[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
AMERICAN ENERGY SECURITY AND INNOVATION: AN ASSESSMENT OF NORTH
AMERICA'S
ENERGY RESOURCES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 5, 2013
__________
Serial No. 113-1
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi JOHN BARROW, Georgia
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BILL CASSIDY, Louisiana DONNA M. CHRISTENSEN, Virgin
BRETT GUTHRIE, Kentucky Islands
PETE OLSON, Texas KATHY CASTOR, Florida
DAVID B. McKINLEY, West Virginia JOHN P. SARBANES, Maryland
CORY GARDNER, Colorado JERRY McNERNEY, California
MIKE POMPEO, Kansas BRUCE L. BRALEY, Iowa
ADAM KINZINGER, Illinois PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida PAUL TONKO, New York
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
STEVE SCALISE, Louisiana BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois JERRY McNERNEY, California
JOSEPH R. PITTS, Pennsylvania PAUL TONKO, New York
LEE TERRY, Nebraska EDWARD J. MARKEY, Massachusetts
MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York
ROBERT E. LATTA, Ohio GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington LOIS CAPPS, California
BILL CASSIDY, Louisiana MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia DORIS O. MATSUI, California
CORY GARDNER, Colorado DONNA M. CHRISTENSEN, Virgin
MIKE POMPEO, Kansas Islands
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California (ex
FRED UPTON, Michigan (ex officio) officio)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the State of
Kentucky, opening statement.................................... 1
Prepared statement........................................... 3
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 4
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 5
Prepared statement........................................... 6
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. Eliot L. Engel, a Representative in Congress from the State
of New York, prepared statement................................ 180
Witnesses
Adam Sieminski, Administrator, U.S. Energy Information
Administration................................................. 9
Prepared statement........................................... 12
Answers to submitted questions............................... 189
Daniel Yergin, Vice Chairman, IHS................................ 34
Prepared statement........................................... 37
Jennifer Morgan, Director, Climate and Energy Program, World
Resources Institute............................................ 45
Prepared statement........................................... 47
Answers to submitted questions............................... 193
Mary J. Hutzler, Distinguished Senior Fellow, Institute for
Energy Research................................................ 78
Prepared statement........................................... 80
E. Harry Vidas, Vice President, ICF International................ 115
Prepared statement........................................... 117
Submitted Material
Map entitled, ``Lower 48 oil and gas shale plays and federal
lands,'' by EIA, submitted by Mr. Doyle........................ 167
IHS The Energy Daily, Friday, January 25, 2013, submitted by Mr.
Pompeo......................................................... 181
Article entitled, ``Windmills Overload East Europe's Grid Risking
Blackout: Energy,'' Bloomberg, October 25, 2012, submitted by
Mr. Pompeo..................................................... 185
Statement of the National Petroleum Council, submitted by Mr.
Whitfield...................................................... 187
AMERICAN ENERGY SECURITY AND INNOVATION: AN ASSESSMENT OF NORTH
AMERICA'S ENERGY RESOURCES
----------
TUESDAY, FEBRUARY 5, 2013
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:08 a.m., in
room 2322 of the Rayburn House Office Building, the Honorable
Ed Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Scalise,
Shimkus, Pitts, Terry, Burgess, Latta, Cassidy, Olson,
McKinley, Gardner, Pompeo, Kinzinger, Griffith, Barton, Upton
(ex officio), Rush, Tonko, Markey, Engel, Green, Capps, Doyle,
Barrow, Matsui, Christensen, Castor, and Waxman (ex officio).
Staff present: Nick Abraham, Legislative Clerk; Gary
Andres, Staff Director; Charlotte Baker, Press Secretary; Mike
Bloomquist, General Counsel; Sean Bonyun, Communications
Director; Matt Bravo, Professional Staff Member; Allison
Busbee, Policy Coordinator, Energy and Power; Patrick Currier,
Counsel, Energy and Power; Tom Hassenboehler, Chief Counsel,
Energy and Power; Heidi King, Chief Economist; Ben Lieberman,
Counsel, Energy and Power; Jason Knox, Counsel, Energy and
Power; David McCarthy, Chief Counsel, Environment/Economy; Gib
Mullan, Chief Counsel, Commerce, Manufacturing, and Trade; Mary
Neumayr, Senior Energy Counsel; Andrew Powaleny, Deputy Press
Secretary; Krista Rosenthall, Counsel to Chairman Emeritus;
Chris Sarley, Policy Coordinator, Environment and Economy; Phil
Barnett, Democratic Staff Director; Alison Cassady, Democratic
Senior Professional Staff Member; Greg Dotson, Democratic
Energy and Environment Staff Director; Kristina Friedman, EPA
Detailee; Caitlin Haberman, Democratic Policy Analyst; and
Alexandra Teitz, Democrat Senior Counsel, Energy and
Environment.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF KENTUCKY
Mr. Whitfield. I would like to call this hearing to order
this morning, and I certainly want to welcome our panel of
witnesses and also I want to welcome all the members back on
the subcommittee. I look forward to another 2 years with the
ranking member, Mr. Rush. And also, we are really excited to
have three new members on the Republican side joining our
subcommittee for the first time, Mr. Latta of Ohio and Mr.
Cassidy of Louisiana and also Mr. Kinzinger of Illinois. We are
delighted that they are on this subcommittee and look forward
to working with them on important issues facing our Nation in
the energy sector as well as all the members of the
subcommittee, Democrat and Republican.
The title of today's hearing is ``American Energy Security
and Innovation,'' and we are going to focus on an assessment of
North America's energy resources. I think all of us agree that
we have many problems facing our country today but one of the
primary ones that we have is a sluggish economy and we want to
be sure that we take every action possible to stimulate the
economy and create more jobs. Certainly, we are very much aware
in the last quarter our GDP decreased by .1 percent. Our
unemployment has ticked up from 7.8 to 7.9 percent, and so we
all face this challenge of adopting policies and taking actions
that can help stimulate the economy.
Certainly, one of the primary factors that affects the
economy is energy policy, and certainly there are other factors
as well but that plays a vital role. I was reminded as I read
the testimony last night that it wasn't too many years ago when
people throughout the country, experts and otherwise, were
talking about the United States fossil fuels, for example,
their resources were being depleted. We were running out of
oil, we were running out of natural gas and we were going to
have to be importing more. As a matter of fact, in January
2007, a CEO of one of our largest utility companies made the
comment that we were running out of natural gas, production was
declining and demand growing so he expected that imports would
go from 3 percent of our national needs to 24 percent in 2020.
And then of course, we know what has happened. We have had all
sorts of new discoveries--the Bakken field, the Eagle Ford,
developments in Colorado--and most of these shale fields have
been discovered on private lands, and even though the number of
permits on public lands has gone down, the production on
private lands has increased dramatically.
So this is a real game changer, the possibility of a game
changer in America. We have heard the term for many, many
years, we have the opportunity to be energy independent, and
that is actually the reality today, and I tell you what, people
around the world are focused on it too because some of our
witnesses today attended the World Economic Forum in Davos, and
we know that many Europeans are expressing great concern about
the abundance of energy that we have in America and their
ability to compete in the global marketplace because their
energy costs are going up in Europe and we have the opportunity
to decrease our energy costs because of this abundance of
fossil fuels that we have.
Now, we all recognize that we have renewable that can play
a role as well, but I am not going to be an alarmist about the
increased use of fossil fuel because our carbon dioxide
emissions today are lower than they have been in America in 20
years, which shows that the marketplace can continue to play a
vital role, our expertise in technology continues to improve
and so in oil, in natural gas and in coal, we have abundant
resources that can meet the needs of this country on the
electricity side and the transportation side for years and
years to come.
So we have a unique opportunity and the policies that we
adopt at the government level will determine whether or not we
are going to be successful in America, and some of the
policies, there is a lot of disagreement on this committee
about aggressive EPA should be. I was reading some court
decisions over the last couple of weeks. There were a total of
eight of them in which the court language was very strong in
chastising EPA for being overly aggressive and exceeding their
legal authority, and yet they have had good policies as well
and America does not have to take a back seat to anyone, to any
country for our enforcement of environmental laws. But our
objective is, we want a balanced approach. We don't want to be
an alarmist on climate change, for example, but we want to
protect our environment and we want to fully explore the
natural resources that we have which can go a long way toward
stimulating our economy and creating jobs for Americans.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
Today, we are going to kick off the subcommittee's
activities, and we are going to do so with a hearing on what
many of us consider to be the most significant energy story to
emerge in a long time--the potential to truly be more energy
secure as a nation. We have long known that we possess an
abundance of coal, but the news on oil and natural gas has been
a very pleasant surprise.
We have seen increases in domestic oil production since
2007 and natural gas production since 2006, according to the
Energy Information Administration. And EIA predicts that these
upward trends will continue for years to come.
At the same time, Canadian oil production is growing so
fast that we will need the Keystone XL pipeline expansion
project to bring the additional output to American refineries
in the Midwest and Gulf Coast.
In fact, the news is so promising that some analysts are
talking about the possibility of achieving North American
energy independence by the end of the decade.
Of course, experts may disagree as to just how much energy
potential is out there, but none would have claimed just a few
years ago that our nation would reverse course and have the
potential to become a true global energy supplier and
powerhouse. A quantitative assessment of the resource base is
the topic of today's hearing and what we will hear today shows
how the impacts are profound and only beginning to be
understood.
I might add that we are seeing a truly dramatic shift away
from long-held beliefs about domestic oil and natural gas
supplies. So much of our existing legislation is rooted in the
assumption of domestic energy scarcity, not energy abundance.
Needless to say, a wholesale rethinking of energy policy is in
order, and today's hearing is the first step in that process.
This domestic energy wealth brings with it many issues that
will need to be addressed by this subcommittee in the months
and years ahead. After all, an abundance of energy alone means
little without the right policies in place. Just look at the
nation's abundance of coal, which in my view is being
squandered thanks to a long and growing list of anti-coal
regulations from the EPA.
As we will soon hear from one of our witnesses, Mary
Hutzler of the Institute for Energy Research, America possesses
nearly half of the entire world's coal reserves. This is enough
coal to continue its use at current rates for 500 years. We
should be making good use of this gift instead of strangling it
in red tape.
We want policies that enable our resources to be utilized
for the benefit the American people. If we do this right, we
can lower energy prices, create jobs, and strengthen national
security.
There will be issues related to access, issues related to
infrastructure, and issues related to export, among other
things that will need to be sorted out. But today, we will
focus on the threshold question of how much potential is out
there and how this knowledge can help shape the difficult, but
remarkable choices we will have to make as a country on how
best to use it all.
This includes ensuring a diverse mix of our resources:
coal, oil, gas, and renewables, continue to power America. But
these and other policy considerations will be the subject of
future hearings. We are pleased to welcome the EIA and all of
our witnesses today.
The good news is that a future of plentiful, affordable,
and reliable supplies of North American energy is no longer
just a dream. With today's effort to gain an accurate
assessment of the resource base, we are taking the first step
in what I hope will be a bipartisan initiative to help turn
that dream into a reality.
# # #
Mr. Whitfield. With that, at this time I would like to
recognize the gentleman from Illinois, Mr. Rush, for 5 minutes.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I certainly want to thank you, Mr. Chairman, and
Mr. Chairman, I also want to join you in welcoming all the new
members of the subcommittee and those who are returning, and I
want to especially welcome the new members on the Democratic
side, Mr. McNerney, Mr. Tom Cole, and Mr. Barrow; Ms. Matsui
and Ms. Christensen to this subcommittee.
Mr. Chairman, I want to thank you for holding today's
hearing assessing North America's energy resources. As we begin
the subcommittee's work for the 113th Congress, I would submit
that it is critical for us as policymakers to understand the
changing landscape of our Nation's energy supplies, not only as
we move away from policies guided by scarcity but also so that
we can develop a comprehensive energy plan for moving this
Nation forward.
This subcommittee needs to get down to the serious business
of enacting an energy blueprint that will move this country
towards a truly all-of-the-above strategy that will follow four
basic principles: one, to provide safe, reliable and affordable
energy to all Americans; two, to provide additional jobs and
economic opportunities to all segments of our population;
three, a plan that will address the dire consequences of
climate change that scientists have been warning us about for
years now and which we have been seeing more and more firsthand
evidence of across this Nation; and fourth, to set a path that
would help us become self-sufficient and energy independent
over the next few decades.
Mr. Chairman, today we will hear from our expert witnesses
that domestic crude oil production has increased significantly
over the past few years with the EIA reporting that U.S. crude
oil production has increased from 5.1 million barrels per day
in 2007 to 6.4 million barrels per day in 2012, the highest
level since 1997. The EIA reports that in 2005, the United
States imported 60 percent of the petroleum it consumed, and by
2012, that number had dropped to about 41 percent, the lowest
level in decades. This decline can be attributed primarily to
increased domestic oil production, the additional use of
biofuels as well as the adoption of higher fuel efficiency
standards for vehicles. The EIA also projects that the United
States will reduce its reliance on imported oil to less than 30
percent of consumption by 2035, and U.S. natural gas production
will increase by 44 percent by 2040 due primarily to the
projected growth in shale gas production.
However, Mr. Chairman, in order to reach all the necessary
objectives of providing reliable energy, creating new jobs,
addressing climate change and also becoming energy independent,
it is imperative for this subcommittee to also promote and to
encourage renewable energy resources. The NREL estimates that
we could supply 80 percent of total U.S. electricity generation
from renewable energy generation through technologies that are
commercially available by the year 2005.
Mr. Chairman, I welcome today's hearing, and we move
legislatively, I will urge this subcommittee to promote a truly
all-of-the-above energy policy that includes renewables and
clean energy sources as well as traditional carbon-intensive
fossil fuels before the time is too late, Mr. Chairman, too
late to act.
I thank you, and I really look forward to hearing from
today's witnesses and I yield back the balance of my time.
Mr. Whitfield. Thank you, Mr. Rush. We appreciate that
opening statement.
At this time I recognize the chairman of the full
committee, the gentleman from Michigan, Mr. Upton, for 5
minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman.
Certainly, this hearing is a welcome one to examine the
positive developments resulting from advancements in innovation
and technology, the game-changing potential for North American
energy independence. What was once believed to be unthinkable
is certainly now within our grasp.
For 3 decades, 30 years, the American people have been told
that we are a Nation of declining resources at the mercy of
OPEC. The story was nearly as gloomy with natural gas with
forecasts of dwindling domestic supplies, higher prices, and
rising imports from the Middle East. In fact, in this
committee, many may remember when we crafted a new title in the
Energy Policy Act of 2005 to facilitate what we thought would
be the new norm: pending reliance on imported gas from
geopolitically unstable regions of the world, to add to our
growing reliance on OPEC oil. What a bad thing.
But thanks to American ingenuity and advanced technologies,
the trends in domestic oil and natural gas production have in
fact been turned upside down. In fact, the United States is now
the world's leading producer of natural gas, and the IEA is
predicting that by 2020, U.S. oil production will exceed Saudi
Arabia. 2020, let me repeat that, we are going to exceed the
production in Saudi Arabia.
Our overall energy landscape has changed dramatically in
just a short period of time, and it is not only rewriting the
economic outlook that we have as a Nation, but also beginning
to change the geopolitical nature of global energy economics.
Today, this subcommittee is launching a series of hearings
on energy security and innovation to hear from experts who are
working with the current realities. It is up to us to ensure
that our federal laws are not continuing to introduce roadblock
after roadblock to enhanced energy security. We have got to
remain steadfast in our support for efforts to improve the
infrastructure necessary to maximize use of these resources,
including the Keystone XL pipeline. These issues are too
important for our Nation to be looked at in a vacuum, and if we
don't take advantage of our energy abundance, other nations are
eagerly waiting to step in and use North American energy to
fuel their own growth.
The benefits of our emerging energy abundance are many,
boosting our economy and creating jobs across the nation, a
bright spot in the economic downturn. We have got to build upon
that progress. Once we have a more accurate sense of North
America's energy potential, we can start the process of
ensuring we have the proper vision for the future.
I yield the balance of my time to--anybody? Mr. Barton.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Today's hearing is a welcome one to examine the positive
developments resulting from advancements in innovation and
technology--the game changing potential for North American
energy independence. What was once believed to be unthinkable
is now within our grasp.
For over 3 decades, the American people have been told that
we are a nation of declining resources at the mercy of OPEC.
The story was nearly as gloomy with natural gas--with forecasts
of dwindling domestic supplies, higher prices, and rising
imports from the Middle East. In fact, in this committee, many
may remember when we crafted a title in the Energy Policy Act
of 2005 to facilitate what we thought would be the new norm:
Pending reliance on imported gas from geopolitically unstable
regions of the world, to add to our growing reliance on OPEC
oil.
But thanks to American ingenuity and advanced technologies,
the trends in domestic oil and natural gas production have been
turned upside down. In fact, the U.S. is now the world's
leading producer of natural gas and the IEA is predicting that
by 2020, U.S. oil production will exceed Saudi Arabia's. Let me
repeat that--by 2020, U.S. oil production will exceed Saudi
Arabia. A remarkable turn of events.
Our overall energy landscape has changed dramatically in
just a short period of time, and it is not only rewriting the
economic outlook that we have as a nation, but also beginning
to change the geopoliticalnature of global energy economics.
Today, this subcommittee is launching a series of hearings
on American Energy Security and Innovation to hear from experts
who are working with the current realities of this energy
transformation. It is up to us to ensure that our federal laws
are not continuing to introduce roadblock after roadblock to
enhanced energy security.
We must remain steadfast in our support for efforts to
improve the infrastructure necessary to maximize use of these
resources, including the Keystone XL pipeline. These issues are
too important for our nationto be looked at in a vacuum, and if
we don't take advantage of our energy abundance, other nations
are eagerly waiting to step in and use North American energy to
fuel their own growth.
The benefits of our emerging energy abundance are many,
boosting our economy and creating jobs in Michigan and across
the nation, a bright spot in the economic downturn. We must
build upon our progress.
Once we have a more accurate sense of North America's
energy potential, we can start the process of ensuring we have
the proper vision for the future. I welcome our esteemed panel
of experts here today, including Dr. Daniel Yergin. The
domestic energy boom is good news--but only if we are wise
enough to let it happen.
# # #
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Well, thank you, Mr. Chairman.
I want the record to show that I have my iPad and I am
trying to do this electronically, so I am at least trying.
I want to welcome our witnesses. I see former Congressman
Martin Frost out in the audience. He knows a little bit about
energy. We are glad to have you here, Martin.
Today is an important hearing, Mr. Chairman. I represent a
Congressional district in Texas that at one time had it been a
nation would have been the fifth largest oil-producing nation
in the world. The first oil field west of the Mississippi was
discovered in my Congressional district at Corsicana in 1895.
As we speak today, in the Barnett shale, which is not totally
in my Congressional district, there are over 16,000 producing
natural gas wells, and last year they produced in the
neighborhood of 2 trillion cubic feet of natural gas in that
one field.
With the miracle of hydraulic fracturing, we have unleashed
a drilling and production revolution in this country, not only
in natural gas but now that technology is being used in oil,
and the State of North Dakota, which less than 10 years ago had
probably fewer than 200 or 300 oil wells, is on track in that
one State to produce over a million barrels of oil in the very
near future, possibly this year. We can be energy independent
if we want to. It is not a question of can we. It is a question
of, is it in our economic and political self-interest to do so.
So today's hearing is an important hearing for the American
people to see the energy abundance that our Lord blessed us
with and the policymakers in this room and in this city can
decide what we want to do with it.
With that, Mr. Chairman, I yield back to you or any other
person.
Mr. Whitfield. Thank you, Mr. Chairman.
At this time I would like to recognize the ranking member
of the full committee, Mr. Waxman of California, for 5 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman. I appreciate that we
are holding this hearing on North America's energy resources.
We are going to hear testimony about fossil and renewable
energy supplies in the United States, Canada and Mexico.
We are dramatically improving the efficiency of our use of
oil, so we are using less of it. At the same time, we are
producing more domestic oil, which means we are importing less
oil from dangerous parts of the world.
We are unlocking new reserves of natural gas, which is
helping to limit the use of polluting coal, and to increase the
competitiveness of our domestic industries. We have doubled our
capacity to generate renewable electricity from wind and solar
in just 4 years, which has cut our pollution and invigorated
clean energy manufacturing.
These are all positive developments. The question we must
ask is whether we are on a sustainable course for the years to
come.
In his inaugural address, President Obama said that we must
transition to a sustainable energy future. He said we must
respond to climate change, because to do otherwise would
``betray our children and future generations.''
As we debate our energy future, this committee has a
choice. It is an energy choice and a climate policy choice, and
ultimately it is a moral choice.
The biggest energy challenge we face as a country is carbon
pollution. We can't have a conversation about America's energy
policy without also having a conversation about climate change.
We have a rapidly diminishing window of time to act to reduce
our carbon pollution before the catastrophic impacts of climate
change are irreversible.
In November, the International Energy Agency published its
World Energy Outlook. IEA concluded that our current global
energy system is ``unsustainable.'' The International Energy
Agency found that ``the climate goal of limiting warming to 2
degrees Celsius is becoming more difficult and more costly with
each year that passes.'' The International Energy Agency also
concluded that if the world does not take action to reduce
carbon pollution before 2017, then ``all the allowable
CO2 emissions would be locked in by energy
infrastructure existing at that time.
That means that the energy policy decisions we make today
will have a real and direct impact on whether we can limit
climate change in the future. Every decision to build a new
fossil fuel-fired power plant, or construct a pipeline to
transport tar sands, or drill for more oil off our Nation's
coasts has climate risks. We need to understand and weigh those
risks before we lock in infrastructure that will produce carbon
pollution for decades to come.
There is an appeal to the energy resources we are
discovering. We are stronger when we produce oil in the United
States than when we import it from Saudi Arabia. We are better
off when we produce our own natural gas than when we import
LNG.
But we also must recognize that the world has far more
proven reserves of oil, gas and coal than we can ever safely
use. The atmosphere has a rapidly shrinking capacity to safely
absorb carbon. In fact, if we want to have a reasonable chance
of limiting average global warming to 2 degrees Centigrade, or
3.6 degrees Fahrenheit, there is an estimated five times more
carbon in proven fossil fuel reserves than we can release into
the atmosphere. If we burn all the known reserves of fossil
fuel without new technologies to sequester the carbon, the
damage to the planet would be immense.
The future will belong to the country that leads the
inevitable transition to the clean energy economy of tomorrow.
It is our responsibility to figure out how we make sure our
Nation is in the forefront of this change.
Mr. Chairman, this is a new Congress. I want to begin it by
offering to work with you as we grapple with these incredibly
serious challenges. I look forward to this hearing and future
hearings on this subject and to our cooperation to deal with
these problems in a bipartisan and a balanced way.
Thank you. I yield back the time.
Mr. Whitfield. Thank you, Mr. Waxman. We appreciate your
opening statement.
I also want to welcome Joe Pitts of Pennsylvania, who is a
new member of this subcommittee. As many of you know, he is the
chairman of the Health Subcommittee, and we are delighted to
have him on the Energy and Power Subcommittee as well. We do
have a new vice chairman also, Steve Scalise, who was here but
I think stepped out for just a moment.
Right now I would like to get our witnesses. We are
thrilled with the panel that we have today. Each one of them
are real experts in various fields of energy and we genuinely
appreciate your testimony that you have prepared and that you
are about to give, and I know that everyone will have questions
for you, and at this time I would like to introduce our panel
of witnesses. First we have Adam Sieminski, who has been here a
number of times. He is the Administrator for the United States
Energy Information Administration, and we welcome you. Dr.
Daniel Yergin is Vice Chairman of IHS, and many of you know Mr.
Yergin also because he wrote a book called The Prize, which won
the Pulitzer Prize, so we are delighted that he is here. We
have Jennifer Morgan, who is the Director of the Climate and
Energy Program at the World Resources Institute, and we look
forward to your testimony, Ms. Morgan. We have Mary Hutzler,
who is a Distinguished Senior Fellow at the Institute for
Energy Research. I read her testimony as well, and she has some
great things to tell us today. And then we have Mr. Harry
Vidas, who is Vice President for ICF International, and we
appreciate your thoughtful testimony as well, Mr. Vidas.
So each one of you will be given 5 minutes for your opening
statement, and there are a couple of little boxes with lights,
and when it is green that means go, and when it is red, it
means stop, but we will give you some leeway because we do
respect your being here and appreciate your expertise.
So Mr. Sieminski, I will recognize you for 5 minutes for
your opening statement.
STATEMENTS OF HON. ADAM SIEMINSKI, ADMINISTRATOR, U.S. ENERGY
INFORMATION ADMINISTRATION; DANIEL YERGIN, VICE CHAIRMAN, IHS;
JENNIFER MORGAN, DIRECTOR, CLIMATE AND ENERGY PROGRAM, WORLD
RESOURCES INSTITUTE; MARY J. HUTZLER, DISTINGUISHED SENIOR
FELLOW, INSTITUTE FOR ENERGY RESEARCH; AND E. HARRY VIDAS, VICE
PRESIDENT, ICF INTERNATIONAL
STATEMENT OF ADAM SIEMINSKI
Mr. Sieminski. Thank you, Mr. Chairman and members of the
subcommittee. I appreciate the opportunity to appear before you
today to discuss American energy security and innovation. EIA
is the statistical and analytical agency within the U.S.
Department of Energy. By law, its data, analyses and forecast
are independent of approval by any officer or employee of the
U.S. government.
My statement today summarizes recent trends in production
and draws on EIA's January short-term energy outlook, and also,
I am going to talk about resource estimates for oil, gas, coal
and renewables for the United States.
As I discuss the different sectors, though, it is useful to
keep in mind that the methodologies for developing reserve and
resource estimates differ across the fuels. EIA estimates that
U.S. total crude oil production averaged 6.4 million barrels a
day in 2012, an increase of .8 million barrels a day. This is
the largest annual increase since Colonel Drake drilled the
first commercial crude oil well up in Titusville, Pennsylvania
back in 1859. This growth is driven largely by tight oil
production--that is in figure one of my written statement.
Drilling in tight oil plays in North Dakota, Montana, and Texas
are expected to account for the bulk of the forecast production
growth over the next 2 years. U.S. crude oil production could
reach 8 million barrels a day in 2014, and with some very
strong assumptions about how drilling could proceed and other
factors, could get as high as 10 million barrels a day but that
is not currently in our reference case.
U.S. dry natural gas production has increased consistently
since 2005, mainly because of the production of shale gas
resources. Total marketed production averaged about 69 billion
cubic feet in 2012, and EIA expects production will remain
close to that level this year and next year.
Crude oil and natural gas proved reserve additions in 2010
were the highest recorded since EIA began publishing those
numbers in 1977. Crude oil proved reserves increased by 12.8
percent, almost 3 billion barrels, during 2010 to end the year
at over 25 billion barrels. U.S. proved reserves of wet natural
gas increased by almost 12 percent, or 34 trillion cubic feet,
during 2010, ending that year at well over 300 trillion cubic
feet.
Next, I want to speak to the issue of oil and natural gas
resources. Estimates of technically recoverable resources,
while inherently uncertain, are a common measure of the long-
term viability of U.S. domestic production. U.S. crude oil and
lease condensate resources in non-prohibited areas are
estimated at 223 billion barrels in the Annual Energy Outlook
that we just published in December up from EIA's estimate of
140 billion barrels back in the year 2000. That is despite
cumulative production since the year 2000 of over 26 billion
barrels of oil. U.S. total dry natural gas resources, 2,327
trillion cubic feet in the AEO2013 are up from our 2000
estimate of nearly 1,600, maybe I should say only 1,600
trillion cubic feet, despite cumulative production between
those years of 260 trillion cubic feet. The shale gas resource
in the AEO2013 is about 13 percent higher than what we
estimated in 2012.
Moving on to coal, domestic production decreased by 12
percent by over 1,000 million short tons between 2008 and 2012,
half of this decline between 2011 and 2012, as electric
utilities and the industrial sector cut back their purchases.
EIA estimates that coal consumption in electric power in 2012
will total 829 million short tons, the lowest since 1992, due
largely to competition from low natural gas prices. Coal
exports in 2012 partially offset that decline in consumption.
The largest category of coal resources, the demonstrated
reserve base, represents coal in the ground, this resource base
was originally estimated back in 1974 by the Bureau of Mines as
part of the last comprehensive assessment. On January 1, 2012,
the resource base was estimated to contain 483 billion short
tons. That is a huge amount. Limited resources at EIA have
prevented us from doing a full national reassessment but we
have updated some of the regions.
Finally, I would like to highlight developments in
renewable resources. EIA estimates that production of
renewables, most renewables, grew significantly in 2012,
especially wind and solar. Hydropower production fell because
of the drought. Even so, the overall growth in renewable energy
consumption from 2010 to 2012 was over 10 percent. Drought in
the Midwest caused fuel ethanol production to fall by about
80,000 barrels a day in the second half of 2012. We expect that
production will pick back up again as the drought recedes and
we will get back to pre-drought levels of about 870,000 barrels
a day of ethanol production. Biodiesel production averaged a
billion gallons in 2012 and it is expected to meet the RFS
requirements of 1.28 billion gallons that have been set for
2013.
That concludes my testimony. Thank you again, Mr. Chairman,
for the opportunity to be here.
[The prepared statement of Mr. Sieminski follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. Well, thank you.
And Dr. Yergin, you are recognized for 5 minutes.
STATEMENT OF DANIEL YERGIN
Mr. Yergin. Chairman Whitfield, Ranking Member Rush,
members of the committee, I am pleased to be here----
Mr. Whitfield. Is your microphone on?
Mr. Yergin. I don't think so. So I will start over with 5
minutes. Thank you.
Chairman Whitfield, Ranking Member Rush, members of the
committee, it is really an honor to be here to have the chance
to share some thinking that fits into the framework of the
discussion that the members have already laid out.
It is indeed very timely because the United States is in
the midst of an unconventional revolution in oil and gas that
fits that all-of-the-above strategy that Congressman Rush
talked about and also becomes increasingly apparent, goes
beyond energy itself, that is, it goes to the economy, and it
has only become really apparent in the last year or two that
this unconventional revolution is supporting currently about
1.7 million jobs in the United States and it is not only in the
oil- and gas-producing States. There are 44,000 jobs in New
York, which doesn't produce, 39,000 jobs in the State of
Illinois. We think that overall job number will rise to 3
million by 2020.
Last year, this unconventional revolution brought $62
billion in revenues to federal and State government. By 2020,
that number could be close to $115 billion. It is helping to
stimulate a manufacturing renaissance in the United States. We
have noted something like $95 billion of plans for investment
in the chemical sector in the United States. I don't know if
all of that will get done but that demonstrates it. It is
certainly improving the competitive position of the United
States in the world and beginning to affect global geopolitics.
I think although great advances have been made in solar and
wind--I talk about them in The Quest--the rebirth of
renewables, those are really innovations from the last century.
In terms of this century, what is happening in oil and gas is
the biggest energy innovation so far of the 21st century. It
has unfolded fast. Those of you who participated in hearings in
2008 remember those dark, dire days when, I think as Chairman
Whitfield reminded, the world was going to run out of oil and
the United States was going to run out of oil even more
quickly. How that has changed. Shale gas now has gone from 2
percent of our supply to 37 percent of our supply, and what is
really dramatic is what has happened on oil, which instead of
continuing its long decline has increased dramatically by
almost 39 percent since 2008. That increase is equivalent--
because you say what does that mean. It is equivalent to the
entire output of Nigeria, the 7th largest oil-exporting country
in OPEC. It is almost equivalent to Iran's total exports before
sanctions went into place. Indeed, it is sobering to consider
that without these technologies, and the oil output that has
resulted from them, the sanctions on Iran might well have
failed.
The environmental aspects have been touched on. U.S. carbon
dioxide emissions from energy consumption are down 13 percent
since 2007. I think in discussion we might get to some of the
conclusions that we came to as the Deutch committee, the
subcommittee of the Secretary of Energy Advisory Board set up
at the behest of President Obama, on managing the environmental
issues around this. One thing that did come out of that hearing
is a focus on the role of the States and in particular the
activities of STRONGER, the collaborative organization of the
States that seeks collaborative benchmarking and standard
setting.
Let me come finally to something that is always
contentious, which is imports and exports of oil and energy,
which has been a major issue for the United States for about 70
years. Until the end of the last decade, it seemed that the
question was only how fast would oil imports go up and how big
would our imports of natural gas become, as the chairman
referred to in his remarks. Well, this unconventional
revolution has sure turned that around. Mr. Rush has cited the
decline in our imports over the last 7 years or so, and this is
the result both of surging production and greater efficiency.
Moreover, the flow of imports has changed. Canada now supplies
about 27 percent of our total.
But what gets the most attention right now is the question
of whether we are going to become an export of LNG, liquefied
natural gas, and I think this needs to be looked at in terms of
the overall U.S. supply and global competition. Our view,
similar to others, is that the market in the United States is
demand constrained, not supply constrained. Many LNG projects
have been announced. We think only a handful will be built,
these $10 billion projects. The reason is both cost and scale
of global competition. Currently already, before any of these
get going, already about a third, equivalent to a third of
total existing capacity new projects are under construction or
have been committed. So the United States capacity will be
coming into a market in which there will be new supplies from
Australia, new sources such as offshore East Africa and eastern
Mediterranean and Canada. Just yesterday, Canada approved a
major export project to Asia. Finally, the shale gas
development that will occur elsewhere, so these will all be
offsets.
So let me just add one other thing. I think for decades,
the United States has made the free flow of energy supplies
really one of the corner principles of our foreign policy. It
is the policy we have urged on many other nations. So to me, at
least, it is puzzling how we can say to a close ally like Japan
suffering energy shortages as a result of Fukushima that on the
one hand we want you to import less oil from Iran, yet on the
other hand we don't want to consider new natural gas exports to
Japan. So those are some thoughts for consideration on it.
I will just conclude by saying certainly expanded domestic
supply will add resilience to shocks and add to our security
cushion. Moreover, prudent expansion of U.S. energy exports
will actually add an additional dimension to U.S. influence in
the world. However, there remains only one world oil market,
and a disruption anywhere will be a disruption everywhere.
So all together this unconventional oil and gas revolution
has already had a major impact in multiple dimensions. Its
significance will continue to grow as it continues to unfold,
and these opportunities certainly provide a timely opportunity
for assessing the impact and significance in its many
dimensions. Thank you.
[The prepared statement of Mr. Yergin follows:]
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Mr. Whitfield. Thank you, Dr. Yergin.
Ms. Morgan, you are recognized for 5 minutes.
STATEMENT OF JENNIFER MORGAN
Ms. Morgan. Thank you very much, Mr. Chairman, and thank
you for the opportunity to testify here today. I work for the
World Resources Institute, which is a nonprofit, nonpartisan
think tank, and we focus on the intersection of environment and
improving people's lives.
I am very delighted to speak here today about America's
abundant energy resources and the smart choices we need to make
to deliver them, and I have two main points to share with you
today. First is that an effective, durable and affordable
energy strategy must consider the risks of climate change. Why?
Well, our climate is changing. Each successive decade in the
last 50 years has the warmest on record globally, and extreme
weather events are on the rise with tens of billions of dollars
in damages in the United States each year. A 2010 National
Research Council report concluded that ``climate change is
occurring, is caused largely by human activities and poses
significant risks for, and in many cases is already affecting a
broad range of human and natural systems.'' This is the message
of numerous comprehensive science assessments including the
draft National Climate Assessment that was released last month.
Directly relevant to this subcommittee are electric
infrastructure and reliability are already being affected and
are increasingly vulnerable to droughts and other disruptions
caused by climate change. Current impacts on energy production
are just the beginning. Unless we change course, these impacts
will become more extreme, placing our energy infrastructure and
our country at great risk, which brings me to my second point,
which I think is very important. To avoid the most serious
climate change impacts, our energy policy must drive low-carbon
technologies forward now and build them out at a much larger
scale.
The good news is that we don't have to choose between
energy security and climate security. America is rich in
renewable resources and has large opportunities to increase
efficiency. According to the National Renewable Energy
Laboratory, 80 percent of our electricity needs can be met in
2050 through renewable generation and existing technology. We
can also improve our efficiency across the economy. The
National Academy of Sciences found that the United States could
save 30 percent of the energy used, and reducing methane
emissions from natural gas and capturing and storing
CO2 can put us on the cutting edge of technology
development, which I think is a true win-win.
If the United States, however, and we decide not to move
forward with a low-carbon future now, we risk not only the
severe impacts of climate change but also stranded investments
from short-term poorly informed planning. Many utilities are
already factoring climate change into their investment
decisions, and they are looking for regulatory and climate
policy certainty. Investments in high-polluting resources, I
think, will prove to be a poor bet over time and these
investments will be at direct physical risk from increasing
impacts.
So without a rapid shift to a low-carbon economy, the
United States is also going to miss out on the clean technology
market around the world. The global market for low-carbon
technology could double or triple by 2020.
So in conclusion, Mr. Chairman, I think the United States
has the opportunity to be both energy and climate secure in the
future, and Congress can help and assist in that effort through
policies that first ensure climate change risks are more
directly incorporated into both public and private decision
making; two, build out America's clean energy sector through an
approach that is comprehensive, long term, targeted and
inclusive; three, increase energy efficiency across the
economy; and four, provide funding and incentives for low-
carbon and clean energy technologies. Ultimately, Congress will
work together to build national energy policies that take these
climate risks very seriously and take advantage of all the
opportunities presented by our abundant clean energy resources.
Thank you very much for the opportunity, sir.
[The prepared statement of Ms. Morgan follows:]
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Mr. Whitfield. Thank you, Ms. Morgan.
Ms. Hutzler, you are recognized for 5 minutes.
STATEMENT OF MARY J. HUTZLER
Mr. Hutzler. Chairman Whitfield, Ranking Member Rush and
members of the subcommittee, thank you for the invitation to
participate in today's hearing.
The Institute for Energy Research is a nonprofit think tank
that conducts research and analysis concerning global energy
issues. In the last several years, IER has monitored closely
the boom in energy production that is taking place in the
United States, primarily on private and State lands. IER also
tracks regulations and policies that limit the potential to
reduce our dependence on overseas oil regimes, hinder our
ability to generate much-needed revenues, and harm efforts to
foster an energy-based economic recovery that creates jobs.
Just this morning, we released a study on the economic
effect of immediately opening federal lands onshore and
offshore to energy production. According to our analysis,
immediately opening federal lands that are currently
unavailable because of statutory or administrative action would
result in an additional $14.4 trillion to our GDP over the next
37 years. In light of the recent Commerce Department report,
the GDP shrank for the first time since 2009. Our economy needs
the lasting stimulus that robust energy development on federal
lands and waters would provide.
But today's hearing is focused primarily on the resource
availability and the potential under our feet and off our
shores to achieve domestic energy goals, almost unthinkable
just a few years ago. In fact, for decades Americans were
asking the question, where we will get the energy we need to
heat our homes, fuel our cars and meet the demands of a strong
21st century economy. Due to hydraulic fracturing and
horizontal drilling technologies, we no longer question whether
we have the resources. Rather, we question whether we will be
able to develop them and thus reap the nationwide economic
benefits such development would foster.
The myth of energy scarcity that has plagued our national
conversation has been exposed. Just in the last year, the
misleading refrain that the United States only possesses 2
percent of the world's oil reserves has been replaced by the
mounting evidence of our Nation's resource abundance. IER
highlighted this in an inventory of North America's energy
resources. Using government information, we cataloged the vast
resources of the United States and our neighbors. The United
States has enough resources to provide reliable and affordable
energy for centuries to come. The question is whether the
federal government will permit us to access these abundant
resources and not whether sufficient resources exist. We can
now unlock our shale resources using technology proven for more
than 60 years in over 1 million wells without a single
confirmed case of contamination.
Furthermore, while our use of fossil energy has
dramatically increased over the last 50 years, our air quality
has improved. According to the EPA, emissions from the six
criteria pollutants under the Clean Air Act have decreased 68
percent since 1970, even though our energy consumption has
increased by 45 percent. Therefore, however troubling trends in
policy that threaten to restrict access to our vast energy
resources, which could make American-made energy less
available, affordable and reliable. Oil shale development has
all but stopped because Administration policy withdrew research
in much-needed leasing activity that could bring these
resources to market.
Increased oil sands imports from our neighbor Canada could
free the United States from energy dependence on foreign
countries where American workers face increasing threats of
kidnapping by terrorists and even murder. But we need the
transportation infrastructure to get it here and the energy
security this infrastructure would provide. Onshore development
on federal lands, which is roughly estimated at 700 million
acres of subsurface mineral estate, is extremely limited and is
increasingly so. In fiscal year 2009, for example, the current
Administration leased fewer onshore acres for energy
development than in any preceding year on record. Offshore
development on 1.76 billion acres of mineral lands has suffered
from the de facto Administration embargo with lease plans
canceled, moratoria imposed and cumbersome regulatory activity
that served to discourage exploration.
Today, permitting delays by federal regulators have driven
the wait to more than 300 days before drilling can begin on
federal lands, about twice as long as it took in 2005. By
contrast, States like North Dakota are now turning permits in
10 days, in Ohio, 14 days, in Colorado, 27 days. Alaska's
energy resources lie dormant even though its pipeline has
enough unused capacity to take twice the daily production of
North Dakota.
Decisions made today about access to energy resources
affect energy production for years and decades to come. The
more areas accessible to energy production today increases the
likelihood of domestic production tomorrow, and with it,
increased jobs, government revenues and economic activity.
Thank you for the opportunity to testify today, and I look
forward to your questions.
[The prepared statement of Ms. Hutzler follows:]
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Mr. Whitfield. Thank you, Ms. Hutzler.
Mr. Vidas, you are recognized for 5 minutes.
STATEMENT OF E. HARRY VIDAS
Mr. Vidas. Chairman Whitfield, Ranking Member Rush and
members of the subcommittee, I appreciate the opportunity to
discuss my work in estimating the U.S. endowment of oil and
natural gas resources.
Due to technology advancements, the U.S. natural gas and
oil resource base is now widely seen as large and diverse.
Lower-48 production of shale gas, tight oil, and associated
natural gas liquids has been an engine of economic growth in
recent years. Our analysis of the remaining resource base
indicates that this unconventional resource base is large and
that this production activity is in the early stages of the
resource development cycle. Therefore, we expect growing
production and increased jobs many years into the future.
In recent years, ICF has extensively evaluated shale gas
and tight oil resources, both in terms of technical and
economic recovery. This work has been sponsored by private
companies, industry associations and government agencies. We
have evaluated the geology, historic production and costs of
all the major U.S. and Canadian geologic settings, or as we
say, plays. This analysis shows that these resources are
geographically widespread, and are economic to develop at
moderate wellhead prices. The ICF analysis of these emerging
natural gas and oil resources is done using a geographical
information system, a process that evaluates the resource at a
highly granular level, accounting for variations in geology,
resource quality and economics within the plays.This ICF
analysis reflects recent upstream technology including advances
in horizontal drilling and steering, multistage hydraulic
fracturing, improvements in fracturing fluids and methods, and
improvements in seismic and geophysical analysis that helps
identify the best locations for the wells. And finally, I would
point out advances that reduce the environmental impacts of
drilling. These are such things as using multi-well drilling
pads, conservation of water and recycling of water resources,
reformulation of chemical additives, and reduced emission
completions that capture gases in the flow-back.
These upstream technology advances have enlarged the U.S.
economic resource base by expanding areas where drilling can
take place, increasing recovery factors and reducing capital
and operating costs per unit of production. ICF estimates that
the remaining technically recoverable U.S. natural gas resource
base is 3,850 trillion cubic feet, which represents 155 years
of current consumption. The U.S. shale gas resource is almost
2,000 tcf, and that makes up 52 percent of the total. One
should look at these assessments as conservative in the sense
that they are developed assuming current technology and no
major new plays are discovered.
In terms of U.S. oil production, as already been mentioned,
U.S. production started increasing in the year 2009 for the
first time since 1984 and there is the potential for the United
States to become a much larger oil producer in coming decades
due, as we have heard, from expanded production of tight oil.
Our current assessment of the U.S. oil resources in terms of
technically recoverable resources is 264 billion barrels. This
represents 110 years of production at current production rates.
The U.S. tight oil potential is excellent due to the wide
range of potential producing plays in diverse geologic settings
at numerous basins. The success in tight oil across a wide
spectrum of geologic settings indicates that most historic oil-
producing areas will eventually see horizontal drilling, and in
many cases, this tight oil development will dominate activity
and production.
So in summary, recent advances in drilling and completion
technologies have dramatically increased estimates of
technically recoverable natural gas and oil resources and have
led to a much more optimistic outlook for future oil, gas and
natural gas liquids production. Our forecast for natural gas is
that it is going to be growing at about 2.2 percent per year up
to about 32 tcf by 2025, and our forecast for the oil
production is even faster 2.6 percent, up to 9 million barrels
per day by 2025.
The other point I want to make is that we expect upstream
technologies to continue to improve and therefore we expect
these resource base number to be going up in the future as well
as the economics to improve as well. Thank you.
[The prepared statement of Mr. Vidas follows:]
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Mr. Whitfield. Thank you, Mr. Vidas.
At this time we will go into the question-and-answer
period, and I will recognize myself for 5 minutes for
questions. Once again, I want to thank all of you for your
testimony. It is quite encouraging that we find ourselves in
America today with abundant natural resources--gas, oil, coal--
as well as renewables, and your testimony, as I had indicated
in my opening statement, shows how just a short period of time
how everyone was talking about we were depleting our natural
resources. So it is really exciting that we find ourselves in
America in this situation and particularly at a time when we
really are in a global marketplace and we find ourselves
competing with other countries for jobs and for job creation.
How many of you attended the World Economic Forum in Davos? Dr.
Yergin? OK.
Now, I had read some comments that there was a lot of
discussion in Davos about the focus on American energy
independence, and the articles that I read indicated it was a
major concern for the Europeans because fortunately in America,
most of our production and discoveries have occurred on private
lands which we have been able to develop even though permits on
public lands are down, and I know that in Europe, a lot of
these discoveries are on government-owned lands. But would you
make a comment about your observation of the Europeans' views
on what is happening in America in the energy sector?
Mr. Yergin. Yes. I think it was summarized for me at the
World Economic Forum, I asked a prominent journalist what he
thought the number one theme was, and I expected him to say the
euro, and he said shale, and it took me by surprise, but I
think that, you know, it takes time for thinking to catch up
with changes, and I think Europe is suffering from enormous
unemployment problems. Spain has 26 percent unemployment. And
they are looking at the United States and saying the United
States, because of this low-cost, abundant energy is going to
be a very formidable competitor and people kind of stopping
investing Europe and wanting to transfer their investment to
the United States, and I think companies that are European
based saying that they are going to be at a disadvantage
competing against the United States.
I heard the same thing when I was in China for the
publication of my book The Quest. I spent 2 weeks there and I
heard the same intense discussion about shale in the sense that
the United States was going to be changing the competitive
playing field in the global economy because of this, so I think
the rest of the world has really kind of become obsessed with
this development in the United States because of how it changes
the competition, as I say, in the global marketplace.
Mr. Whitfield. Well, I agree and I think we are very
fortunate to live here, and the policies that we adopt are
going to go a long way in determining how far we can go down
this road, and I said in the beginning, one of our primary
focuses today is about economic growth and job creation, and we
have what I will refer to as a magic key to really facilitate
that in many ways.
Let me just briefly talk about the export of liquefied
natural gas. I know it is controversial and I know there are a
lot of different sides to it. My understanding is that a permit
has been issued and there is a facility being built in
Louisiana for the purpose of doing that. I know the chemical
industry, for example, is very much opposed to it, but would
some of you just make a brief comment on what you think about
it? I mean, do you think this is something we should be looking
at? When you think about the impact it would have on our trade
deficit too, that is good. But Dr. Yergin, I know you mentioned
it briefly. Just give me your views on that.
Mr. Yergin. Well, I think that some of us can remember a
few years ago when we were going to have all these importing
facilities for LNG, and you would look at a map and you would
see 30 or 40 of them and it turned out it is sort of zero right
now, so I think there is a kind of boom discussion about all
these facilities, and our conclusion is that the number that
will be built is perhaps, you know, you could count them on one
hand because a lot of the discussion has left out, as I said,
the competitive factor that there are a lot of other people.
Canada might have three to five just in British Columbia and
they cost a lot, and a lot of new projects. There is new gas
off of East Africa. There is new gas off Israel. All that is
going to be coming into the marketplace, so that will kind of
put a balance upon it, and I think as many of us feel on this
panel that the issue is that we are demand constrained. We have
a lot of gas and so it would not have a dramatic impact on gas
cost and it would unfold over a decade or more.
Mr. Whitfield. Did you want to make a comment, Ms. Morgan?
Ms. Morgan. We haven't worked extensively on LNG exports
but I think the key point I think across the board is, if the
United States is successful in integrating carbon capture and
storage along with gas from shale and other resources, you
actually, I think, would have even greater opportunities.
Mr. Whitfield. I see my time is expired so at this time I
will recognize the gentleman from Illinois for 5 minutes, Mr.
Rush.
Mr. Rush. I want to thank you, Mr. Chairman.
Dr. Yergin, it is so good to see you again. I remember
having breakfast with you at the Aspen Institute and I thought
you did quite well and you are doing quite well now. In your
testimony, you report that the unconventional energy revolution
supports 1.7 million jobs currently and that that number will
grow significantly over the next decade. Can you speak to these
new jobs and what we can expect to see? How will the number
grow, the types of jobs that will be created and where these
jobs will be located nationally?
Mr. Yergin. We undertook this research over about the last
six or seven months, and we were surprised by a couple of
things, one, the scale of the jobs. We use the same methodology
that the Bureau of Economic Analysis and Commerce Department
uses. And secondly, that it really spread across all the
States. That is why I mentioned New York and Illinois as
examples because of these long supply chains, and I think this
too, if we talk about the surprise around unconventional
resources, the first surprise was the scale of it and the speed
and the second has been this wider economic impact. So the
jobs, that 1.7 million that we talk about includes direct jobs,
which would actually be working in the oil and gas fields. It
would include the technology jobs, the service jobs that
support it, and then it is the jobs that are created--this is
called the induced jobs that are created by the rising incomes
that people have to spend and it is the kind of services that
would be provided. So it is kind of package of all of them, and
you know, it is a demonstration of how tightly integrated our
national economy is, that it goes across the entire country. So
it could be everything from somebody working in manufacturing
steel in Ohio to somebody working in information technology in
California that feeds into this industry.
Mr. Rush. Are we equipped now? Is the American workforce
prepared to take these jobs? Are we prepared to deal with these
jobs?
Mr. Yergin. I think so up to a point, but it does require
training. For instance, the State of Ohio is getting prepared
for activity there, and Governor Kasich there has made a big
emphasis on vocational training in the schools to train workers
who would be working directly in the oil or gas field, in the
Utica shale, as it is called. I think it is striking that this
job creation or job support has really occurred during a period
of high unemployment and it has been in a sense one of the
bright spots during these 5 tough economic years that we have
had.
Mr. Rush. Thank you.
Ms. Morgan, in your testimony you state that the United
States has been a world leader in clean energy research and
development but it has had less success relative to other
countries in actually developing a domestic clean energy
manufacturing industry. In your opinion, what has prevented the
United States from developing a robust clean energy
manufacturing sector?
Ms. Morgan. Thank you. We recently did an assessment across
five countries of the wind and solar value chain to look at who
is winning the clean energy race, and what we found across the
board is that the countries that are ahead, which include
Germany and China, have a long-term policy signal that provides
certainty for investors in manufacturing. So you need to have
something that goes beyond 3 years. So now with our short-term
benefits, you may see some wind turbines come up but you may be
creating the perverse piece where you are not creating the
manufacturing capacity domestically because there is no long-
term policy signal around renewable energy and therefore you
may see the import of those parts because investors don't know
what is going to happen in 2 years or 3 years, so it is mostly
that lack of national renewable energy policy that is lacking
here.
Mr. Rush. Along the same lines, what does the United States
need to do to become a net exporter of clean energy technology?
Ms. Morgan. I think there are a number of pieces across the
value chain that would be essential. The first is that national
policy that provides that long-term certainty, so that could be
anything from a renewable portfolio standard to a feed-in
tariff to whatever policy of choice provides that long-term
certainty. The second really is putting in place the innovation
centers that bring together public and private actors to be
able to develop those new technologies rapidly. The third is to
increase our research and development. We are doing pretty
there, but our problem really is that although we are leading
the world in R&D, we are not doing it fast enough vis-`-vis
other players. Thank you.
Mr. Rush. Thank you very much, Mr. Chairman. You have been
very kind.
Mr. Whitfield. Thank you. At this time I recognize the
gentleman from Texas, Mr. Barton, for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman.
I would like to ask Mr. Yergin if he is familiar with the
emerging technology on hydraulic fracturing that greatly
minimizes the amount of water that is used. Have you studied
that in any detail?
Mr. Yergin. I am certainly aware of companies who are
working to perhaps reduce the water requirements by as much as
75 percent, and I think, you know, one of the things when we
did this study for the Secretary of Energy Advisory Board, we
said that the needs here, as your question suggests, are going
to really promote a lot of innovation and there sure is a lot
of innovation going into the water issues right now, and we do
see the water usage as a major part of it.
Mr. Barton. There is a company in my district and then
there are a number of companies around the country that they
haven't commercialized it to a great degree yet but they have
certainly shown that it works on a prototype basis, and some of
them can take as much as 99 percent of the water that is
currently used to frack a well. It is no longer necessary. And
I think that if we can solve that issue satisfactorily, the sky
is the limit. I think that seems to be the larger environmental
issue.
Mr. Yergin. Congressman Barton, if I can say, it is
striking that this is all--you know, this is only in the last 4
or 5 years and already to see this innovative response, which
is part of our hearing, it kind of shows the creativity of our
industries to respond to immediate needs.
Mr. Barton. When I was chairman of the full committee, we
passed a bill called the Energy Policy Act of 2005, and we put
in language that gave the Federal Energy Regulatory Commission
ultimate say on siting LNG facilities for import. We thought we
were going to be importing liquefied natural gas. That
authority is now being used by the FERC to license facilities
to export, in some cases the same facility. They are just
turning it around. Do you see LNG for export radically changing
the price structure for natural gas, which right now is a
little under $3 1,000 cubic feet?
Mr. Yergin. No, we don't see LNG exports as having a major
impact on price. I mean, what we see is a continuing growth of
supply and there is actually a need for additional market,
whether it is LNG, whether it is vehicles, it is electric
power, and we don't think that these projects will have much
impact.
Mr. Barton. So you don't see any national security issues
if we were to license LNG facilities?
Mr. Yergin. I think we see a gain to national security from
the United States being an energy exporter and the influence
that will come from that that is a net positive for our
national security.
Mr. Barton. I happen to agree with that.
And finally, I have got about another minute and a half,
Dr. Yergin, how do you see the combination of hydraulic
fracturing and horizontal drilling in terms of oil production?
A lot of companies down in Texas 5 or 6 years ago when I talked
to them about using this technology for oil production, they
kind of laughed. They said it is just not the same, it doesn't
work. And a company in Houston, EOG, and also a privately owned
company, Hunt Energy up in Dallas, they decided to try it, and
I will be darned, all you have to do is look at the Bakken up
in North Dakota, and I think almost all of that production is
horizontally drilled with hydraulic fracturing. Do you see that
becoming the norm or do you still see the conventional drilling
for oil dominating?
Mr. Yergin. I think it is really spreading. I mean, as you
say, it was only around--this is only really is 2009, 2010 that
it took off for oil, and I think the numbers keep--I don't know
what Administrator Sieminski would say but the numbers keeping
exceeding the projections that are happening so fast and we see
it being applied in traditional areas like the Permian Basin,
which has been pronounced dead several times and of course is
going through another----
Mr. Barton. They had an all-time year last year.
Mr. Yergin. Yes, so I think it is going to be applied, and
I think that we will see probably impact of this faster
globally than we will see it in terms of natural gas.
Mr. Barton. My final question is to Mr. Sieminski. Do you
see the United States being self-sufficient in oil production
in the next 10 years?
Mr. Sieminski. In oil production?
Mr. Barton. Yes.
Mr. Sieminski. In our reference case for the Annual Energy
Outlook, which we just published, we have oil self-sufficiency
getting down to the low 30s, low 30 percent, so 30 percent of
our consumption would still be imported. In the side cases,
which we will publish in March for the Annual Energy Outlook,
we have looked at what it would take to get to self-sufficiency
in oil. It involves closer well spacing, greater estimates of
what the resource base is and a number of other factors that
would drive oil production higher. We also looked at the demand
side; that is, could fuel efficiency standards for automobiles,
for example, be improved, and other steps that could be taken
to reduce demand. In that set of circumstances, which requires
further policy changes on both supply and demand, we could get
to a crossover where the United States would be self-
sufficient.
Mr. Barton. You are not saying it is probable but it is
possible?
Mr. Sieminski. It is possible.
Mr. Whitfield. The gentleman's time is expired.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I am proud to follow my
colleague in Texas, on the success we have had on directional
drilling in both natural gas and oil. You might remember, you
were chair of the committee, Congressman Barton, in 2005 when
we did a bipartisan energy bill that we put in a little
provision for the DOE to do a study on directional drilling
because they had a great lab in Wyoming to do it, and we had a
Houston or a Texas company who was drilling at that time out to
35,000 feet and they thought they could get to 50,000 and on,
and we are seeing some of the success of that both for natural
gas but also for the tight oil, as we call it.
I have always believed a balanced energy policy must
support all domestic sources of energy including oil, natural
gas and renewables, and again, the last question was, we are
also using our energy smarter now because each time I buy a new
car, I am getting 5 to 10 miles more per gallon than I did on
the previous one, so we are using our energy smarter. Limiting
this production would only serve to jeopardize our small-
business jobs and increase our reliance on foreign sources of
energy. It may also have an impact on our ability to address
climate change because if we fail to provide the natural gas
needed to meet our short-term carbon reduction targets while
providing affordable and reliable sources to American
consumers.
Administrator Sieminski, the EIA expects natural gas
production to remain close to its 2012 level in both 2013 and
2014. Is that correct?
Mr. Sieminski. Yes.
Mr. Green. I know currently there are a lot of wells
comprised of just gas, or just dry gas, that are not being
produced due to the low price of natural gas. This is one of
the reasons I support the export of LNG so that there is
additional incentive to produce these gas wells. Has EIA looked
at what these export opportunities might mean for our future
natural gas production levels?
Mr. Sieminski. We have done that. Coming back to the major
driver behind why we have natural gas holding even this year
and next year, it is mainly because we are assuming natural gas
prices are going to recover to $4 by the end of next year. That
begins to allow coal to compete more effectively for electric
utility generation markets and holds natural gas back. So one
of the interesting factors here that comes into play is that
because of continuing strong supplies, natural gas prices
remain low. That would actually lead to more demand in the
electric utility sector.
As far as LNG is concerned, and in response to the question
that Chairman Whitfield asked at the beginning of the hearing,
Mr. Green, the United States is already exporting natural gas.
We export by pipeline to Mexico and Canada. Of course, we get
more gas from Canada. In the reference case that we examined
for the Annual Energy Outlook, EIA has LNG exports from the
lower 48 States and Alaska rising towards about 5 percent of
domestic output over the period out to 2040.
Mr. Green. Well, I actually have two issues, I guess, on
that. One, I represent an area that is heavy in the chemical
industry who is concerned about the rise in natural gas prices
but I also know that when I drive through south Texas and I see
so much flaring of the dry gas because we don't have the
capacity or the infrastructure or the customers for it, it is
just such a waste of our utilization of natural gas, and so if
we could sell it to someone for $15 an mcf, I wouldn't mind
doing that.
But has the EIA incorporated the increased use of enhanced
oil recovery in its oil projections? In Texas, for example, the
use of EOR has changed our predicted production levels, and you
mentioned the Permian Basin area as a good example of that.
Mr. Sieminski. We have built in some assumptions along
those lines, and in separate cases, we look at other factors
that could help drive oil production. One of the main questions
raised at this hearing is, what is the extent of the resource
base, and if we were to see the same improvements that have
taken place in the last 5 years in natural gas occurring in the
oil shale area, what we would end up saying is that rather than
our roughly 6.4 million barrels of oil production we had last
year getting up to about 8 before it begins to taper off, then
it could get up closer to 10 million barrels a day and then
hold pretty steady at that level, and one of those things
includes better technology and recovery.
Mr. Green. Well, and 10 million barrels a day sounds like a
lot, but I actually have five refineries in East Houston and
Harris County that use over a million barrels a day right now
to make refined product, so we still are going to have to
import or produce the needs for our own country.
Mr. Whitfield. The gentleman's time is expired.
Mr. Green. Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the vice chair, Mr.
Scalise, for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
having this hearing on America's energy security, and
specifically to look at an assessment of our resources because,
you know, I think the chairman had mentioned, the first natural
gas facility, the first LNG export facility is in south
Louisiana. I have actually toured that facility, Cheniere
Energy, in south Louisiana, and that was originally built to be
an import facility because we didn't think we had the reserves
that we needed for natural gas, and then eventually because of
the technology, the advancements that brought all these shale
plays online, now the actual opposite has happened where we
have so much that in many cases they are not even drilling in
areas where they have leases because all of a sudden we found
these resources that we didn't really know we could access just
a few years ago and so they spent billions of dollars to
retrofit and shift that from an import facility to an export
facility, allowing us to create more American jobs and to
continue to advance that new technology, which has really
helped start a revolution, as I think a number of you talked
about in your testimony.
I want to ask you, Ms. Hutzler, because you specifically
mentioned production on federal lands versus non-federal lands,
and it is one of the misnomers that we hear about up here in
Washington, you know, and the President will go around saying
that production has never been higher, and yet you actually
look at some of his policies that have shut production off on
federal lands in the areas where the federal government doesn't
currently have the ability to go and have an impact in those
States where they are seeing a real revolution, it is on non-
federal lands. So if you can touch a little bit on that, about
maybe some of the factors behind such an increase on non-
federal lands where you actually have some problems and in some
cases reductions on federal lands on production.
Ms. Hutzler. Production, for instance, production of oil on
private and state lands over the past 5 years has increased, is
essentially 96 percent of the total production that we have
gotten, and the reason generally is that there is a lot of red
tape when you try to deal with production on federal lands, and
I think I mentioned in my opening remarks and in my testimony
that it takes over 300 days to now get a permit to drill on
federal lands where in the States it is less than 30 days. So
all of this is taking much longer for a company to invest their
money in terms of trying to deal with production on federal
lands.
Mr. Scalise. Yes, and we can see, especially if you look at
the shale natural gas plays, they are actually regulated. You
know, the EPA might try to give the impression that there are
no federal regulations and they need to step in, and I think
that concerns a lot of people because the EPA doesn't have a
good track record of implementing good regulations where States
have actually done a really good job at regulating natural gas
shale plays, and frankly, the topography in Louisiana is a
whole lot different than it is in Pennsylvania or North Dakota
or Texas, and so the States have the ability to do that much
better and have a great track record, by the way, of doing
that, and so I think it is a good point to make because where
we have seen real growth not only in energy but in jobs where
in North Dakota, the lowest unemployment in the Nation they
have up there because of all of this new economic growth coming
from this technology, and so we surely don't want to see the
federal government come in and try to slow that down in the
name of good regulations when in fact you already have good
regulations the way it is supposed to be done and that is where
the States themselves do it.
I want to ask you, Mr. Vidas, because you have looked at
some of the data. We get data from the Energy Information
Agency and they have even shown that there has been a decrease
in production on federal lands but some of the information you
have on resources, on the known resources, are dramatically
higher, I think 50 percent in some cases higher than the
numbers that come out of EIA. Can you explain what data you
look at that shows the outlook for this country is even better
than what we get from the EIA's numbers?
Mr. Vidas. Well, in any type of resource assessment, there
is going to be uncertainty because what we are talking about is
some activity that has yet to happen, so we are predicting then
the productivity of potentially hundreds of thousands of wells
that will be drilled in the future, and the way we do it is to
first start with the geology and to develop maps of each of the
plays, and we try to deal with and get data on the key
parameters like what is called the structure maps, which is the
drilling depth you need to go down to, the thickness of the
shale, some of the parameters of the shale in terms of their
carbon content, the porosity, the pressures and temperatures,
and from that we can develop what is called a gas-in-place
estimate, which is an estimate of how much gas there is in the
ground in the formations that will be targeted. And then we
have information on wells that have already been drilled and we
can look at their production profiles and estimate over their
lives how much gas they are going to produce. So, for example,
if we looked at Pennsylvania and we looked at the Marcellus
shale, we would see that the horizontal wells there that have
been drilled have been improving in terms of their productivity
and now are producing about 4-1/2 billion cubic feet per well.
But that is in the better parts of the play because producers
have gone to look for the best gas first, the most economic
gas, but then we can look at the other areas of the play in
terms of either being thinner or less pressure or lower
porosity and we can correct for the productivity using basic
engineering principles and thereby forecast that into the
future, the future productivity of the wells, which we think on
average will be about half of that, maybe 2 bcf per well.
Mr. Scalise. I am seeing I am out of time. I apologize, but
I thank you for your testimony and your answers, and Mr.
Chairman, I yield back.
Mr. Whitfield. At this time I will recognize the gentlelady
from California, Ms. Capps, for 5 minutes.
Mrs. Capps. Thank you, Mr. Chairman, very much, and thank
you, each of you, for your testimony.
You know, assessing our current energy resources is
obviously important, especially in light of the numerous
advancements in research and technology in recent years and
that is why I appreciate today's hearing, but I am concerned
that we are not getting the full picture. Today's testimony and
the questions coming from the majority have focused
overwhelmingly on fossil fuels. Oil, natural gas and coal
obviously dominate our energy supply but they are certainly not
the only resources available. The EIA Energy Outlooks makes
this clear, pointing out that renewable energy sources such as
solar, wind and biofuels make up a sizable portion of our
energy use.
So my first question is to you, Administrator Sieminski.
EIA projects that use of renewables will continue to grow, in
some cases by double digits. Is that right?
Mr. Sieminski. Yes, that is correct. We actually have
renewables growing the fastest in percentage terms of all of
the fuel sources over the period out to 2040. I would also like
to point out that the share of generation of electricity from
renewables grows from 13 percent in 2011 to about 16 percent in
2040. Electricity generation from solar and to a lesser extent
wind energy sources grows as recent cost declines make them
more economical. The 2013 projection is a little bit less
optimistic about advanced biofuels because of the difficulty
that companies have had in gearing up their manufacturing
process but in general renewables are growing pretty strongly
and help the fact that overall carbon dioxide emissions from
energy in our forecast actually remain below the peak of 6
billion metric tons that we hit in 2005.
Mrs. Capps. Thank you. And in addition to what you just
said, Ms. Morgan, you established a direct link between burning
fossil fuels and climate change, and that has already been well
established from a variety of sources, and we have begun to see
these impacts if we just even look at extreme weather events
like Hurricane Sandy, all the droughts and the wildfires as
well, and I represent a coastal State and a costal district. I
am particularly mindful of climate change impacts on higher sea
levels and increasing erosion.
Ms. Morgan, in your testimony you discuss some of these
impacts. Could you elaborate, particularly on sea-level rise
and increased erosion for those of us who do represent coastal
communities?
Ms. Morgan. Certainly, yes. Sea-level rise is one of the
major threats to the United States and is already occurring
along the Eastern seaboard and certainly also on the West
Coast. I am familiar, we have done some work looking in Florida
particularly where you see that Miami Beach is already having
to spend more than $200 million to overhaul its storm damage
system. You are seeing that Hallandale Beach has to spend $10
million a year on new wells because of saltwater intrusion.
Florida is built on limestone, which means sea walls don't help
much. So that is a major piece of worry. Also, certainly, the
energy infrastructure that is located along the coast is also
at risk.
Mrs. Capps. I just want to add an example to that. I
represent the central coast of California, and the city of
Pismo Beach is installing sea walls itself to protect two
sewage lift stations that are threatened by erosion, and in
Santa Barbara, our central creek that comes right down through
the heart of the city has been widened to increase its flood
capacity. These projects come at a high cost, and I know these
communities have struggled to find necessary resources.
One final one, in the last few seconds, is this something
other communities are also struggling with and finding that the
cost is really prohibitive?
Ms. Morgan. Absolutely, and I know in Florida there are
four counties that have joined together and are facing
tremendous cost. If you look here in Lewes, Delaware, not far
away from communities that are struggling with it, go up to
Maine. So it is a real issue that we need to face on our
infrastructure investments but also the cost to local
communities. It puts an imperative on emission reductions as
well.
Mrs. Capps. Thank you very much. I will yield back.
Mr. Whitfield. At this time I recognize the gentleman from
Nebraska, Mr. Terry, for 5 minutes.
Mr. Terry. Thank you, Mr. Chairman.
This fall I hosted a natural gas forum in Omaha where we
had representatives from just about every facet of the natural
gas world from users, producers and potential future users. One
theme came from that, and that is that we have a great supply
of natural gas, we can argue 100 years or 150 years, that there
is enough supply that we could expand the uses of natural gas
into transportation, and this begs of question, we have been
talking about exporting surplus but we could also have
discussions of additional uses of natural gas.
But one thing always came back, and that is the uncertainty
of regulations and the regulations when you drilled further
down were defined as uncertainty about whether the federal
government was going to start regulating fracking, if and how,
and that that in itself is the worry for the users. I am one of
those that feels that expanding natural gas into vehicles will
help our country not only because we are using a domestic
product but the fact that diversity in auto fuels, whether we
start with trucks, heavy trucks or whatever, enhances our
national security status.
So starting with Mr. Sieminski, honorable, and then going
down, this is the question I would like to have your respective
opinions, and that is, is it fair to say that moving more of
our transportation to natural gas will impact our national
security?
Mr. Sieminski. Thank you, Mr. Congressman, for calling me
honorable. I guess I get that because the Senate confirmed me
in my appointment. I tell people that a lot of folks in my new
place of employment call me sir, and that is very different
than when I was in the private sector, but I have to fly
economy when I travel.
Mr. Terry. I understand that. With a 9 percent approval
rating here, we get called a lot of things, but honorable is
not one of them.
Mr. Sieminski. I think that you are on to a really
interesting question here. We actually took at look at how
quickly natural gas could grow in transportation, and it is a
very small number, a rounding error in terms of percentages. We
do use 3 percent of our natural gas to move natural gas in the
pipelines, but when most people think about transportation,
they are thinking about trucks or cars and so on. We believe
that LNG in freight trucks and then eventually natural gas
being turned into liquids like a high-quality diesel fuel--
there is a plant under consideration down in Louisiana to do
just that--could actually almost double the amount of total
natural gas in transportation so that we could get up from 3
percent now to easily 6 percent and possibly as high as 8 or 9
percent. A lot of that is because natural gas, from a pricing
standpoint, looks really, really attractive compared to global
oil prices. So there is a lot of effort underway there.
Mr. Yergin. I think we have pretty much the same view as
EIA, that, you know, it does now appear that natural gas will
become an important fuel for large trucks, for railroads and so
forth. At this point we don't see it becoming a major fuel for
private automobiles because of the nature of the infrastructure
and so forth that would be needed.
Mr. Terry. I would like to hear your opinion.
Ms. Morgan. I would be happy to.
Mr. Terry. You are the contrarian.
Ms. Morgan. We haven't done extensive research on this area
but the one piece that I can add to the discussion perhaps is
that it is clear that gas a lower global warming potential than
oil, so from that perspective, it is more beneficial, and I
think as I was saying earlier, if we can also tackle the carbon
capture and storage piece of that, you will see even greater
benefit.
Mr. Terry. Thank you.
Ms. Hutzler. From our standpoint, we essentially agree with
Dr. Yergin in the sense that there is certainly a market in the
heavy-truck area, and it is easier to deal with the
infrastructure problems there of supplying the natural gas but
in the private sector for residential vehicles, it is more
difficult.
Mr. Vidas. The analysis that we have done is very similar,
that although we expect natural gas and liquefied natural gas
vehicles to triple their use over the next 20 or 25 years, it
still represents a relatively small part of the overall sector.
The more likely way that natural gas could be used to displace
oil would be through gas-to-liquids technologies or even using
natural gas to generate electricity and then using electricity
in battery cars.
Mr. Whitfield. The gentleman's time is expired.
Mr. Terry. Thank you.
Mr. Whitfield. At this time I recognize the gentlelady from
California, Ms. Matsui, for 5 minutes.
Ms. Matsui. Thank you, Mr. Chairman. I would like to also
thank the witnesses for being with us today. I am pleased to be
back on the Energy and Power Subcommittee this Congress, and I
look forward to working with my colleagues to comprehensively
address our Nation's energy needs, and that also includes
dealing with climate change.
Right now there are thousands of clean technology companies
manufacturing innovative products that will help fundamentally
shift our country away from carbon-intensive energy sources.
Many of these are small-business owners and entrepreneurs. My
district of Sacramento has over 220 such companies. I have seen
firsthand the progress they have made in solar, wind, hydrogen
fuel cells and waste-to-energy conversion techniques. These
companies are working on the technology to ensure that America
remains a leader in green energy global market. We are rapidly
losing ground in this sector to countries like China and
Germany who are heavily investing in the renewable energy
markets, and the United States must level the playing field to
allow our clean technology companies to better compete. Low-
carbon energy sources must have a seat at this table. Energy
efficiency must have a seat at this table, and clean energy
technology must have a seat at this time. Anything less is
shortsighted and detrimental to our economy, our environment
and our energy goals.
I want to follow up to Ranking Member Rush's questions
regarding the clean energy manufacturing sector. Last month,
Chairman Emeritus John Dingell and I introduced H.R. 400, which
is a bill to promote American clean energy exports and increase
clean energy manufacturing. This bill passed the House with
bipartisan support during the 111th Congress and it is my hope
that this committee will consider it soon.
Ms. Morgan, can you expand on the economic benefits we
would receive by boosting our clean energy manufacturing
sector?
Ms. Morgan. Certainly. I think one key piece, if we are
able and hopefully will build out our manufacturing sector
would be in the area of jobs. Currently, according to the
Energy and Environment Study Institute, you have more jobs
created in clean energy than you do in oil, fossil and coal
combined, and a recent study by the University of California
actually looked at the fact that you can--over time if you were
to really go for 30 percent renewables and push your energy
efficiency in the economy, you could have 4 million jobs by
2030. So the job benefits are certainly significant, that is
for sure.
Ms. Matsui. OK. And in your testimony, one of your
recommendations is that we must build out America's renewable
energy sector. Now, what are some criteria that policymakers
should consider for driving clean energy growth and
competitiveness?
Ms. Morgan. I think the main criteria right now, if I look
at where the United States stands on clean energy, is the
clear, long-term, long, loud and legal signal that investors
are looking for to see that this is a growing area, so that
means that national renewable energy policy, I think it can
take many different forms but optimally one that goes beyond 3
years. I think certainly having grid access for that renewable
energy is another key criteria that I would look for, and I
would add in training. I think the other piece that is very
important, Colorado is doing some work on this, and that is
happening in Germany, is a really specific training program,
big job opportunities.
Ms. Matsui. OK. And do you think we need to consider
creative financing options for smaller clean energy companies
to succeed?
Ms. Morgan. Definitely. I mean, I think that if you look
at--there is a number of different innovative ways that you can
bundle the demand for renewable energy and create new financing
mechanisms to do that. We have had some experience with that in
the United States and we are now seeing that happening in India
as well.
Ms. Matsui. Thank you. And I also believe too as we look
forward, we are not--because of my focus on clean energy, clean
energy technology, it does not at all mean that we cannot look
at the transitional aspects of things like natural gas as long
as I believe we look at some of the areas of carbon capture and
storage which I think needs to be looked at alongside the
wonderful aspects of how much gas we have. So anyway, I really
appreciate your testimony and I hope that we can continue the
conversation and looking at somewhat all of the above as we
move forward.
Thank you very much. I yield back my time.
Mr. Whitfield. Thank you. At this time I recognize the
gentleman from Illinois, Mr. Shimkus, for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman, and I thank the panel
for coming to Mr. Sieminski and Dr. Yergin and actually
Hutzler, and I can't see the name and we don't have paper
anymore, so--Vidas. I had to go flip back on the side pad to
find the testimony a couple times.
Because in your presentations, a lot of you have the maps
and the various plays, whether it be the shale, tight oil,
coalbed, others in your testimony. What I would like to know
is, how far behind are we from the pipeline infrastructure to
move this product? I mean, the pipeline issue, we are dealing
with Keystone and Keystone XL, part of the North Dakota play,
the problem is, we don't have access to a pipeline so a lot of
this North Dakota oil is being inefficiently trucked down
versus through pipelines. So can you all just briefly talk
about pipeline infrastructure?
Mr. Sieminski. Thank you, Mr. Shimkus. So just to start,
the infrastructure issues take time. I mean, you can often get
some production going and you get a lot of wells being drilled.
Whether or not companies can then afford to build the pipeline
infrastructure to move those products, oil and gas, around
depends on their own view about how long the production
activity will last.
Mr. Shimkus. Yes, and if you would just a little brief,
because most of the pipeline infrastructure now is based upon
traditional oil and gas and refineries and the like, so all
these new plays are in areas where there may not be access to.
Mr. Sieminski. Exactly.
Mr. Shimkus. I guess the point is, is that something we
ought to consider in public policy debates? Dr. Yergin?
Mr. Yergin. Yes, I absolutely think so. I mean, it is like
I said, our thinking needs to catch up with reality. Our
logistics need to catch up with new production. Everything has
been turned upside down. Instead of going south-north, it is
going north-south. A big question, you know, we just managed to
survive, save those refineries on the East Coast, but they have
to be hooked into North Dakota. We see, as you say, trucking,
we see railroad cars. Ultimately, the most efficient way to
move these supplies is by pipeline. Canada's output of oil
sands is equivalent to Libya's before the revolution there.
That supply--you know, we talk about U.S. energy independence.
It is really a North American integration. So we have got to
get, you know, a pipeline system that catches up with the fact
that technology has changed.
Mr. Shimkus. There is also some oil being barged down on
the Mississippi, and there was a recent one that ran into the
bridge down in the southern part of the Lower Miss, so, I mean,
there is also issues with that type of transportation.
Ms. Hutzler?
Ms. Hutzler. Yes, I agree with Dr. Yergin. We do have oil
that is landlocked in North Dakota. We have built up in our
storage facilities in Cushing and it is more efficient to move
by pipeline. We are moving by rail now, I think I saw a number
of 800,000 barrels a day, which is pretty substantial, and it
is also safer to move it by rail--I mean by pipeline than rail.
Mr. Shimkus. Mr. Vidas?
Mr. Vidas. I agree with the other speakers, that oil and
natural gas infrastructure that is going to be needed to move
this oil and gas to market is very important and it involves a
substantial investment each year and thousands of miles of
pipe. The other point that I would emphasize as well is that
pipelines in general tend to be the least expensive and usually
the safest way to transport both gas and oil.
Mr. Shimkus. Thank you. And I will finish with Dr. Yergin.
This whole debate on slowing down or not exporting natural gas
I find pretty problematic as natural gas is just a basic
commodity product just like corn or beans or pork or anything
else, and that it has to be priced on the world market and we
have to get it. You mentioned in your comment that there is a
need for additional markets. Why did you say that and what do
you mean by that?
Mr. Yergin. Well, because we have seen as been described my
colleagues on this panel this growth, this technology has
opened up a huge amount of new supply and right now, you know,
there is a lot of supply that can't get to market and you see
activity going down.
Mr. Shimkus. So if there is no price signal, then all these
jobs for location discovery and recovery would be gone because
there is no price signal to continue the----
Mr. Yergin. Yes. What has happened is of course a lot of it
has flipped into looking for either oil or for gas that is rich
with liquids but nevertheless I think the general view is that
at this low level that this is not a sustaining price to
maintain the growth in supply that we need for electric power,
that we need for our industry and might need for transportation
and to meet global markets.
Mr. Shimkus. Great. Thank you very much. Thank you, Mr.
Chairman.
Mr. Whitfield. At this time I will recognize the gentlelady
from the Virgin Islands, Ms. Christensen, for 5 minutes.
Mrs. Christensen. Thank you, Mr. Chairman, and I want to
thank you and the ranking member for this hearing as well.
Mr. Sieminski, I represent our U.S. territory, the U.S.
Virgin Islands, and they are plagued with the highest rates of
electricity in the United States. In my district of the U.S.
Virgin Islands, current electricity rates are five times the
national average. An average family pays, if they can, 50.8
cents per kilowatt compared to the 9.83 U.S. average. A visit
to your Web site shows a very clear breakdown of State
electricity profiles with the U.S. average retail price
reported but in order to find information about the
territories, you have to really search and it is quite
confusing. The majority of information is on a beta site that
says, for public testing and comment only and there is a
country analysis brief on the Virgin Islands, but this is
really unacceptable. So why is it that the territories'
electricity cost information is not included there even if it
is as an outlier and what can we do to have that information
included?
Mr. Sieminski. Thank you, Congresswoman Christensen. I said
at my confirmation hearings that EIA needed to get its data
better, faster and cheaper, and we are working on that. We need
to receive complete and timely data from everybody. This has
been a problem with some of the territories but I will look
into that question and I will see what we can do.
Mrs. Christensen. And we can work to try to make sure that
you have the information. It is important for that information
to be out there. Thank you.
We have spent a lot of time talking today about oil and gas
resources but the United States has been said by Ms. Morgan and
others that we are blessed with ample renewable energy
resources as well. The question is whether we and the rest of
the world are doing enough quickly to develop those clean
energy resources and make our economies more energy efficient.
Last November, the IEA released their World Energy Outlook for
2012 and found that our current energy system is unsustainable
and they projected that in a little more than 20 years we could
see average global temperatures increase up to 6.5 degrees
Fahrenheit as approximately 80 percent of future global
emissions are already locked in by existing infrastructure.
Ms. Morgan, how much would we have to reduce fossil fuel
use in order to prevent more than, I think that would be 2
degrees Centigrade rise in temperature and what does it mean
that we would be locked into these emissions?
Ms. Morgan. Thank you. Well, on the longer term what the
scientific estimates state is that we need to be reducing our
emissions by 80 to 95 percent by 2050, which means that we have
to really have the longer term in mind. The estimates for 2020
time period for developed countries tends to be around a 25 to
40 percent reduction. The United States has made a commitment
to 17 percent. I think the thing to recognize is that there are
points of no return where we hit tipping points where you are
no longer able to restore coral reefs, where the arctic ice
melts completely. Those are the types of irreversible impacts
and the lock-in of our infrastructure that, you know, comes
from the current pathway on high carbon is very much
responsible for that.
Mrs. Christensen. And, you know, they also say that it is
possible to prevent that 2-degree Centigrade increase if we
were to act to reduce CO2 emissions prior to 2017.
So I don't know if you wanted to comment or Mr. Sieminski
wanted to comment on what is it that--you know, the window we
have is rapidly closing. It hasn't closed yet. But the IEA has
said that it is ambitious but still possible. So what is it
that we would have to do? What kind of technology should be
included in this rapid development in climate policy if we
could reduce that increase, in order to reduce that increase by
2017?
Ms. Morgan. I will answer quickly. I think the key points
are, we have to have a revolution in the renewable energy space
and energy efficiency. We have these technologies now. We need
to put in place the policy frameworks and the R&D to get those
going. We need to price carbon. Most other major economies
around the world price carbon. It drives efficiency. And we
need very much to drive R&D much more quickly.
Mrs. Christensen. It is only 5 years.
Mr. Sieminski. I won't make any policy recommendations but
I would like to point out that this is a global issue so to
deal with the 2-degree Centigrade we need cooperation around
the world. EIA's forecasts show that almost all of the growth
in carbon dioxide emissions from energy will be taking place in
the non-OECD countries so outside of the developed world what
we really need is to help countries like China and India move
towards lower-carbon fuels.
Mr. Yergin. I think one of the things just to add is, our
CO2 emissions from energy consumption are down 13
percent since 2007, so this is already actually happening. And
the other thing that we can do that has a huge impact is simply
become more energy efficient. We are twice as energy efficient
as a Nation than we were a few decades ago. We have
technologies and tools to do that today and that is a big
thing. But as Adam Sieminski says, the growth is in the
emerging markets and those numbers tend to overwhelm what we
are doing.
Mrs. Christensen. Thank you.
Mr. Whitfield. Time is up. At this time I recognize the
gentleman from Texas, Dr. Burgess, for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman, and I thank you for
convening this panel. It really has been a fascinating morning.
I am going to start off this new session of Congress by
agreeing with the ranking member of our committee. In his
opening statement, he said we must not betray our children and
our future generations. I agree with him. Now, while he was
referencing carbon capture and storage, I would reference the
economic conditions that have prevailed for the past 4 or 5
years. The last Congresses, I was also on the Joint Economic
Commission. It was our duty the first Friday of every month to
receive from the Bureau of Labor Statistics the employment
numbers from the previous month, and you saw a pattern emerging
through all of that bad news, and there was a lot of bad news
during the years, but mining and manufacturing always led that
list of new job creation.
Now, we see this morning Forbes magazine is reporting that
four out of the top 10 best places to live in the world are in
Texas. I knew that. They didn't need to tell me. But Austin
leads the list followed by Houston second, Dallas third, San
Antonio ninth. In fact, the State of Texas has added almost a
half million people over the past years from last summer to--
the summer of 2011 to the summer of 2012, and the reason for
that of course is the availability of energy and the cost of
energy, and while energy in and of itself cannot be its own
end, it does help drive our economy. So when we talk about not
wanting to betray our children and future generations, I think
we have a responsibility to the economy, and part of that
responsibility is the energy supply that is available to our
economy.
Dr. Christensen talked about tipping points. I will just
ask an open-ended question. I know you guys don't like to
speculate, but what kind of tipping point would we have seen
with the economy in the last 4 or 5 years in the absence of
shale? What might have happened to our economy without the
ability to produce this energy and produce these jobs? And
either Dr. Yergin or the Honorable Sieminski, I would like to
hear your thoughts on that.
Mr. Yergin. Well, if we had remained on the track that we
had been on prior to when we were going to build all of those
LNG receiving stations, we would probably be spending $100
billion a year now to import LNG into the country, so that
would have been a big burden. Secondly, had we not seen this
increase, this substantial increase in oil production, as I
said, this equivalent to Iran's total exports before sanctions,
we would be paying a lot higher prices for oil, and it would be
a much, much tighter and more vulnerable market and we would
not have had what we have seen is that these supply chains are
so long in our economy, these are dollars that stay here. They
are going to jobs here rather than going into a sovereign
wealth fund somewhere else in the world. So in that other
universe, it would have been a much more difficult picture and
more congruent with what seemed to be the picture in front of
people in 2008.
Mr. Sieminski. Virtually every economic study that I have
seen suggests that higher domestic production of fuels leads to
greater GDP, and when you get to the import issue you obviously
have lower trade deficits. All of that helps the economy, leads
to greater job creation, as Dr. Yergin said. I think one of the
things to keep in mind is that the availability of relatively
low-cost natural gas has actually, I believe, helped to sustain
some of the growth in wind and solar on the renewable side
because those are intermittent sources. They need a backup
supply and it is often natural gas that provides the backup for
these rapidly growing renewables that are going to become a
fairly significant part of U.S. energy production and
consumption.
Mr. Burgess. Sure. We have peaking demands in north Texas
where in the summertime when the air conditioners are all
cranked down low, even if you had a substantial wind component,
you would never be able to keep up with that peak demand.
I just have to tell you, this is such a different hearing
than we had in this very room in 2008 and, I mean, it is good
news. It is good news for the American people, it is good news
for the American economy. Regardless of political party or
political persuasion, this is a good-news hearing.
The other part of the good news, and Mr. Vidas, I won't
leave you out down on the end, yesterday flying up here reading
in the Star Telegram and the concept of having an
environmentally friendly fracking fluid that is being developed
now by Halliburton in Texas. I understand other companies are
doing that as well. But the technology is changing and it is
changing in a way that is environmentally responsible, and you
referenced some of that in your testimony but do you have
additional thoughts on that?
Mr. Vidas. Yes. What I said was there are several ways in
which the industry has tried to adapt their technologies to
reduce the footprint of drilling these wells. One is the
surface footprint and trying to reduce the amount of space that
it takes by combining multiple wells on a single path, and that
can reduce the amount of space used by a factor of eight. The
other point that I made is the drilling fluids themselves,
which in the old days had been formulated with diesel oil. That
has almost totally been eliminated now, and some of the toxic
substances in the frack fluids are being replaced by more
environmentally benign fluids.
And then the other point that has been raised is the use of
water itself. Typically, a well will take about 3 million
gallons in terms of the fracking process, and one of the ways
the industry is reducing that is by recycling the water and
being able to use it over and over again, and the other thing
that they have been doing is trying to reduce the total amount
of water used by various different techniques including
substituting other fluids such as CO2, nitrogen and
in some cases propane instead of water.
Mr. Whitfield. The gentleman's time is expired.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the ranking member,
Mr. Waxman from California, for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman. I appreciate that we
have made great advances and it is a reason for celebration. We
ought to be very pleased with the advantages that have come to
us with the production of more oil and gas resources, and we
now have advances in technology that have allowed us to drill
in many new areas.
But as we congratulate ourselves for these new discoveries,
we also, I think, need to discuss how energy choices we are
making today will have long-term impacts for our climate. We
have a rapidly diminishing window to act to reduce our carbon
pollution before the catastrophic impacts of climate change are
irreversible.
Ms. Morgan, in your testimony you say the United States
cannot and should not make energy decisions without factoring
in the risks associated with climate change. This committee is
charged with developing energy policy for the United States.
Ms. Morgan, how should this committee factor in climate when
making energy policy?
Ms. Morgan. Well, I think that if you look longer term, it
is quite important. First of all, you need to take into account
the intensity, the greenhouse gas intensity of the fuels you
are looking at and you need to put a price on those fuels in
order to drive innovation and energy efficiency. That is point
one. The second point I think is that although emissions of
CO2 have reduced extensively, which is very good
news, they are plateauing out and emissions of methane and
other gases are increasing, so that means that we need to put
in place mandatory and voluntary approaches to reduce methane
emissions as well, and we need a very solid renewable energy
approach. The countries that are moving forward, you see those
kind of three pieces in there. Carbon pricing, renewable energy
policy, energy efficiency standards are all quite important,
and then support mechanisms around those to make them work.
Mr. Waxman. I have been on this committee for a number of
decades, and I remember the period of time when we decided that
we will continue to subsidize the fossil fuels through not
requiring them to pay their external costs and in some cases
directly through the tax code, and we undermined the
alternatives that could have made us less dependent on these
fossil fuels, which made us, of course, more dependent on Saudi
Arabia and Iran and other countries, the OPEC countries that
held us hostage. We made a mistake not diversifying our energy
sources at that time. We should develop our energy policy under
this new circumstance that doesn't make the same mistakes and
put us all in the same situation where we will look back and
regret that we didn't recognize that our energy policy had to
be more thought through.
What are the potential economic repercussions if we fail to
integrate climate risk with our energy policymaking?
Ms. Morgan. I think that there are three main risks. I
think the first really is around stranded investments because I
think companies today that are investing in high-carbon
infrastructure without putting in place the mechanism to deal
with CO2 are being shortsighted and that as climate
change unfortunately gets worse and policies get put in place,
those will be stranded investments, and if we wait to act,
those likely will be more expensive as we go forward.
The second really is missing out on new and existing
markets around the world which are growing exponentially. You
are looking at up to $7 trillion in new capital and renewables
by 2030 and there is national policies in every other major
economy in the world on renewables. They are serious about
this. They are moving forward for a range of reasons. And the
third are the impacts actually on our infrastructure itself and
on the country, which as you know, as the EIA said, if we keep
going the way we are going, you are looking at a 10.8-degree
Fahrenheit rise in temperature, which is unprecedented in our
time.
Mr. Waxman. Dr. Yergin, aside from the investment we ought
to be making and looking at alternative energy sources,
renewables, efficiency, some of that research is threatened by
the budget cuts that members want to make. Do you think we
ought to develop a policy that looks at the environmental
consequences of where we are going in energy development?
Mr. Yergin. I think so. In the 1990s, I headed a taskforce
on energy R&D for the Department of Energy, and I think one of
the things, you know, we found very distressing was this
volatility in spending on R&D, and whether you are talking
about, you know, MIT where more people work on solar than
anything else or advances in drilling or whatever it is, I
think that a sustained commitment to R&D----
Mr. Waxman. But aside from that----
Mr. Yergin. --is the most important investment.
Mr. Waxman. I absolutely agree with you, but aside from
that, do you think we ought to make policies in the energy area
that look at not just the research but the consequences to the
future in reducing carbon emissions?
Mr. Yergin. I mean, I think so. I think the environmental
considerations obviously should be part of how you make energy
policy.
Mr. Waxman. Thank you. Thank you, Mr. Chairman.
Mr. Scalise [presiding]. The gentleman's time is expired.
The gentleman from Louisiana, Mr. Cassidy.
Mr. Cassidy. Mr. Yergin, there are those that say that we
shouldn't export liquefied natural gas because in some way by
doing so we will promote the production of more natural gas and
therefore contribute to global warming, but what you are saying
is that is absurd because if we don't do it, Australia or
Canada or some other country will export liquefied natural gas.
Is that a fair statement?
Mr. Yergin. Yes, I think people will fill the market and
fill the need, and in fact are racing ahead to do that.
Mr. Cassidy. Now, as they race ahead, it is fair to say
that if is a $5 billion or $10 billion project to create one of
these export terminals, those are a heck of a lot of jobs that
will be sacrificed because of an absurd premise? Again, is that
a fair statement?
Mr. Yergin. The absurd premise is that----
Mr. Cassidy. Being that if we don't export liquefied
natural gas, then natural gas will not be mined.
Mr. Yergin. Well, I think in fact if you take a country
like China, which as Adam Sieminski pointed out, it is very
heavily oriented towards coal and wants to reduce its use of
coal and use more natural gas to produce electricity to reduce
pollution, they will look in one direction or another, and if
we are sending natural gas we would be contributing to their
reducing their pollution.
Mr. Cassidy. So if we can create those jobs, we will
simultaneously improve our economy, but too, improve, decrease
carbon release worldwide potentially?
Mr. Yergin. Yes. I think what is happening now is----
Mr. Cassidy. I am going to let you hold that.
Mr. Yergin. OK.
Mr. Cassidy. Mr. Sieminski, in 2007 you published a report
at the request of Congress demonstrating subsidies for
different sources of fuel, and at that time biofuels got $5.72-
per-million-BTU subsidy from the government, solar got $2.82,
coal got 4 cents per million BTU and natural gas got 3 cents
per million BTU. Your updated report did not have this chart,
but when we speak about subsidies for various forms of energy,
there is an order of magnitude difference there. Is that still
the ballpark of the federal subsidies?
Mr. Sieminski. I would have to look at the numbers,
Congressman, but the number of assumptions and factors that you
have to take into consideration to do those calculations are
numerous and complex, but I think it is fair to say that in
addition to fossil fuel subsidies that there are also obviously
subsidies on renewable fuels and many of the other things that
we do.
Mr. Cassidy. Yes, like 100 fold, 100 fold going to
renewables.
Mr. Yergin, back to you. When you were at the World
Economic Summit, you are right, if we don't send energy to
Japan, their economy will tank. That is on my mind when I go
around to the exporters in Louisiana. I say what do you need to
create more American jobs. They say more robust markets to
export to. Right now Japan and Europe are in the doldrums. We
need those economies to do better so we can create more
American jobs.
So is it fair to say, let me ask, at the World Economic
Summit, what is the prognosis for the Japanese economy as an
example if they cannot replace their nuclear capability with
some reasonable----
Mr. Yergin. Well, they have turned--I mean, the new
government in Japan is going to reconsider, and I think in July
is going to come out with its policy about whether it is going
to keep some of the plants operating or not. With that said,
the Japanese are kind of in a panic about energy supplies right
now, very focused on LNG as their kind of major increment, and
I think the point you say, a Japanese economy that is a weak
economy as part of a global economy contributes to global
weakness. So we are pretty interdependent with them. That is
why I said, you know, they are a close ally and if they do
well, we do better.
Mr. Cassidy. It is in our self-interest to make sure that
they have adequate energy supply.
Mr. Yergin. That is right, and it is in our political
interest and it is in our economic interest.
Mr. Cassidy. OK. Sounds great.
Ms. Morgan, you spoke about methane emissions. I think it
is important to make sure the record is straight. A lot of
times folks who are critical of natural gas state that the--
quote that Cornell study, Mr. Howarth's study, and which finds
very high levels of methane released with natural gas
production. But just to set the record straight, that is kind
of an outlier study, isn't it? I mean, both the Department of
Energy as well as MIT peer-reviewed study have found a tenth of
the emissions as the Howarth study. Is that a fair statement?
Ms. Morgan. We are actually in the process of putting out a
study on this. We think that that study is on the upper end.
Mr. Cassidy. The Howarth study is on the upper end?
Ms. Morgan. Yes, but that there are also real measures that
can be put in place to control methane even on the lower level
that are important.
Mr. Cassidy. Mr. Yergin?
Mr. Yergin. Just to add, I know my colleagues in the
Howarth study used data that supposedly came from us, and my
colleagues had written a letter to the journal which was
published saying the data had been quite distorted, and there
is now a cooperative program with the Environmental Defense
Fund and a number of companies to actually measure methane and
come out with some hard data on it.
Mr. Cassidy. I just say that because Ms. Morgan, your
testimony suggested that the lifecycle carbon release of
natural gas is not as favorable as we would presume, but that
really seems to assume the Howarth study is valid, and frankly,
there seems to be a general agreement that it is not.
Ms. Morgan. I think even on the lower levels, it is
important to put in place measures to deal with----
Mr. Cassidy. Well, I am not arguing that. I am just saying
the lifecycle release has been overstated.
Ms. Morgan. The lifecycle as a whole, that study does
overstate it.
Mr. Cassidy. I yield back. Thank you.
Mr. Scalise. The gentleman's time is expired. The
gentlelady from Florida, Ms. Castor.
Ms. Castor. Good morning, and thank you very much for your
insightful testimony.
The outlook from the Energy Information Agency is very
positive for the economy and I think beyond the current outlook
there is great potential for additional economic growth tied to
domestic supplies if we have the appropriate environmental
safeguards, and I think here in America we can do more for
consumers and for electric reliability or reliability from all
energy sources. But in order to build that more sustainable
energy system, we need to bring greater balance between fossil
fuels and renewable sources, and I don't think it is all about
generating energy from cleaner sources. We also need to make
our economy more efficient so that we use less energy overall,
and I think that it may be time to look at the business models
for utilities and the incentives and modernizing those business
models.
According to the IEA, energy efficiency is an enormous
unrealized opportunity for the world to reduce energy use and
thereby carbon pollution. The IEA projects two-thirds of
potential efficiency gains will remain untapped through 2035
under current policy. That is a real hit on the pocketbooks of
American families and businesses.
Ms. Morgan, in your testimony you say the United States has
immense remaining potential for improving efficiency in its
industrial, transportation and building sectors. Which energy
efficiency measures have the most potential to reduce energy
consumption from the U.S. industrial sector?
Ms. Morgan. I think there are a number of different
measures, and they can come in on either the State level or on
a national level. There is tremendous potential of combined
heat and power on the State level for industrial facilities. In
the building sector, certainly also you look at both the
opportunity for new business models but also for jobs in
retrofitting buildings. There is great potential there. And
certainly, you know, the evidence base is quite strong if you
look at the benefits that have come from the new car standards
that have been put in place.
Ms. Castor. Can you give me some more specific examples or
the most innovative energy measures in use today? Are there
energy efficiency measures being implemented at the State level
or abroad that we should expand or employ on a national level?
Ms. Morgan. There is a program actually in Germany that is
very focused on the retrofitting of buildings and you need to
look at the ownership structure obviously but they are looking
at how you can get at the point that the owner and the renter
don't always share the benefits and looking at new models of
how they can put in place measures to retrofit those buildings
extensively across the country. They are funding that actually
with revenue from their emissions trading system so it is not
additional funding coming in. I think that is a very strong
example. You actually have a very strong program in China
around their enterprises as well where they are putting in
place measures to share practices and set targets for companies
to increase their efficiency.
Ms. Castor. And in your written testimony, you state that
the federal government can play an important role in improving
energy efficiency across the economy. You said the first step
is to support programs that ensure consumers can make informed
choices. What were you talking about? What else can the
Congress do to encourage consumers to make energy-efficient
choices in the marketplace?
Ms. Morgan. I think there are things like smart metering,
information provided in all products that is much clearer about
energy saved, money saved, CO2 saved. There is ways
when you start looking at our grid on the smart metering side
of things. I think if consumers first of all have more
information but then also, you know, can be able to buy the top
products as affordably as possible.
Ms. Castor. Wouldn't it help if then the electric utilities
really had an incentive to promote conservation and greater
efficiency? They would help empower consumers to do that. It
would be a win for families. They would have more money to
spend at home, and the utilities, their business would change a
little bit. For example, in my neck of the woods, we have this
terrible debacle with a broken nuclear power plant, and it is
enormously expensive, and we like the diversity in power
supply, it is very important, but it seems now that we would
get more bang for the buck if we helped save energy and the
utility had some incentive. Where is that happening? Are those
discussions happening?
Ms. Morgan. Yes, they are happening somewhat on the State
level, I think, in certain States where you have these kind of
demand-side management models that are put together where both
utilities and consumers benefit. I think they need to be much
more broadened out so that they occur across the country more
systematically.
Ms. Castor. Do any of you have information on those kind of
incentives of changing the business model?
Mr. Sieminski. I could just add very quickly that the
lighting standards that have been put in place starting this
year, changes in appliance efficiency, the improvements in auto
fuel efficiency, lower vehicle miles traveled, all of that is
leading to lower energy use per capita, which is good. You are
getting more value for less consumption.
And quickly, the difference between the new auto fuel
efficiency standards that got adopted last year so between 2012
and 2013 in our forecast by the year 2035 that is worth
something like 1\1/2\ million barrels a day of oil imports.
Ms. Castor. Thank you very much.
Mr. Scalise. The gentlelady's time is expired. The
gentleman from Texas, Mr. Olson.
Mr. Olson. I thank the Chair, and welcome to the witnesses.
I thank you for your time and expertise as we lay the
groundwork for a broader discussion about federal energy policy
and the importance of robust domestic energy industry. I want
to dig a little deeper into the geopolitical challenges we are
facing in the new energy era. As we move forward as a Nation,
we need to better understand how our newly realized energy
resources can advance our foreign-policy goals.
One historic example of how U.S. production or a lack
thereof impacts the geopolitical landscape, the Persian Gulf.
At the end of World War II, our geopolitical focus was on
containing communism. When I joined the Navy in 1989, we had
four numbered fleets: the 2nd Fleet in the Atlantic, the 6th
Fleet in the Mediterranean Sea, the 3rd Fleet in the eastern
Pacific and the 7th Fleet in the western Pacific in Japan.
Communism fell in 1991, and as a result, our global military
forces changed dramatically. We added the 5th Fleet in the
Persian Gulf. We disestablished the 2nd Fleet in the western
Pacific in September of 2011, and the 7th Fleet has now become
the largest fleet in our Navy, and it is ramping up very
quickly with China's aggression in the South China Sea.
American innovation and our abundant energy resources can and
should be leveraged to protect our allies around the world from
unreliable and unfriendly regimes and promote our interests.
Another example of how U.S. energy supply can strengthen
our relationships with important countries is India. They have
the world's largest democracy and they are in a pretty
unreliable neighborhood. They have Pakistan to the west, China
to the north, Bangladesh to the east. I had lunch with the
Indian counsel general in Houston a couple weeks ago. We spoke
for 20 minutes about India getting U.S. LNG, export natural gas
to India. Right now they have got a big problem: they have no
pipelines. Because of their neighbors, they can't have overland
pipelines so all their energy supply has to come in the form or
oil or gas, has to come either via train or via boat, mostly
boat. They want to be our partner.
And so my question for you, Dr. Yergin, in your view, how
can our energy resource base reshape our foreign-policy
objectives? What countries should we develop or strengthen our
ties with and how can we pressure rogue states without relying
on military intervention?
Mr. Yergin. Well, that is a big question. I think that
first we are seeing, as we have been describing, a rebalancing
of global oil that is occurring and that we will see the
Western hemisphere largely self-sufficient in years to come and
more of the oil from the Middle East going to the Far East, so
I think that is kind of one of the fundamental changes. I think
what you referred to with India, I found when I was in Asia
recently in Singapore and other countries also that interest in
seeing the United States at least a player as an energy
exporter, if not a massive one, because for them it is
diversification and they would like to actually be more reliant
and diversified more to depend upon the United States. I think
as these technologies develop and we see it develop elsewhere,
a key country actually is what Mexico does in terms of opening
itself up to these new technologies. It is something that I
think is right on the foreground.
In terms of new relationships, Brazil is on course to be a
global energy powerhouse and I think the U.S.-Brazilian
relationship is one that grows in significance for us. So those
would be some of the changes.
Mr. Olson. How about Eastern Europe, who buys their natural
gas largely from Russia?
Mr. Yergin. Well, Poland is very interested in--it is
interesting, you have different mixes in Europe on policy.
Poland certainly wants to develop its shale gas to reduce its
dependence on Russian gas, and Ukraine, of course, there is
constant friction between Russia and Ukraine over the price of
natural gas, and Ukraine, I think just last week or the week
before, started signing some large agreements to develop shale
gas in Ukraine, and for them, it is not only economic but it is
also a geopolitical development.
Mr. Olson. I get emails back home every week from people
along the Silk Road, you know, where Turkey starts and heads
east toward all those countries right there, the former Soviet
states up there on the Caspian Sea, they want our natural gas.
So again, I think it is a great opportunity for our country to
actually have an influence on these people, make some friends,
create American jobs, and again----
Mr. Yergin. And I think they wanted to be integrated in the
global markets as a way to sustain their nationhood.
Mr. Olson. Yes, sir. It looks like I am out of time. I
yield back the balance of my time. Thank you.
Mr. Whitfield. At this time I recognize the gentleman from
Pennsylvania, Mr. Doyle, for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman, and thank you to our
witnesses today.
This morning we are discussing a new landscape for North
America's energy resources and how we develop an effective
energy policy in the absence of resource scarcity. In my home
State of Pennsylvania, especially in western Pennsylvania where
I represent, we are experiencing a surge in energy development
that each of you have discussed in your testimony. In my neck
of the woods, we have natural gas, coal, nuclear. We have got
steelworkers making wind turbines. We have got universities
producing energy startups that are harnessing renewables.
Marcellus shale alone in my State has provided thousands of new
jobs and we are burning a cleaner fuel for our transportation
and electric industries. So it is important to me that
policymakers fully understand energy reserves that we have and
the best ways to develop them. But something that is equally
important to me is how we manage the effects of carbon
emissions that come from burning these resources. I have worked
many years on this committee--this is my 13th year on the
committee and the 19th year in Congress--to do this in a
comprehensive way, and I think most of the members of this
committee know that I want to get our fossil fuel resources out
of the ground. I don't think it has to be an either-or
proposition. But what I am interested in is how we find that
sweet spot where we can develop North American energy resources
and effectively manage our carbon emissions simultaneously.
So I have some questions about that, but before I ask those
questions, I just want to provide some clarity to something
that we heard at this hearing, and we hear a lot. My good
friend, Mr. Scalise--and he is my good friend--had asked Ms.
Hutzler why we weren't seeing more development on federal
lands, and her reply was that the permitting process takes up
to 300 days. I want to put a map up on the screen that I think
we have that I think should provide a little bit of clarity. As
you look at the United States, that dark area, the gray shaded
area, that is the federal lands, and the light red, the pinkish
area, is where our oil and gas shale plays are, and then the
dark red that you see is where there is an overlap of federal
lands and oil and gas shale plays, and Mr. Sieminski, I think
back in August you testified to this committee that because
basically the shale resource basins are largely outside of the
federal lands, so too is the shale production, I think your
quote was in this case the geology is working in favor of non-
federal landowners.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
So we hear this a lot that there is all this development
that could be taking place on federal lands but the permitting
process is so bad, and I think the map pretty graphically
illustrates that there is just not much federal lands where the
oil and gas shale plays are in the United States. I just wanted
to provide that for clarification.
I want to ask Dr. Yergin and Ms. Hutzler too, you both
briefly addressed climate change and greenhouse gases in your
written testimonies, and I just wonder, as we start to reassess
these vast new energy resources, and it is not that they are
new, you know, technology has given us a way to make them
economically feasible to go and recover them now, right? And
everything we do is a technology question, whether it is how we
dispose of nuclear waste, what do we do with carbon emissions,
just all of this, the answer is in technologies, and we are
discovering new ways to do things in a more environmentally
sound way. We hear about new types of fracking fluids because
there is this tremendous potential to get this out of the
ground, and I guess my question is, I am interested to hear, do
you believe that we should also factor in climate change in
these environmental concerns? Because it seems to me that once
industries, you know, have to address these carbon issues too,
we are going to see technology innovations there also that are
going to be very valuable to U.S. companies to help these
economies like in China and India and others. They are not
going to be the leaders in figuring out to deal with carbon
emissions. That is going to hopefully come here and then we are
going to sell that technology all over the world. So I guess
what I want to ask you is, do you think we should factor this
in as we are looking at a new energy policy and these new
fuels, factoring in environmental concerns and climate change
as we develop policy?
Mr. Yergin. I think we are certainly factoring them in. As
I said, I had spent some time on that Secretary of Energy
Advisory Board committee that I think provided a framework for
looking at the environmental questions and saying how do you
address them, and there is climate change but there is also the
water questions, what do you do about wastewater, questions
that you know very well from your district that need to be
addressed. I think that as we have just discussed,
understanding the methane emissions from natural gas drilling
is a very important contribution to it. There are different
views as to what the results will be.
And I would say that the other thing is that you have to
see this in an entirety. It is not that we are going to more
oil because we are producing oil but it means our cars, as Adam
says, are going to get a lot more efficient as we do it but the
question is, is that oil going to be produced in the United
States or are we going to import it. So we have to see it in
the framework.
Ms. Hutzler. I want to address your map again, and maybe
that is the case for the shale formations, but on the other
hand, the federal government has a lot of non-shale-based areas
that----
Mr. Doyle. But all the growth is in the--I mean, the boom
we are seeing right now is happening because we figured out how
to get this oil and gas out of shale.
Ms. Hutzler. Well, let us take the offshore area in terms
of oil drilling. We were drilling a lot, and as a matter of
fact, the oil numbers offshore in fiscal year 2010 were very
high but then it dropped by 17 percent. So you can still get a
lot of oil offshore if you allow the permitting to go on.
Mr. Doyle. The point is, we are seeing this huge boom in
oil and gas shale and it basically exists on non-federal land,
so I just think it is somewhat of a red herring.
Mr. Chairman, I see my time is up.
Mr. Whitfield. The gentleman's time is expired. At this
time I recognize the gentleman from Colorado, Mr. Gardner, for
5 minutes.
Mr. Gardner. Thank you, Mr. Chairman, and thank you to the
witnesses today, and if I could have that last slide put up on
the screen again, that would be fantastic.
If you look at the State of Colorado as it appears on the
map that is right there, you can see the state of Colorado.
That red spot is in my district in northern Colorado. But there
is tremendous opportunity for development in the gray spots,
and a lot of that gray spot that you see in Colorado with the
Rocky Mountain areas, it is BLM land, it is U.S. Forest Service
land. They are unable to get permits through the BLM because of
various bureaucracies. In fact, according to the Western Energy
Alliance, over 100,000 jobs could be created in the western
United States, primarily on those gray lands, if the permitting
delays were simply lifted. Over 100,000 jobs could be created
in the western United States. That is not because all the
development is taking place in the red areas or the pink areas.
That is because Bureau of Land Management and other agencies
have been so slow in their permitting that we can't get those
permits through to create those kinds of jobs. So I think you
would see a lot more red areas if we could actually get a
government that was willing to allow us access to those
resources in a responsible manner, and so I for one would like
to see over 100,000 jobs being created in the western United
States.
But I would also like to ask a couple of other questions,
pointing out that in that red area you see in northern Colorado
right there, because that development is taking place in that
play. There was an article in Greeley Tribune on January 17
that said--the Greeley Tribune is the newspaper in northern
Colorado--that said Weld County rose 20 spots in a year to rank
number 42 in the Nation in job and wage growth. There was an
article in that same newspaper January 8, 2013, that said Weld
County wage growth hits number five in the Nation because of in
great party the energy development that is taking place in
Colorado. So we can see the opportunities, and I believe it was
Ms. Hutzler that talked about the amount of economic impact
that we have seen. I think your statement--what was it again
you said about the trillion dollars over 30 years? What was the
amount of money you said as a result of development?
Ms. Hutzler. If we opened up new areas onshore and offshore
to development, that we would get over the next 37 years $14.4
trillion to the economy.
Mr. Gardner. And I believe the President's budget said that
if we had--and I am going to get this number in the ballpark--
if we had 1 percent GDP growth over the next 10 years, we would
generate around $2 billion or so in new revenues for the
federal government, so you can see the kind of activity, the
GDP growth we would see, the kind of GDP growth we would see as
a result of energy development across the country.
Ms. Hutzler, you mentioned the permitting delays on federal
land. What do we need to do in order to alleviate those delays?
Ms. Hutzler. We need to make the process more streamlined.
We need to get rid of all the red tape and the delays and look
at the States to see how they are doing it to remove those
delays or in fact allow the States to actually do the
permitting because they certainly know the geologic areas and
what is best for the State.
Mr. Gardner. Ms. Morgan, you had said something in your
statement regarding 2050 carbon emissions. Is that reducing
carbon emissions by 80 percent by 2050? Twenty percent of
today's carbon emissions would be, what, about a billion tons
of CO2? Is that roughly what it would be?
Ms. Morgan. Roughly, yes.
Mr. Gardner. Can you give me an emissions inventory for
2050 of specific sources that would add up to 1 billion tons in
CO2?
Ms. Morgan. In 2050?
Mr. Gardner. Yes, a specific inventory of emissions.
Ms. Morgan. Well, I can certainly--I mean----
Mr. Gardner. Does the technology exist today to do that?
Ms. Morgan. Yes, it does exist today. The National
Renewable Energy Laboratory actually said you can get to the 80
percent renewables by 2050 with existing technologies. What the
inventory would be then would be much less CO2.
There would probably be a bit left over in some of the non-
CO2 gases. But the point is that I think if we were
to build out and put in place the policies, you can find that
sweet spot of extracting or clean energy resources while also
producing the gas in a more climate-friendly fashion.
Mr. Gardner. And I think that is something that I have long
been supportive of is an effort to find a sweet spot when it
comes to bulk renewable alternative energy sources as well as
traditional energy sources, but unfortunately, what I see in
Colorado and what I see out of this Administration are attempts
to actually make it more difficult to develop that traditional
resource. In fact, I was reading a letter from one of the EPA
regions, I believe it was region 3 of the EPA, concerning an
LNG export facility that they were asking how many new wells
would have to be drilled across the country as a result of that
one single LNG facility, and I think when we start asking those
kinds of questions, what happens to this LNG to wells being
drilled in Colorado, that seems to me to be a very adverse tone
for energy production in this Nation.
I see my time is expired and I will yield back.
Mr. Whitfield. At this time I will recognize the gentleman
from New York, Mr. Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair, and thank you to the
witnesses for presenting at this hearing.
There has been a lot of discussion about the oil and gas
production and the estimates of oil and gas reserves. I believe
there is most likely this gap between proven and technically
recoverable reserves. To what degree, if any, have the
environmental costs of exploiting oil and gas been considered
in estimating the technically recoverable reserves? Anyone?
Mr. Vidas. I can try to address that issue. In the work
that we have done, we have defined technically recoverable to
be based on current technology and current activity, so we
apply a factor of so many bcf or so many barrels per well based
on what is going on right now. So it does not take into account
future changes to regulations that might change the cost.
However, when we look at the economically recoverable
resource base, which is a subset of the technically
recoverable, we have to make certain assumptions about the
costs. So depending on what kind of scenario we are looking at,
we may use today's costs, which are based on today's
environmental rules, or we may hypothesize new regulations that
might be imposed in the future. And typically when we look at
that, we would look at a series of different rules about water
use, different types of materials that can be used and so on,
and generally when we have looked at that, we would say that
the future regulations might add something like 7 percent to
the cost of a well, so that would produce then a resource cost
that would be about 7 percent higher than today's cost, but of
course, that depends on what regulations are implemented in the
future.
Mr. Tonko. Anyone else? Many of you did not respond, so I
am assuming there was no environment cost. Ms. Morgan?
Ms. Morgan. Yes, sir. I believe that environmental costs
are actually not factored in, and we would be happy to provide
data from a recent National Academy of Sciences report on the
climate and non-climate impacts that has a United States focus.
Mr. Yergin. If the environmental costs, if you mean, for
instance, regulations that require how you manage water, how
you manage land, how you manage air quality, those are all
environmental costs that are then internalized because they are
part of the regulatory process.
Mr. Tonko. Well, Dr. Yergin, you discussed the implications
of the expansion in gas production for our domestic markets and
for the global market. The demand in the United States has
leveled out recently but global oil consumption continues to
expand and fossil fuel use continues to expand. How do the
rates of increase in our reserves compare to the rate of
increase in oil and gas consumption globally?
Mr. Yergin. Globally, the world is now divided into two.
There is the OECD, the United States, western Europe, Japan
where we really started in about 2005, 2007 to have peak demand
in terms of oil and our oil consumption is going to go down,
not up, because of more efficient cars, because of demographic
changes in our population, because people reach a limit to how
many hours they want to spend sitting in a car, so I think that
is happening, but the great boom is of course in the emerging
markets and they roughly now consume about the same amount of
oil as the advanced markets but that is where all the growth is
going to be. China in 2000 sold 2 million new cars, we sold 17
million new cars. By 2010, we were selling 12 new cars and they
were selling 17 million. So that tells you where the growth is
going to be.
Mr. Tonko. And we are experiencing this period of relative
abundance but we have been there before in our recent past
history, so oil and gas markets are volatile and have led us to
a false sense of energy security in the past. So how do we
develop a national energy policy that is less shortsighted and
more strategic? Basically, how can we best use these reserves
to maximize----
Mr. Yergin. Well, what you said is quite right, that what
we have seen overall, this is just development in the last 3 or
4 years and we are focusing this discussion and our resource
base, but look at the Middle East. I mean, people used to talk
about the arc of instability going from Syria to Iran. Now they
talk about it going from the Sahel in Africa to central Asia.
So you look at the map and there are many parts of the world
which have abundant energy supplies, where there is a lot of
very evident political risk, and I think your point that we
shouldn't--there is no reason here for complacency.
Mr. Tonko. Ms. Morgan?
Ms. Morgan. I just wanted to say that I think that if you
look at the--we really can pull out all of our resources, that
we don't need to be thinking of an either-or, and that
renewable energy resources, energy efficiency and CCS are all
part of that and you need to take that longer-term view or else
we will be making shortsighted decisions and not building the
CCS in now to our gas and oil decisions.
Mr. Tonko. Thank you very much. With that, I yield back.
Mr. Whitfield. Thank you very much. At this time I
recognize the gentleman from Virginia, Mr. Griffith, for 5
minutes.
Mr. Griffith. Thank you, Mr. Chairman. I have to say I
think we have to use all of our energy resources to develop a
plan long term.
That being said, in regard to natural gas, Administrator
Sieminski, you would expect at some point in the next few years
for gas to return to $4? Is that correct?
Mr. Sieminski. We have natural gas prices getting back to
$4 a million BTUs by the end of next year.
Mr. Griffith. OK. And in fact, they have been going up.
They hit a low in April of $1.95 and in December they were
$3.34. Is that correct?
Mr. Sieminski. I believe so, sir.
Mr. Griffith. And if I understood your testimony earlier,
when it gets to $4, coal becomes very competitive again?
Mr. Sieminski. It is a sliding scale but as natural gas
prices go higher, coal becomes more attractive.
Mr. Griffith. I appreciate that very much coming from a
coal district, and I will turn to you, Ms. Hutzler.
A lot of what we have been doing has been ignoring coal and
its potential as a major resource in this country. It has
always been that way. And I would point out that I think in
your testimony you said that we relied on three major sources.
Of course, we have got our renewables but our three major
sources are nuclear, coal and natural gas. Is that correct?
Ms. Hutzler. Yes.
Mr. Griffith. And I think you also reported that just the
mercury utility MACT rules would cost about $21 billion a year
and 183,000 jobs a year. Is that correct?
Ms. Hutzler. Yes.
Mr. Griffith. And that retirement of coal power plants by
2016, we are going to be retiring 27 gigawatts. Is that also
accurate?
Ms. Hutzler. I think that is through 2015 and that is an
EIA number that has been reported to them by electric utility
companies.
Mr. Griffith. All right. And that is much higher than the
EPA's estimates when they first came out with this new
regulation. Isn't that correct?
Ms. Hutzler. Yes.
Mr. Griffith. And in fact, not only is it going to affect
jobs in the coal fields and at coal-fired power plants, but it
also will cause our electric rates to go up by 10 to 20 percent
in most of the country. Isn't that correct?
Ms. Hutzler. Yes.
Mr. Griffith. And in fact, in some parts in the Midwest, I
don't represent them but in some parts it could be right up
there at the 20 percent.
Ms. Hutzler. Yes, in States that are highly dependent on
coal-fired generation.
Mr. Griffith. Now, you acknowledge in your written
testimony that the EPA claims that they are not going to do
this but you do raise some concern and worry that the EPA may
decide that the modifications in regard to greenhouse gases
could impact existing coal-fired power plants because that
would force them to, if they interpreted that complying with
Utility MACT created them into a new source that that would
then put a tremendous amount of pressure on the existing coal-
fired power plants and cause even more closures. Is that
correct?
Ms. Hutzler. Yes, because under the Utility MACT rule, if
there are substantial changes, they might be able to look at
that particular unit as a new unit and therefore treat it as a
new unit where they don't want the amount of greenhouse gas
emissions to be any more than from a natural gas plant
essentially.
Mr. Griffith. And you cited a report from the United Mine
Workers of America that would indicate that if that were to
happen, that job losses could amount to more than 50,000 direct
jobs if you could coal, utilities and the railroad industry,
and as much as 250,000 jobs indirect. Is that a correct
assessment of what the UMWA said?
Ms. Hutzler. Yes.
Mr. Griffith. So this is of great concern in my area
because we have railroads, coal and utility companies.
I would point out also that it is kind of interested that
your written testimony indicates that the Chinese are using
about four times as much coal as we are and that while they are
building cleaner plants, they are not putting their older, less
clean plants out of existence in the meantime, are they?
Ms. Hutzler. No, they are not. With their GDP growth, they
need all the power they can get, and in fact, according to the
National Energy Technology Laboratory, they are building 60 to
80 gigawatts of coal-fired plants a year, and they think that
will happen easily through 2016 and maybe further.
Mr. Griffith. And so they are relying on coal including
maybe some of our coal to generate their energy and the growth
in their economy. Isn't that true?
Ms. Hutzler. Yes. They have to import coal now. They can't
produce enough themselves to satisfy their demand and we are
exporting coal to them.
Mr. Griffith. And so when I tell my constituents that not
only are we damaging coal but we are also damaging jobs in the
United States, we are allowing the Chinese to grow their
economy while retarding our economy by not using our clean coal
technology. Isn't that correct?
Ms. Hutzler. Yes.
Mr. Griffith. And in fact, in my district there is a plant
that just opened this year that is extremely clean, and because
of the carbon rules, the greenhouse gas rules, it wouldn't be
allowed to be built if it hadn't already been in construction
and opened this year. Isn't that correct?
Ms. Hutzler. Yes.
Mr. Griffith. And so for all intents and purposes, at least
at this point in history, there is not the technology available
for the United States to build any more clean coal plants,
coal-fired electric generation plants, and we are really
handicapping ourselves in relationship to our competitiveness
with the Chinese. Isn't that also true?
Ms. Hutzler. Yes. We don't--currently, CCS technology is
not available, commercially available for these plants.
Mr. Griffith. I thank you, and I yield back, Mr. Chairman.
Mr. Whitfield. At this time I recognize the honorable
gentleman from Massachusetts, Mr. Markey, for 5 minutes.
Mr. Markey. I thank the gentleman very much.
Just a point. In 2009 in this committee and on the House
Floor, Mr. Waxman and I built in $60 billion for clean coal
technology, carbon capture and sequestration. We voted it out
of this committee with no Republican support. Over the last 5
years, unfortunately, coal has dropped from 51 percent down to
35 percent of all electrical generation in the country, and
what has gone up? Natural gas. It is less expensive and it is
cleaner. So coal is being attacked but it is by the natural gas
industry, so let us just get that clear, and we put the $60
billion in and the coal industry opposed the Waxman-Markey
bill. They opposed now, and now they suffer from not having the
investment in technology to make it cleaner. So don't blame us,
blame the coal industry for not wanting the funding and blame
the natural gas industry for their technological breakthroughs
that have allowed for the production of more and cheaper and
cleaner sources of energy.
Mr. Sieminski, recently the Department of Energy released a
study of the economic impacts associated with exporting large
quantities of natural gas that was performed by NERA
Consulting. The study used outdated 2010 EIA projection data
and concluded that while exports would lead to higher domestic
energy prices and adverse impacts to American manufacturing,
the overall economic impact would be positive. Mr. Sieminski,
isn't it true that EIA's 2010 data predicted that domestic
natural gas use in the power sector would decline between 2010
and 2020, though its use in the power sector has actually ended
up growing by 27 percent just since 2010?
Mr. Sieminski. I have been in the forecasting business a
long time----
Mr. Markey. No, I am just asking, is that true or not? I am
not asking for your personal history.
Mr. Sieminski. Yes.
Mr. Markey. OK. That is all I needed to know. So way off.
EIA was way off. Natural gas and the utility sectors not only
did not go down, it has now gone up 27 percent since that
report. Isn't it true that EIA's current projections of natural
gas use in the transportation sector are seven times as high as
the 2010 data used in the NERA study?
Mr. Sieminski. And our supply estimates are also higher.
Mr. Markey. I am only--I am not asking you--I am asking you
to just go back to this study that is being relied upon. Is it
not seven times higher in the transportation sector than NERA
projected in just 2010?
Mr. Sieminski. Yes, sir.
Mr. Markey. OK. Thank you. So this data was released in
2010, and since then 100 major manufacturing projects totaling
$95 billion in investment have been announced. These are
manufacturing facilities that would produce chemicals,
fertilizer, steel, aluminum, gas, tires, plastics and other
goods, all of which rely on cheap natural gas. That is what is
driving this manufacturing. These announced projects alone
would push U.S. industrial demand for natural gas 30 percent
beyond the estimates used in the NERA study. Just yesterday,
the Wall Street Journal described decisions made by German and
Canadian companies to locate new facilities in the United
States because of low natural gas prices. The Germans, the
Canadians are coming to the United States with their
manufacturing facilities.
Do you believe that we should be making decisions about
what to do with domestic natural gas in 2013 and beyond using
data that reflected what was going on in that sector 3 years
ago that vastly underestimated what is happening today?
Mr. Sieminski. I think it is always better to have recent
and accurate date in making forecasts but----
Mr. Markey. Especially since the data we are talking about
is like a Frankie Avalon record except it only took 3 years to
turn it into completely outdated information that was totally
wrong about where we would be 3 years later----
Mr. Sieminski. Congressman Markey, as I was trying to say
earlier----
Mr. Markey. Let me just continue. Last year your agency
found that exporting 12 billion cubic feet per day of natural
gas could lead to a 54 percent increase in domestic prices but
today companies are applying to export nearly three times that
amount. It seems to me that before we permit more natural gas
exports to occur, we should have an understanding of the
potential economic impacts on consumers, on the manufacturing
sector and on the transportation sector in the United States in
terms of our own internal domestic growth in those sectors of
our economy and have it based upon real data, not old data that
bears no resemblance to what is happening in the natural gas
sector today.
Now, let me just ask this question. This panel led by the
Republicans voted in 2012 to repeal the ability of EPA to
increase fuel economy standards for the vehicles which we
drive. Let me just go down the line here and just ask each of
you, do you support the repeal of the ability of the EPA to
increase fuel economy standards or do you oppose repealing the
authority? Can we just go down and we will just get your views
on that way in which we deal with oil consumption in the United
States? Mr. Sieminski?
Mr. Sieminski. It is not a question for me, Congressman.
Mr. Markey. It is not?
Mr. Sieminski. No, it is not. It is a policy issue.
Mr. Markey. OK. Good.
Mr. Yergin?
Mr. Yergin. I think fuel efficiency standards are an
important contribution to energy efficiency and our overall
energy mix.
Mr. Markey. Thank you.
Ms. Morgan. I agree, it is a great example of how you can
meet energy and climate security goals at the same time.
Mr. Markey. Thank you.
Ms. Hutzler. Well, they are important and certainly make a
difference. You have to take a look at----
Mr. Markey. No, just that one issue. One issue, please.
Ms. Hutzler. Well, there are safety issues with vehicles
and other issues that have to be taken into account.
Mr. Markey. So you would consider repealing EPA authority?
Ms. Hutzler. I would think that it needs to be studied and
you have to look at the entire situation.
Mr. Markey. Yes, sir?
Mr. Vidas. I don't want to state any policy opinions like
that, but as a personal consumer of cars, I certainly like to
have more efficient cars.
Mr. Whitfield. The gentleman's time is expired.
Mr. Markey. Thank you.
Mr. Whitfield. At this time I recognize the gentleman from
Illinois, Mr. Kinzinger.
Mr. Kinzinger. Thank you, Mr. Chairman, and thank you all
for coming in. Just a couple of questions, and this may not
take all my 5 minutes.
Mr. Yergin, last week's Wall Street Journal, there was an
article titled ``Can Gas Undo Nuclear Power?'' which discusses
how low natural gas prices are problematic for our baseload
energy production, and I would like to know your thoughts on
low gas prices as it impacts fuel diversity into the future and
existing domestic resources like nuclear.
Mr. Yergin. I think what has happened with natural gas
prices, remember, when people went out to start developing
shale gas, it was--the incentive was very great for these
independents. It was like $12 and now we know we are talking
around $3, and that is really changing the marketplace, the
electric power marketplace for everything, certainly including
nuclear.
Mr. Kinzinger. So does that give you concerns for maybe the
viability of nuclear in the future if this continues? And also,
what do you think is going to happen? Do you think in 10 years
if you can magically look forward that we will have a diverse
energy supply or do you think we will have too many eggs in one
basket?
Mr. Yergin. Well, I think it is the--we have four reactors
that are under construction, two projects now. I think that in
this cost environment it is very hard to see anybody committing
to a current generation of new power plants. The Secretary of
Energy Advisory Board, the last session was partly devoted to
small modular nuclear reactors, in other words, where there is
technological innovation. And I think the other question about
our nuclear fleet is, it is about 20 percent of our
electricity. Lives have been extended. What happens after
another 20 year and does that shrink away then.
Mr. Kinzinger. And then another question. You mentioned my
home State of Illinois as a State that already employs 39,000
people in oil and gas.
Mr. Yergin. Well, who are benefiting from the
unconventional oil and gas revolution.
Mr. Kinzinger. Right.
Mr. Yergin. Although Illinois hasn't yet passed the
regulations.
Mr. Kinzinger. No, it is about time we get there.
What would the economic impact be on Illinois if they
allowed oil and gas production, in your mind, as far as new----
Mr. Yergin. It would be--it would lead to considerable
generation of income in the State, as we have seen in other
States. Mr. Doyle mentioned it in his State. And when I was out
in Illinois, that day the front page of USA Today was about how
income is shifting, new income is being created in areas, rural
areas, areas that had been depopulated and so forth because of
this activity and kind of in the center of the State, and the--
--
Mr. Kinzinger. They are the areas that are frankly
suffering sometimes the hardest under this recession, or this
economic difficulty, we will call it, to avoid argument on it.
Mr. Yergin. The new Albany shale could be very important
for the economy of your State.
Mr. Kinzinger. And what price do you think natural gas
would need to be in order for production to occur in Illinois?
Mr. Yergin. Well, I think it is really--I mean, I think
people are ready to go ahead. It depends on happens in
Springfield, I think, as to whether it goes ahead or not and at
what----
Mr. Kinzinger. I will say Springfield makes Washington,
D.C., look highly functional.
Well, thank you, and I appreciate everybody's testimony. I
appreciate your answering my questions. The big concern here
into the future is, I have always been a believer in saying you
can't have too few energy supplies, and when it comes
specifically to nuclear, I think it is important we ensure
nuclear maintains a major part of our energy portfolio because
in the future you never know how things change.
With that, I want to say thank you. Thank you, Mr.
Chairman. I yield back.
Mr. Whitfield. At this time I recognize Mr. Pompeo from
Kansas for 5 minutes.
Mr. Pompeo. Thank you, Mr. Chairman, and I thank the
witnesses. It has been a long morning. I think I am hitting
cleanup today.
A couple thoughts. It has been great to listen to. I have
heard words like renaissance and revolution thrown around and
all the good things that are happening. I think it is worth
noting for everyone here, almost all of that happened with
almost zero role of the federal government. Most of the things
that the federal government's resources have gone to in this
intervening period between the hearing in 2008 and the one in
2013 continue to provide a very, very negligible set of outputs
important to the American economy. So I think that suggests the
direction of travel for us as well as we think about new
policies.
Mr. Yergin, I have got a question for you about pipelines.
Mr. Shimkus talked about it a little bit. You know, there is an
article in Energy Daily talking about how long it is taking for
permitting. I would like to introduce that article into the
record if I might, Mr. Chairman.
Mr. Whitfield. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Pompeo. The study found that nearly 20 percent of
natural gas pipelines have delays of over 6 months or more,
enormous capital at risk when you think about building a new
pipeline, and it is important not only for existing fields to
get those pipelines--the Mississippi shale in my district is a
good example. We have got production but relatively little
demand in towns like Anthony and Coldwater, Kansas. We have got
to this product to the right places.
I think there is also a circular effect, that is, if you
know that you can efficiently build a pipeline, folks will go
look for in other places as well. Can you talk about the
interplay between challenges in building pipelines and people's
willingness to take risks in finding these fields in North
America?
Mr. Yergin. Well, Ms. Hutzler spoke about that before too.
I think that getting--the word she used, streamlining
permitting for pipelines. I mean, pipelines are literally a
pretty straightforward thing and that we ought to--that you
need them to keep up with where we are and otherwise you either
are using flaring for gas or you are shipping oil by truck and
so forth and that is not a very efficient way to do it.
Mr. Pompeo. I appreciate that. I am actually--I am working
on some legislation to give FERC a little more authority in
trying to streamline this process. I think it will be
bipartisan. I think we can do this in a way that provides all
the protection for the environment, all the things we need to
do, but getting us to a finish line where we actually make
decisions about these. Whether the pipeline is a go or a no go,
we do it in a much more timely and reliable fashion.
We talked about energy exports. I was surprised Mr.
Griffith didn't talk about coal exports. We have been talking
about LNG mostly but it is a broad set of energies that we
ought to be exporting from America. Today with respect to LNG
exports, we have a delineation about DOE's authority, whether
we are going to transport this to a free trade agreement
country or a non-free trade agreement country. I guess this is
for anyone on the panel. Is there any reason for that
demarcation to continue to exist?
Mr. Yergin. I think it is an artifact.
Mr. Pompeo. Yes, that is my sense as well.
Mr. Yergin. I mean, Japan, the example I gave, is not a
free trade country and yet it is an incredibly important
country to us.
Mr. Pompeo. It seems to me too that there is a history. I
read a little history of how it came to be and it seems
something that we as a policy matter could get rid of. We could
direct those two places for shipment to be treated identically.
I have a few of what DOE's authority ought to be. I don't think
the--I think the national interest finding is by definition
free trade, it creates wealth in America. I think it is by
definition but I am sure others would have a slightly different
view on that but at least we could get rid of that demarcation.
Ms. Hutzler, I was reading an article about renewable
energy, and in Eastern Europe they subsidized it even longer
than we have and even more than we have, and they have had some
power blackouts. There is an article in Bloomberg on October 25
that I would also like to submit for the record that talks
about these energy blackouts.
Mr. Whitfield. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Pompeo. You know, our grid could suffer the same kinds
of things, in my view, if we have non-storable, non-reliable
energy source. Do you have a view of the risk of us subsidizing
this at such a rate that we get to a place where we have got
less reliable electricity in America?
Ms. Hutzler. Yes. Germany is a good example because they
are phasing out their nuclear units and turning to renewable
energy in its place, but obviously it has to be backed up, and
it has caused instability to their grid. Neighboring countries
are not allowing them to export their renewable energy, their
wind energy, to them such as Poland, and in fact, industrial
users are seeing some disruptions in their service that is
causing them hundreds of thousands of dollars in equipment and
they have already told the German government that either you
fix this problem or we are going to leave.
Mr. Pompeo. I have got just 20 seconds. Mr. Sieminski, you
talked about renewables growing at a huge rate. It is easy to
grow at a huge rate off a small base. I remember, I ran a small
company at one point too. It is still not a hugely important
part of our energy resource base. When you made these
assumptions about its economic growth, what did you assume for
federal policy? Did you believe that we would continue our
current--somebody on the other side of the aisle called it
creative financing. I will call it getting in the pockets of
taxpayers. But what assumptions did you make about state RPSs
and these kinds of non-economic policies remaining in effect
supporting----
Mr. Sieminski. EIA's forecasts always use existing law and
regulation. We don't try to forecast regulation or law. We do
have the California renewable and other laws built into our
forecasts. Renewables go from about 13 percent over the last
few years to 16 percent of total electricity generation, so
there is a lot of growth but it is still a small portion.
Mr. Pompeo. Great. Thank you. Thank you, panelists, all for
being here today.
Mr. Sieminski. Congressman, I just want to add one other
quick thing if I might, Mr. Chairman.
Mr. Pompeo. It is OK with me. My time is up.
Mr. Sieminski. Your background in the oil service industry,
a number of questions have come up here this morning about the
impact of hydraulic fracturing and need for water. In
Pennsylvania, I know that most of the flow-back water is now
being recycled and used again, and changes in technology like
the multistage fracturing could lead to much less water use
simply because the identification of where to frack along a
horizontal well could cut the number of feet that you have to
frack in half, and all these things, these changes in
technology are taking place at such a rapid pace. It is one of
the reasons why EIA's forecasts have fallen short, as Mr.
Markey suggested.
Mr. Pompeo. Great. Thank you.
Mr. Whitfield. OK. All time is expired, and I want to thank
the panel of witnesses. So thank you all very much. We will
keep the record open for 10 days, and I am asking unanimous
consent to submit into the record a copy of a statement from
National Petroleum Council and also the executive summary of
the IER study on opening federal lands to oil and gas leasing.
[The information appears at the conclusion of the hearing.]
Mr. Whitfield. So with that, we will conclude today's
hearing, and once again, I appreciate the participation of
everyone.
[Whereupon, at 1:05 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Eliot L. Engel
Thank you Mr. Chairman.
As we start a new legislative year, I am pleased to see a
strong focus on North American energy resources. I have been a
strong proponent of doing everything we can to make the United
States energy independent. One of the reasons I formed the
Energy and National Security Caucus was to draw attention to
the fact that our dependence on imported oil affects our
national security.
I believe in an ``all of the above approach'' to energy
independence, but we must include renewable energy as part of
the mix, even as we tap new fossil fuels. Our country, the
climate, and the world cannot afford for us to rest on our
laurels. Climate change is a serious threat to our country and
to the entire planet. We must tackle this threat by seriously
by focusing on renewable energy resources which do not
contribute to global climate change.
New York, New Jersey and Connecticut were recently
devastated by Superstorm Sandy; western states are still
suffering through record droughts, and many areas were
devastated by wild fires. Climate change is contributing to
these weather patterns. We can no longer afford to ignore
climate change and I am hopeful that this Committee will
seriously deal with the issue.
One method for helping to grow renewable energy resources
is make sure it is on an even playing field with fossil fuels.
I will soon be reintroducing my ``Open Fuel Standard Act'',
that would require 95% of new vehicles to be able to operate on
another fuel in addition to or instead of gasoline.
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