heard
from expert witnesses about America's vast untapped unconventional
energy resources. The amount of energy under our own soil is striking.
With continued technological advances and the right policies to enable
access to these resources, America could become the global leader in
energy production for the next generation and beyond.
For example, the Green River Basin, located in Colorado, Utah, and
Wyoming, may contain up to three trillion barrels of oil--more
potential oil than the rest of the world's current oil reserves
combined. If this energy--which is overwhelmingly on federal lands--is
made available, I am confident American ingenuity will find ways to
responsibly explore and produce this resource.
Portions of the United States are already experiencing the
significant economic benefits of unconventional energy production.
North Dakota's unemployment rate is the lowest in the Nation due to the
shale oil revolution. The State's top economic challenge is not job
creation but rather finding workers to fill the thousands of job
openings created by the energy boom--a problem most States would love
to have. The Federal Government should afford other States the
opportunity to replicate this success story through aggressive pursuit
of leasing, permitting, and technological opportunities.
Unfortunately, when it comes to unconventional energy, President
Obama talks the talk more than he walks the walk. Beginning with his
State of the Union speech earlier this year, the President has touted
the historical contributions of the Department of Energy's fossil
energy research programs, while his annual budget request to Congress
repeatedly calls for elimination of the very same programs. And while
the President regularly boasts of his support for an ``all of the
above'' energy strategy, his administration is focused more on
producing new regulations and restrictions than it is on producing more
oil and gas. For example, the President has unleashed 10 different
federal agencies in pursuit of potential regulations on hydraulic
fracturing.
Similarly, President Obama's campaign Website includes an ``all of
the above'' energy page that neglects to even acknowledge the fuel
providing 45 percent of the United States' electricity: coal. It is
clear the President continues to pick his preferred energy technologies
at the expense of the free market and consumer choice.
Perhaps most incredibly, just three days after his State of the
Union speech declaring his commitment to an ``all of the above'' energy
strategy, the President's Interior Department effectively reduced lands
available for oil shale development by 75 percent--putting over 1.5
million acres off limits not only to exploration and production but
also to research and development.
This morning, I am interested in examining the impact of the
Administration's antifossil-fuel policies, as well as exploring what
targeted research question DOE can and should address to facilitate the
further development of America's unconventional energy resources.
I also look forward to hearing how innovative companies are
enabling more efficient and environmentally sound development of
America's unconventional oil and gas resources.
I thank the witnesses for appearing before the Subcommittee, and I
now recognize Ranking Member Tonko for his opening statement.

Chairman Harris. I now recognize Ranking Member--I am
sorry. Mr. Tonko is--I guess you are the Ranking Member for
today, the substitute Ranking Member, for his opening
statement.
Mr. Tonko. Thank you, Mr. Chair.
Today's hearing is focused on another unconventional fossil
resource that we have heard about many times in the past
decades. Every time oil prices have spiked or that we have
become concerned about a major disruption in our oil supplies,
oil shale gets a new look. Why we continue to use public funds
to pursue this energy source is truly a subject for research, I
believe. The oil companies and the Federal Government have
poured millions of dollars into research, demonstration
projects, and subsidies to find an economically viable way to
develop this resource. Yet it is still years, if not decades,
away from being economically, technologically, and
environmentally viable.
Oil shale should not be confused with shale oil. Shale oil
is being commercially produced along with shale gas in various
places around our great country. Through application of
conventional fracturing processes, oil is released from shale
formations and then pumped to the surface. Oil shale, on the
other hand, is essentially a rock that must be heated at
extremely high temperatures for long periods of time before the
hydrocarbons within it are indeed released. The magnitude and
severity of the impacts on land, water, and other natural
resources required to turn rock into oil are only part of the
reasons that these resources have never been commercially
viable. They should serve as our cue to look beyond oil.
I have listened as many of my Republican colleagues
questioned the wisdom and need for public investments in
renewable energy resources, either through support of research
or through tax incentives. But when it comes to offering
subsidies to one of the wealthiest and most profitable
industries in the world--the oil industry--their generosity
knows no bounds. When I look at the potential for oil shale, I
can only wonder why we should be throwing more hard-earned
taxpayer dollars after bad.
Even though gas prices have recently come down a bit, our
constituents still feel the pain at the pump and know that it
is a just a matter of time before another price spike hits. The
public is tired of seeing an increasing portion of their
paycheck go to the most profitable companies in the world,
along with outsized portion of their tax dollars in the form of
tax breaks for the oil and gas industry.
Subsidizing oil shale has never lowered gasoline prices or
led to our energy independence. I do not believe it ever will.
In spite of years of government support for research and
development since the early 1900s, this resource has proven to
be much more bust than boom. The high cost of delivering this
energy will inevitably translate into high retail prices for
refined products. It is time we took a different path and
invested in alternative energy sources. The oil industry has
the financial resources to pursue this further if they believe
it is viable.
As our witness from the Government Accountability Office,
the GAO, will outline from their investigation, there are
things the Federal Government can do to better understand the
range of uncertainties regarding the impacts of oil shale
development. Among these, understanding the impacts on water
quality and quantity stand out as the biggest concerns. The
legendary water battles in the West are not about protecting
ecosystems, though that is a worthwhile cause. These battles
are about economics.
There is no greater indicator of a region's economic
potential, its ability to sustain human life and industry, than
its access to clean water. It is hard for those of us from
relatively water-rich States to understand what it means for a
region whose annual rainfall can be measured in single digits
in a good year. But for most Westerners, it is a sixth sense.
I happen to be from an area of the country that is blessed
with abundant, high-quality water resources. Given the current
and looming shortages of water in many areas of the West, I
cannot imagine why we would consider trading water, a
renewable, vital resource for which there is no substitute, for
a non-renewable resource that we can only obtain with very
costly, highly damaging, and destructive methods. Land and
water are not, or should not, be treated as disposable goods.
The Interior Department released a draft Programmatic
Environmental Impact Statement that was not only appropriately
cautious, but reflected the reality of the technological
immaturity of the oil shale industry. The Department of
Interior is charged with managing the Nation's lands for the
benefit of all the public in a manner that keeps faith with
generations to come. These lands support hunting, fishing and
recreation of all types. They serve as protection for
watersheds that recharge groundwater supplies and feed streams
and rivers that support agriculture, ranching, power production
and countless other businesses. The people engaged in these
economic activities in Colorado, Utah, and Wyoming also deserve
consideration.
A number of groups representing these interests have voiced
their concerns about leasing public lands for oil shale
development, and about its impact on water resources in
particular. I am attaching several of their past communications
on this subject to my testimony today.
We should not sacrifice sustainable communities and
livelihoods in an attempt to mimic Earth's geologic process of
converting rock into oil. Can we really ask the public to once
again believe that we are going to secure our energy future
this way? Perhaps our witnesses this morning can convince me
otherwise, but I believe we can make far better investments
with public funds by increasing energy efficiency and expanding
our use of renewable energy supplies.
I thank our witnesses for being here this morning, and I
look forward to hearing their testimony.
With that, I yield back, Mr. Chair.
[The prepared statement of Mr. Tonko follows:]

Prepared Statement of Acting Ranking Member Paul D. Tonko

Today's hearing is focused on another unconventional fossil
resource that we have heard about many times in past decades. Every
time oil prices have spiked or that we have become concerned about a
major disruption in oil supplies, oil shale gets a new look. Why we
continue to use public funds to pursue this energy source is truly a
subject for research. The oil companies and the Federal Government have
poured millions of dollars into research, demonstration projects, and
subsidies to find an economically viable way to develop this resource.
Yet it is still years, if not decades, away from being economically,
technologically, and environmentally viable.
Oil shale should not be confused with shale oil. Shale oil is being
commercially produced along with shale gas in various places around the
country. Through application of conventional fracturing processes, oil
is released from shale formations and pumped to the surface. Oil shale,
on the other hand, is essentially a rock that must be heated at
extremely high temperatures for long periods of time before the
hydrocarbons within it are released. The magnitude and severity of the
impacts of land, water, and other natural resources required to turn
rock into oil are only part of the reasons that these resources have
never been commercially viable. They should serve as our cue to look
beyond oil.
I have listened as many of my Republican colleagues questioned the
wisdom and need for public investments in renewable energy resources,
either through support of research or through tax incentives. But when
it comes to offering subsidies to one of the wealthiest and most
profitable industries in the world--the oil industry--their generosity
knows no bounds. When I look at the potential for oil shale, I can only
wonder why we should be throwing more hard-earned taxpayer dollars
after bad.
Even though gas prices have recently come down a bit, our
constituents still feel the pain at the pump and know that it is just a
matter of time before another price spike. The public is tired of
seeing an increasing portion of their paycheck go to the most
profitable companies in the world, along with outsized portions of
their tax dollars in the form of tax breaks for the oil and gas
industry. Subsidizing oil shale has never lowered gasoline prices or
led to our energy independence. I do not believe it ever will. In spite
of years of government support for research and development--since the
early 1900s--this resource has proven to be much more bust than boom.
The high cost of delivering this energy will inevitably translate into
high retail prices for refined products. It is time we took a different
path and invested in alternative energy sources. The oil industry has
the financial resources to pursue this further if they believe it is
viable.
As our witness from the Government Accountability Office (GAO) will
outline from their investigation, there are things the Federal
Government can do to better understand the range of uncertainties
regarding the impacts of oil shale development. Among these,
understanding the impacts on water quality and quantity stand out as
the biggest concern. The legendary water battles in the West are not
about protecting ecosystems, though that is a worthwhile cause. These
battles are about economics. There is no greater indicator of a
region's economic potential--its ability to sustain human life and
industry--than its access to clean water. It is hard for those of us
from relatively water-rich States to understand what it means for a
region whose annual rainfall can be measured in single digits in a good
year. But for most Westerners, it is a sixth sense.
I happen to be from an area of the country that is blessed with
abundant, high-quality water resources. Given the current and looming
shortages of water in many areas of the West, I cannot imagine why we
would consider trading water--a renewable, vital resource for which
there is no substitute--for a nonrenewable resource that we can only
obtain with very costly, highly damaging and destructive methods. Land
and water are not--or should not--be treated as disposable goods.
The Interior Department released a draft Programmatic Environmental
Impact Statement that was not only appropriately cautious, but
reflected the reality of the technological immaturity of the oil shale
industry. The Department of Interior is charged with managing the
Nation's lands for the benefit of all the public in a manner that keeps
faith with generations to come. These lands support hunting, fishing,
and recreation of all types. They serve as protection for watersheds
that recharge groundwater supplies and feed streams and rivers that
support agriculture, ranching, power production and countless other
businesses. The people engaged in these economic activities in
Colorado, Utah, and Wyoming also deserve consideration. A number of
groups representing these interests have voiced their concerns about
leasing public lands for oil shale development, and about its impact on
water resources in particular. I am attaching several of their past
communications on this subject to my testimony today.
We should not sacrifice sustainable communities and livelihoods in
an attempt to mimic Earth's geologic process of converting rock into
oil. Can we really ask the public to once again believe that we are
going to secure our energy future this way? Perhaps our witnesses this
morning can convince me otherwise, but I believe we can make far better
investments with public funds by increasing energy efficiency and
expanding our use of renewable energy.
I thank our witnesses for being here this morning. I look forward
to hearing your testimony,

Chairman Harris. Thank you very much, Mr. Tonko.
If there are Members who wish to submit additional opening
statements, your statements will be added at this point.
At this time, I would like to introduce our witnesses for
the first panel. The first witness is Mr. Charles McConnell,
Assistant Secretary for Fossil Energy at the U.S. Department of
Energy. Prior to joining DOE, Mr. McConnell served as the Vice
President of Carbon Management at Battelle Energy Technology.
He also spent 31 years with Praxair in various positions in the
United States and Asia, including Global Vice President. He
previously held a number of advisory positions, including
chairmanships of the Gasification Technologies Council and the
Clean Coal Technology Foundation of Texas.
The second witness on the first panel will be Ms. Anu
Mittal, Director, National Resources and Environment of the
U.S. Government Accountability Office. Ms. Mittal has been with
the GAO since 1989, during which time she has led a variety of
reviews of federal programs related to land management, water
resources, oceans and fisheries, environmental restoration,
energy, defense cleanup, housing, food safety--you are busy--
science and technology and agriculture issues.
Thank you for appearing before the Subcommittee today. As
our witnesses should know, spoken testimony is limited to five
minutes each, after which the Members of the Committee will
have five minutes each to ask questions.
Before I recognize Mr. McConnell, I want to again express
what has been a recurrent theme, the displeasure with DOE's
habitually late communications to Congress and to this
Subcommittee and Committee. The testimony for this morning's
hearing, I don't know if you realize this, Mr. McConnell, your
testimony was due Tuesday morning at 9:30. That is the standard
operating procedure for the Committees. We didn't receive it
until 7 o'clock last night. At 7 o'clock last night, we were in
session debating and voting until midnight. Obviously, Members
did not have time to review your testimony, as we are entitled
to under our rules. This extreme tardiness is the rule rather
than the exception coming out of DOE. Whether it is delivering
testimony or responding to letters from me and other Committee
members and questions for the record, DOE is almost always
embarrassingly late. Mr. McConnell, I trust that you will
communicate this frustration back to Secretary Chu and his team
and commit to delivering all follow-up materials associated
with this hearing to the Subcommittee in a timely fashion.
With that, I now recognize Assistant Secretary McConnell to
present his testimony. You are recognized for five minutes.

STATEMENT OF HON. CHARLES MCCONNELL,

ASSISTANT SECRETARY FOR FOSSIL ENERGY,

U.S. DEPARTMENT OF ENERGY

Mr. McConnell. Chairman Harris, Ranking Member Miller and
Members of the Subcommittee, I appreciate the opportunity to
discuss the role that the Office of Fossil Energy continues to
play in the development of the Nation's unconventional fossil
resources.
Expanding production of American energy resources is a key
part of President Obama's ``all-of-the-above energy'' strategy
that includes renewables, nuclear and fossil resources. Very
recently, the President laid out a specific goal to reduce the
imports of oil by a third over the next ten years. Reducing our
imports will have the important impacts of improving our energy
security, balance of trade, generating new jobs and growing our
economy, and we are in the progress of making that goal.
Over the past few years, crude imports have dropped from 70
percent to 50 percent, while natural gas today is at an
abundant and unprecedented price point, driven by expanded
production of shale gas, and an abundance currently has U.S.
storage capacity at near capacity.
America is sitting on one of the largest gas finds in the
world as well as the globe that we live in today. The benefits
are game changing. EIA estimates that in the current rate of
consumption, the Nation has a 90-year supply of domestic
economically recoverable natural gas. If anybody needs proof
that domestic energy production can spark a renaissance in
American manufacturing, increase exports, and create more jobs,
just look at the impact of shale gas on the industries across
the country. A recent announcement in the global companies such
as Shell and Dow, perfect examples of that.
The American Chemistry Council estimates $16 billion of
capital investment, $132 billion in economic output, 17,000 new
high-paying jobs and 395,000 nore jobs tangential to the
chemical industry. Other industries such as the electric power
industry, steel industry, and heavy manufacturing will all
benefit from this expanded supply of domestic natural gas.
We are poised to do some great things for our energy and
economic security, but to get those benefits, we will have to
do it right. We will have to do it right the first time, and
you don't get do-overs in this business. A sustainable future
requires sustainability in the way we do our work and how the
work is performed.
DOE has played a critical role in that development for
years. Between 1978 and 1992, the Department invested $137
million in early research on innovative shale gas technologies
that led to investments by independent oil producers. Today our
research on unconventional resources is being conducted against
the backdrop of industry's rapidly evolving exploration and
production practices. While these advances are exciting, but
there are also challenges. Hydraulic fracturing processes have
received a great deal of attention, and people in communities
want the confidence that the expansion of the E&P is
sustainable. These are primary technical challenges, and if
they receive the proper focus, sensible focus, they can be
addressed.
So going forward, the expertise of our natural gas
technologies program is being refocused to help launch an R&D
initiative with the EPA and the Department of Interior to
address the potential environmental health and safety impacts
of natural gas drilling practices, particularly hydraulic
fracturing. This effort is being driven by the Secretary of
Energy Advisory Board recommendations focusing on shale gas
safety as well as the President's new interagency working group
on unconventional domestic gas resources, and we have recently
cemented this with an interagency MOU. FE's role in this
initiative will be to conduct R&D to ensure the development of
sustainable fracturing technologies and techniques such as
cementing, well bore integrity, and water usage, and let me add
that while this R&D is focused on shale gas, many of the
technologies can be applied and will be applied to shale oil
production, particularly in areas such as the Bakken.
In addition to shale, U.S.-led technology advances are
making it possible for us to explore other unconventional
resources. A prominent example of this is Fossil Energy's
methane hydrate research process. Recently we conducted an
unprecedented test of technology on the North Slope of Alaska
that was able to extract a steady flow of natural gas from
methane hydrates. This is a combination of cooperative work
with the country of Japan, ConocoPhillips, and a collaborative
effort with DOE and Fossil Energy to cost share. This isn't a
subsidy to oil and gas, but it is a critical research done in
the early stages of a critical market where resource discovery
is necessary. Our methane hydrates research represents the
critical ground floor that could provide a return on investment
similar to that of our early shale gas, and we are just getting
started.
Additionally, the Department is focused on enhanced oil
recovery using carbon dioxide from coal-fired power plants with
enhanced oil recovery utilizing CO2, putting the
CO2 in the ground and producing oil, and safely, and
long-term permanently storing that CO2 for
environmental benefits so we get both the benefit economically
as well as environmentally.
Thank you. I look forward to taking your questions.
[The prepared statement of Mr. McConnell follows:]

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Chairman Harris. Thank you very much.
I now recognize Ms. Mittal.

STATEMENT OF MS. ANU MITTAL, DIRECTOR,

NATURAL RESOURCES AND ENVIRONMENT,

U.S. GOVERNMENT ACCOUNTABILITY OFFICE

Ms. Mittal. Chairman Harris and Members of the
Subcommittee, I am pleased to be here today to participate in
your hearing on unconventional oil and gas resources.
As requested, my statement will focus on oil shale and will
highlight the opportunities and challenges related to the
development of this unconventional energy resource. My
statement is based on the findings of a report that we
completed for this Committee in October 2010.
As you know, U.S. interest in oil shale has waxed and waned
since the early 1900s because, over time, average oil prices
have generally been lower than the threshold necessary to make
oil shale development profitable. More recently, however,
higher oil prices have renewed interest in domestic oil shale.
The Federal Government is in a unique position to influence
this development, because 72 percent of U.S. oil shale lies
beneath lands managed by the Department of the Interior.
The Green River formation in Colorado, Utah, and Wyoming
contains the world's largest deposits of oil shale. Being able
to tap this vast amount of oil locked within this formation
will go a long way to help to meet our future demands for oil.
The U.S. Geological Survey, as you noted, estimates that the
formation contains about three trillion barrels of oil, of
which half may be recoverable. As you can imagine, having the
technology to develop this vast energy resource will lead to a
number of important socioeconomic benefits, including the
creation of jobs, increases in wealth, and increases in tax and
royalty payments for Federal and State Governments.
Along with these positive outcomes, there are a number of
key challenges that also should be considered. First, there is
the uncertainty surrounding the viability of current
technologies. To date, no commercial-scale surface retort or in
situ technology has been proven in the United States that is
both economically and environmentally viable. According to some
energy experts, the key to developing U.S. oil shale will be
through an in situ process, because most of our richest oil
shale is buried beneath hundreds of feet of rock, making mining
difficult or impossible.
Second, developing oil shale poses significant
environmental challenges for water quantity and quality, air
quality, and wildlife. The water quantity and quality
challenges are of particular importance, because developing oil
shale will require significant amounts of water, which could
pose problems in the arid West. Estimates of the quantities of
water needed to support oil shale development vary
significantly depending upon the assumptions that you use.
However, it is expected that while the water is likely to be
available for the initial development of the industry, the
eventual size of the industry may ultimately be limited by the
water availability. In addition, in the absence of effective
mitigation measures, oil shale development could significantly
impact water quality through increased runoff of sediments,
salts, and chemicals, decreased downstream flows, permanent
groundwater impacts to aquifers and wastewater discharges to
streams and rivers.
While large-scale oil shale development offers
socioeconomic opportunities, it also poses certain
socioeconomic challenges that also should not be overlooked.
Oil shale development like other extractive industries can
bring a sizable influx of workers who along with their families
put additional stresses on local infrastructure. Development
from expansion of extractive industries has historically
followed a boom-and-bust cycle, making planning for growth
difficult for local governments.
As we noted in our 2010 report, industry experts believe
that the United States is currently at least 15 to 20 years
away from developing a large-scale oil shale industry, but
there are certain actions that federal agencies can begin to
take now to proactively prepare for such an industry. These
include improving collaboration between federal agencies on
research and developing more comprehensive baseline information
on the current ground and surface water conditions in the
region. Such information will help position federal agencies to
better monitor and mitigate the impacts of oil shale
development if a viable industry should emerge.
In conclusion, Mr. Chairman, while there are potential
opportunities for the development of oil shale, they must be
balanced with the technological, environmental and
socioeconomic challenges that are also present.
This completes my prepared statement. I would be pleased to
answer any questions that you might have.
[The prepared statement of Ms. Mittal follows:]

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Chairman Harris. Thank you very, very much, and we will
begin the questioning. The Members will be recognized for five
minutes, and I recognize myself first.
Mr. McConnell, as you know, the President has recently
talked, as I said in my opening statement, about this ``all of
the above'' energy strategy, so I am going to ask you just a
few questions about what the Administration means by all of the
above. First of all, is gas production from methane hydrate one
of the components of ``all of the above''?
Mr. McConnell. Yes.
Chairman Harris. Okay. Can you just explain why for the
last three fiscal years, then, the Fossil Energy budget request
has proposed to eliminate the program, Fiscal Year 2010, 2011
and 2012?
Mr. McConnell. I can't speak to those previous years, but I
can tell you, the budget request for 2013 has it in there. Last
year, we did work on methane hydrates with funding that was
provided through the Office of Science, recently conducted a
test----
Chairman Harris. I know you mentioned that. Thank you very
much, and I appreciate the change of heart, believe me.
Now, is oil shale part of the ``all of the above''
strategy?
Mr. McConnell. Oil shale is certainly a part of the ``all-
of the above'' strategy.
Chairman Harris. And what is the Administration doing to
actively support the development of oil shale?
Mr. McConnell. Much of the work that we are doing in the
unconventional processing work that we are doing all provides a
lot of the baselines for that industry, as well as the
hydraulic fracturing that is going on in natural gas as well as
tight oil that is going on in that area as well.
Chairman Harris. But with regard specifically to oil shale,
what is the level of investment that the Administration is
proposing?
Mr. McConnell. We don't have a specific line item in this
year's budget request.
Chairman Harris. Do you have any idea about how much out of
the--the DOE has a several billion dollar budget. How important
are they looking for the future, toward the future for oil
shale? Is it $5 million, $10 million, $15 million?
Mr. McConnell. In this year's budget request, it was zero.
Chairman Harris. Oh, zero? Oh, okay. It doesn't sound like
much active support. But what about oil sands? Is oil sands
part of the ``all of the above'' approach?
Mr. McConnell. It is part of the ``all of the above''
approach, and it is also part of what we are constantly looking
at and part of our overall process.
Chairman Harris. Is that also line item zero in the DOE
budget?
Mr. McConnell. We have a number of line items that aren't
specifically identified by the market segments you are
identifying, but in terms of the key technologies and the
cross-cutting research that goes on from technologies that
apply to many of the markets that you are mentioning.
Chairman Harris. Perhaps you can follow up with some more
detail. We will have some follow-up questions.
The DOE has, you know, requested, as you said, I think, $12
million in the budget to, I think you called it R&D initiative,
but what it sounds like is, you know, understand and minimize
the potential environmental, health and safety impacts of shale
gas. I mean, most people would realize this is the prelude to
regulation basically. Is there any research that you are doing
that might actually help increase production?
Mr. McConnell. There sure is.
Chairman Harris. Okay.
Mr. McConnell. It would be well bore integrity. We are
looking at processes in terms of extraction, and we don't draw
a distinction between sustainability and extraction techniques.
We see it as one and the same because it has to be done right
the first time with a sustainable impact.
Chairman Harris. Right, and done right the first time, you
are aware that, for instance, hydraulic fracturing has been
done 1.2 million times in the United States, right, with no
documented evidence of contamination of drinking water ever?
Mr. McConnell. That is correct.
Chairman Harris. That sounds not only done right the first
time, it sounds like done right 1.2 million times, but anyway,
we are going to have a difference of opinion on that, probably.
Now, in 2007, the Department of Energy's Strategic
Unconventional Fuels Task Force published a strategy and
program plan that included numerous recommendations on how the
Federal Government could support unconventional energy,
development of unconventional energy. Is the DOE implementing
any of the recommendations made by that task force back in
2007?
Mr. McConnell. We are working, continue to work year over
year with the RPSEA organization following that--following
those sets of recommendations.
Chairman Harris. What progress has been made on the
specific recommendation to ``provide an effective land tenure
system'' for access to resources on public lands?
Mr. McConnell. That is a question I can't answer. I don't
know the answer.
Chairman Harris. Perhaps you could, you know, get the
answer and provide it in writing.
What progress has been made on the recommendation ``to
provide an inclusive regulatory system and development process
that encourages expeditious development and a predictable
schedule for permitting and approvals''? Is the Administration
doing anything to encourage a predicable schedule for permit
approvals?
Mr. McConnell. That is not something in Fossil Energy that
I am aware of directly, and I will have to provide that to you
as well.
Chairman Harris. Thank you. And do you know if the task
force is still actively meeting and producing work products? Is
that task force still having meetings?
Mr. McConnell. It does meet from time to time, regularly--I
can't speak to how often it has met, but it has had routine
meetings over the past several years.
Chairman Harris. And the last one being what do you think?
Mr. McConnell. Don't know the answer to that.
Chairman Harris. Okay. Maybe you can get that answer to us
also. Well, thank you very much.
I now recognize Mr. Tonko for five minutes.
Mr. Tonko. Thank you, Mr. Chair.
In this Committee, we have spent a lot of time debating the
appropriate role of government in the development of energy
technologies. My Republican colleagues seem steadfast in their
resolve that anything beyond basic research, whether it is
applied research, demonstration, or financing amounts to
government interference in the free market, somewhat of a
picking winners and losers and crowding out private investment.
However, this appears to only apply when maligning clean energy
technologies, and their commitment to these principles quickly
disappears when it comes to supporting increasing taxpayer
funds to develop technologies for the oil and gas sector. That
said, I am willing to acknowledge that there may be areas
within fossil energy research space where a little government
research could be helpful.
With that in mind, Ms. Mittal, your report includes some
recommendations for research areas. Could you expand on that,
please, and address why you think these areas are particularly
well suited for government involvement?
Ms. Mittal. When we looked at gaps in research for oil
shale, we heard from federal as well as State and academic
researchers a consistent message that there were two areas in
which there were gaps. One was that there was insufficient
information and data on groundwater and surface water baseline
information in the region that there was not enough information
right now on the conditions of groundwater and surface water in
the region. Therefore, when an oil shale industry develops, you
will not know what the baseline conditions are, so it will be
impossible to determine what the impacts of the industry are,
so we need to do more research and get good information on both
quantity and quality impacts, information on quantity and
quality of the groundwater and surface water.
The other area is that we need to develop more information
on how groundwater and surface water interact with one another,
and this will help develop models that will allow us to
determine how contaminants are transported from groundwater to
surface water and vice versa, and those are two areas that were
identified for needing more federal research.
Mr. Tonko. Thank you very much, and to our Assistant
Secretary, the Department made a recent announcement regarding
its work on methane hydrates. Can you please provide some
detail on that, and in particular, discuss how it fits into
what you would consider to be the right problem space for
government research programs in fossil energy?
Mr. McConnell. Well, in any kind of early emerging
technologies, government assistance is required to help promote
and stimulate industry involvement. A good example of that
would have been in the early 1970s when hydraulic fracturing
for natural gas actually began, and again, that just wasn't the
government investing money, but it was a combination of
government and industry partnering, and George Mitchell and the
Woodlands a long, long time ago was very interested in moving
forward but needed some help, and the government and Mitchell
Energies moved forward with those initial--that work, and it
has borne quite a bit of fruit since then.
I think methane hydrates is a good analogy to that
situation. It was--it is a unique and emerging type of
technology in industry for natural gas conducted on the slopes
of Alaska, and it also was a partnership between
ConocoPhillips, the Japanese government as well as the
Department of Energy, and I think any one of these emerging
technologies, early on, a good measure of industry interest is
their willingness to cross-share and partner, and that is the
way that kind of research can be conducted and be most
beneficial. We had the work done in Alaska. It was very
successful. We were highly encouraged by the results we saw,
and in any type of research program, it sets the baseline for
what we hope will be continued work in that area and continued
involvement that we can bring forward, and again, in
partnership with industry and others that are willing to
partner in the effort. So like any good strategic process, you
do some things. You find out what you learn and then grow from
there, and we are certainly enthused about what we have seen.
Mr. Tonko. And in terms of comparing that with the
potential DOE role in developing technologies for other
unconventionals such as oil shale, would you contrast that for
us?
Mr. McConnell. Well, I don't know that there is any
contrasting. I think the most important thing we do at Fossil,
I believe, is to be very close to industry's interests and
development so that we can stay close to their enthusiasm, and
we talk a lot about technical recovery, and then we talk about
economic recovery, and I think industry is a far better gauge
of what emerging technologies they would like to spend time on
and actually develop, and in the case of what you are
describing, for us to find industry partners that are willing
to do the cost sharing, to be involved and cooperatively
develop this research, what it does is, it is a real bellwether
for industry's level of enthusiasm at the time that they are
involved, and we will stay very close to that.
Mr. Tonko. Thank you very much.
I yield back, Mr. Chair.
Chairman Harris. Thank you very much.
I now recognize the gentleman from California, Mr.
Rohrabacher, for five minutes.
Mr. Rohrabacher. Thank you very much.
``All of the above,'' really, we have a problem with that
and I have a problem with that, and I just do not believe that
the President has been forthright in discussing his energy
policy with the Congress. We have seen that in this Committee
where we have seen what appears to be purposeful deployment of
regulatory bodies to stop certain types of production,
especially fracking, which seems to be a--which seems to be
something that is actually greatly expanding the energy
available to the United States. So that gives us some concern.
That isn't necessarily something that you would be involved in.
I think that we--do you agree that we have reached a
technological stage that we could become energy self-sufficient
within a decade?
Mr. McConnell. I wouldn't debate that with you, but I think
it is really important that we have energy security. I think
that is a little different than energy independence, but maybe
we are just making a fine point of a word. I don't know. I
think is important that we be energy secure.
Mr. Rohrabacher. But are we technologically capable of that
now?
Mr. McConnell. Well, I will give you an example. We talked
earlier about hydraulic fracturing, and I mentioned
sustainability, and in fact, we have fracked a lot of wells for
a lot of years. There is no question about that. I think it is
also fair to say that in our society today, there are a lot of
questions about fracturing, about the impacts in local
communities, et cetera, and it is not just issues associated
with groundwater, but it also has to do with seismic effects,
it also has to do with wastewater disposal, wastewater
treatment, all of the issues that are really important to
sustainability.
Mr. Rohrabacher. Do you think it also has to do with a
mindset that what is formally described as Luddite mindset that
has been beaten into kids' heads at our universities that a
habitat for a squirrel is more important than energy for
American homes?
Mr. McConnell. I wouldn't subscribe to that. I don't think
that at all. As a matter of fact, I think it is really
important that it do be deemed sustainable and a big part of
our future, and that is what----
Mr. Rohrabacher. You don't think that anti-energy attitude
has had some impact on the Administration and the production of
energy in our country?
Mr. McConnell. I can't comment to that. I can tell you it
hasn't had any effect on what we are doing at Fossil Energy.
Mr. Rohrabacher. Let me just note that we have had the
ability in a number of areas. I have supported energy research
into solar, for example, over the years, and it wasn't up until
about a year and a half ago, there were no permits issued by
the Federal Government to move forward with solar energy plants
in the desert--none. And in fact, Mr. Chairman, I had to
actually introduce legislation to sort of ``goose'' the system
into letting people go on these vast stretches of desert that
we have and set up a solar plant, and do you know how many
solar plants have been issued permits now in the last year and
a half?
Mr. McConnell. I don't know the answer to that, sir.
Mr. Rohrabacher. I think it is six, but let us just note
that we are way behind the curve because the technology was
there and has been there to try to build a solar plant in the
desert, yet up until a year and a half ago there were zero
solar plants in the desert, and you look back and I think it an
overvalue being placed on habitat for insects and lizards
rather than electric power for the homes of human beings.
What about-- let me get to methane hydrates. It is another
one I supported early on over the years. Has there been any
progress with methane hydrate other than Alaska? There are
methane hydrate potentials, for example, in the ocean.
Mr. McConnell. There are indeed, and as part of the
unconventional strategy going forward, we are doing some very
early work in that to make assessments of resources and overall
impact, yes.
Mr. Rohrabacher. Has there been any--assessment of resource
is one thing, development of technology is another. Have there
been any technological steps forward in trying to utilize
ocean-based methane hydrates?
Mr. McConnell. We haven't conducted any demonstration
projects, if that is your question.
Mr. Rohrabacher. One last note. For the amount of energy
that is being produced and consumed by the American people, the
amount of research money that is spent by the Federal
Government into that particular area, wouldn't you say that oil
and gas actually produces a huge amount of our energy that we
consume and that it is actually per amount of energy that we
use from that source the amount of research actually is less
than in other areas?
Mr. McConnell. Well, from our standpoint, we recognize that
both oil and gas as well as coal is an incredibly big part of
our future. I think what we want to be sure we do is not fall
into the trap of looking at how much we are using today and
having that be equivalent to how much we are spending on
research. A lot of the emerging technologies that we are
spending our money on at a federal level as well as with
industry is important in that regard. So yes, I think it is a
big part of our future and it will be a big part of Fossil
Energy's strategy.
Mr. Rohrabacher. Thank you very much, and we just hope that
the President is serious and it is reflected in the policies
that go through his Administration about this idea of ``all of
the above,'' because America, nothing would be better for our
economy than for us to quit sending that money overseas and
spending it right here. Thank you very much.
Mr. McConnell. I couldn't agree with you more.
Chairman Harris. Thank you very much.
The gentleman from New Mexico, Mr. Lujan, is recognized for
five minutes.
Mr. Lujan. Mr. Chairman, thank you very much.
Mr. Chairman, I was really encouraged when I read the
hearing charter, ``Supporting American Jobs in the Economy
through Expanded Energy Production: Challenges and
Opportunities of Unconventional Resources Technology,'' but I
was a bit disappointed when reading through the charter and
through the testimony that was filed with us, that I didn't see
any mention of fuel production from algae or that we were going
to be able to talk about the energy that could be produced from
battery storage. And I say that, Mr. Chairman, because there
have been recent reports that have been put out that talk about
the research and development that is taking place through the
Department of Defense with unconventional energy production so
that we can save soldiers' lives when we fully appreciate the
amount of lives that have been lost through the transport of
fuel that is developed from petro products or the weight of
those batteries that they have to carry in those packs to be
able to develop any generation or communication aspects.
But with that being said, Mr. Chairman, I still am
encouraged at the conversation that we are having today, and I
hope that we can take that conversation up as well because it
is an important one as we talked about, ``all of the above''
opportunities through the expansion of research and
development.
Pertaining to oil shale development and water concerns in
the West, I appreciate the sensitivities that are being brought
in that area. Coming from the high desert, although I have six
beautiful ski areas in my district, you can imagine that the
snowpack isn't always what it should be, and this year as we
talk about the re-adjudication of water from the Colorado and
the way that it is going to impact the West, what that means to
water flows, commerce, opportunities, food production in the
West is something that I am very sensitive to.
And so, Ms. Mittal, being from the Southwest where water is
so scarce, I would appreciate you going into some more detail
on the potential impact of oil shale development on water
quality, on quantity, and how research and development might
lead to other opportunities as we talk about the amount of
water that is necessary in these areas.
Ms. Mittal. One of the things that our 2010 report noted
was that right now it is very difficult to assess or measure
the quantity impacts of oil shale development, and that is for
three primary reasons. One is that we don't have a good sense
of what the baseline conditions of groundwater and surface
water is, as I mentioned earlier. The other issue is that there
is a lot of uncertainty related to the technology, so we don't
know how much water is actually going to be used by the
technology. It is very, very uncertain. And the third issue is
that there are a lot of uncertainties related to climate
change, how much water is going to be needed in the future in
that region from growing population, from compacts. There are
water compacts that are going to require certain demands, that
are going to place certain demands on the water in the Colorado
River region. There are going to be other uses of water. So
there are a lot of uncertainties right now that make it very
difficult to actually quantify the impacts of oil shale
development on water resources in that area.
Mr. Lujan. I appreciate that. Although myself and my
colleagues may not agree on what is causing some of the drought
conditions that we are experiencing, the reality is that I have
ranchers back in New Mexico that have sold off entire herds
because there is less water, and I hope that we can all agree
on the reality that there is less water out there and that we
need to be mindful of that.
Mr. McConnell, one thing that I don't believe that we do a
good enough job of is explaining to the American people that
there is a difference between oil shale and shale oil. But I
want to concentrate my efforts on oil shale. The way that I
understand it is, it is a rock and that there is an element in
there, if I pronounce it correctly, kerogen, that has to be
heated up, so we have to heat this rock up that is down below.
How would you propose that we heat that rock up? You know, does
it take a long match? How are we able to reach down there to
heat that rock up so we can get this energy coming out of that?
What kind of heat do we need?
Mr. McConnell. Well, most of the technologies that are
looked at--and again, there is a suite of technologies that can
be employed, but it is really an in situ process in which you
need to get the fuel source into that area to be able to do
that heating as you described it. There are a number of
different technologies that are being looked at, but again,
this is a very early emerging industry and I wouldn't say there
is a business-as-usual case for exactly what you are
describing.
Mr. Lujan. I appreciate that.
Mr. Chairman, thank you very much and look forward to the
next round of questions with the next panel. Thank you.
Chairman Harris. Thank you.
I now recognize the other gentleman from Maryland, Mr.
Bartlett, for five minutes.
Mr. Bartlett. Thank you very much.
I was reading the other day a report that indicated that
the gas in the Marcellus shale was the equivalent of 3.4
billion barrels of oil. Is that the number that you have heard?
Is that in the ballpark?
Mr. McConnell. Equivalencies sometimes can be tricky, but I
would agree with what you are talking about, yes.
Mr. Bartlett. Now, underlying the Marcellus shale is a
bigger footprint of Utica shale, which contains oil. This same
report said that there was 4-1/2 billion barrels of oil in the
Utica shale. Is that a number that you think is in the
ballpark?
Mr. McConnell. A large number, yes, sir.
Mr. Bartlett. Okay. Every day the world uses 84 million
barrels of oil. That means in 12 days, the world uses a billion
barrels of oil. So this 4-1/2 billion barrels of oil, which you
said was huge will last the world 52 days. That doesn't seem to
me to be a really big deal, just 52 days.
Methane hydrates have been mentioned. There are potentially
huge energy stores in methane hydrates.
Let me mention something else where there are huge
potential energy resources. That is the tides. The Moon lifts
the whole darn ocean what, two, three, four feet a day? I carry
two buckets of water, that is heavy. That is an awful lot of
energy. Why aren't we getting more energy out of the tides? It
is for the same reason we aren't getting any energy, much of
any energy out of methane hydrates because it is very
dispersed. It has got to be concentrated before you can really
capitalize on it. I think it will be a long time before we get
much energy out of methane hydrates, although the potential
energy there, I think, exceeds most other energy sources, does
it not? It makes a potentially huge energy reserve in methane
hydrates.
The oil shales, 1-1/2 trillion barrels of potentially
recoverable oil. Shell Oil Company has tried twice there and
they have given up. Oil at $80 barrel was not high enough that
it was recoverable.
But let us imagine that we can get a trillion and a half
barrels of oil from the oil shales. You know, it is awfully
easy when you are dealing with big numbers to slip a zero or
two, so I want you to check the numbers with me. Is 1,500
billion a trillion and a half?
Mr. McConnell. I am going to take you word for it that it
is. I am not quite sharp enough to answer your question, sir.
Mr. Bartlett. I think that 1,500 billion is a trillion and
a half, and if that is true, and I now do some arithmetic, I
find that if we are able to develop this trillion and a half
barrels of oil from the oil shales, that it will last the
world, I think, 40 or 50 years. A little over four years ago, I
let a CODEL to China. Nine of us went to talk about energy, and
the Chinese began their discussion of energy by talking about
post oil. Clearly, there will be a post-oil world. The first
prominent person I know of to recognize that was Hyman
Rickover, and if you want to read a very fascinating speech, it
was lost for a number of years, just Google for Rickover and
energy speech, and his speech given the 15th day of May 1957 in
St. Paul, Minnesota, will come up, and he made a very
interesting observation. He said in the 8,000-year recorded
history of man, the age of oil would be but a blip. He had no
idea how long the age of oil would last. Now we know, the age
of oil is going to last about 300 years. We are 150 years into
the age of oil and we are not running out of oil, by the way.
What we are running out of is our ability to produce it as fast
as we would like to use it. There is way more oil out there to
be pumped than all the oil that we have pumped, but the
challenge is pumping it as fast as we would like to use it.
Now, if we develop all of that oil and it lasts us just 50
years, I have got great-grandkids. What are they going to do in
50 years?
Thank you very much, Mr. Chairman, and I yield back.
Chairman Harris. Thank you very much.
They are calling us for votes, but I think we can get a
couple more Members' questions in before we have to go. I now
recognize Mr. McNerney, the gentleman from California, for five
minutes.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. McConnell, how would you compare hydro fracking
technology to oil shale technology, both in terms of the
economics and impacts on local environment?
Mr. McConnell. Well, maybe first of all, think about it in
terms of where we are on the technical scale or the really--it
is often called the TRL, or technical readiness. In terms of
hydraulic fracturing and what is going on in the Marcellus and
other areas across the country, that technology has been noted,
as it has been performed for a number of years, recently come
into a lot of prominence because of the high cost of natural
gas just three or four years ago. We were all very concerned
that we as a Nation were going to have to import natural gas,
and we were able to take this technology, put it in play and
utilize it. And from the standpoint of the Marcellus and many
of the numbers that you quoted about availability of resources,
etc., oftentimes the first call on that is considered to be
technically recoverable hydrocarbon. But it is not really
technical recovery, but it is really economically recoverable.
And so we have got vast quantities of additional hydrocarbon
resource that with the price points being what they need to be
and with the technology evolving to where it can go, it really
then opens up large additional volumes.
The hydraulic fracturing activity has been performed for
years and years, but of course, we continue to look at the
impacts of it not just from standpoint of the fracturing itself
but the wastewater disposal, the seismic activity, all of the
other things that many of the people in our country are
concerned about.
Contrast that with the oil shale that you mentioned. It is
much, much less far along on its technical scale of
capabilities. A lot of the initial resource assessments have
been performed. The volumes and the capabilities are vast. If
you look at where we are today in terms of crude oil and the
capacity that we have in this country in our domestic imports
of it, I know that industry will continue to look at it as a
next best opportunity to move forward to. But today it doesn't
have economic recoverability, and because of that, there hasn't
been a draw by industry at this point to get into it in the
same way that we have done with hydraulic fracturing for
natural gas.
Mr. McNerney. Thank you. Would you comment on energy return
on investment as applied to oil shale? Are you familiar with
that term?
Mr. McConnell. Well, I can give you just a statistic from
the National Energy Technology Laboratory. Over the past 20
years, we have done some analysis. For every dollar that the
taxpayers put in, we have got about $13 of return back in terms
of jobs and economic impact and other things that have
contributed to our economy. The statistics that I quoted
earlier, the rather modest investment that was done in
hydraulic fracturing for natural gas today is paying enormous
dividends and we are enjoying that and the American chemical
industry, and we will likely be using more and more natural gas
in electric power generation, etc., as we move forward.
In the oil shale today, a lot of the initial work that we
are doing again in assessments and looking at the potential for
it, I don't know that we are far enough along to actually put a
return on investment just yet.
Mr. McNerney. Well, by energy return on investment, I mean
energy in versus energy out. So energy out is a numerator;
energy in is the denominator. If you have any comment on that,
or Ms. Mittal, if you have a comment on that?
Ms. Mittal. We didn't look at the actual amount of energy.
What we were told is that it does require a lot of energy,
especially the in situ process because you have to heat the
rock for large periods of time to very high temperatures. It is
a very high-energy-intensive process.
Mr. McNerney. So it is likely to have a small energy return
on investment in terms of the way I just defined it?
Ms. Mittal. It could, but we don't have the actual numbers.
Mr. McNerney. Thank you, Mr. Chairman. I will yield back.
Chairman Harris. I thank you very much.
I recognize the Chairman of the Committee, the gentleman
from Texas, Mr. Hall.
Chairman Hall. Mr. Chairman, I thank you, and I am really a
little confused right now. I heard something that really
sounded good to me, that one of our leaders said this country
needs an ``all-out,'' ``all-of-the-above'' strategy that
develops every available source of American energy. Of course,
I jumped up and down and clapped my hands and re-read it,
listened to it, say it one more time. I found out it was Mr.
Obama that said that in the State of the Union speech. And
other than prayer, energy is probably the most important word
in the dictionary to any youngster that is in high school or
early college right now.
And it is very difficult to square that statement with the
Administration's actions. For example, the budget proposes to
eliminate a $50 million R&D program aimed at expanding safe
production of oil and gas. This program, which I created in the
Energy Policy Act of 2005, several Presidents have tried to
knock it out, supports development of next-generation
technologies important to ensuring domestic production of oil
and gas and it is maintained and even increased. It was simple.
We knew the energy was there, but we couldn't get it to the top
of the water. We traded to universities the technology, traded
the same very energy that they are going to get for us by
giving us the technology to get it. It is an easy way to get
technology without pledging or paying out money direct here
too. It was a deal and it has worked. I don't understand why
anybody wants to knock it out, because the program was
highlighted by the Department of Energy's own advisory board as
an effective program that should be enhanced and supported. I
really don't--Mr. McConnell, if the President really wants to
identify every single way to lower gas prices and increase
energy production over the long term, why is he trying to
eliminate the R&D program?
Mr. McConnell. I don't believe he is trying to eliminate
the R&D program. I think----
Chairman Hall. What is he trying to do then? Tell me.
Explain to me. I don't understand that. Where do you get that?
Mr. McConnell. What we are trying to do is take the
resources that we have got available and with the fiscal means
that we have available, and one of the things I said when I
took this job is, I would do the best we could to get the most
impact with the resources we had available to us, and that is
what we are doing.
Chairman Hall. You have got a lot of resources up in ANWR
and all of you say don't drill on little ANWR. There is just 19
million acres in little ANWR. All we want to drill on is 2,000
acres. Maybe 40 years of energy there. How in the world can you
square what you are testifying to here? And you know you are
under oath right now, don't you?
Mr. McConnell. Yes, sir, I do.
Chairman Hall. Then go ahead and explain to me. I will just
note for the record that in the State of the Union speech, the
President said, and I quote, ``It was public research dollars
that helped develop the technologies to extract all this
natural gas out of shale rock,'' and it is troubling that he is
suggesting the Federal Government made hydraulic fracturing
possible, while at the same time trying to kill R&D within the
same program, and he said he deserves credit for the current
oil and gas boom. This is a program that is working, that has
worked with several universities and it's paying off. Why would
anybody want to knock it out? And I will say this in deference
to your President. My President tried to knock it out too,
President Bush before he left office. We had a vote on the
Floor. Overwhelmingly, they knew this program was working. I
don't understand why anybody would want to knock out something
that is working when we have the greatest need in the world for
more energy.
Mr. McConnell. I can't comment on what you are saying in
terms of giving you a reason for what other people may view or
how people want to see something go down. I guess what I will
say is that the research and the focus in the areas that we
have identified in hydraulic fracturing to continue that
research, to put in a budget request for this year. We are
enthused about it, and we will continue to work hard at all the
things that you are talking about using the resources that we
have got available and the manner in which we can most
effectively employ them.
Chairman Hall. Well, your views on hydraulic fracturing has
been turned back and your spear blunted, witness after witness
after witness. Even your own witnesses, the EPA's witness have
sat there and admitted that what they are saying about
fracturing and the danger it has done to drinking water, you
had to go all the way to Wyoming to kind of drag up something
that could hit fracturing. I don't understand that. Actually I
will just say for the record that the State of the Union
speech, the President said it was public research dollars that
helped develop the technology to extract oil and natural gas
out of the shale rock. It is very troubling that he is
suggesting the Federal Government made hydraulic fracturing
possible, while at the same time trying to kill R&D with the
same program he said deserves credit for the current oil and
gas boom. How do you react that he is campaigning one way and
saying something and doing something else?
Mr. McConnell. Federal research dollars originally back in
the 1970s were leveraged with industry enthusiasm, George
Mitchell and the Woodlands and the work that was done with
industry, and in fact, hydraulic fracturing was pioneered by
the Department of Energy's work along with industry.
Chairman Harris. Thank you.
Chairman Hall. Yes, sir, it was a different Department of
Energy than what you folks are running over there now, though.
I yield back my time.
Chairman Harris. Thank you very much, Mr. Chairman.
The gentlelady from California, Ms. Woolsey, has been very
patient. We are going to recognize her and then we are going to
walk fast over to vote.
Ms. Woolsey. You can't answer this question, but my
question is--well, he left. I can't imagine why I love our
Chairman so much after that group of questions. You can't
answer that because you don't know, but we just think he is
great, but not today, I don't.
Mr. McConnell, our colleagues, as you have heard today and
over time, have been arguing that more taxpayer resources need
to be transferred from work on emerging alternative energy
technologies and into technology development for oil and gas.
So regardless of one's priorities in that regard, there is such
a question about the relative impact of limited federal dollars
in all of these sectors and whether a major increase in oil and
gas research funding translates into real benefits for the
industry or consumers. So what happens if we increase the oil
and gas research program? Will it be a big or a small
improvement? And is the oil and gas industry actually beating
down your door asking for more research money? And where do we
get the biggest bang for our buck on this?
Mr. McConnell. Well, I think that is a great question
because really what it does is, it speaks to the pulse in the
industry and what industry is looking at. I think the signals
that come from the Federal Government in terms of funding,
willingness to support activities and focus on research that
industry is interested in, they get signals from budget, but
they also get signals from the capabilities and competencies
that exist within the Department of Energy. We have received a
number of enthusiastic support signals from industry. Those in
the natural gas industry, the leaders in those industries are
incredibly driven by wanting to ensure that sustainable
processes for this, not just in the seismic--or the hydraulic
fracturing but in the wastewater disposal, in the seismic
impacts, in the communities. They all want this to be a
sustainable, long-term industry, and the ability for us at the
Department of Energy to work with the Department of Interior,
to work with EPA from an interagency standpoint, to do things
going forward in a sensible manner so that industry can have
the confidence that this Administration is going to move it
forward in a confident manner, to make it a sustainable
industry. I think the President has been pretty clear about the
fact that he wants that to happen. He has certainly been clear
to us at the Department of Energy of what we are supposed to
do.
Ms. Woolsey. So what is the Department of Energy thinking
about drilling and exploration for gas and oil off of, for
example, the northern California coast, which I represent, that
should be a sanctuary and probably will never be drilled but if
it was, it would take all kinds of expensive research to make
any of this worthwhile. But is there any way that we can prove
that that isn't worth the pennies we would--well, the thousands
of dollars we would--millions invest in order to get pennies
worth of energy?
Mr. McConnell. We don't have any plans to do either at this
point. That is not on our short-term strategic plan, and the
focus that we have with the resources we have is not oriented
in that area.
Ms. Woolsey. Okay. Thank you. And I think because of that,
I am going to yield back so we can go vote. Thank you so much.
Chairman Harris. Thank you very much.
I want to thank the panel for their valuable testimony, the
Members for their questions. The Members of the Committee may
have additional questions for you, and we will ask you to
respond to those in writing. The record will remain open for
two weeks for additional comments from the Members.
I am going to dismiss the first panel. We will recess until
five minutes after the last vote, which should be about 20
minutes from now, to go ahead with the second panel. Thank you
very much to the first panel for being with us this morning.
The Committee stands in recess.
[Recess.]
Chairman Harris. Thank you very much. I want to thank the
second panel for your patience with us, and I will call the
Committee to order.
The first witness in our second panel is Ms. Samantha Mary
Julian, Director of the Office of Energy Development for the
State of Utah. Previously, she served as the Energy and Natural
Resources Cluster Director for the Governor's Office of
Economic Development. Ms. Julian is responsible for the
promotion of Utah's state energy policy, coordinating with the
Governor's energy advisor to implement the Governor's energy
goals and objectives, seeking federal grants and participating
in federal programs and making administrative rules.
Our next witness is Mr. Jim Andersen, President and CEO,
U.S. Seismic Systems. Mr. Andersen began his career as an
engineering officer on U.S. Navy nuclear submarines and went on
to hold a variety of engineering and senior management
positions in engineering-intensive, high-technology companies,
including Westinghouse, White Hall Hydroscience, Litton
Industries, and Northrop Grumman.
Our third witness is Mr. Cameron Todd, CEO of U.S. Oil
Sands, Inc. Prior to joining U.S. Oil Sands, Mr. Todd worked
five years with Conoco Oil and Gas Limited, where he had the
executive role of Senior Vice President, operating refining and
marketing. He has had an extensive and successful career in the
domestic and international oil and gas industry, with over 30
years of experience in all facets of the business.
Our final witness on the second panel is Mr. Tony Dammer,
Member, Board of Directors, National Oil Shale Association. Mr.
Dammer is an independent consultant specializing in oil shale
and other unconventional fuels development. From September 2008
to February 2012, he was Senior Vice President of Red Leaf
Resources, a Utah-based oil shale technology and resource
development company. He joined Red Leaf Resources after 28
years of federal service in the U.S. Department of Energy,
Office of Naval Petroleum and Oil Shale Reserves. For the last
20 of those years, he served as the Director of the office,
responsible for the management and operation of six reserves in
California, Wyoming, Colorado, and Utah.
As our witnesses should know, spoken testimony is limited
to five minutes each, after which the Members of the Committee
will have five minutes each to ask questions.
I now recognize our first witness on the second panel, Ms.
Julian, to present her testimony.

STATEMENT OF MS. SAMANTHA MARY JULIAN,

DIRECTOR, OFFICE OF ENERGY DEVELOPMENT,

STATE OF UTAH

Ms. Julian. Thank you, Chairman Harris, Ranking Member
Tonko and Members of the Committee.
Utah is the epicenter of unconventional fuel development
for the United States. Our office was created in 2011 with the
Utah legislature seeing that there needed to be an ``all of the
above'' approach to energy development. We are the voice for
energy development responsibly through economic development and
policy.
I am not here today to say that oil shale or oil sands will
drop prices at the pump or immediately solve the country's
dependence on foreign oil. I am here to say that despite the
lack of efforts of some federal agencies, the unconventional
energy industry is happening in Utah today and deserves
support.
These developments are important, and the Federal
Government needs to understand that these industries are
commercially viable. Operators seek public land certainty and
federal policy consistency.
Special interest groups often attack these industries
claiming massive use of water that is otherwise unavailable in
our State. In Utah, water is available for oil shale and oil
sands development through existing water rights and general
market system. Water is owned by the State and in trust of its
citizens. It is subject to the water appropriation system and
managed by the State Engineer. The process has been in place
for over 100 years.
Utah also manages its lands to promote responsible
development. It is the main source of our funding for our
educational system, and our pupils and educators count on it.
As any operator will tell you, whether it is shale, sands,
gas, oil, coal, working with the State is much more streamlined
and consistently regulated.
Our oil sands technology zone is a way for Utah to lead in
innovative and research and development efforts. It is a rent-
free lease on a pre-permitted site adjacent to a sands mine,
allowing proof of concept to remove technology risk for capital
providers. Our alternative energy development incentive
encourages responsible development, again, to fund our
textbooks, our classrooms, and our students. It is a post-
performance incentive for oil shale, sands, utility-scale
renewable energy, and nuclear.
Governor Herbert's 10-year energy plan is the State's path
forward for responsible energy development. It is about all
approach diversified resources.
So how could the Federal Government contribute to expand
production through R&D? The most consequential assistance the
Federal Government could provide, and I repeat, the most
consequential assistance the government could provide, is to
assist the BLM in consistent--to be consistent with the Energy
Policy Act of 2005. Secondly, current DOE procurement favors
federal R&D providers. That is national labs over external
providers of industry and universities. If funding decisions
were, instead, calculated proportionately on GDP or ranking of
energy production, Utah would increase from $3.5 million in
funding to $60 million, or almost twentyfold. Proactive work by
the BLM and DOE would positively affect our energy
independence, security, and decrease our dependence on foreign
oil.
We truly appreciate the support of Congress to make
unconventional energy an R&D priority and help federal agencies
understand that taking steps to ensure public lands certainty
and federal policy consistency would create an energy game
changer.
Thank you for the opportunity to speak today. I look
forward to your questions.
[The prepared statement of Ms. Julian follows:]

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Chairman Harris. Thank you very much.
I now recognize Mr. Andersen for five minutes to present
his testimony.

STATEMENT OF MR. JIM ANDERSEN,

CHIEF EXECUTIVE OFFICER AND PRESIDENT,

U.S. SEISMIC SYSTEMS, INC.

Mr. Andersen. Thank you very much, Chairman Harris, Members
of the Subcommittee.
I have a little bit different presentation, and I am going
to show some charts and hopefully this technology will work
right.
So what I am here to talk about is, we have developed a
revolutionary sensing technology that we believe will solve
many of the environmental problems associated with
unconventional oil and gas development, primarily for
hydrofracking. The sensors are all fiber optic, no electronics
or copper in the well, and they replace the 50-year-old sensor
technology that has been used in the industry that really isn't
up to speed with these new extraction techniques, and I will
talk a little bit about that.
Not to go into a lot of technical mumbo jumbo, just a real
simple ``how does it work.'' You know, we have two things. We
have a box we call an optical interrogator. All the smarts are
in that box, and lasers, electronics and all that, and then we
have a fiber optic cable which we drop down the well. The fiber
optic cable has no electronics, no circuit boards or any power
that goes down the well. That makes it very reliable and
inexpensive. How it works, we send laser-like pulse down the
cable. When the reflection comes back, the information we are
looking at is in that reflected pulse. Very, very simple.
So just so you don't think that this is smoke and mirrors,
in my prior life I used to run the division of Litton
Industries and was responsible for fiber optics there, and we
put the fiber optic sensor system on all the Virginia-class
submarines. The contract was valued at over $450 million, had
the electronics inside the submarine, fiber optic sensors
outside the hull, and it turned out to be a very, very reliable
system. It is now on the order of a dozen submarines, and
reliability record is outstanding.
A lot of the team members that used to work for me at
Litton are now at my company, and we have commercialized it,
made it less expensive and more reliable for commercial
applications, and also we develop our own IP, but we have also
licensed some of the technology from Northrop Grumman.
So here is our premise. The existing equipment for frack
monitoring is just too expensive and the performance is
marginal, and when I say expensive, I use an example that, you
know, to drill a well to produce shale, it costs about $5
million. To install sensors and the cost of sensors is another
$5 million. People just don't do it, and plus the performance
is poor so there is really no motivation.
We also believe that, you know, it is not just the sensing
system but how much it costs to install, and the main driver to
that is the cost of drilling the wells to install it. We have
been working with the Department of Energy and they have done
some studies and shown if you have very sensitive sensors like
we do, instead of going down and drilling down to, you know,
5,000, 6,000 feet, you could drill 500 or 600 feet. Great
savings on installation also. We are trying to make this
inexpensive so everybody will do it.
You know, frack monitoring, basically what you end up with
instead of blindly pumping in fluid at high pressure and, you
know, wondering if you are fracturing, you monitor it with
sensors in the ground as you do the stage. You can see there
are different colors and you block off a certain section, you
frack it and do the next one, and you see what the extent of
the fractures are. So you have a record, and if it starts going
to places where you don't want, you could stop it. We believe
100 percent monitoring will solve the problems, and it is not
just us. You know, the Secretary of Energy Advisory Board came
out with some recommendations and they said you should have
surveys carried out to ensure fracturing is limited to where
you want it to occur. And they also have said we need
additional studies to talk about shale gas leakage of water
wells. We are also working with FTS International, a large
company in the United States that does fracking and is
developing systems to do 100 percent monitoring.
Here I will just talk about well casing leaks a little bit.
You know, it is an important issue. My feeling is, it is
designed to prevent communication between layers but, you know,
these things happen, and the next chart will show that the
problem with gas migration, people talk about it like it is a
new thing. It has been around for over a decade. You know, they
had studies in Canada that 45 percent of the wells are leaking.
So my thought is, is rather than denying or saying does this
leakage happen or not, we have technology that is cheap
insurance, and you could check for it and make sure that if it
does happen, you could fix it.
So summing up, there are several of the major areas of
environmental concern that can be minimized via monitoring
during and after the fracking process. This includes chemical
contamination of the subsurface, aquifers, gas migration and
even induced seismicity, and we have developed revolutionary
fiber optic sensing technology to address the technical
problems, such that you could do remediation before there is
significant environmental damage.
And I thank you and I welcome your questions.
[The prepared statement of Mr. Andersen follows:]

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Chairman Harris. Thank you very much, Mr. Andersen. That is
some fascinating technology.
I now recognize our third witness, Mr. Todd, to present his
testimony.

STATEMENT OF CAMERON TODD,

CHIEF EXECUTIVE OFFICER,

U.S. OIL SANDS, INC.

Mr. Todd. Mr. Chairman and Members of the Committee, I
thank you for the opportunity to address you today on vital
matters of energy, environment, and the economy. My name is
Cameron Toddm and I am the Chief Executive Officer of U.S. Oil
Sands, a public company with a unique proven technology for the
development of the U.S. extensive oil sand resources.
I am here today to explain that development of these
valuable resources is not only economically viable and
technologically proven, but also can be done in an
environmentally responsible manner with significant economic
benefit for the Nation.
U.S. Oil Sands has a proprietary technology using a
renewable biosolvent to extract heavy oil from oil sand without
the need for tailings ponds. This breakthrough is expected to
revolutionize the development of oil sands, particularly in the
United States where, in spite of extensive resources, there
have been no commercial extraction projects to date.
The solvent we use is nontoxic and biodegradable, made from
citrus peels. Over the last 10 years, our company has
exhaustively tested and piloted our process. It greatly
simplifies current approaches to development and allows them to
be built on a smaller scale using modular phases.
Our company has been active in Utah for more than seven
years and has invested more than $20 million developing the
technology, acquiring lands, doing environmental reviews, in
design, and initiating construction. Beginning later next year,
expect to complete construction and initiate production on the
first commercial oil sands extraction project in the United
States. By that time we will have invested more than $50
million and employed hundreds of people.
Our process demonstrates the best environmental performance
of any oil sand development to date. We recover 96 percent of
the bitumen processed, the highest of any project. Since we
produce clean sand without tailings ponds, we reclaim the mined
area as we go. The process recycles 95 percent of the water
used, and we use half the water of other projects. We use less
than a third of the amount of energy and we have a lower
greenhouse gas footprint than any project to date.
Our first project is modest, producing 2,000 barrels a day.
Over the next 10 years, assuming fair access to lands, our
company has expansion plans for 50,000 barrels per day. Over
the project life, we expect to generate over 60,000 person
years of direct employment, high-quality, permanent jobs. And
they come at a time when the American economy has been hit with
the worst recession in 75 years. We expect to pay more than $9
billion in taxes and royalties and contribute more than $20
billion to the economy. And we will be saving the import of
over $50 billion worth of foreign oil.
And while we may be first, U.S. Oil Sands is not alone.
Other companies are pursuing exciting technologies, and new and
environmentally responsible and economically attractive
projects are coming.
So what is standing in the way? In short, federal policy.
Even though most resources are on federal lands, it is no
accident that 100 percent of our company, U.S. Oil Sands,
leases are on State lands. The State is strongly supportive
while the BLM essentially has a de facto moratorium on leasing
and approval, this in spite of the instructions of Congress in
the Energy Policy Act of 2005. The BLM is further proposing to
reduce the lands available for development by nearly 80 percent
because of their belief that commercial technologies do not
exist, that only massive large-scale development would occur.
It is not that these lands are conservation areas where
development is prohibited. Quite the contrary, as conventional
oil and gas, forestry, grazing, and mining are allowed, subject
to normal approvals. It is only oil sand and oil shale leasing
that is restricted.
Developers are not asking for unfettered access. Every
project would still be subject to extensive scrutiny and
approval, just as are conventional projects. We have already
shown that small-scale phased development is possible, and that
world-class environmentally responsible technologies are
proven.
In conclusion, the oil sand resources of the western States
are large and accessible. U.S. Oil Sands has developed a
process to unlock these valuable resources in an
environmentally superior manner. We expect our project on State
lands to be in production next year. The process uses far less
water, energy, surface area, and generates less greenhouse gas
than any project to date. It generates clean tailings and
requires no tailings ponds. Our company expects to generate
tens of thousands of man-years of employment, billions of
dollars of tax revenue, and contribute tens of billions of
dollars to the economy. In exchange, we ask for no special
treatment, no fuel subsidies and no grants. We simply suggest
that Congress permit these developments on federal lands as
mandated in the Energy Policy Act.
We at U.S. Oil Sands intend to implement our game-changing
approach with or without access to federal lands. We have
identified large resources on State lands and will develop them
in concert with the State. We will apply our approach to
resources in Canada and other parts of the world where large
deposits exist. It would be a shame if the people of the United
States were not able to enjoy the benefits of development of
their own extensive resources, but such a great technology and
such a win-win-win result with respect to energy, the economy
and the environment, is too good to not to be applied to solve
the energy challenges of the world.
Thank you.
[The prepared statement of Mr. Todd follows:]

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Chairman Harris. Thank you very much.
Our final witness, Mr. Dammer, is now recognized for five
minutes to present his testimony.

STATEMENT OF MR. TONY DAMMER,

MEMBER, BOARD OF DIRECTORS,

NATIONAL OIL SHALE ASSOCIATION

Mr. Dammer. Thank you, Mr. Chairman and Members of the
Committee. I thank you for the opportunity to appear today. I
have worked on and off in the oil shale business for several
decades. They kicked me out of Colorado in 1982 when Colony
folded, so I have seen the ups and downs of the industry.
As been pointed out, oil shale development has had a long
and tortured history which would take hours to relate, so I
won't go over that in any detail here. But in 1982, Exxon
abruptly closed its doors to the Colony project and, without
warning, left the scene. That was referred to as Black Sunday.
So the industry has been characterized by boom and bust, but
not until almost 25 years later the passage of EPAct 2005, the
Energy Policy Act of 2005, the government demonstrated any
appreciable interest in the oil shale resource. High price of
crude oil, coupled with concerns regarding energy geopolitics
and increased dependence on imported oil from unfriendly,
unstable sources, focused attention back on oil shale.
Today, there are several companies engaged in oil shale
research and development in the United States in varying
degrees of development. Some are small, their work limited to
the laboratory. Others such as Shell, Exxon, AMSO, Red Leaf,
Total, Shale Tech International, just to name a few, are
actively testing their technologies in various stages of
development in the field.
The secure fuels and domestic report, resources report
published by the U.S. Department of Energy summarizes those
technologies, those 32 separate companies working in oil shale
and tar sand development in the United States. Most or all oil
shale development companies and their profit and their profiles
are summarized in www.Unconventionalfuels.com.
I have by no means covered the technical landscape
regarding oil shale development, and I regret that time does
not allow a comprehensive review of all the technologies.
Advances that have taken place in the last five years are very
large. Suffice to say that clean, safe and sustainable
technologies are being advanced to develop oil shale resources.
The passage of the Energy Policy Act of 2005 provided impetus
for this program.
We talked a little bit about some of the key technical
challenges that presents us. We talked a little bit about
water. I have not read anything from any oil shale company that
believes that they will exceed one barrel of water per three
barrels of oil shale produced. A lot of the industries are
water producers. I think there is a lot more known about water
utilization than is generally understood by the public.
One of the greatest concerns has been the requirement of
water development in the scarce area. I think that has been
overstated. A far greater concern than the technical challenges
faced by oil shale, the oil shale industry, are policy and
regulatory inconsistency and uncertainty. Since the passage of
the Energy Policy Act of 2005, the Department of Interior has
reversed itself on the initial Programmatic Environmental
Impact Statement and changed the associated resource
development plans. As we all know, oil shale regulations were
overturned in 2008.
The Energy Policy Act, however, was a comprehensive piece
of legislation designed not only to prepare for R&D and leasing
regulations but also to plan for the orderly development of oil
shale and tar sands in what is essentially the Green River
formation of Colorado, Utah, and Wyoming. That planning
responsibility was assigned to the U.S. Department of Energy
under section 369(h) and (i). Section 369(h) of that Act
directed the Secretary of Energy in cooperation with the
Secretary of the Interior and the Secretary of Defense along
with governors of affected States to establish a task force to
develop a plan to accelerate the commercial development of
strategic unconventional fuels and initiate a partnership with
Alberta and nations with oil shale resources. The task force
report with recommendations was completed and forwarded to the
President and Congress in 2007. Section (i) of the Act directed
the Office of Petroleum Reserves to coordinate and create and
implement the implementation of a commercial strategic fuels
program. If these sections of the Act were implemented and the
unconventional fuels development program was initiated within
DOE, uncertainty and inconsistency in policy would not exist
today.
Unfortunately, there is little evidence that the
recommendations of the task force or the establishment of an
unconventional fuels program has occurred. My strong
recommendation would be to implement the law as it was stated
in the Energy Policy Act of 2005.
Mr. Chairman and Members of the Committee, thank you once
again. I would be pleased to answer any questions.
[The prepared statement of Mr. Dammer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Chairman Harris. Thank you very much for your testimony,
and we will now begin the first round of questioning. I will
recognize myself for five minutes.
Mr. Andersen, let me just ask you, your technology, was
there any government involvement in the development of the
technology?
Mr. Andersen. Well, I talked about initially there was some
government involvement in technology that was put on a
submarine, but we took that and developed our own intellectual
property, our own funding. We built some systems for the
government, but the R&D for those was all internal.
Chairman Harris. Okay. And did you ever request any help
from the Department of Energy or, you know, sought some of the
funds from some of the programs we have been talking about
today?
Mr. Andersen. No, we haven't.
Chairman Harris. Okay. Now, Mr. Dammer, your testimony--I
want to thank you for your testimony. You know, it was a little
disturbing to me that, you know, the Department of Energy, you
know, Mr. McConnell kind of admits that oil shale and oil sands
are part of all of the above but they are not spending any
money on it. They are not really doing anything. The task force
that you mentioned that produced that report in 2007 did
outline some impediments that are occurring or constraints that
exist on development of oil shale. In your opinion, is the DOE
or BLM really doing enough or doing anything to implement the
recommendations of that task force or basically has it almost
ground to a halt?
Mr. Dammer. I can't really speak to what the Department of
Interior is doing. Let me correct that. I know exactly what
they are doing, and they really are on the regulatory side of
this, and we have sort of jumped the gun on regulations,
because as you have heard today, you have people questioning
water usage, you have the carrying capacity of the western
energy quarter, socioeconomic concerns. Those are the concerns
that need to be addressed and addressed in a plan, and that was
the purpose of section 369(h) and (i) was intended to do. They
weren't intended to promulgate new regulations. That is the
responsibility of the DOI. It was to put together a plan to
reasonably develop these resources, and these resources stretch
from Wyoming down through Colorado, and they do broach the
Green River and the Colorado River. So there is all kinds of
hydrologic issues, incidentally, some of which have been
answered far better than the testimony by GAO.
Chairman Harris. Let me ask you, so--because my
understanding that that--the oil shale, is it true that if you
look at oil shale resources, that the United States really has
more than the entire world's reserves, if we could unlock oil
shale?
Mr. Dammer. Many times over.
Chairman Harris. That is what I thought. So, you know, it
is an interesting all-of-the-above strategy. That is all I can
tell you.
I want you to directly comment on the use of water, because
my understanding, the GAO report suggests that it takes five
barrels of water to produce one barrel of oil. You say that
more likely that it is one barrel of water for three barrels of
oil. Is that because of advances in technology or the feeling
that we can make those advances and that is a goal?
Mr. Dammer. Well, I think the genesis of that statement is,
is that companies like Shell, Exxon, Total, Red Leaf have been
out on the ground for some period of time. A number of those
projects have pilot projects. In the case of Red Leaf, we ran a
pilot project so we know exactly how much water we were using,
and we were using actually less than one barrel of water per
barrel of oil shale produced. And most of that water was for
domestic consumption and dust control. So there is a gap
between what is going on in the industry and what is being
talked about by these various reports and whatnot.
Chairman Harris. Thank you very much. As you said, the
purpose of the Energy Policy Act was to try to answer some of
those questions.
Mr. Todd, you know, thank you all the work the company has
done. Just out of curiosity, were there--because you say you
don't really want any loans or programs or grants or whatever,
and that is kind of too bad because I think the money in your
company would be much better than Solyndra, for instance,
probably much better spent. What is the price per barrel that
it is going to cost you ultimately when you begin this
production? Can you give us an idea about what the price per
barrel of producing is from the oil sands using your
technology?
Mr. Todd. We estimate our operating costs at under $30 a
barrel, and we estimate the economic limit to be about $50 a
barrel priced to go ahead.
Chairman Harris. So even at today's relatively--I hate to
say relatively depressed price of Midwest oil compared to the
world but, you know, roughly $97, $96 a barrel, whatever it was
in the last few days, it is economically--again, the Department
of Energy testified it has to be economically viable, and
clearly, that is economically viable in today's oil market.
Mr. Todd. Absolutely. Of course, one of the problems we
have in oil sands side in the federal level is to lump oil sand
and oil shale together. They are different resources. They are
both very large. They both occur in the western States. That is
about where the----
Chairman Harris. And they both start with ``oil.''
Mr. Todd. But the fact is that the technologies for
developing oil sand have been well at play. Our company is a
unique one, but in Canada, we are--we have got two million
barrels a day. It is hardly unconventional anymore.
Chairman Harris. Yes. Thank you very much, and we will
probably have a second round but I want to recognize Mr. Tonko
for five minutes.
Mr. Tonko. Thank you, Mr. Chair.
Mr. Dammer, since oil shale companies have secured
thousands of acres of oil shale resources in Utah and have
apparently secured funding to move forward with a commercial
oil shale development program on these lands, why do you think
it necessary for the Federal Government to make millions of
acres of federal lands available for commercial development
since, (A) large amounts of federal lands have already been
available for oil shale development; (B) millions of acres of
oil shale resources in the West are already in the hands of
private industry, none of which to date have been commercially
developed; and (C) it seems that ample oil shale resources have
been acquired to move forward with the commercial program?
Mr. Dammer. I think the short answer to that is the
economics. The richest oil shale on earth is located in the
Piceance Basin of Colorado. It is a relatively small area, but
it is the area where the RD&D leases are located. That is where
Shell, AMSO, Exxon, and Chevron want to deploy their in situ
technologies, and the reason for that is, is that in that
particular region, the pay zone in the middle of the Piceance
Basin is 1,000 feet thick, all right, so there is about 1,000
foot of over burden and then there is about 1,000 foot of pay,
a very, very high quality, consistent oil shale. So what they
want to do is they want to put those electric heaters down into
that very thick pay. Keep in mind, we would be heating that
whole column of thousand foot, and the payoff for that is
tremendous. Shell incidentally believes that they will produce
a million to 1.2 million barrels per acre. There is no
conventional oil play on Earth that is that productive and that
concentrated. So that is the story with the Piceance Basin.
Mr. Tonko. And with the State and private lands that exists
along with the proposed research leases in PEIS, are those not
enough in terms of area or land space?
Mr. Dammer. Well, they reduced the land space from two
million to somewhere below 500,000 acres. The thought is no,
that is not enough land.
Mr. Tonko. Even for research and commercial pilots?
Mr. Dammer. For commercialization. The two million acres
that were the preferred alternative in the original regulations
were two million acres, so what has happened is that amount of
land has been carved back to somewhere below 500,000 acres, and
yes, the answer to your question is, that is not enough open
land.
Mr. Tonko. Okay. In support of this discussion, I would ask
that the Wilderness Society document outlining the private and
state land leasing for oil shale be included, if we might, Mr.
Chair, in the record?
Chairman Harris. Without objection.
[The information may be found in Appendix 2.
Mr. Tonko. Thank you.
And the oil shale industry has a very long history of grand
failures, which have come at enormous cost to investors and to
taxpayers and certainly the environment, yet today we are
talking about it as this resource of the future, as if it is
some new idea that has not seen a century of attempts with no
return on investment. GAO just testified that their project to
assess the water impacts of oil shale was complicated by the
fact that the technologies were not mature enough to inform a
precise assessment, yet here we are hearing that it is a proven
commercial ready technology and all you need is the federal
land to make it happen.
Mr. Dammer and Ms. Julian, what has changed to perhaps have
us think differently here?
Mr. Dammer. Well, I don't want to correct you, but I don't
think we said that these were ready for commercial, to be
commercialized. There is no commercial oil shale development
project. But what I would say is that there has been a lot of
private R&D that has gone into these technologies. Shell has
spent hundreds and hundreds of millions of private capital out
on their site in Colorado. They have a very good idea of what
their water usage is and their energy return on investment, as
does Red Leaf Resources Incorporated, who has run a pilot. So--
--
Mr. Tonko. Has that research provided for any different
approach or would it be the same--is it the same effort with
the same potential impacts on water and the environment?
Mr. Dammer. Well, I think the in situ technology and the
Red Leaf technology, which is a modified in situ, is unlike any
other kind of technology that you might hearken back to, to the
1980s where the surface retort was king and rumen pillar mining
and surface mining were being considered. That is not to say
that surface retorts haven't improved their technology
remarkably, but this is not your grandfather's oil shale
industry anymore. Just as with shale gas technology, 10 years
ago--I have been in the oil and gas business for a long time.
Ten years ago, people were saying you would never be able to
deviate a well into a shallow conventional shale reservoir that
is 10,000 feet deep and put out a long-reach horizontal well
another 10,000 feet. People would have laughed at you. So, I
mean, it is a technological play that is evolving, and it is
evolving very fast.
Mr. Tonko. Thank you, Mr. Chair. I yield back.
Chairman Harris. Thank you very much. And again, we will
have a second round here.
Ms. Julian, in your written testimony you state that ``As
any operator will tell you, coal, oil, gas, wind, solar, shale,
sands, et cetera, working on state land is not only more
clearly streamlined but consistently regulated.'' Could you
please expand upon some of those lessons from Utah with regard
to the permitting process or energy regulation with regards to
state versus federal?
Ms. Julian. Sure. In the State of Utah, our regulatory
policy is laid out pretty simply. We completely have everything
out on the table and really want to be an expeditious,
business-friendly process. It is not subject to interpretation
as much federal regulation is, which creates a delay and turns
it into a judiciary system. The process to improve everything
from air and water permits to mining permits in the last three
years, the timeline has decreased significantly where some
permits can be done in 90 to 120 days. And some of the things
that we do in the State of Utah is, we put all the regulators
in the room together for an entire project, and we have them
work it out together with the company all at the same time and
say what are the timelines, what are the obstacles, what do we
need to go through for this, and just getting them in the same
room and having these predesigned meetings has cut down on all
kinds of things that regulatory agencies go through on a
federal level that turn into a judiciary-type situation where
you have lawsuits delaying projects and perhaps losing private
investment such that happens to the federal entities.
Chairman Harris. Thank you.
I would like to ask unanimous consent to enter into the
record the following three documents from the State of Utah:
the Utah's economic development plan, Utah's 10-year strategy
energy plan that is called ``Energy Initiatives and
Imperatives,'' and Utah's response to the BLM's draft
Programmatic Environmental Impact Statement for Oil Shale and
Tar Sands. So without objection, so ordered.
[The information may be found in Appendix 2.]
Chairman Harris. Thank you very much.
Specifically, you know, you discuss Governor Herbert's 10-
year strategic energy plan. Are there any particular examples
from the plan you would like to highlight with regard to
regulations, streamlined development, coordination, long-term
planning, anything that you would suggest to the Federal
Government adopt some kind of similar strategies?
Ms. Julian. Sure. There were eight recommendations that
came out of the plan from the task force. One of them was to
increase transparency, to really look at the regulatory system,
the licensing system, put it online, have people see exactly
where it is at, and adjust the regulatory framework to
technology, modernize it. Some of the things that we look at
and the way that we look at regulatory processes are decades
old. We haven't changed it. Technology has changed. Some of
these processes were put in place before there were cell
phones, before there was other messages--excuse me--methods of
technology, and we haven't sped up the regulatory process to
keep up with technology.
Chairman Harris. Thank you.
Now, Mr. Andersen, with regards to your technology, I
understand that one of its usefulnesses actually can be to
direct how the horizontal drilling occurs. Is that right? By
detecting the--by doing--well, by seismic detections as you are
drilling?
Mr. Andersen. Oh, you could do that also. That is not one
of the, I guess, parts that we are pushing here. But basically,
you put a bunch of sensors in the ground and they triangulate
on some event that is occurring and knowing exactly in three
dimensions where it is, be it a fracture occurring or a drill
progressing down, you know, as you drill a well.
Chairman Harris. And what you are suggesting is that the
technology actually would enable to be more efficient with
regards to the fracturing. Is that right? Because you would
know exactly where it is occurring and when it is occurring and
the extent of it and whether you are near where you shouldn't
be?
Mr. Andersen. Absolutely. One of the things I primarily
talked about here was the environmental effects, but in
reality, there is a big efficiency improvement. I was in a
frack job down in Fayetteville shale about a year ago, and I
was talking to the geophysicist during the frack monitoring,
and, you know, I asked her, what is your interest in this, why
are you monitoring and a lot of the other guys aren't? She says
well, you know, we have a certain amount of acreage, we want to
maximize how much we get out of that field. If we don't
monitor, we have to guess how far we space the wells, because
we are not sure where the fractures are occurring. So if you
put it too close, you will have thief zones and the frack fluid
would leak into a previous fracked area. So the point was,
their thought was if they could get this done inexpensively,
they would do this on all their frack jobs and it will allow
them to get maybe 30 percent, 35 percent more out of the fields
rather than leaving areas just untouched.
Chairman Harris. So in essence, that also relatively
reduces the amount of--the environmental impact per, you know,
million BTU of gas extracted from a gas well, for instance,
right? Because you are extracting more from the same bore hole?
Mr. Andersen. Exactly, and one other point is that, you
know, I was talking--we had investor day at my plant yesterday
and I was talking to one of our clients who, you know, does a
lot of fracks, and he says, you know, typically you might do
stages like six, eight stages, half of them may not produce,
but you don't know because you are not monitoring it so you are
not, you know, seeing the effects. So there would be a lot of
efficiency improvements if you monitored 100 percent.
Chairman Harris. And the bottom line is, two years ago,
that technology just didn't exist?
Mr. Andersen. It did not exist. That is correct.
Chairman Harris. So, you know, as we look--and the whole
purpose of the hearing is to look at research and development
of unconventional oil and gas. I personally believe--and I am
going to ask you whether you agree, but I suspect you do--that
it is through technological improvement that we will actually
improve and increase the amount of available unconventional oil
and gas, and I think your product is a perfect example of how
you do it through technology.
Mr. Andersen. I agree 100 percent. If I may just real
quickly, you know, they were talking in the 1970s that peak oil
was reached, energy production was going down but then, you
know, technology came along, hydro fracking, you know, and
starting around 2008, it is going up. You know, technology has
done that and what I am worried about is that whole revolution
could get slowed down by people having concerns about the
safety of it, and we can monitor that, and the technology
exists to do that, and if some events start happening, they
could be corrected before there is any significant
environmental damage.
Chairman Harris. No, this is great. I am a firm believer in
technology. I wish we had invited ATK, a company that has some
presence in my district that you may or may not be familiar
with, is doing the propellant fracturing. It eliminates the use
of water, and, you know, they claim they can roughly double the
yield of wells, of their test wells done with that technology.
Now, you combine that with your--and all of a sudden, you know,
we have got potentials that we knew nothing about two, three
years ago, which is always exciting.
Yes, Mr. Todd, briefly, and then I am going to go to Mr.
Tonko.
Mr. Todd. If you don't mind, I might build on the same
point relative to water. The last company that I worked for, an
in situ oil sand developer in Canada, we were the first company
to use a new water recycling technology that had developed and
acquired by GE. It was--it allowed us to get the highest water
recycle that had ever been achieved in the oil sands to date.
It was a technology that did not exist five years prior. It is
now standard practice, and it couldn't have existed if we had
to have the answer before we were allowed to get access to the
resource. As you start on the projects and you start small, you
identify the problems and the opportunities and technology
works along with you. But if you have to solve it all before
you get started, you can never get there.
Chairman Harris. Thank you very much.
Mr. Tonko.
Mr. Tonko. Thank you, Mr. Chair.
Ms. Julian and Mr. Dammer, there seems to be an apparent
difference in public acceptance in Utah versus Colorado. Can
you speak to that, please?
Ms. Julian. There is public opinion difference, definitely
in Colorado versus Utah, and much of that is that some of the
folks that are interested in oil shale development actually
don't live in those regions or areas, and so they are worried
about those particular concerns because they are not in the
area, they are not aware of the jobs, the economic benefits to
that community and the fact that it isn't just about water
availability, it is how you use the water, and so Colorado and
Utah do have somewhat of a difference. Even though Colorado has
got a great resource, the State of Utah is open for business,
and many oil shale and oil sands companies are coming over the
border to do business with us.
Mr. Tonko. Mr. Dammer?
Mr. Dammer. Well, I think that Utah has an entirely
different attitude toward commerce and development than
Colorado has. Colorado is very much more diverse. I got a
letter, I guess it was last night, that said that a number of
mayors had objected to the expansion of oil shale lands to two
million and they were backing the 400,000-acre thing, and one
of the objectors was from Carbondale. Well, Carbondale is
southeast and halfway to Aspen. So there is a lot of
recreational, there is a lot of retirement type of activity out
in and around Rifle and the Piceance Basin, and I think one of
the challenges for oil shale development is going to be, how
are you going to responsibly and sustainably build that
industry in that area. It is going to be different.
The other side of the coin is, is that three county
commissioners, Mesa County, Garfield County, and Rio Blanco
County, wrote the opposite letter saying that we represent the
people of these counties and we support the two-million-acre
thing. But what you see in Colorado that I don't think you see
in Utah is, you see retirement communities that are not
interested in mineral development. So you go into these towns
and talk to people that have to ship their kids down to Aspen
to serve Starbucks coffee to keep them in the area. They are
interested in high-paying jobs. So it is a push and pull. I
worked in Utah, and it is open for business. It is an entirely
different environment.
Ms. Julian. I would----
Mr. Tonko. I am sorry.
Ms. Julian. I am sorry. I would also add to it that I think
people don't realize that you can have both. You can have
environmental sustainability and energy development. It is not
mutually exclusive. These things can happen together. You can
have prosperity and economic development and jobs, ripple
effects into the school systems, and you can still have
tourism, you can still have your endangered species and all of
the species that go along with it, our plant life survive and
thrive and you can still have other industries such as
agriculture and hunting. It can be done together. It is, again,
not mutually exclusive.
Mr. Tonko. My understanding is that the processes used in
Estonia have reaped massive environmental damage there. Would
we use that same process here?
Mr. Dammer. No, sir. I worked in Estonia for several years.
You are exactly right. The old, antiquated surface retorts that
they use there are pretty nasty business. They produce a lot of
semicoke. You know, they call them the Estonian Alps. To the
credit of Enefit, which is their--they have a U.S. subsidiary
now called Enefit American Oil and they own land in Utah. They
refined that retort. I can't tell you exactly all the technical
details of it, but it is much improved. But you would never
want the retorts that are operating in Estonia to come to the
United States, as with the Chinese retorts, the Fushun retorts.
Those are horrible, nasty things.
Mr. Tonko. Many of you have made reference to the
technologies that produce water. What is the quality of this
water compared to that which already exists on the surface?
Mr. Todd. In our case, the water is a fresh water that we
produce. We don't actually discharge water. The water that we
lose is essentially water that evaporates and is coating the
sand grains and so it is like putting wet beach sand on the
ground. It has got water entrained in it, and that is all the
water that is used in our process.
Mr. Tonko. I believe I am out of time, so I yield back, Mr.
Chair.
Chairman Harris. If you have an additional question, you
can take a little extra time if you want to ask another
question.
Mr. Tonko. If I could just ask Mr. Todd about the--in terms
of commercial readiness, what is the difference between oil
sands and oil shale?
Mr. Todd. There are many, many differences, and we can go
back to the chemistry of it all, but oil sands have oil in
them. It is oil that is ready to go into a refinery. And so
when we produce our oil, it will go direct to refining. It does
not require to be upgraded. It is not a kerogen. It is oil. It
is heavier and it requires some technical dealing with
viscosity. Those are chemical problems to be dealt with. The
kerogen that--they both started off in the shale. All the oil
and gas in the world started off in shale. The stuff that
migrated out of the shale after it became mature became oil and
gas, and the oil, if it came close to the surface as it has in
Utah, and the surface was eroded away and that oil came into
contact with the atmosphere, the light ends of the oil would
run off and what would be left is very heavy, and that is why
it is hard to get out of the ground. On the other hand, what is
left in the shale is still needed to be cooked, but
unfortunately, it wasn't left buried long enough and so now it
needs to be cooked man-made to get it out.
So there are two completely different problems. One is the
oldest oil in the world and one is the youngest oil in the
world.
Mr. Tonko. Mr. Chair, in support of the discussion we have
been having, I ask that the nine-page report by the Checks and
Balances Project titled ``A Century of Failure'' be included in
the record.
Chairman Harris. Without objection, so ordered.
[The information may be found in Appendix 2.]
Mr. Tonko. Thank you. And also a compilation of expert
quotes titled ``Not Ready for Prime Time'' expressing opinions
about the commercial readiness of oil shale, also prepared by
the Checks and Balances Project, be included in the record.
Chairman Harris. Without objection, so ordered.
[The information may be found in Appendix 2.]
Mr. Tonko. Thank you, sir.
Chairman Harris. Thank you. I am going to ask unanimous
consent to enter into the record three resolutions passed by
the Board of County Commissioners for Garfield, Mesa, and Rio
Blanco counties, Colorado, opposing the U.S. Bureau of Land
Management's 2012 oil shale and tar sands Programmatic
Environmental Impact Statement for lands administered by the
BLM in Colorado, Utah, and Wyoming.
[The information may be found in Appendix 2.]
Chairman Harris. Additionally, I would ask unanimous
consent to enter into the record two additional documents, a
white paper co-authored by Mr. Dammer entitled ``Economic
Impact of Failure to Implement Legislative Mandates of Section
369, Energy Policy Act of 2005,'' and a letter from Dr. Dag
Nummedal and Dr. Jeremy Boak with the Colorado School of Mines
regarding unconventional oil and gas development. Without
objection, so ordered.
[The information may be found in Appendix 2.]
Chairman Harris. I want to thank the witnesses for their
valuable testimony, and their Members for their questions. The
Members of the Committee may have additional questions for you,
and we ask you to respond to those in writing. The record will
remain open for two weeks for additional comments from Members.
The witnesses are excused. Thank you all very much for
coming. The hearing is now adjourned.
[Whereupon, at 11:54 a.m., the Subcommittee was adjourned.]

Answers to Post-Hearing Questions

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Answers to Post-Hearing Questions

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Appendix 2

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Additional Material for the Record

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Letter from Members of Wyoming House of Representatives to Bureau of
Land Management

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``Water on the Rocks'': A Presentation by Western Resource Advocates

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Letter from Denver Board of Water Commissioners to Subcommittee on
Interior, Environment, and Related Agencies, Committee on
Appropriations

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Letter from Rocky Mountain Farmers Union to Subcommittee on Interior,
Environment, and Related Agencies, Committee on Appropriations

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Oil Shale Fact Sheet from the Wilderness Society

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Utah's Economic Development Plan from Governor Gary R. Herbert

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Energy Initiatives and Imperatives: Utah's 10-Year Strategic Energy
Plan
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Draft Programmatic Environmental Impact Statement: Possible Land Use
Plan Amendments for Oil Shale and Tar Sands (May 4, 2012) (Utah)

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Oil Shale: A Century of Failure Report by Checks and Balances Project,
April 2012

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Not Ready for Prime Time: Prepared by Checks and Balances Project

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Resolution of Mesa County, State of Colorado

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Mesa County News Release, April 19, 2012, and Resolution No. 2012-12

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Economic Impact of Failure to Implement Legislative Mandates of Sec
369, Energy Policy Act 2005, a White Paper by Anton Dammer, M.S., and
James Bunger, Ph.D.

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Letter to the Subcommittee from Dr. Dag Nummedal, Director, Colorado
Energy Research Institute, and Dr. Jeremy Boak, Director, Center for
Oil Shale Technology and Research, Colorado School of Mines

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U.S. Department of Energy, Office of Naval Petrolum and Oil Shale
Reserves, November 2008, ``Strategic Plan: Unconventional Fuels
Development Within the Western Energy Corridor''

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