[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
AMERICAN ENERGY OUTLOOK:
TECHNOLOGY, MARKET AND POLICY DRIVERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
WEDNESDAY, FEBRUARY 13, 2013
__________
Serial No. 113-2
__________
Printed for the use of the Committee on Science, Space, and Technology
Available via the World Wide Web: http://science.house.gov
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR., DANIEL LIPINSKI, Illinois
Wisconsin DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas ERIC SWALWELL, California
PAUL C. BROUN, Georgia DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi ALAN GRAYSON, Florida
MO BROOKS, Alabama JOSEPH KENNEDY III, Massachusetts
ANDY HARRIS, Maryland SCOTT PETERS, California
RANDY HULTGREN, Illinois DEREK KILMER, Washington
LARRY BUCSHON, Indiana AMI BERA, California
STEVE STOCKMAN, Texas ELIZABETH ESTY, Connecticut
BILL POSEY, Florida MARC VEASEY, Texas
CYNTHIA LUMMIS, Wyoming JULIA BROWNLEY, California
DAVID SCHWEIKERT, Arizona MARK TAKANO, California
THOMAS MASSIE, Kentucky VACANCY
KEVIN CRAMER, North Dakota
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS STEWART, Utah
------
Subcommittee on Energy
HON. CYNTHIA LUMMIS, Wyoming, Chair
RALPH M. HALL, Texas ERIC SWALWELL, California
FRANK D. LUCAS, Oklahoma ALAN GRAYSON, Florida
RANDY NEUGEBAUER, Texas JOSEPH KENNEDY III, Massachusetts
MICHAEL T. McCAUL, Texas MARC VEASEY, Texas
RANDY HULTGREN, Illinois MARK TAKANO, California
THOMAS MASSIE, Kentucky ZOE LOFGREN, California
KEVIN CRAMER, North Dakota DANIEL LIPINSKI, Illinois
RANDY WEBER, Texas EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas
C O N T E N T S
Wednesday, February 13, 2013
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Cynthia Lummis, Chairwoman,
Subcommittee on Energy, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 7
Written Statement............................................ 12
Statement by Representative Eric Swalwell, Ranking Minority
Member, Subcommittee on Energy, Committee on Science, Space,
and Technology, U.S. House of Representatives.................. 13
Written Statement............................................ 15
Witnesses:
The Honorable Adam Sieminski, Administrator, Energy Information
Administration (EIA), U.S. Department of Energy
Oral Statement............................................... 17
Written Statement............................................ 20
Mr. Robert McNally, President, The Rapidan Group
Oral Statement............................................... 61
Written Statement............................................ 63
Ms. Lisa Jacobson, President, Business Council for Sustainable
Energy
Oral Statement............................................... 68
Written Statement............................................ 70
Discussion....................................................... 83
Appendix I: Answers to Post-Hearing Questions
The Honorable Adam Sieminski, Administrator, Energy Information
Administration (EIA), U.S. Department of Energy................ 102
Mr. Robert McNally, President, The Rapidan Group................. 107
Ms. Lisa Jacobson, President, Business Council for Sustainable
Energy......................................................... 109
AMERICAN ENERGY OUTLOOK:
TECHNOLOGY, MARKET AND POLICY DRIVERS
----------
WEDNESDAY, FEBRUARY 13, 2013
House of Representatives,
Subcommittee on Energy
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:05 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Cynthia
Lummis [Chairwoman of the Subcommittee] presiding.
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Chairwoman Lummis. Well, good morning. The Subcommittee on
Energy will come to order. Welcome to today's hearing. It is
entitled ``American Energy Outlook: Technology, Market and
Policy Drivers.''
Now, in front of you are your packets containing the
written testimony, biographies, and truth-in-testimony
disclosures for today's witnesses on our panel. So we will
start with opening statements. And I recognize myself for five
minutes.
And I just want to again thank the witnesses this morning
for joining us. I also want to congratulate Representative
Swalwell on his appointment as Ranking Member of the Energy
Subcommittee, and I am looking forward to working with you.
Mr. Swalwell. Thank you, Madam Chair, and I look forward to
working with you in this Committee.
Chairwoman Lummis. Thanks. I also want to welcome all the
Members of the Subcommittee, and I look forward to having a
very productive Congress together.
It is difficult to overstate the importance of energy to
America's success. Abundant, affordable energy is arguably the
single most important factor to enabling our prosperity, from
our health and wellness to our national and economic security.
Technology development impacts all components of a healthy,
developed energy system, including exploration and production,
transportation, and consumption. By providing the private
market with the tools to innovate, our energy system can add
new technologies to reliably provide affordable and abundant
energy.
The jurisdiction of this Subcommittee, which includes about
$8 billion in research and development at the Department of
Energy, provides us a unique opportunity to help share the
direction and future of energy in America. This Congress, I
hope we can work together to do just that.
As a Congressman from Wyoming, I see the many benefits
associated with energy production. Wyoming is the United
States' second leading producer of total energy. It is the top
producer of coal and uranium, third in natural gas, eighth in
oil. Wyoming is also a national leader in renewable energy,
generating significant energy from wind and geothermal
resources as well. In fact, we are number one in wind energy
resources, many of which are yet undeveloped.
I am a strong supporter of an all-of-the-above energy
strategy. And now, more than ever, Congress and the President
must take real steps to advance such a policy.
The timing has never been better. U.S. energy is in the
early stages of a historic period of technology-driven
transformation. Advancement in horizontal drilling and
hydraulic fracking has unlocked vast amounts of oil and gas, so
much that the International Energy Agency projects that by
2020--that is just seven years from now--the United States will
overtake Russia and Saudi Arabia to lead the world in oil
production. The EIA also projects that coal will be the
dominant energy source globally by 2030. While domestic use of
coal declined last year, the global use of coal is increasing
by leaps and bounds. Coal is abundant in America, and it is the
only source of energy that can meet the scale of energy demand
for those billions of people worldwide who have no electricity
at all. And quite frankly, it is not our call to hold those
people back by denying them the affordable resources to bring
them into the 21st century.
Throughout our languishing economic recovery, expanded
domestic natural gas is a bright spot in the current economy
and has the potential to revitalize America's economic engine.
Increased production has created sorely needed jobs, stimulated
local economies, and contributed to low unemployment in States
like North Dakota and Wyoming. Additionally, affordable and
abundant natural gas is poised to drive a revival in the
American manufacturing sector, a sector we heard about a lot
last night in the State of the Union speech.
Perhaps less obvious, but equally significant, is the
potential for increased energy production to help address the
Nation's spiraling debt. As Wyoming's former State Treasurer, I
can testify firsthand to the importance of mineral revenues to
Wyoming's sovereign wealth and ability to provide quality K-12
educations, as well as roads, sewers, and the infrastructure to
have a vital, vibrant society.
Last week, the Institute for Energy Research reported that
increasing access to energy development would, in addition to
growing GDP by $127 billion annually, increase federal revenues
by $24 billion annually for the next seven years, and $86
billion per year thereafter. Most of the options we have to
address the budget crisis, cutting spending and increasing
taxes, are difficult to achieve. Increasing energy production
should be easy to achieve.
Our great energy story here in the United States has not
gone unnoticed around the world. The German Economic Minister
recently expressed concern that German firms are relocating to
the United States primarily due to lower energy prices. While
President Obama often cites European energy policies as a model
he would like to follow in the United States, statements such
as these should provide a powerful reminder of the importance
of affordable energy to our global economic competitiveness.
I want to thank our distinguished panel for being here
today and look forward to further discussions on how we can
better encourage safe and responsible domestic energy
production to make newfound visions of energy independence a
reality. Thank you.
And now, I would like to recognize the gentleman from
California, Mr. Swalwell, for five minutes.
[The prepared statement of Mrs. Lummis follows:]
Prepared Statement of Chairwoman Cynthia Lummis
I would first like to congratulate and welcome Representative
Swalwell on his appointment as Ranking Member of the Energy
Subcommittee. I look forward to working with you during the 113th
Congress. I would also like to welcome all the Members of the
Subcommittee and hope we have a productive Congress together.
It is difficult to overstate the importance of energy to America's
success. Plentiful and affordable energy is arguably the single most
important factor to enabling our prosperity--from our health and
wellness to our national and economic security. Technology development
impacts all components of a healthy, developed energy system, including
exploration and production, transportation, and end-use consumption. By
providing the private market with the tools and incentives to innovate,
our energy system can continue to integrate new technologies to
reliably provide affordable and abundant energy.
The jurisdiction of this Subcommittee, which includes roughly $8
billion in research and development at the Department of Energy,
provides us a unique opportunity to help shape the direction and future
of energy in America. This Congress, I hope we can work collaboratively
to do just that.
As the Representative of the State of Wyoming, I see first-hand the
widespread benefits associated with energy production. Wyoming is the
United States' second leading producer of total energy. It is the top
producer of coal and uranium, and ranks third and eighth in natural gas
and crude oil production, respectively. In addition to being a major
fossil fuel producer Wyoming is a national leader in renewable energy,
generating significant energy from wind and geothermal sources as well.
Needless to say, I am a strong supporter of an ``all of the above''
energy strategy. And now, more than ever, it is imperative Congress and
President Obama take concrete steps to advance such a policy.
The timing has never been better. The U.S. energy sector is in the
early stages of an historic period of technology-driven transformation.
The advancement and application of horizontal drilling and hydraulic
fracturing technologies has unlocked vast amounts of oil and gas
resources to economic production. So much that the International Energy
Agency projects that by 2020--just seven years from now--the U.S. will
overtake Russia and Saudi Arabia to lead the world in oil production.
The IEA also projects that coal will be the dominant energy source
globally by 2030. While domestic use of coal declined last year, the
global use of coal is increasing by leaps and bounds. Coal is abundant
in America, and it is the only source of energy that can meet the scale
of energy demand for the billion people worldwide who live with no
electricity at all.
Throughout the languishing economic recovery, expanded domestic
energy production and low natural gas prices are two of the few bright
spots in the current economy and have the potential to revitalize
America's economic engine. Increased production has created sorely
needed jobs, stimulated local economies, and contributed to low
unemployment in states like Wyoming. Additionally, affordable and
abundant natural gas is poised to drive a revival in the American
manufacturing sector.
Perhaps less obvious but equally significant is the potential for
increased energy production to help address the nation's spiraling
debt. Last week, the Institute for Energy Research reported that
increasing access to energy development would--in addition to growing
GDP by $127 billion annually--increase Federal revenues by $24 billion
annually for the next seven years, and $86 billion per year thereafter.
Most of the options we have to address the budget crisis--namely,
cutting spending and increasing taxes--are politically controversial
and difficult to achieve. Increasing energy production shouldn't be.
Our great energy story here in the U.S. has not gone unnoticed
around the world. The German economic minister recently expressed
concern that German firms are relocating to the U.S. primarily due to
lower energy prices. While President Obama often cites European energy
policies as a model he would like the U.S. to follow, statements such
as these should provide a powerful reminder of the importance of
affordable energy to our global economic competitiveness.
I thank our distinguished panel for being here today, and look
forward to further discussion on how we can better encourage safe and
responsible domestic energy production to make newfound visions of
energy independence a reality.
Thank you and I now recognize the gentleman from California, Mr.
Swalwell, for five minutes.
Mr. Swalwell. Thank you, Madam Chair. I appreciate you
holding this hearing today and I look forward to working with
you on energy issues on this Subcommittee. And I also want to
thank our panel for appearing today and I look forward to
hearing each of your testimony.
Appropriately, this hearing will serve as a stage-setter,
an opportunity to get a snapshot of the current energy
landscape in the United States and abroad. And we heard a
little bit of that last night from our President. And I was
encouraged as he talked about how our country in the last four
years has started to bend the curve and the trend of other
countries dominating in the clean energy industry. And I look
forward to continuing to support that and U.S. innovation from
this Committee.
Today, we will hear more about the shipping dynamics in the
energy marketplace. Far from being stagnant and hopeless, we
are now seeing an unprecedented pace of change that was
unpredictable even a few years ago. For instance, renewables
are penetrating at a remarkable rate with growth in wind, as
the President mentioned last night, alone outpacing natural gas
in 2012.
Our responsibility is to ensure that this country is
prepared for whatever changes that the markets may experience.
Overreliance on a limited range of technologies and finite
resources is unsustainable and unreasonable. We know that the
U.S. uses 20 percent of the world's oil but that we only have
two percent of the world's oil reserves. Our strength will lay
in our ability to transition to new, cleaner, more sustainable
resources. Simply, we cannot drill our way out of this problem.
However, we can innovate our way out of this problem and we can
work to make our country more energy secure and help make a
thriving economy.
We must be competitive and not let ourselves get behind. As
Washington bickers, our competitors are pulling out all of the
stops to capitalize on the booming clean energy economy. It is
time for us to get serious about creating a coherent green
energy policy, a national policy to enable us to compete more
so globally. We should be leading the world in a search for a
better, safer, more affordable energy.
The Pew Charitable Trusts estimate that between now and
2018, annual revenue from clean energy installations will grow
by about eight percent globally and by about 14 percent here in
the United States. These profits, if we can make sure they are
generated here in the United States--that the innovation is
designed and manufactured here in the United States--will
create new, good, well-paying, middle-class jobs for all
Americans.
Finally, we must recognize the impact that our energy
choices have on public health and the global environment now
and into the future. Addressing climate change--and I am glad
the President talked about this also last night and in his
inaugural remarks--is about global security. The ecosystems
that feed us are public health and safety and our future
economic well-being.
From the outside I will say that I believe there is no one-
size-fits-all prescription or standardized test for the
appropriate role of government in securing our energy future.
In a field as complex as energy, we must be flexible and
efficient when deploying taxpayer resources and rely on a mix
of scientific expertise, market forces, common sense, and ways
that we can identify gaps to inform our policy decisions.
The President also talked last night about working to have
businesses in homes. He challenged us to reduce energy
consumption that we have in our businesses and homes. And I
will--I believe there is an opportunity for us to work with the
business community especially and residents to bring down their
own energy consumption and work with the utility companies as
well to find ways that we can do that and provide incentives
because that also will bring down the amount of energy we
consume and also create, I believe, new jobs for clean energy
providers.
Finally, we should engage our world-class scientific
enterprise from universities to national laboratories to
overcome fundamental scientific and technical challenges. Two
national labs in particular, Lawrence Livermore National
Laboratory and Sandia National Laboratory, are located in my
Congressional District, and they are hard at work taking on the
energy challenges of the future.
Federal programs have a role to play in giving innovators,
investors, and companies space to collaborate. We should do
more to replicate public-private partnerships like IGATE--
Innovation and Green Advanced Transportation Excellence--that
harness the creativity of our best and brightest in science and
business and then transfer their technologies out to the
private markets.
We should also leverage equitable and innovative financing
mechanisms where the market is not well structured to take on
the often high technical and financial risks. Finally, where
there is no tool to match the problem, we should have the
courage to reinvent the way government does business. Programs
like Advanced Research Projects Agency--Energy, ARPA-E and the
Hubs showed us that this can be done.
With scientific research, nothing is guaranteed and so we
need to be willing to take risks. I come from the Bay area,
which includes Silicon Valley, where risk-taking is critical to
the region's economy. Taking risks means sometimes you will not
succeed, but scientific progress in our country and
internationally has never been a straight line. Only by taking
risks and charging forward can we ever hope to reach goals
which today may seem out of reach.
The big energy challenges we face require big lead times to
solve. We thus can't let bureaucratic inertia and partisan
politics delay or get in the way of us making investments and
encourage research, innovation, and competition. If the United
States is to be the world leader in all aspects of energy, we
must be willing to work together, compromise, and embrace
innovation.
Again, I want to thank Chairman Lummis for holding this
hearing. I look forward to engaging in a discussion of these
critical energy issues facing our country. I look forward to
hearing from our witnesses.
And with that, I yield back the balance of my time.
[The prepared statement of Mr. Swalwell follows:]
Prepared Statement of Ranking Minority Member Eric Swalwell
Thank you, Madam Chair. I appreciate you holding this hearing
today, and I look forward to working with you on energy issues on the
subcommittee.
I also would like to thank our panel for appearing today. I look
forward to your testimony.
Appropriately, this hearing will serve as a stage-setter, an
opportunity to get a snapshot of the current energy landscape in the
U.S. and abroad.
Today we will hear more about the shifting dynamics in the energy
marketplace. Far from being stagnant and hopeless, we now are seeing an
unprecedented pace of change that was unpredictable even a few years
ago. For instance, renewables are penetrating at a remarkable rate,
with growth in wind energy alone outpacing natural gas in 2012.
Our responsibility is to ensure that this country is prepared for
whatever changes the markets may experience. Overreliance on a limited
range of technologies and finite resources is unreasonable. We know
that the U.S. uses 20 percent of the world's oil but has only two
percent of world's oil reserves. Our strength will lay in our ability
to transition to new, cleaner, more sustainable resources. We cannot
drill our way to energy security and a thriving economy--we need to
unleash the creativity of our scientists, engineers, and entrepreneurs
to unlock our energy potential.
We must be competitive and not let ourselves get left behind. As
Washington bickers, our competitors are pulling out all of the stops to
capitalize on the booming clean energy economy. It is time for us to
get serious about creating a coherent green energy policy to enable us
to compete globally. We should be leading the world in the search for
better, safer, more affordable energy.
The Pew Charitable Trusts estimates that, between now and 2018,
annual revenue from clean energy installations will grow by eight
percent, globally, and by 14 percent in the U.S. and this will amount
to almost two trillion dollars in cumulative revenues in that
timeframe. These profits, if we can make sure they are generated here
in the U.S., mean good, middle-class, American jobs.
Finally, we must recognize the impact that our energy choices have
on public health and the global environment, now and far into the
future. Addressing climate change is about global security, the
ecosystems that feed us, our public health and safety, and our future
economic well-being.
From the outset I will say that I believe there is no one-size-
fits-all prescription or standardized test for the appropriate role of
government in securing our energy future. In a field as complex as
energy, we must be flexible and efficient when deploying taxpayer
resources and rely on a mix of scientific expertise, market forces, and
common sense to identify gaps and inform our policy decisions.
First and foremost, we should engage our world-class scientific
enterprise--from universities to national labs--to overcome fundamental
scientific and technical challenges. Two national labs in particular,
Lawrence Livermore and Sandia, located in my congressional district,
are hard at work taking on the energy challenges of the future. Federal
programs have a role to play in giving innovators, investors, and
companies a space to collaborate. We should do more to replicate
public-private partnerships like i-GATE (Innovation for Green Advanced
Transportation Excellence) that harness the creativity of our best and
brightest in science and business.
We also should leverage equitable and innovative financing
mechanisms where the market is not well-structured to take on the often
high technical and financial risks. Finally, when there is no tool to
match the problem, we should have the courage to reinvent the way
government does business. Programs like Advanced Research Projects
Agency-Energy (ARPA-E) and the Department of Energy's Hubs showed us it
can be done.
With scientific research nothing is guaranteed, and so we need to
be willing to take risks. I come from the Bay Area, which includes
Silicon Valley, where risk-taking is critical to the region's economy.
Taking risks means sometimes you will not succeed, but scientific
progress has never been a straight line. Only by taking risks and
charging forward can we ever hope to reach goals which today may seem
out of reach.
The big energy challenges we face require big lead times to solve.
We thus cannot let bureaucratic inertia and partisan politics delay or
get in the way of us making investments that encourage research,
innovation, and competition. If the U.S. is to be the world leader in
all aspects of energy, we must be willing to work together, compromise,
and embrace innovative ideas.
Again, I want to thank Chairman Lummis for holding this hearing. I
look forward to an engaging discussion of the critical energy issues
facing our country. With that, I yield back the balance of my time.
Chairwoman Lummis. Thank you, Mr. Swalwell.
You know, my first job out of college was in what is now
your district. I worked for Flying U Rodeo Company. It was
based in Marysville, California. And we did a rodeo in
Livermore. And I can remember jogging around the Lawrence
Livermore plant before I got to work and it was the first time
I ever experienced an earthquake, and that was very memorable.
Mr. Swalwell. Yes, and they are our largest employer in the
district.
Chairwoman Lummis. Well, it is an enormous facility. It
would be fun to go in it some time. I was just on the
perimeter.
There are so many things that Democrats and Republicans
agree about when it comes to energy, and I think particularly
in this Committee. When we are really going to be focused on
the research and the science and the technology and the
innovation, we will find a lot of areas of agreement. And I
really, really mean that. I want to work with both sides of the
aisle to achieve something significant. I didn't come here to
just conduct hearings. I really want to get the work done. So
let us make that our goal.
Mr. Swalwell. Great. And you have an ally here----
Chairwoman Lummis. Thank you.
Mr. Swalwell. --that wants to do the same.
Chairwoman Lummis. Fabulous.
Do any Members wish to submit opening statements? If so, we
will accept them now and they will be added to the record.
Anyone? Okay. Well, we are good. At this point we will
introduce our witnesses.
Our first witness is Hon. Adam Sieminski, Administrator for
the Energy Information Administration at the U.S. Department of
Energy. Mr. Sieminski is responsible for collecting, analyzing,
and disseminating independent and impartial energy information
to promote sound policymaking, efficient markets, and public
understanding of energy and its interaction with the economy
and the environment. Prior to his appointment, Mr. Sieminski
was Chief Energy Economist for Deutsche Bank working with the
bank's global research and forecasting energy market trends.
Our next witness is Mr. Robert McNally, President of the
Rapidan Group. Did I pronounce that right? Okay. Mr. McNally
has over 20 years of government and market experience as an
international energy market consultant, investment strategist,
and White House policy official. His background and expertise
spans the convergence of energy with economic, security and
environmental sectors from global oil market fundamentals to
regulatory policies.
And our final witness today is Lisa Jacobson, President of
the Business Council for Sustainable Energy. Ms. Jacobsen has
advised states and federal policymakers on energy, tax, air
quality, and climate change issues. She serves as a private
sector observer to the World Bank's Climate Investment Fund and
is a member of the Department of Energy's State Energy
Efficiency Steering Committee.
As our witnesses should know, spoken testimony is limited
to five minutes each, after which Members of the Committee will
have five minutes each to ask questions. And although I am not
a stickler on going over 15 seconds here or there, after that,
I start getting squirmy, so just fair warning.
Now, I recognize Mr. Sieminski to present his testimony.
And we are so delighted you are here. Please proceed.
STATEMENT OF THE HONORABLE ADAM SIEMINSKI,
ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION
(EIA), U.S. DEPARTMENT OF ENERGY
Mr. Sieminski. Madam Chairman, thank you very much for that
warm welcome and kind going through my background. I appreciate
that.
Ranking Member Swalwell, Members of the Committee, I really
appreciate the opportunity to appear before you today to
provide testimony on the U.S. energy outlook.
The Energy Information Administration is the statistical
and analytical agency within the U.S. Department of Energy. Our
data, analyses, and forecasts are independent of the approval
by any other officer or employee of the U.S. Federal
Government. The views expressed in my testimony should not be
construed as representing those of the Department of Energy,
the Administration, or other federal agencies.
What I would like to do today is summarize some key
findings from our February Short-Term Energy Outlook, just
released yesterday, as well as the 2013 Annual Energy Outlook
Reference case that was issued in December. At this point, I
would like to highlight that our short-term analysis
incorporates the extension of the production tax credit for
renewables and more recent trends in oil and gas production
activity here in the United States.
In the short term to 2014, the EIA expects crude oil prices
to decline and gasoline and diesel fuel prices as well. Natural
gas prices rise but remain below $4 a million BTU in 2013, '14.
As natural gas prices rise relative to coal prices, EIA does
expect a modest rise in coal-fired electricity generation.
Generation from conventional hydropower will continue through
the recent drought-driven decline into 2013 and then rebound
slightly in 2014. Total electricity generation from renewables
should increase through 2014. We expect wind generation to grow
by 16 percent in 2013 and another eight percent in 2014. Solar
generation is expected to grow by roughly 30 percent annually
in both 2013 and 2014. Four large solar thermal plants in
California, Nevada, and Arizona are expected to come online
driving utility-scale solar increases 64 percent this year and
another 47 percent in 2014.
Turning to the long term, as outlined in the reference case
for the Annual Energy Outlook, natural gas production increases
throughout the projection period out to 2040, outpacing
domestic consumption by 2020 and spurring net exports of
natural gas. Relatively low natural gas prices facilitated by
growing shale gas production spur an increase of 16 percent in
the industrial sector to 2025 and ensure continuing growth in
electricity generation. Natural gas also reaches new markets as
a fuel for heavy duty freight transportation and as feedstock
for producing liquid fuels through gas-to-liquids technology.
Over the next three decades, electricity use is expected to
continue to grow but only at a rate of less than one percent
per year, as you can see in Figure 1 in my testimony. Slowing
population growth, technological change, efficiency standards
for equipment, and shifts in the economy towards less intensive
industry are all factors. For example, just yesterday, EIA
published a Today In Energy feature explaining that although
newer homes are 30 percent larger, they only consume about the
same amount of energy as older homes. As shown in Figure 3,
energy use in the residential sector was relatively flat
between 1993 and 2009 but used many more consumer electronic
devices.
EIA expects the recent shift and the fuel mix for power
generation to continue with natural gas plants accounting for
most of the new capacity added. Strong growth in hydro
renewable generation is driven by a combination of state
renewable portfolio standards and federal tax incentives that
spur growth in the near term, as well as the increase in fossil
fuel prices that shift the competitive markets.
EIA projects no growth in transportation energy demand
between 2011 and 2042 with declining light-duty vehicle energy
consumption of over 1-1/2 million barrels a day out to 2040.
The growth in heavy-duty vehicle demand also spurs some fuel-
switching to natural gas, as I mentioned earlier. Natural gas
is projected to have a significant impact on heavy-duty vehicle
energy consumption in relatively high travel applications such
as tractor-trailers, which account for two thirds of all heavy-
duty travel.
Finally, U.S. energy-related carbon dioxide emissions
remain more than five percent below their 2005 level through
2040 due to improved efficiency of energy use and a shift
towards less carbon-intensive fuels.
This concludes my testimony, Madam Chairman and Members of
the Committee. I would be happy to answer questions that you
might have as we proceed. Thank you.
[The Statement of Mr. Sieminski follows:]
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Slides presented during testimony
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Chairwoman Lummis. Thank you, Mr. Sieminski, and we look
forward to asking you some questions.
I now recognize Mr. McNally for five minutes to present his
testimony.
STATEMENT OF MR. ROBERT MCNALLY,
PRESIDENT, THE RAPIDAN GROUP
Mr. McNally. Chairman Lummis, Ranking Member Swalwell,
Members of the Committee, thank you for the opportunity to
testify today on technology, market, and policy drivers of the
American energy outlook. I approach the subject with 21 years
of professional experience in analyzing global oil markets and
energy policymaking. I am currently an independent analyst,
don't represent any entity, and these views you hear today are
my own.
I would like to respectfully make 5 observations and
suggestions as you set about your important work. First, as you
mentioned, Madam Chairman, it is hard to overstate but often
overlooked how much modern civilization depends on the
continuous access to substantial flows of energy from producers
to consumers. ``Energy,'' as Nobel chemist Richard Smalley
noted in 2003, ``is the single most important factor that
impacts the prosperity of any society.''
Fossil-based energy, or hydrocarbons--oil, gas, and coal--
account for about 3/4 of our energy supply, and experts project
that share will grow in coming decades. As a primary energy
source, hydrocarbons are far superior to others, such as
biomass or renewables, because they are dense, highly
concentrated, abundant, and comparatively easy to transport and
store. Our transportation food and electricity systems, among
others, depend critically on hydrocarbon energy.
Second, many major energy transitions take a very long
time, measured in decades if not generations. Recognizing the
overwhelming superiority of hydrocarbons, rapidly
industrializing and urbanizing countries in Asia, the Middle
East, and Latin America are making enormous investments in
hydrocarbon energy production, transportation, refining,
distribution, and consumption systems and devices. These could
not be quickly replaced in any reasonable scenario. Energy
transformations are more akin to a multi-decade exodus than a
multiyear moon-shot. Pretending otherwise misleads citizens and
distracts from serious debate about real circumstances and
practical solutions.
Third, just as history has humbled energy experts who make
bold predictions about future energy trends, policymakers
should be cautious and restrained when setting arbitrary,
unrealistic, and aggressive energy targets, much less spending
tax dollars on subsidies or grants in an attempt to reach them.
The historical record is littered with failed policy targets
and costly attempts by government to pick winners in the
marketplace. Government can play a useful role in collaborating
with industry in basic core scientific research, but only
private sector companies and consumers responding to market-
based incentives can develop and deploy viable new energy
resources and devices.
Fourth, energy can deliver unwelcome surprises with no
short-term solutions. For instance, our oil production is
soaring but so are our gasoline prices. They are at record
levels. The combination of rising oil production and prices can
be befuddling. Moreover, large gasoline price swings have
become more frequent in recent years and consumers are
wondering why this is the case. Pump prices at home are
determined mainly by crude prices set in a global oil market.
Crude oil prices are rising mainly because global supply-and-
demand fundamentals are tight and geopolitical disruption risk
is high. OPEC's spare production capacity--almost entirely held
by Saudi Arabia and which in the past has been used as a buffer
against disruptions or tight markets--is low.
As we saw with Libya in 2011 and Iran in 2012, when the
market is tight and fearful, even relatively minor disruptions
or risks of disruption anywhere in the world can send our
gasoline prices up fast. Unfortunately, there are no effective
short-term policy options to counter the short-term crude and
gasoline price volatility caused by fundamentally tight and
fearful global oil market. A crucial step is to increase oil
supply everywhere. In a tight market, every extra barrel
counts.
And this leads me to my fifth and final point. Not all
surprises in energy are bad. The most pleasant surprise in
energy, if not in our entire economy in the last few years, has
been the ability of oil and gas producers to unlock vast
previously unreachable resources through multistage hydraulic--
horizontal hydraulic fracturing of domestic oil and gas reserve
trapped in deep shale formations. Last week, Dan Yergin
testified before your colleagues in the House Energy Committee
and called the boom in unconventional oil and gas production
``the most important energy innovation so far in the 21st
century.''
Higher U.S. and hemispheric oil and gas production is great
news for our economy and energy markets. If the investment and
regulatory climate allows industry to realize its full supply's
potential, it will mean more jobs, billions of dollars in
revenue, improved resilience to supply disruptions, and a lower
trade deficit. Our companies and workers will have
opportunities to take advantage of these same techniques and
technology to unlock unconventional oil and gas resources
globally where there appears to be much potential.
This happy surprise is just the latest in the energy
industry's history of continuous improvement and innovation in
technology. While we cannot predict or prescribe the future, we
can be confident that our scientists and our engineers will
rise to the challenge of finding and producing the abundant,
affordable energy our Nation requires while protecting the
environment and conserving natural resources.
Thank you.
[The prepared statement of Mr. McNally follows:]
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Chairwoman Lummis. Thank you, Mr. McNally.
And now I recognize Ms. Jacobson to present her testimony.
Welcome.
STATEMENT OF MS. LISA JACOBSON, PRESIDENT,
BUSINESS COUNCIL FOR SUSTAINABLE ENERGY
Ms. Jacobson. Madam Chairman, Ranking Member Swalwell, and
Subcommittee Members, thank you for the opportunity to testify
today.
Over the past several years, we have seen real market
penetration of a wide range of sustainable energy technologies
and resources, and we have witnessed the results of policies
and research and development that work. But our work is not
done.
To continue the momentum of growth in these sectors and to
receive their co-benefits, long-term, stable policies will be
needed to level the playing field and to provide market access.
We will also need to continue to invest in energy research,
development, and deployment to increase the efficiency of our
energy generation and use and to spur new innovations. This is
important to domestic economic growth and for U.S.
competitiveness in the energy sector.
I would like to share some of the findings from the
recently released Sustainable Energy in America 2013 Factbook.
The Factbook was researched and produced by Bloomberg New
Energy Finance and commissioned by the Business Counsel for
Sustainable Energy. It is a quantitative and objective report
intended to be a resource for policymakers with up-to-date,
accurate market information.
Some of the most significant findings from the Factbook
point to the dramatic changes underway in the U.S. energy
sector over the past several years. The data shows that natural
gas, renewable energy, and energy efficiency are on the rise.
These changes are increasing the diversity of the country's
energy mix, improving our energy security, cutting energy
waste, increasing our energy productivity, and reducing air
pollution and greenhouse gas emissions.
In terms of the importance of policy, stable, long-term
policies at state and federal levels are needed to sustain
growth in clean energy sectors. Further, electricity market
structures are evolving, and the U.S. power sector, long
organized around large centralized systems, is considering
distributed power options such as combined heat and power,
waste heat-to-power, small-scale renewables, and fuel cells. Of
note, ensuring ongoing grid reliability is a growing concern
for electricity market operators and regulators. Dynamics
contributing to this focus include changes in our energy mix,
the impact of severe weather events, and increased presence of
variable energy resources on the electricity grid.
Yet other changes are occurring as well, including reduced
electricity demand through energy efficiency, the introduction
of smart grid technologies for improved grid management, a new
focus on distributed generation, and the growing role for
dispatch of all resources such as natural gas plants,
hydropower, and demand response. They can all help the
electricity industry address these challenges.
Still, many market structures do not yet fully recognize
the benefits of some of these technologies, including
technologies offering new flexibility such as energy storage.
Given these factors, research, development, and deployment
investments are needed in the area to--this--needed in these
areas to improve efficiency, demonstrate performance, and to
spur the innovations that will be required to meet the evolving
needs of the power grid.
With regard to federal energy investments, the Business
Council strongly supports the continued funding of basic and
applied research for clean energy technologies. This must be
balanced with work on commercialization, market transformation,
and other efforts to ensure that products do not sit on
laboratory or university shelves but are transferred to the
private sector to achieve the intended public benefit.
There are strong analytical findings that show the overall
return on investment that have resulted from federal energy
research, development, and deployment initiatives. For example,
three decades of investment in extraction of natural gas from
shale have led to low natural gas prices saving households and
businesses money, attracting new industrial manufacturing
opportunities in the United States, and helping to create U.S.
jobs. In Wyoming, shale production is forecasted to bring
23,000 jobs to the State by 2020.
For energy efficiency, according to a report released last
week by the Alliance to Save Energy's Commission on National
Energy Efficiency Policy, private sector research and
development budgets are limited in many energy efficiency
sectors. In the Commission's Energy 2030 vision, it sets a goal
of doubling U.S. energy productivity by 2030 and includes a
call to support research, development, and deployment to meet
it. Achieving the goal could save $327 billion annually and add
1.3 million jobs.
For renewables, the development of today's robust solar
market and low costs in the United States can be attributed to
smart investments in research and development at DOE and
national laboratories over the last four decades. For wind,
past investments in wind have resulted in significant
improvements over the past 30 years such as increased output,
improved reliability, and lower costs. Technology advances have
enabled the typical modern wind turbine to produce 15 times
more electricity than a typical turbine in 1990 but further
improvements are needed.
The value of federal investments in research, development,
and deployment is essential given current market conditions.
According to Bloomberg New Energy Finance, a near-term trend is
reduced private sector investment from venture capital and
private equity investors in early-stage clean energy companies.
In closing, I would like to say council members look
forward to working with this Committee and the Federal
Government to ensure that any and all public investment in
these sectors is highly leveraged, effective, and efficient in
carrying out the intended policy aims of these investments.
Thank you very much.
[The prepared statement of Ms. Jacobson follows:]
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Chairwoman Lummis. Well, I would like to thank all of our
witnesses for your testimony and for staying around so we can
ask some questions of you. Before we do that, I want to
acknowledge that we have been joined by Committee Chairman
Lamar Smith of Texas. He is the Chairman of the Full Committee.
Mr. Chairman, thank you so much for joining us.
And the Chairman Emeritus of this Committee, Mr. Ralph
Hall, also of Texas. So I would like to welcome these two very
distinguished Members.
And I further want to remind Members that Committee rules
limit questions to five minutes. And the Chair will at this
point open the round of questions. So I recognize myself for
five minutes.
Mr. Sieminski, I would like to talk a little bit about coal
and the technology improvements in that sector sometimes are
overlooked. And I would like to ask--slide up. They knew I was
going to ask some questions about this slide or make some
points about this slide. If you look at the two gigantic dots
in red, those are China and India and those are proposed global
coal-fired plants. And then the United States' dot is on the
far left in the middle of the screen, obviously, way smaller
than what we are seeing in China and India, also smaller than
what we are seeing in Vietnam, in Turkey.
And so global demand and global growth in coal-fired power
plants is going to, I believe, necessitate continued research
and development of increasingly clean coal. And so I want to
kind of focus on that for a minute.
Mr. Sieminski, what are EIA's projections on coal export
trends to meet this growing global demand? As you know, coal
consumption in China grew more than nine percent, and I know
you recently reported that China consumes nearly as much coal
as the rest of the world combined. So going forward with China
and India installing over 500,000 megawatts of coal generation,
more than 25 times what is planned for the United States, we
have got this huge coal resource available for export to those
countries and we can also export our technology for them to
burn it cleaner and more efficiently. So what do you see is the
global demand and what does this mean for jobs and the economy?
I also want to know what you see as barriers to increase in
coal exports.
Mr. Sieminski. Madam Chairman, we have coal demand growing
very rapidly outside of the developed countries, so outside of
the OECD. This accounts for, I think, the largest portion of
growth in energy on a global basis. A lot of that, as you point
out on your slide, is in China and India. For the United
States, because we have electricity growth only increasing at
less than one percent a year, .9 percent per year, the
opportunities for almost any fuel going into the electricity
markets are going to be somewhat limited in the United States.
And the competition between natural gas and coal basically on a
price basis has been moving more natural gas into electricity
generation.
In EIA's forecast out to 2040, we have the use of coal in
the United States actually going up slightly in terms of tons.
Although coal's market share is reduced somewhat as natural gas
and renewables increase their market share, the actual amount
of coal being used grows slightly. And the reason that we see
that in the United States is that there are a number of
relatively new cleaner plants that are running at below their
maximum capacity utilization factors. And even with retirement
of our older plants, we will see those utilization factors, if
we are correct in our assumption that natural gas prices rise
over time, creating a better competitive atmosphere for coal.
As you said, Madam Chairman, the opportunity then for the
United States to export coal does exist. We have been doing
that. U.S. coal has been moving into European markets, for
example, as those countries have higher natural gas prices than
we do and some countries, including Germany, have talked about
lowering the amount of nuclear-generated electricity that they
have.
On the R&D side, that is not really something that EIA has
looked at, but I would be happy to provide to you for the
record our detailed forecasts on all these numbers. We will be
publishing the International Energy Outlook this summer and we
will have, I think, some fairly decent data for you, Madam
Chairman.
Chairwoman Lummis. Well, thank you, Mr. Sieminski. And we
would be most interested in having those figures for the
record.
I want to make sure that everybody gets a chance to ask
questions of our witnesses, so at this point I would like to
recognize Mr. Swalwell for five minutes.
Mr. Swalwell. Thank you, Chairman Lummis. And I did want to
go back to--as I mentioned in my opening remarks, I was
interested by the President's challenge last night when he
referred to how we can cut in half our energy consumption in
our homes and our businesses. And before coming to Congress, I
was a local city councilman and I worked very closely in local
economic development projects. And I know that many commercial
buildings--that the business owners did want to take measures
to make their buildings more energy efficient so they could
reduce their own costs and also help make the earth more
healthy and our country less dependent on foreign sources of
oil. But it would always have to pencil out. It would always
have to make sense financially. And often times, not just in my
district, but across the country, I have heard that commercial
buildings and even homeowners have had a tough time connecting
to the grid and working with public utilities.
In the United States there are approximately 5 million
commercial buildings, approximately 72 billion square feet of
commercial buildings. And commercial buildings consume about 19
percent of all energy in the United States. So my first
question--and I will ask Mr. Sieminski--is there an opportunity
for us to have commercial buildings working better with public
utilities to connect to the grid where we can install clean
energy-type technology on these buildings to make them more
energy efficient, reduce their consumption, and also create
more made-in-America jobs? So how do we approach that
challenge? Is it something we should be considering as a
national energy policy rather than region-by-region, state-by-
state if our President is issuing sort of this national
challenge?
Mr. Sieminski. I think there are lots of opportunities in
the building sector for improvements in energy efficiency. And
I like to think of it that way because it is something that
consumers can do for themselves in terms of saving money on
their energy purchases. The opportunities for improvements in
the efficiency of heating and air-conditioning equipment is
something that EIA has tried to build into our forecasts.
Mr. Swalwell, we have a number of surveys that we do and
EIA is the only group that is seriously undertaking to survey
commercial buildings, residential buildings, and manufacturing
facilities for their energy use. The Commercial Building Energy
Survey that we are working on right now, and will be sending
people out into the field in the next few months, will provide
a baseline to be able to answer some of these questions that
you have raised.
It is a rather expensive part of what EIA's budget
represents, but it is supported by numerous people in the
private sector, including electric utilities and the commercial
building owners themselves because they like to see how their
numbers stack up against the averages. I think there are
tremendous opportunities. Not just EIA but virtually every
other research group that has ever looked at the opportunities
finds that now that we have moved as rapidly as we have on
light-duty vehicles, the next best place to find energy
efficiency savings in the United States is likely in the
buildings area.
Mr. Swalwell. Great. And Ms. Jacobson, do you care to weigh
in on this? I bet you could----
Ms. Jacobson. Sure.
Mr. Swalwell. --also inform us.
Ms. Jacobson. Well, first of all, thank you for the
excellent question. And I think data on commercial buildings is
essential. And there is an initiative called the Better
Buildings Initiative, which brings all of the players together,
including utilities, building owners, financiers to come
together to both increase awareness, discuss financing models,
and try to overcome some of the barriers--the split incentives
you are describing--that exist between building owners and
building users.
But I would like to point out that we have had some success
due to increased building codes and standards both at the state
level and federal action as well. ENERGY STAR's certified
commercial building floor space has increased by 137 percent
from 2008 to 2012. And the stringency of building air-
conditioning efficiency standards has increased by 34 percent
since 2005. I mean clearly, there is more that we can do, but
as you have said, there is tremendous potential here. And I
think there is a real partnership between utilities, building
owners, government, and data providers, as well as financiers
to really unlock that potential.
Mr. Swalwell. Great. And I believe not just to make us more
energy efficient, which I think is our primary goal, but also
to create local good-paying jobs in clean energy.
Ms. Jacobson. Well, very much so. When you are talking
about energy efficiency--I know people have used this saying--
but these jobs can't be outsourced----
Mr. Swalwell. Right.
Ms. Jacobson. --and a lot of the equipment is--we have an
innovative edge and the United States on a lot of the building
management technology, a lot of the equipment and significant
insulation that is a manufactured here in the United States. So
I mean the opportunities are abound.
Mr. Swalwell. Great. Thank you.
Chairwoman Lummis. Thank you so much, Ms. Jacobson. And
thank you, Mr. Swalwell.
I will now recognize the gentleman from Texas, Mr. Weber.
Mr. Weber. Thank you, Madam Chair.
Mr. Sieminski, a question for you. You have done a lot of
calculations, a lot of discussion about coal. Has EIA done any
calculations with improving clean coal technology? Have you
factored out going into the future what the reduction in
emmissions from those new clean coal technology plants?
Mr. Sieminski. We have incorporated that into our estimates
of energy use and including the numbers that we do on carbon
dioxide emissions. We try to build in not leapfrogs in
technology but the trends so that we are capturing the likely
continuous improvement that we are seeing in areas like that,
yes, sir.
Mr. Weber. Second question would be, this may be above your
pay grade to use a previous term, have you done any
calculations when the Federal Government invests money in
renewable technology, including, for example, the 500 million I
think it was to Solyndra, what are we getting on a return in
investment? In other words, we are investing a lot of money,
but exactly how much is that increasing solar contributions to
the grid? Have you calculated that out?
Mr. Sieminski. EIA has not done such calculations. I am
sorry.
Mr. Weber. Right. I was afraid you would say that. The
reason I ask is because, obviously, if you have building
owners, and I was encouraged to hear Ms. Jacobson say that we
have an innovative edge in. For example, I am an air-
conditioning contractor, so ENERGY STAR means something to me
in power requirements. I am glad to hear we have an innovative
edge, but I am also mindful that business owners should be able
to take those energy savings and plow them back into another
property, invest in more jobs and into the economy. That kind
of return on investment I would be interested in hearing. I
don't know who to ask. If the money that the Federal Government
is spending in subsidies, what are we getting? How much bang
for the buck? And then we would have to equate that, too, if
private entrepreneurs took that money and reinvested it, it
would mean more purchases of real estate, more jobs in their
local economies. So I think we would want to look at that.
That is just more of a statement than a question. And then
finally for Mr. McNally, I did not see a footnote on the 2003
quote by Richard Smalley. What is that source?
Mr. McNally. Congressman Weber, that is an article he wrote
called the ``Terawatt Challenge.'' And I would be happy to send
that to you. I apologize.
Mr. Weber. Yeah.
Mr. McNally. I should have footnoted that.
Mr. Weber. Yeah.
Mr. McNally. I will send that to you----
Mr. Weber. Would you send that to my office?
Mr. McNally. Yes, sir.
Mr. Weber. Thank you very much.
And I yield back the balance of my time that I don't have.
Chairwoman Lummis. Thank you, Mr. Weber.
I will now recognize the gentleman from Massachusetts, Mr.
Kennedy.
Mr. Kennedy. Thank you, Madam Chair. And to our Committee
Chairman as well, thank you, and our Chairman Emeritus, and the
Ranking Member Mr. Swalwell, thank you for holding this
hearing. To our witnesses, thank you very much for coming to
testify.
To begin, Ms. Jacobson, I was hoping you could just build a
little bit on some of your comments about residential
efficiency that we can build upon. I am from the Northeast. I
lived in an apartment where in the winter I did not pay for
heat. It was heated by the management company. It was so hot
that I would often keep a window open throughout the entire
course of the winter and often had a fan in the window because
it would be about 85 degrees in the apartment. Many apartment
buildings in the Northeast, old buildings, they don't have
insulation. Do you have any idea of how many--the figures about
energy loss that we are losing and how--some strategies, either
state or federal, that we can start to implement that would
help?
Ms. Jacobson. Thank you very much for the question.
Clearly, retrofitting buildings in the residential sector, as
well as you are talking about apartments, are a significant
challenge. In some ways, we are doing a little bit better with
new construction because we can upgrade the codes and
standards. But with the majority of our buildings living 30 to
50 years or more, we have significant challenges to face.
I don't have specific statistics on residential and
efficiency across the board, an aggregate. Perhaps some of the
other panelists would. But I can get it for you. I point you to
one of our board Members, the Alliance to Save Energy, but I
will take it upon myself to get you whatever data is available,
either from the Alliance to Save Energy or the American Council
on Energy Efficiency. They are really the key resources on data
for energy efficiency.
But I think your experience is so telling and I appreciate
you mentioning it because that is kind of the real world
reality that we are in. But you know, with more public
awareness and by innovative actions by states through revolving
funds to help support residential energy efficiency or the PACE
program you might have heard of, which is facing some
challenges, but those types of innovative models will get in
front of more customers to help retrofit homes.
Mr. Kennedy. I appreciate that.
Mr. McNally, I had a quick question for you as well, sir. I
represent a city called Fall River in southeastern
Massachusetts, and there is a company there called TPI
Composites that manufactures wind turbines along with other
military and transportation equipment in their product lines. I
spoke just last week with the CEO of TPI Composites and he
expressed obviously the importance of the production tax credit
for their business model and for facilities that continue to
invest in wind energy despite loaded upfront costs that should
thus bring an additional element of diversification to our
American energy portfolio.
So if we know that clean energy technology manufacturing
can create high-quality jobs in Fall River, and we know that
minimizing uncertainty about our federal investment can create
a dependable landscape that encourages further private sector
investment in these technologies, but we also recognize that
renewable energy alternatives like wind are not yet priced
competitive with other existing technologies and traditional
fossil fuels, what, then, would your path forward be that you
suggest? You testified a bit about the market-based incentives
and the need to make energy security policy a priority. While
fossil fuels are deeply entwined in our current way of life and
our standard of living, federal investments like the production
tax credit are industry-wide, that you are not picking
individual winners and losers, I think have a value for adding
renewables and other clean energy sources to the mix. I would
appreciate your comments on this if you can, sir.
Mr. McNally. Thank you, Congressman Kennedy, for that
question. As I said in my remarks, in my view in general, and
particularly during these times of stretched fiscal resources
and difficult budget questions and constraints, the proper role
for Federal Government is in the basic research area. I would
rather shut down the production tax credit, which is really
helping mature but uneconomic renewable energies, and take some
of that money and maybe hire some more scientists to figure out
how to produce batteries that can store and discharge
electricity better than they can now with the idea being if
they can figure that out, they may then--those findings can
translate down into the commercial sector that are without a
production tax credit or distorting mechanisms of any kind.
Industry can take and deploy that.
So again, I guess I would say in general but certainly in
stretched budget times, let us focus the government's role in
basic research--Ms. Jacobson said and I agree with very much--
stable, long-term investments in basic research would be my
preference, sir.
Mr. Kennedy. Thank you. I yield back.
Chairwoman Lummis. Thank you.
Our next questioner is the gentleman from Texas, Mr. Hall.
Mr. Hall. And I do thank you, Madam Chairman.
The hearing today is entitled ``American Energy Outlook,''
and I think that is one of the most important outlooks, besides
prayer, energy is probably the most important word in the
dictionary. The youngsters that are graduating from high school
and going into college, they will be affected by how we treat
and how we work with the energy people and people who are
producing energy. Being from Texas, of course, I am sure Mr.
Weber is a supporter of fossil fuels and coal and all of the
above. And I am pleased to see young Kennedy on this Committee
because of the Kennedy family, not just a famous family, but
supporters of energy and invested in energy for our country, so
I think he will be a a very good Member of this Committee.
We ought to be selling energy and not buying energy. We
have tried for years to drill on ANWR. We have certain groups
here that any time you talk about drilling on ANWR they say oh,
don't drill on little ANWR. We want to drill on about about
2,000 acres up there out of 19 million acres. I doubt seriously
that that would ruin little ANWR. And we have had previous
bills, 22 bills at one time, that we sent to the Senate to
drill ANWR particularly, and one got through. And President
Clinton had some reason--maybe a good reason--to veto that
particular bill.
But the other bills never got through because we had a
person running the Senate then who was a Republican, and
Republicans had charge of the House, Senate, and the President,
and he felt like a businessman. And when they would pull up one
of those energy bills, some of those fellows would get up over
there to filibuster and he would pull it down because he didn't
want to waste the Senate's time. And those 20 bills languishing
over there, any of the 20 could help us for 60 years of energy
from there.
Those are the things that I am interested in. And I guess I
might ask Ms. Jacobson. There have been a lot of actions by the
EPA onto their efforts to regulate or restrain production from
hydraulic fracturing, and I would just like to ask you, in
their effort to regulate or restrain production from hydraulic
fracturing impact, does that impact not just energy production
but our economy as a whole?
Ms. Jacobson. Chairman Emeritus Hall, thank you very much
for the thoughtful question. First, I would say our coalition,
which is natural gas, renewable energy, and energy efficiency,
believes in the abundancy and the need to tap into this
unprecedented development we have had with natural gas in this
country. And the key to that is public confidence and making
sure that we have the regulatory frameworks in place so it is
done in an environmentally sound fashion. And we believe that
is very possible.
I think what is interesting is what is happening at the
state level. There is discussion over at the Senate Energy
Committee yesterday from the Governor of Colorado about the
models that they are taking into account with regards to
regulation of shale production.
So with regard to the Environmental Protection Agency or a
state or other federal actions, I think we need to be careful
and cautious and get the right data and make sure that the
American public is confident so we can benefit from all the
benefits that shale development can provide us.
Mr. Hall. Yeah, their decisions ought to be a little more
game on scientific background more so we think then they have
done. The next gentleman to speak, Mr. Rohrabacher, is very
knowledgeable on fracturing. And we have had a lot of hearings
along that line. And I think that we need desperately, and I
was here when we passed the Clean Air and Clean Water bills,
and we kind of didn't create the EPA but I was in favor of the
EPA being there. And being from Texas and of the oil and gas
industry, I thought they needed some regulation and some
support. And I thought the EPA was fine. I don't think they are
so fine today.
And the election didn't come out just exactly like I had
hoped it would, but we might be doing something about that.
But I thank all three of you and I know you know the
importance of energy. It is a national defense issue for us.
And I thank you for your answer. I might have one other
question I want to ask you if I can find it here for Mr.
McNally.
Let me ask you this. In the last ten years, U.S. energy
outlook has been transformed from what some refer to as an
energy renaissance or revolution. Can you explain how various
technological developments and advancements such as widespread
adoption of the hydraulic fracturing have revolutionized the
U.S. energy outlook?
Mr. McNally. Thank you, Congressman Hall, for that
question. Yes, I think you put your finger on the main one, and
that is really in innovation and technology and the industry
figuring out in the late 1980s in Texas and Oklahoma how to get
at resources that are vast and that we have known are there.
Now, we have known that there are vast amounts of oil and gas
trapped in rock 10,000 feet below the ground for decades. And
we haven't figured out how to get it.
We have been using hydraulic fracturing some say since the
Civil War throwing dynamite down a hole. The Federal Government
reportedly looked at nuclear explosions underneath the ocean
floor to stimulate wells by fracturing. But the real innovation
came with going after the shale deposits and using hydraulic
fracturing. And that turned what we call resources, which is
the oil that we think is in the ground but we don't know how to
get out, into reserves, producible by our companies. And we are
having continuous improvement and how to frack those wells, how
to do so more efficiently, to go horizontally and in multi-
stages, not just one straw into the ground.
So really, it is a remarkable story of industry progress
with some government involvement mainly at the core, basic
research level we should note. But it is brought to us by the
industry and it has smoothed out our supply curve not only for
natural gas but also for oil to the point where, according to
some forecasts, we will surpass in the near future Saudi Arabia
in production.
Mr. Hall. I thank you. I yield back.
I am sorry, Madam Chairman. I took him over.
Chairwoman Lummis. Thank you both, Mr. McNally and Mr.
Hall.
And I would like to next recognize Mr. Veasey. And Mr.
Veasey, did I pronounce that correctly?
Mr. Veasey. Veasey.
Chairwoman Lummis. Veasey. It is Veasey.
Mr. Veasey. Yes, ma'am.
Chairwoman Lummis. And you are also a gentleman from Texas?
Mr. Veasey. Yes, I am from Texas. Yes.
Chairwoman Lummis. Well----
Mr. Veasey. From almost the same area where Mr. Hall lives.
I am a little bit west.
Chairwoman Lummis. Could you name for our benefit a couple
of communities in your district so we can help----
Mr. Veasey. Yes.
Chairwoman Lummis. --put you in a place?
Mr. Veasey. Yes. I live in Ft. Worth----
Chairwoman Lummis. Okay.
Mr. Veasey. --and I also represent the City of Arlington
and the City of Dallas.
Chairwoman Lummis. Well, you are recognized and welcome.
Mr. Veasey. Thank you very much. I appreciate that, Madam
Chair.
And I wanted to ask Mr. Sieminski specifically about a
concern that I have with the flaring of natural gas. As you
know in the Bakken, they are producing a lot of oil but I also
know they do not have the pipeline capacity and so they are
flaring quite a bit of natural gas. The Texas Railroad
Commission does a really good job in Texas of keeping up with
the number of permits that are given to operators, but I know
in the Eagle Ford in particular and even some in my area, in
the Barnett Shale, that there is some flaring going.
I know you specifically talked a little bit earlier about
the rising cost of natural gas as it goes worldwide
particularly. If the Department of Energy decides to export
liquefied natural gas, or LNG, is there any technology on the
horizon that would make it where we wouldn't have to flare so
much natural gas so we would have more in quantity? I mean I
think that that should be one real environmental concern that
we have, particularly when you start talking about drilling in
remote places like Alaska where there would be a lot of
associated gas produced with oil production that would have to
be flared off.
Mr. Sieminski. Congressman Veasey, thank you very much.
Just to put some numbers on the flaring, although there is a
significant amount of flaring taking place in the Bakken
formation right now, I think the latest statistics from North
Dakota suggest that it is actually coming down. It had been as
high as 35 or 36 percent of the gas. It is now down slightly
below 30 percent. This is usually indicative of infrastructure
build-out needed in a new area. And the gas is associated with
the oil production in North Dakota. I suspect that over time
the pipeline networks will be built out in North Dakota and
those numbers will come down even further.
Although it seems like a lot of gas when you just look at
the percentage in North Dakota, the amount in North Dakota is
less than 1/3 of one percent, so less than 1/3 of one percent
of total U.S. gas production. So it is actually a very small
number. And you are correct, sir, that there actually has been
some flaring in the Eagle Ford essentially for the same reason.
Eagle Ford is in a part of Texas that is not heavily populated.
It does not have the same pipeline infrastructure that you see
in other parts of Texas. And it will just take a little bit of
time--companies are working on that on the technology side.
There has been an effort to look into small LNG liquefaction
facilities that might be put in place in some of these remote
areas where you could turn that natural gas that is being
flared into a liquid, which would be easier to transport.
So I think that there is a lot of thinking going on in the
industry. And although those satellite pictures showing the sky
at night and the amount of light being given off in some of
these new producing areas seem startling, it is I think a
relatively small proportion. It is fairly normal in the course
of development in new areas.
Very quickly, in Alaska there is a lot of gas that comes up
in Alaska with the oil, but it is re-injected back into the
formation. And so there is very little flaring taking place in
Alaska.
Mr. Veasey. And one more question about the rising prices,
particularly if we end up exporting LNG. I know that some of
our manufacturers and some of our plants of that are dependent
upon the use of natural gas are concerned about those rising
prices as they built them into their business models. Where do
you see the appetite, particularly in Europe, for the
production of natural gas, particularly as it pertains to
fracturing and some of the other environmental things that we
have talked about earlier? Because, as you know, particularly
in my area in the Barnett Shale to where, you know, I mean I
think that we have a gas lease on one of our properties
literally in a single family setting I have a frack pond,
pipelines like in the middle of Ft. Worth, you know, 700,000
people.
What do you see as far as the future is concerned, Europe's
appetite for developing any formations? Because I would think
that would be interesting. I don't know if they are even to a
certain extent--can sometimes be even more environmentally
sensitive to things than we are.
Mr. Sieminski. There are a number of countries in Europe
that are taking hydraulic fracturing very seriously. Poland,
for example, Romania, the Ukraine, there is activity underway
by industry there. The main thing that makes U.S. LNG exports
so attractive to some companies and consumers in Europe, and in
Asia as well, is that in most of the rest of the world, LNG
prices are matched one-for-one to oil prices. In the United
States it is a separate market. The models that we have run at
EIA do incorporate the existing already-permitted facility in
Louisiana that is going to export LNG, and we think that
exports of LNG from the West Coast of Canada and possibly even
Alaska into Asia would make economic sense, but there are
policy issues, obviously, involved in making that decision.
Chairwoman Lummis. Thank you, Mr. Veasey.
I would like to now acknowledge--since the Bakken came up--
the gentleman from North Dakota, Mr. Cramer.
Mr. Cramer. Thank you, Madam Chair, and Ranking Member. And
thank you to all of the witnesses. This is quite enlightening
and it has been hard for me to sit here and not answer half of
these questions, quite honestly. But your answer was right on
with regard to----
Mr. Sieminski. I would welcome your testimony.
Mr. Cramer. No, I spent the last ten years as a public
utilities regulator in North Dakota prior to coming to
Congress, and one of the things that oftentimes gets overlooked
is that while North Dakota is in fact the second-leading
producer of oil, largest producer of gas, we mine 30 million
tons of coal, generate about 5,000 megawatts of electricity
with that coal, export it to many States and provinces, we also
enjoyed the lowest natural gas residential retail rates in the
country.
And I love, by the way, Mr. Sieminski, your service. I use
it a lot. I always did use it a lot. And I am looking right now
at the average retail price of electricity to ultimate customer
users by end-use sector--that is one of my more common tables
that I look up--and see that North Dakota continues to be among
the three for lowest-priced electricity States in the country.
And so when I hear, frankly, Ms. Jacobson, somebody talk
about leveling the playing field for all forms of energy, what
I really hear is manipulating the playing field to create an
advantage where one doesn't exist when the playing field is
level. And so I would be interested in public policy thoughts
as to how we would properly incent the marketplace. My
definition, of course, properly might not be the same as yours.
But it truly creates the level as opposed to manipulation.
The other thing, and then I will let Mr. Sieminski perhaps
answer this question first and then we can get into the other
stuff, but with regard to electricity prices and the use of the
shift by policy from coal to natural gas, realizing that even
in my short term on the Public Utilities Commission in North
Dakota, the Public Service Commission, that I saw gas at $12
and I saw gas at $2 and everywhere in between. Do we run the
risk of tightening this demand-and-supply curve of natural gas
even in this abundance to a point where we make ourselves
dependent on a fuel source that is so volatile? How much of
that do you consider when you consider the price and the
outlook going forward?
Mr. Sieminski. We try to take that into account by looking
at the reserve base and ultimate resource base for the
different fuels. We are fairly confident that the resource base
for natural gas will allow for continuing increases in
production in the United States, all the way out to 2040 with
shale gas currently accounting for about one third of U.S.
production reaching half of U.S. production by 2040. We think
that the coal resource base is also pretty strong, and although
the deepest research on that was done quite some time ago, one
of the reasons that it hasn't been updated is because the
resource base is actually so vast that it didn't make as much
sense to concentrate on that.
On the oil side, EIA does believe that there are some
questions--and we do have tight oil production rising fairly
sharply, reaching almost 8 million barrels a day by 2014,
probably continuing to increase into 2020, but possibly coming
back down again. What we would love to have, sir, is another
two or three years worth of that on the oil side comparable to
what we now have on the gas side to let us make a better
judgment about the extent of the resource base therefore tight
oil.
Mr. Cramer. Thank you. You do a great job by the way.
Mr. Sieminski. Thank you.
Mr. Cramer. I appreciate the data.
Mr. Sieminski. And we would be happy to work with your
staff to show you some of the newer things that we are doing,
including state mapping where any of you can go down to your
Congressional District level and look at the energy
infrastructure, including resources, power plant facilities,
pipelines, and electric transmission lines and so on. It is a
very useful thing, I think, for the entire Congress.
Mr. Cramer. I want to allow Ms. Jacobson to respond to my
comments earlier.
Ms. Jacobsen. Mr. Cramer, thank you very much. And my
organization supports a diverse energy mix, and all-of-the-
above strategy. Just let me start with that. But as you know
very well, given your experiences, there are a range of
decisions that go into energy procurement. Some of them
interact with state and federal policy, some deal with
technology, some deal with price. And clearly, the credits that
have been given for energy efficiency or various renewable
energy sources are attempts to lower the cost and make more
competitive these resources for a range of reasons, whether
they be economic, environmental, or technology innovation-
related.
As you know as well, very well, looking at the history of
government involvement in energy policy, it is a century deep.
And I think that when we look at energy efficiency or renewable
energy, or energy storage, or we could go down the line. There
are times when strategic investments, whether it be on
incentives, for purchase, or lowering the cost for consumers
and businesses are in play, or opportunities to entice the
private sector through new investments that they might make. I
mean I think what we are looking for is balance and ensuring
that all these technologies will be available in the future.
So though certain incentives may be temporary versus
permanent, we think all of them should be looked at critically
to make sure that they are leveraging private sector
investment, that they make sense for the public good, and that
they are driving the objectives of this Committee and other
Members of Congress.
Mr. Cramer. Thank you. I yield back.
Chairwoman Lummis. Thank you, Ms. Jacobson. Thank you, Mr.
Cramer.
We will go next to Mr. Lipinski. Before we do, Mr. Swalwell
has had to leave for a Homeland Security meeting. He thanks the
witnesses for your time and expertise this morning.
So next, I will recognize the gentleman from Illinois, Mr.
Lipinski.
Mr. Lipinski. Thank you, Chairwoman Lummis. Thank you for
holding this hearing today. Obviously, it is critical to get
this overview right now and I look forward to the work that we
are going to be doing on the Committee on this issue.
I want to start out with a question for Mr. Sieminski. EIA
projections have nuclear production increasing by--increasing
15 percent by 2025, and by 2040, production is still projected
to be up 14 percent. Now, these projections are made despite
the relatively few orders for expansions of existing nuclear
plants. I know that nuclear plant operations have made great
improvements in the past to keep plants operating more
efficiently and producing more electricity. But I want to ask,
what is the source of these increases in projections? Is EIA
projecting that most of these plants will have their operating
licenses extended and that efficiency gains will continue? Or
are these projected increases due to new production possibly
from next-generation technologies?
Mr. Sieminski. Thank you, Congressman Lipinski. We have a
couple of new power plants built into the projections. There
are several under construction right now. In addition to that,
we are assuming some further efficiency gains in the industry.
They call it up-rating where you get more power out of the
individual plants. And on--the reason that the numbers do begin
to trail off at the end of the time is that we are assuming
that there will be some retirements, but in general, I think we
have built in extensions of licenses in a number of cases for
relicensing.
The overall numbers that we have for the type of fuels used
in generating electricity, the fastest growth that we see is in
solar, percentagewise, as well as wind. The biggest from a
standpoint of not the annual percent increases but the absolute
numbers is in natural gas, and that comes back more to the
continuing strong price competition that we see between natural
gas and coal.
Mr. Lipinski. Okay. I wanted to continue on a little bit on
nuclear technology and how much might be gained from additional
R&D into our nuclear energy. I just wanted to ask Mr. Sieminski
but if you have additional comments here also. Do you think
advanced concepts like small modular reactors and fast breeder
reactors could change the conversation about nuclear to make it
safer and easier to build while also helping to solve the waste
issue? Or at a minimum, could it help extend the life of
existing reactors with greater safety? Because what we are
focused on here in this Committee is the R&D. So what do you
think we can get from nuclear R&D? And what is the future for
nuclear?
Mr. Sieminski. I would be happy to come back to you for the
record and provide you some background on the assumptions that
we are making in that area.
In general, as I said, our overall forecast generally
assumes trend improvement and technologies but not major
breakthroughs. We try not to predict changes in regulation,
legislation, or huge changes in technology. The role that
technology has played recently has been very strong. In Mr.
Swalwell's district, the labs--Lawrence Livermore and Sandia--
as Mr. McNally said earlier, these labs played a strong role in
providing research, particularly in 3-D seismic technology and
in horizontal drilling that was instrumental in the Barnett
Shale breakthroughs that took place back in the 1990s.
Interestingly, there was also a Section 29 tax credit for
shale gas--type gas at that time that also spurred things. I
think that one of the more interesting aspects of that tax
credit is is that it expired and it was allowed to expire so
that we got the benefits of the R&D, little help from a tax
credit that ultimately was no longer necessary once the
industry was on its feet.
Mr. Lipinski. My time is almost up. Does anyone else have
any comments on nuclear R&D? All right. Thank you very much.
I yield back.
Chairwoman Lummis. Well, thank you, Mr. Lipinski.
And I would note that Mr. Lipinski, Mr. Rohrabacher, and
Ms. Lummis all have an interest in this issue. And so we may
want to pursue that further with you, the notion of modular
nuclear reactors, small nuclear reactors, very small-scale
electricity production, in Texas, too. So I think that you are
going to find that there is a spark on this Committee for that
subject.
Thank you.
Thanks, Mr. Lipinski.
Next, we will go to Mr. Hultgren. I might just for planning
purposes tell you that, Mr. Hultgren, you are next. Mr.
Rohrabacher, who has joined us as a Member of the Full
Committee, will then have an opportunity to ask some questions.
I want to recognize that Mr. Veasey has joined us in a capacity
as Ranking Member. And then after that, Chairman Smith has
asked me to ask a question on his behalf.
Then, unless there is a burning desire on anyone's behalf
to have a second round, which would be sort of an abbreviated,
one-question-per-person round, if that is not the case, we will
conclude the hearing. But I do want to put out the opportunity
for Members to ask a second question. That preparation having
been laid, I now yield to the gentleman from Illinois, Mr.
Hultgren.
Mr. Hultgren. Thank you, Madam Chair. Thank you all for
being here as well.
Our national competitiveness, our investment in basic
research, and the critical role that each plays in enhancing
the other, as well as the energy security of our Nation are
very important to me and my constituents in Illinois.
Mr. McNally, you have said in your testimony that too
often, leaders and observers predict or prescribe unachievable
targets when it comes to the energy future in this country. In
his State of the Union address last night, President Obama made
frequent references to research and development, something I
find ironic coming from the President that cut high-energy
physics, nuclear physics, manned spaceflight, and planetary
science. I wondered, Mr. McNally, in your opinion, is the
Administration's focus on cutting basic research in order to
subsidize favorable companies in the alternative energy market
going to speed up or delay our eventual adoption of cleaner
technology in the future?
Mr. McNally. Thank you for that question, Congressman
Hultgren. In the interest of bipartisan open-mindedness, let me
say that our energy predictions, our policymakers, are becoming
more realistic. President Nixon kicked things off in 1973 by
predicting we would be oil-import-free by 1980. President
Carter said we would never consume more of a drop than we did
in 1979. We are getting at least a little more realistic in our
productions and prescriptions.
But to your question, no, in my view it is not consistent
with my testimony or my beliefs were we to shut down
investments in basic, core research that then can be deployed
by the private sector in a viable way that adds to wealth and
adds to productivity without continual government support, that
would be a mistake to end those kinds of activities and shift
them towards the type of activities that, again, as I said in
my testimony, there is a long record of failure. So that would
not be my preference, sir.
Mr. Hultgren. Well, I appreciated, as I was stepping out, I
have got another Committee going on at the same time, so I
apologize. Kind of jumping back and forth, but I had heard you
mention a little bit earlier, again, of how important basic
scientific research is and the fear of really undercutting
that, of how that puts us at a disadvantage. The President
seems to think that asking us to spend more money on these
short-term items is really the only way to achieve clean energy
future. He seems to have this sense that we can just buy an
immediate change in our economy. My sense is that it is going
to take maybe 20 years or even longer of long-term, basic
research in the very subjects he is cutting--high energy
physics, nuclear physics--in order to produce a change and
really change our fundamental ability to produce energy in a
cleaner and cheaper way.
Again, Mr. McNally, I wondered if you could talk--what do
you think the best use of limited resources at a time like this
would be in order to best affect that?
Mr. McNally. Well, thank you for the opportunity to respond
to that, Congressman. I wanted to connect a dot. I don't think
I did clearly enough with Representative Kennedy's question.
The reason I thought that we would want to maybe invest in some
research into batteries is because the reason--one of the main
reasons wind is not economical is because you cannot store
electricity. The wind blows in places where we don't need it
and electricity, unlike oil and coal, cannot be stored. So if
we can figure out ways to store and discharge electricity, we
will make all renewable forms of electricity, solar and wind,
more economic. And that is an example, I think, of the
potential benefit of core research.
Another one--and again, my wife calls me Mr. Worst-case-
scenario, so I am not known for flowery predictions about
wonderful transformations, but I will say, as I said in my
testimony, if you ask me what plausible transformative change
is out there that could happen in our lifetimes that could
completely upend in a positive way our energy outlook, and I
would think that is--that we figure out how to get methane
hydrate out of the Earth's crust. Like shale gas and shale oil
of the day, we know it is there. We know the resources are
enormous. Some estimates say there is 6 trillion TCF in the
Gulf of Mexico. That is equal to total proved reserves in the
world, conventional reserves. But we have not figured out yet--
and we and the Japanese and others are working on it and DOE is
doing some good work here--is to get that methane hydrate out
of the crust in a safe way that doesn't create methane burps if
you will and emissions.
So those are the kind of problems that humans can solve. We
don't have to figure out how to make algae go into gasoline. We
know how to use methane. We just have to figure out how to get
it out of the crust. We did it with shale gas and shale oil. I
think we can do it with the government's help in the core basic
research area with methane hydrates.
Mr. Hultgren. My time is winding down, but again, I really
do appreciate each one of you being here. This is an important
discussion to have. I do think, especially at a time like this
where budgets are tight, resources are limited, we have got to
focus where doing the work that only government can do, and I
think that is basic scientific research. We have seen that
industry can step in and apply what is discovered, but there
are certain things that only we can do. So thanks for being
here.
Thank you, Madam Chairwoman. I yield back.
Chairwoman Lummis. Go ahead, Mr. Weber.
Mr. Weber. Well, thank you. In the absence of the
Chairwoman--oh, I see she is back.
I do want to very quickly say, though, Mr. McNally, you can
store direct-current electricity and maybe our tack needs to be
at producing more appliances that actually operate off of DC as
opposed to alternating current AC. But thank you for that.
And Mr. Rohrabacher, the esteemed gentleman from
California, you are recognized.
Mr. Rohrabacher. It seems the lady is away just for a
second and the guys have already taken over. What is going on
here?
Well, first of all, let me suggest that Madam Chairwoman is
absolutely correct when she says that there is a keen interest
in small modular reactors and new types of nuclear power,
approaches to nuclear power. Let me note also that the
Department of Energy is moving forward in building light water
reactors, which is 60-year-old technology as part of their step
forward in the research. I have been disappointed many times in
my 24 years here when government research projects end up
focusing on, because the companies that get involved in that
research make a profit on what they already know rather than
trying to push the envelope. I remember when they tried to get
$500 million from us in research money in order to compete with
the Japanese on high definition TV. And we ended up financing
the development of high definition TV based on analog
technology rather than digital technology. So I mean it is just
examples.
The human genome, which we also with this Committee
financed, I will never forget it was going to take 20 years,
and halfway through it, a private company said look, we can do
this cheaper and we can get this done years in advance. Just
give us the right to own this technology or this approach into
the years that we are going to save it from when the government
when it is going to be done. And it was a big debate about
that.
So I am hoping that if we do provide money for energy
research, it is not for like light water reactors or analog,
that we are literally pushing the envelope. And that is in
terms of our, of course, science that is aimed at breaking new
ground. Applied science and applied research I think that
business could do pretty much on their own. Let us get to that.
First of all, I would like to ask, a few years ago we were
gloom and doom about peak oil and how we are going to be
energy-wise, things are going to get worse and worse. What
about peak oil and gas? Is that just a false alarm?
Mr. Sieminski. Thank you, Congressman.
The problem that I saw as an energy economist, the problem
that I always had with the peak oil hypothesis was that it was
entirely geology-based. The view assumes that the resource base
is completely known, and once you produce half of it that you
inevitably are on a downturn. I think that this Committee
particularly understands that there is a role for both prices
and technology to dramatically change our understanding of the
resource base. And that is what we have seen.
Mr. Rohrabacher. When you talk about price, which is one
thing, we heard it earlier about the importance of efficiency.
Well, assuming that mandates and regulations are what causes
efficiency as compared to price, and when you allow the price
to go up, there is going to be a great deal more efficiency.
People will turn off their lights. Actually, we found that out
in California. If indeed the price of electricity goes up,
again, we go back to market-based solutions. Rather than having
the government step in to try to mandate what direction we go,
quite often, the market-based solutions actually get the job
done better.
Let me ask about fracking now. I understand that the
fracking that has given us so much more energy and thus more
national security, that this is mainly on private land. Has
there been some type of stifling of fracking on public lands?
Mr. Sieminski. There is hydraulic fracturing that takes
place on federal lands. The Bureau of Land Management actually
has issued some rules on hydraulic fracturing and how that
should proceed. For the most case, the vast majority of what we
see geologically as the type of flight oil and shale gas
resource base is on private lands, and I believe that that is
one of the main reasons the bulk of the development so far has
been on private----
Mr. Rohrabacher. But you wouldn't say that it is being
stifled on public land? That is not an accurate charge then?
Mr. Sieminski. That sounds like a policy question and I
think I am going to stay away from policy questions.
If the Chairwoman would allow me 30 seconds, some of the
changes that we are seeing in technology are going to
dramatically shift the public's concept of hydraulic
fracturing. Right now, in Pennsylvania, for example, most of
the water--produced water from hydraulic fracturing is being
recycled and being used again. And the companies involved in
the fracturing activity are finding ways to target the areas
that they fracture so that, rather than fracturing the entire
length of a horizontal wellbore, they are using 3-D seismic
technology to pick where they want to fracture, which then
reduces the amount of water and chemicals and the impacts that
come from hydraulic fracturing. And I think it is technological
breakthroughs like that that offer a tremendous opportunity for
the public to be reassured that hydraulic fracturing can be
done in a sound, safe manner.
Mr. Rohrabacher. Thank you very much, Madam Chairman. And
let me thank the Chairwoman for holding this hearing.
Chairwoman Lummis. Thank you, Mr. Rohrabacher.And Mr. Weber
had a question. Who developed that technology you were just
talking about?
Mr. Sieminski. That technology was developed in the private
sector by a number of the companies active in oil services
activity. A gentleman that I spoke to about the developments
taking place comes from Schlumberger.
Chairwoman Lummis. Does that track with what you recall?
Mr. Weber. It does.
Chairwoman Lummis. All right.
Mr. Weber. Thank you, sir.
Chairwoman Lummis. There is a little company in Wyoming
called Well Dog that also was dropping computers down wellbores
and gathering all kinds of information about whether there were
commercial quantities recoverable in that wellbore, where they
were. And so before they even case the well, they had all kinds
of data. And so these technologies, even in the traditional oil
and gas business, as you have pointed out, are just improving
dramatically every year. So that will be a fun subject for this
Committee to explore further in the months ahead.
I do, with your indulgence, have a question from Chairman
Lamar Smith for Mr. Sieminski. The Energy Information
Administration's 2008 report called ``FederalFinancial
Interventions and Subsidies in Energy Markets 2007'' included
two very useful tables listing federal subsidies by energy
source, as well as the amount of subsidy per unit of energy
produced. Now, this information was not included in the EIA's
updated report in 2011. Chairman Smith would like to request
that EIA update the information contained in both tables and
provide this to the Committee. Can you do this for me, Mr.
Sieminski, so I can pass that information on to the Chairman?
Mr. Sieminski. I understand that we have actually looked
into that. We will come back with--to the best of our ability
with some updates. What we found, Madam Chairman, is that the
assumptions that you have to use to get to the useful
comparable answers on which of our fuels are being subsidized
in one extent or another are extremely complex. But we will
come back to you with some numbers. Thank you.
Chairwoman Lummis. Well, thanks, Mr. Sieminski. And we
expect the information you give us will include appropriate
caveats and an explanation of the complexity of the
calculation. But we would like to see those basic facts on
subsidies and energy production for the Committee.
I would like to close. Mr. Weber, do you have any
additional questions? Okay. This is great. Hey, I want to thank
the witnesses for their valuable testimony, and I want to thank
all the Members for their questions.
Members of the Committee may have additional questions for
you, and we will ask you to respond to those in writing. The
record will remain open for two weeks for additional comments
and written questions from the Members.
With our great thanks, the witnesses are excused and this
hearing is adjourned.
[Whereupon, at 11:40 a.m., the Subcommittee was adjourned.]
Appendix I
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Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by The Honorable Adam Sieminski
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Responses by Mr. Robert McNally
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Responses by Ms. Lisa Jacobson
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