[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE EFFECTS OF RISING ENERGY COSTS ON AMERICAN FAMILIES AND EMPLOYERS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY POLICY,
HEALTH CARE AND ENTITLEMENTS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 14, 2013
__________
Serial No. 113-8
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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80-086 WASHINGTON : 2013
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming PETER WELCH, Vermont
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan VACANCY
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Energy Policy, Health Care and Entitlements
JAMES LANKFORD, Oklahoma, Chairman
PATRICK T. McHENRY, North Carolina JACKIE SPEIER, California, Ranking
JIM JORDAN, Ohio Minority Member
JASON CHAFFETZ, Utah ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
PATRICK MEEHAN, Pennsylvania JIM COOPER, Tennessee
SCOTT DesJARLAIS, Tennessee MATTHEW CARTWRIGHT, Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia TONY CARDENAS, California
THOMAS MASSIE, Kentucky STEVEN A. HORSFORD, Nevada
MICHELLE LUJAN GRISHAM, New Mexico
C O N T E N T S
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Page
Hearing held on February 14, 2013................................ 1
WITNESSES
Mr. George E. Hand, General Manager, Canadian Valley Electric
Cooperative
Oral Statement............................................... 5
Written Statement............................................ 8
Ms. Paula M. Camody, President, National Association of State
Utility Consumer Advocates
Oral Statement............................................... 14
Written Statement............................................ 16
Mr. Eugene M. Trisko, Attorney at Law and Energy Economist
Oral Statement............................................... 26
Written Statement............................................ 28
Mr. Daniel J. Weiss, Senior Fellow, Center for American Progress
Action Fund
Oral Statement............................................... 47
Written Statement............................................ 49
Mr. Daniel Simmons, Director of Regulatory and State Affairs,
Institute for Energy Research
Oral Statement............................................... 75
Written Statement............................................ 77
APPENDIX
The Honorable Jackie Speier, a Member of Congress from the State
of California, Opening Statement............................... 109
The Honorable Matt Cartwright, a Member of Congress from the
State of Pennsylvania, Opening Statement....................... 111
The Honorable Elijah E. Cummings, a Member of Congress from the
State of Maryland, Opening Statement........................... 112
U.S. Total Crude Oil Production 2004-2011........................ 114
The National Association of State Utility Consumer Advocates
Resolution..................................................... 118&
American Coalition for Clean Coal Electricity, Energy Cost
Impacts on American Families, 2001-2013........................ 120
Committee on Oversight and Government Reform Staff Report, The
Department of Energy's Weatherization Program: Taxpayer Money
Spent, Taxpayer Money Lost..................................... 134
Annual Motor Gasoline Regular Grade Retail Price................. 182
THE EFFECTS OF RISING ENERGY COSTS ON AMERICAN FAMILIES AND EMPLOYERS
----------
Thursday, February 14, 2013
House of Representatives,
Subcommittee on Energy Policy, Health Care and
Entitlements,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 1:04 p.m., in
Room 2154, Rayburn House Office Building, Hon. James Lankford
[chairman of the subcommittee] presiding.
Present: Representatives Lankford, Jordan, Walberg,
DesJarlais, Farenthold, Massie, Speier, Norton, Cartwright and
Horsford.
Also present: Representative DeSantis.
Staff Present: Lawrence J. Brady, Staff Director; Joseph A.
Brazauskas, Counsel; Caitlin Carroll, Deputy Press Secretary;
Sharon Casey, Senior Assistant Clerk; Brian Daner, Counsel;
Ryan M. Hambleton, Professional Staff Member; Christopher
Hixon, Deputy Chief Counsel, Oversight; Mark D. Marin, Director
of Oversight; Jaron Bourke, Minority Director of
Administration; Nicholas Kamau, Minority Counsel; Adam Koshkin,
Minority Research Assistant; Jason Powell, Senior Counsel; and
Rory Sheehan, Minority New Media Press Secretary.
Mr. Lankford. I would like begin this hearing by stating
the Oversight Committee mission statement. We exist to secure
two fundamental principles. First, Americans have a right to
know that the money Washington takes from them is well spent.
And, second, Americans deserve an efficient, effective
government that works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn responsibility is to
hold government accountable to taxpayers, because taxpayers
have a right to know what they get from their government. We
will work tirelessly with--in partnership with citizen
watchdogs to deliver the facts to the American people and bring
genuine reform to the Federal bureaucracy. This is the mission
of the Oversight and Government Reform Committee.
This is also the first meeting of this particular
Subcommittee on Energy, Healthcare and Entitlements. It is my
joy to get a chance to introduce as well the ranking member
that will be serving with me, Jackie Speier from California.
Looking forward.
This committee as well is focused on trying to identify
ways that we can help the American consumer, the taxpayers to
have their money protected and also have a government that is
efficient. When the government spends $3.7 trillion, there will
be areas of waste and inefficiencies. We want to help identify
some of those, and we can work in a bipartisan way to be able
to accomplish that. But this is also a moment that we look at
the policies and the ways that we do things specifically to
work to protect the American consumer, which is what this
particular hearing is focused on.
Our Nation and our economy runs on energy. Costs of energy
rises and falls based on the cost of fuel and capital costs.
But the American consumer has a sense that they are being
squeezed. This hearing will work to address the changing costs
of energy and the direction of energy production in America.
According to recent polling, energy costs are the most
important financial issue facing American families today. The
Gallup poll from last month shows that 79 percent of Americans
said that the price of energy, including the price of gasoline,
is hurting their finances. More specifically, the prices of
electricity and gasoline are so high, they are impacting
American families' finances more than food, taxes, or even
health care, according to that poll. Gasoline prices account
for the largest single increase in consumer energy costs over
the past decade. Average U.S. Family will spend an estimated
$3,730 a year on gasoline in 2013, compared to 1,680 a year
just 10 years ago.
Since 2001, the energy cost impacts on American families
have been steadily increasing and are now at their highest
levels in over 10 years. On average, about 60 million
households, or about half of the households in America,
American families, now pay 20 percent of their income towards
energy costs. The poorest Americans, those making less than
24,000 a year, are often forced to make choices between food,
medicine, or Edison. In fact, those who earn less than 10,000 a
year will pay an estimated average of 77 percent of their
income towards energy.
Businesses, and especially small businesses, are also
experiencing in the adverse impacts of higher energy costs.
According to the U.S. Energy Information Administration,
manufacturers spend on average $136 billion a year on energy,
and commercial buildings spend a $108 billion a year. Small
businesses are more susceptible to negative impacts on rising
energy costs.
Energy-intensive industries are building-block industries
because they produce the components that are used for the rest
of the industrial manufacturing and construction sectors. These
industries see energy as a percentage of costs sometimes as
high as 85 percent.
With the rise in horizontal drilling technology, hydraulic
fracking, and other advanced recovery methods, it has vastly
increased the potential for recoverable domestic oil and
natural gas in places like North Dakota and Pennsylvania and
others. However, efficient use and production in North American
petroleum are facing cumbersome obstacles from the Federal
Government. These range from restrictive policies on oil
production on Federal lands to the continued rejection of more
pipeline infrastructures, such as the Keystone XL. State
regulatory primacy is also being challenged in all aspects of
energy production. These hindrances harm the ability of
families and businesses to cheaply access vast resources of
energy. The EPA-mandated framework for the sale of differently
blended versions of fuel across the United States, which means
that gas supplies often can't be shipped between cities even in
the same State.
The U.S. also has an opportunity to rejuvenate the once-
vibrant nuclear industry, as well as a very advanced wind
industry that continues to increase. For the first time in
decades, new nuclear plants are under construction. Further new
technologies, such as small modular reactors, offer tremendous
opportunities in the global market. This opportunity will be
lost if political and regulatory uncertainty impede domestic
development and innovation in that industry.
America has vast domestic energy resources. In order to
achieve affordable energy, Americans should have access to this
energy through all sources, coal, oil, gas, nuclear, and all of
our renewables. However, the costs of these energy resources to
families and businesses must always be taken into account when
providing subsidies to promote some and promulgating
regulations which sometimes limit others. Today it is right for
us to just take a closer look at the costs and the
opportunities for America's energy.
I'd now like to recognize the distinguished ranking member,
the gentlelady from California, Ms. Speier for opening
statement.
Ms. Speier. Mr. Chairman, thank you. And let me say how--
how much I'm looking forward to working with you on this
subcommittee this year. And while we come from different parts
of the country, the issues that we will address will affect
every single American, as this hearing does today. So I truly
look forward to our coordinated efforts on behalf of the
American people.
You know, no matter who controls the White House, oversight
of the executive branch is fundamentally a responsibility of
Congress. Holding the bureaucracy, its contractors, and the
corporations accountable isn't a partisan issue, it's a
congressional duty.
The title of today's hearing is ``The Effects of Rising
Energy Costs on American Families and Employers.'' In this
economy it's imperative that we in Congress do more to help
families recover from the recession as they pay off these
bills. What are we doing, for example, to raise the minimum
wage in this country? What are we doing to create more jobs for
the middle class and ensure that hard work leads to decent
livings? To be sure, we must investigate the high price
consumers and small businesses are paying on their energy
bills. Are regulations the sole factor causing prices to rise,
or are record-breaking profits of the oil companies part of the
cause?
Here is a chart we were hoping to have up for you. But it
shows that the five oil companies in 2011 made $41 billion, an
increase of 31 percent; $31 billion, an increase of 54 percent;
$26 billion, an increase of 114 percent; $27 billion, a 42
percent increase; and $12 billion, a 9 percent increase.
One thing is certain: The American people do not have to
choose between economic growth and environmental protection. We
can do both responsibly. The good news is that the United
States is already making great strides towards energy
independence. Under the Obama administration, domestic oil
production has reached its highest level in 11 years. And, in
fact, this chart shows how far we have come in a very short
period of time in oil production.
U.S. total crude oil production averaged 6.4 million
barrels per day in 2012, an increase of .8 million barrels per
day from the previous year. The largest single increase in
domestic annual production since 19--no, excuse me, since 1859.
Furthermore, domestic natural gas production reached a record
28.6 trillion cubic feet in 2011, marking the highest level of
natural gas production in this country in more than 30 years.
At the same time, we've made investments in renewable energy by
providing loan guarantees to build the Nation's first
commercial-scale cellulosic ethanol plant in Kansas, the
world's largest wind farm in Oregon, and the world's largest
solar plant in California, among many other cutting-edge
projects.
An energy company in my district said it best: Congress
shouldn't pick winners and losers. We should support all of the
above. All of these gains have been achieved while maintaining
strong protections for public health and the environment. We
have doubled the distance our cars can travel on a gallon of
gas, reduced CO2 emissions from power plants, and weatherized
homes to make them safer and more efficient.
The benefits of our environmental policies, meanwhile, have
far exceeded the costs of regulatory compliance. But as the
President made clear in his State of the Union Address, we must
also confront the reality of climate change. In 2011, the
United States endured more than 14 extreme weather disasters,
each costing over a billion dollars. There were another 11 such
disasters in 2012, and the GAO that just finished his
presentation here earlier today talked about climate change and
how we have got to factor it into our crop insurance and flood
insurance, as many of the private insurers in this country
already do.
According to NOAA, the combined 25 disasters from 2011 to
2012 are estimated to cost $188 billion in total. The record
drought of 2012 is estimated to cost $12 billion, and
Superstorm Sandy is estimated to cost $71 billion. Responding
to these extreme weather events will produce a measurable drag
on our economy, and the timing for American families could
hardly be worse. Paying the bills is strain enough, let alone
after the crops are wiped out by searing drought or houses left
flooded after a superstorm.
In conclusion, Mr. Chairman, I don't believe in the false
dichotomy that energy and environmental innovation precludes
economic growth. In the face of climate change, seizing the
opportunities before us in clean energy is critical not just to
preserve a livable planet for our children and grandchildren,
but to prevent Americans from bearing the real economic
consequences of inaction.
With that, I'd like to thank our panel of witnesses for
being here today, and I look forward to your testimony.
And, once again, thank you, Mr. Chairman.
Mr. Lankford. Thank you.
Members will have 7 days to submit their opening statements
for the record.
We'll now recognize our panel today.
Mr. George Hand is the general manager of the Canadian
Valley Electric Cooperative, a fellow Oklahoman with me, and
we're glad that you're here.
Ms. Paula Carmody is the president of the National
Association of State Utility Consumer Advocates. From Maryland;
is that correct?
Ms. Carmody. Yes.
Mr. Lankford. Okay. Glad that you're here.
Mr. Eugene Trisko is an attorney and energy economist.
Mr. Daniel Weiss is the Senior Fellow at the Center for
American Progress Action Fund.
And Mr. Daniel Simmons is the director of regulatory and
State affairs for the Institute for Energy Research.
Thank you all to be here. Pursuant to committee rules, all
witnesses need to be sworn in before they testify. So if you'd
please stand and raise your right hand, and be prepared to take
the oath.
Do you solemnly swear or affirm that the testimony you're
about to give will be the truth, the whole truth, and nothing
but the truth so help you God?
[witnesses answer in the affirmative.]
Thank you. Let the record reflect the witnesses answered in
the affirmative.
You may be seated.
In order to allow time for discussion, and we will have
Members that will come in and out at different points to be
able to ask questions, and so you'll see that movement as it
goes through, we have included a very handy clock right in
front of you. That clock is really a series of lights there,
green, yellow, and red, which I think is pretty standard
practice on it. The yellow will come on when you have 1 minute
left, and then the red will come on when it's time to stop. You
could wind up as soon as possible on that. There are bonus
points for finishing before 5 minutes because we'd like to be
able to have time for questions as well.
So to allow time for that, I'd like to go ahead and begin.
Mr. Hand, you are first up. And I'd be honored to be able
to receive your testimony now.
WITNESS STATEMENTS
STATEMENT OF GEORGE E. HAND
Mr. Hand. Chairman Lankford, members of the subcommittee, I
want to thank you for this opportunity to be heard and appear
before you today. My name is George Hand. I consider myself
fortunate and blessed. I was born in Oklahoma and lived there
all my life. I'm the general manager of Canadian Valley
Electric Cooperative, headquartered north of Seminole,
Oklahoma, and I've served in that capacity for 28 years.
At Canadian Valley Electric Cooperative our purpose is
simple and straightforward: To provide electric utility service
to our customers at the lowest possible cost, consistent with
sound business practice. This mission guides us daily, and we
have not strayed. We believe that if we can be successful in
our mission, it will give the customers we serve the best
opportunity for a better life and the businesses that look to
us for electric power energy the greatest opportunity to be
successful, grow, prosper, and provide jobs.
Profit is not our purpose. Our purpose is to help others
prosper and profit. Most of the territory we serve would not be
considered desirable or even feasible service territory to a
for-profit electric utility. Our power supplier, Western
Farmers, which we are a part owner, has a diversified electric-
generation resource mix comprised of coal, natural gas, wind,
hydro, and purchased power. About 30 percent of the energy last
year was produced with coal, about 6 percent from wind, about
15 percent from our own natural gas plants, and then the
balance, purchased power, which was a mixture of coal and
natural gas and some additional wind.
Electric utilities understand the desirability of a
diversified electric-generating fleet. This helps control price
volatility and, to a degree, enhances reliability. Diversity is
also a hedge against the current flavor of government
regulation.
Today, in Oklahoma, we have several large coal-fired
generating plants. All of these coal plants in Oklahoma were
built in the 1970s because the Federal Government mandated that
no more natural gas-fired electric generating plants be built,
and, further, that the existing gas plants would have to shut
down in the future.
In response to what was the law of the land, the Fuel Use
Act, electric utilities in Oklahoma and elsewhere began
building large coal-fired generators to replace these banned
gas-fired generators.
The law was clear. By the early 1980s, expensive excess
generating capacity was everywhere, and about that time we
discovered that maybe the country was not running out of
natural gas. Congress relaxed the pressure to shut down the
existing natural gas-fired generating plants. Later Congress,
in the face of reality, removed the prohibition on building new
natural gas-fired plants.
But the damage to customers, business, and the economy had
been done. Electric rates to consumers and businesses doubled
as utilities had to service the debt on these new unneeded
generating plants. The cost burden of this mistake on customers
and business lasted for the better part of two decades, until
the economy grew enough to be able to utilize this additional
generation.
We must realize that regulation have a cumulative cost, and
eventually the consumer will rebel or just give up. We should
be especially concerned when we have a government bureaucracy
that can generate new regulations faster than the electric
utility industry can build new generating plants, and much
faster than the consumer and the economy can absorb the cost.
The impact on people. What comes first, food, shelter,
medicine, electricity, doing without? At Canadian Valley, we
have people who call our office wanting to know how much their
next electric bill is going to be so they will know how much
they have to spend at the grocery store.
Growing pressures on the electric utility industry will
continue to put upward costs--pressure on costs, additional
environmental regulations governing air, water, and disposal of
ash, as well as continued increases in fuel prices. More
mandates from the Environmental Protection Agency on air
emissions, water quality, coal ash storage, and handling
threaten to significantly increase the cost of producing
electricity.
The EPA has proposed carbon emission standards, which
forces roughly 50 percent reduction in CO2 emissions from new
coal plants. The rule could impact existing coal-fired plants
if they undergo significant modification. Coal has historically
been our lowest-cost fuel to meet the growing electrical
economy. Now the risk of present and future regulations have
effectively taken our Nation's most abundant, least-cost energy
resource off the table for future requirements. These potential
threats create too great a capital risk for electric utilities
to continue building new coal-fired plants.
I thank you for this opportunity.
Mr. Lankford. Mr. Hand, thank you very much.
[Prepared statement of Mr. Hand follows:]
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Mr. Lankford. Ms. Carmody, we will receive your testimony.
STATEMENT OF PAULA M. CARMODY
Ms. Carmody. Chairman Lankford, Ranking Member Speier, and
members of the subcommittee,thank you for inviting me today to
testify about the impact of rising energy costs on American
families. I am Paula Carmody. I am in the People's Counsel for
the State of Maryland. I head an independent State agency that
represents the interests of residential utility customers.
I am testifying today in my capacity as president of the
National Association of State Utility Consumer Advocates, or
NASUCA. NASUCA is an organization of agencies designated by
State law to represent consumer interests before State utility
regulatory agencies. We advocate for policies and programs that
provide safe, reliable, and affordable energy services for our
consumers in our respective States.
Consumers have experienced changes and energy prices and
therefore energy bills over the past decade, even as most
incomes have remained stagnant or declined in real terms. One
positive note recently has been the drop in wholesale and
retail prices for natural gas. This has provided welcome relief
to families relying on natural gas to heat their homes and
water. We can reasonably expect that these natural gas prices
will remain relatively stable over the next few years. This is
good news for gas consumers, even as issues related to
environmental impacts of hydraulic fracking and LNG exportation
continue to be addressed by policymakers.
The decrease in natural gas prices also has had an impact
on electricity prices in many States as natural gas-fired
generating resources have become more competitively priced in
comparison to other resources. The overall reduction in energy
demand, a result of the economic slowdown and the impact of
energy-efficiency programs, also has affected electricity
prices. In Maryland, the decrease in wholesale electricity
prices has been reflected in lower annual electricity bills for
residential customers. For example, the average annual
electricity bill for residential customers of Baltimore Gas and
Electric Company, our largest combined gas and electric company
in the State, was about $1,900 in 2009. In 2012, this bill was
estimated to be about $1,600.
While the focus of hearing today is on the impact of rising
energy prices, it may be useful to think in terms of the
affordability of energy bills for our consumers. But what is
the affordable energy bill? In general, we tend to consider for
our households an affordable bill is one that can be regularly
paid on a full and timely basis without substantial household
hardship.
NASUCA has expressed particular concern for those low-
income and vulnerable customers whose bills are not affordable.
They pay far more of their household income towards energy
bills than the average customer, and are at greater risk for
falling behind in utility bill payments and losing service.
This concern is reflected in our association's resolution
supporting full Federal funding for the Low Income Home Energy
Assistance Program, or LIHEAP, which has helped households with
heating bill assistance since 1981.
NASUCA also has a long tradition of support for the
adoption of cost-effective energy-efficiency programs for all
consumers as a way of conserving valuable energy resources,
reducing demand, and reducing customers' utility bills. Energy-
efficiency programs can produce benefits by directly reducing
energy usage for individual customers. They can positively
impact energy bills by reducing market clearing prices in
regions with restructured electric utilities. They could also
help to avoid construction of more costly generating facilities
for vertically integrated utilities, and thereby mitigate
potential bill increases.
Low-income customers often live in housing in poor
condition and with faulty heating equipment. To ensure that
low-income families can benefit from reducing their energy
usage and, therefore, their bills, NASUCA also supports
federally funded weatherization programs for low-income
consumers, such at the Weatherization Assistance Program, to
reduce energy usage.
NASUCA members frequently address issues involving resource
planning or generating facilities in their respective States
and regions, whether their regulated utilities are vertically
integrated or purchase electricity supply in wholesale markets.
In either circumstance, the type and proportion of different
resources used to generate supply have varying impacts on the
retail prices paid by consumers in those States.
NASUCA has long noted the importance of long-term planning
and resource diversity. In a 1990 resolution, NASUCA recognized
that it was in the interests of consumers to factor potential
future costs of reducing greenhouse gas emissions into
generation resource planning. However, given the potential for
cost impacts on consumers in the near term, NASUCA also urged
policymakers to keep these cost impacts in mind when adopting
policies or mechanisms to reduce greenhouse gas emissions or to
address other environmental concerns.
NASUCA has not taken a position on the merits of any of the
existing or proposed EPA regulations that are at issue these
days; however, NASUCA recently adopted a resolution urging the
EPA to establish compliance timelines that provide sufficient
time to consider appropriate least-cost responses so as to
avoid rate shock to our electricity customers.
NASUCA continues to advocate and support policies and
programs designed to provide affordable energy to our
consumers, while maintaining safety and reliability. As part of
that advocacy, we have supported energy efficiency programs,
low-income weatherization programs, adequate funding for direct
energy assistance, and the implementation of policies to
support the development of diverse energy resources. In
supporting these type of policies and initiatives, NASUCA has
also emphasized the need to address cost impacts on consumers
in the decisionmaking in order to minimize the impacts on our
consumers throughout the United States.
Again, thank you for the opportunity to testify here today.
Mr. Lankford. Thank you.
[Prepared statement of Ms. Carmody follows:]
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Mr. Lankford. Mr. Trisko.
STATEMENT OF EUGENE M. TRISKO
Mr. Trisko. Thank you, Chairman Lankford, Ranking Member
Speier, members of the subcommittee.
My name is Eugene Trisko. I'm here to present the findings
of a study of the impacts of rising energy costs on American
families. I've conducted this study periodically since the year
2000 for the American Coalition for Clean Coal Electricity. The
latest version is attached to my testimony.
The report analyzes consumer energy cost increases since
2001, and examines the pattern of energy expenditures among
four income levels. Energy costs for gasoline and residential
utilities are summarized in nominal dollars by household income
category for U.S. households in 2001, 2005, and 2013, using
data from EIA, CBO and the U.S. Bureau of the Census. Energy
expenditures as a percentage of nominal after-tax income are
estimated for the effects of Federal and State income taxes and
Federal Social Security and Medicare insurance payments.
The report's findings in sum are: Lower-income families are
more vulnerable to energy costs than higher-income families,
because energy represents a larger portion of their household
budgets.
Energy is consuming one-fifth or more of the household
incomes of lower- and middle-income families, reducing the
amount of income that can be spent on food, housing, health
care, and other necessities.
Approximately one-half of U.S. households have average
pretax annual incomes below $50,000. Measured in constant
dollars, our median, median household income of about $50,000
is nearly 9 percent below the median household income peak of
some $53,000 in 1999.
Family incomes are not keeping pace with the rising cost of
energy. In 2001, U.S. households with gross annual incomes
below $50,000 spent an average of 12 percent of their average
after-tax income of $21,600 on residential and transportation
energy. In 2013, these households are projected to spend an
average of 20 percent of their average after-tax income of
$22,600 on energy. These percentage findings would not change
if the current dollar values I've cited for household income
and energy expenditures were adjusted for the 30 percent rate
of inflation since 2001.
Residential electricity has maintained relatively low price
increases compared with residential natural gas and gasoline.
Virtually all of the residential electricity price increases
over the past two decades have occurred since 2000. Between
2001 and 2013, residential electric prices are projected to
increase in nominal dollars by 40 percent to a national average
of 12 cents per kilowatt hour, above the 30 percent change in
the CPI from 2001 to 2012. These increases are due in part to
additional costs associated with meeting U.S. EPA clean air and
other environmental standards, as mentioned by witness Hand.
Higher gasoline prices account for three-fourths of the
increased cost of energy since 2001. Consumers feel this pain
every time they stop at the gas pump. Average U.S. household
expenditures for gasoline will more than double in nominal
dollars from 2001 to 2013. In comparison, residential energy
costs for utilities will increase on average by 46 percent,
compared with the CPI increase of about 30 percent.
Fixed-income seniors are a growing proportion of the U.S.
Population and are among the most vulnerable to energy cost
increases due to their relatively low average incomes. In 2011,
the median gross income of 27 million households with a
principal householder age 65 or older was $33,000, one-third
below the national median household income of $50,000.
These findings are discussed in more detail in the report.
I am happy to answer any questions from the subcommittee, and
will graciously accept any bonus points the chairman wishes to
confer.
Mr. Lankford. They are given.
[Prepared statement of Mr. Trisko follows:]
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Mr. Lankford. Mr. Weiss.
STATEMENT OF DANIEL J. WEISS
Mr. Weiss. Thank you very much, Chairman Lankford, Ranking
Member Speier, and members of the subcommittee. I am honored to
be at the subcommittee's first hearing. It's like going to the
first Oklahoma Thunder's basketball game.
When considering the energy prices, there are three
important considerations. First, fossil fuel prices do not
include the costs of their side effects, such as air pollution
and the associated costs for premature deaths or asthma
attacks. Second, the Obama administration has adopted important
policies to reduce energy costs for middle- and low-income
families. And, third, expanding domestic oil production in
protected lands and waters owned by all taxpayers will not
lower gasoline prices.
First, fossil-fuel-generated energy has real external
costs. When assessing the effects on rising energy costs, it's
essential that this evaluation also include the external costs
of fossil fuel use and who pays them. For instance, mercury and
toxic air pollution from power plants threaten children, senior
citizens, and the infirm with brain impairment, respiratory
illnesses, and even early death. Reducing these pollutants will
return $3 to $9 in health benefits for every $1 in cleanup
costs.
Coal-fired power plants produce one-third of all the
climate pollution in the U.S., and Climate change has real
costs to our economy. For instance, the National Journal just
reported that the drought will reduce the Mississippi River
barge traffic, resulting in, quote, ``losses of about $7
billion through the end of January,'' unquote.
As Ranking Member Speier mentioned, the National Oceanic
and Atmospheric Administration reported that in 2011 and 2012,
there were 25 floods, droughts, storms, heat waves and
wildfires that each caused at least $1 billion in damages.
Together these severe events caused 1,100 fatalities and up to
$188 billion in total damages. Pollution reduction requirements
internalize some of the costs from pollution so that the costs
are paid for by the fuel users rather than by everyone else.
Second, the Obama administration has adopted important
policies to reduce energy costs. As Ranking Member Speier
mentioned, doubling the fuel economy of passenger vehicles by
2025 will reduce gasoline purchases by $8,000 over the life of
a 2025 car. It's been estimated that this will be like getting
$1 off the price of a gallon of gasoline.
The Department of Energy set efficiency standards for
nearly 40 different appliances, including washing machines and
refrigerators, that together will, quote, ``save consumers
nearly $350 billion on their energy bills through 2030,''
unquote.
As mentioned by the previous witnesses, the Weatherization
Assistance Program weatherized its 1 millionth low-income home
in 2012. The Department of Energy estimates that this saves
each family up to $400 a year on heating and cooling costs.
I agree with Mr. Trisko and Ms. Carmody that those
concerned about the impact of energy prices on lower-income
households should restore the recent funding cuts in the
Weatherization and Low Income Home Energy Assistance Programs.
Eliminating special tax breaks for the Big Five oil companies
can provide $2.4 billion annually in offsets.
Last, expanding domestic oil production into protected
Federal lands and waters will not lower gasoline prices. Oil
prices are set on a world market that's not really affected by
domestic production, and the price is set by a cartel. Two-
thirds of the gasoline price is based on the oil price;
therefore, higher U.S. oil production has little impact on
gasoline prices here.
As Ranking Member Speier noted, the U.S. is already
producing the most oil it has in 15 years. The Energy
Information Administration reports that Federal lands and
waters produced 13 percent more oil in the first 3 years of the
Obama administration compared to the last 3 years of the Bush
administration. That's 2 billion barrels under Obama versus 1.8
billion barrels Under Bush.
The Associated Press tested whether more U.S. Drilling
would lower gasoline prices. After analyzing 36 years of
monthly U.S. oil production and gasoline price data, AP found,
quote, ``no statistical correlation between how much oil comes
out of U.S. wells and the price at the pump,'' unquote.
High oil and gasoline prices do benefit the Big Five oil
companies: BP, Chevron, ConocoPhillips, Exxon Mobil, and Shell.
They made a combined profit of $255 billion over the last 2
years.
To protect American families and business from high energy
prices, we must do a few things: First, reduce the costly
pollution costs by fossil fuel use, which has a real cost to
our economy. Continue to improve the energy efficiency of
vehicles, appliances, and buildings. Fully fund the
Weatherization and LIHEAP programs. And last, eliminate
unnecessary tax breaks for the Big Five oil companies that are
already swimming in profits.
Thanks again for the opportunity to be at your inaugural
hearing.
Mr. Lankford. Thank you.
[Prepared statement of Mr. Weiss follows:]
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Mr. Lankford. Mr. Simmons.
STATEMENT OF DANIEL R. SIMMONS
Mr. Simmons. Mr. Chairman, Ranking Member Speier, and
members of the subcommittee, thank you for the opportunity to
talk today about the impacts of rising energy prices on
American families, and particularly about oil prices.
It's easy to take affordable, reliable energy for granted,
but we should not do that. Having a plentiful supply of
affordable, reliable energy is the result of deliberate policy
choices, and these policy choices matter for many of the
reasons that Mr. Trisko talked about.
Energy prices are frequently unavoidable costs for family
and businesses, and they are--and high energy prices are
disproportionately felt by middle- and low-income families.
Families that make over $50,000 a year spend 9 percent of their
income on energy, but families that make less than 30 percent
spend nearly--well, spend three times that portion, or 27
percent of their income, on energy costs. And this is the
fundamental disconnect with President Obama's energy policies.
During the State of the Union, he talked about wanting to
strengthen the middle class, and yet his policies intentionally
increased the price of energy.
So why have we had high oil prices over the past few years?
The reason for that is that oil is a globally traded commodity,
and with global supply and demand for--because of the global
supply and demand for petroleum products, increased global--
global demand, particularly from Asia, is driving price
increases, especially combined with unrest in the Middle East
and with OPEC intentionally limiting supply.
In the U.S. over the past couple weeks, we have all noticed
prices have increased, gasoline prices have increased. The
reason for that is a decline in U.S. refinery production and
seasonal maintenance. Refineries have spent over $128 billion
in regulatory compliance since the 1990s. These high refinery
costs have reduced the amount of spare capacity and refining
diversity. Over that time, 66 refineries have closed, and as a
result, when a refinery closes for maintenance and repairs,
gasoline prices increase.
So what can we do about high oil prices? One is to increase
North American oil production. Robust oil production in North
America does two, two critical things. First of all, it
increases the global oil supply; and, second, it increases
global spare oil capacity. When we have more spare capacity, it
lessens the impact of unrest in the Middle East, such as when--
during the Libya civil war when Libya's oil production went
offline, and it lessens the global dependence on Middle Eastern
oil. That leads to lower global oil prices overall.
In 2011, the United States experienced the largest 1-year
increase in oil production in our history. These large
increases, however, occurred almost exclusively on private and
State lands. President Obama likes to take credit for this.
That credit is--is completely wrong.
According to CRS, 96 percent of the increase of oil
production between fiscal year 2007 and 2012 came from private
and State lands. This rapid increase is the result of hydraulic
fracturing and directional drilling on private and State lands
combined with rational regulation from the States. Because this
is--and that is the difference between the State regulators
and--and the Federal regulators.
Some say that hydraulic fracturing is dangerous or
controversial, but let's just look at the record. It's been
used for over 60 years in more than 1.2 million wells, and even
EPA Administrator Lisa Jackson says there isn't a single
confirmed case of groundwater contamination from hydraulic
fracturing.
And Federal lands have even more energy potential. We know
there's more than 1.4 trillion barrels of oil shale and shale
oil. But--for example, but the Federal Government leases less
than 2 percent of offshore areas and less than 6 percent of
onshore areas for energy production.
If the Federal Government were serious about lowering oil
prices, they would do two things. First of all, they would
follow the States' example on leasing and regulation of oil
development, and they would help export the States' exemplary
policies around the world.
For example, it takes 307 days for the Federal Government
to process a permit to drill on Federal lands, but it only
takes the State of Colorado 27 days and North Dakota 10 days.
While the President in the State of the Union said that he
would, quote, ``keep cutting red tape and speeding up new oil
and gas permits,'' close quote, the reality is quite the
opposite. The amount--since 2005, the amount of time that it
takes the Federal Government to process a permit to drill has
nearly doubled.
There are vast oil and natural gas resources in the United
States and Canada. Even more oil resources are available if the
Federal Government and other countries around the world were to
follow the lead of States like North Dakota, Texas, and
Pennsylvania with their regulation and benefits from hydraulic
fracturing. So far the only place in the world they have seen
the transformative power of hydraulic fracturing to
dramatically increase oil and natural gas production is on
private and State lands. Rational regulation on Federal lands
and around the world would lead to greater energy produced--
production and lower prices.
Thanks for the opportunity to testify, and I'd be happy to
answer any of your questions.
Mr. Lankford. Mr. Simmons, thank you.
[Prepared statement of Mr. Simmons follows:]
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Mr. Lankford. Thank you, all of you. All of you, as you
know, your written testimony will be made part of the permanent
record as well, because I know that is in addition to what you
did in your oral testimony.
I'd like to also submit with unanimous consent some of the
other documents to go into the record, the two different charts
that Mrs. Speier submitted during her oral testimony.
Also, Ms. Carmody had referenced a resolution from her
organization. I would like to make that part of the permanent
record as well.
The report that was done on Energy Cost Impacts on American
Families that Mr. Trisko referenced in his testimony, make that
part of the record as well.
And then there have been several comments about the
weatherization program. This committee actually last session
did a pretty extensive study on the weatherization program. And
I hate to say some serious problems. There are many of the
programs that we have that are very efficient. That one proved
to not be very efficient in the distribution of funds from DOE
actually down to homes. So I'd like to be able to put that
report as well into the permanent record as well.
Without any objection, all that will be submitted.
Let me begin our questioning time, and we'll take 5 minutes
for questioning and then begin to move back and forth on that
for those of you that have not done questioning before on it.
Mr. Hand, let me begin with you on this. You talked about
diversification of fuel, and talked about some history as well,
when natural gas was then prohibited by the Federal Government,
and so the industry went to coal and is now shifting back to
natural gas again. I look forward to the day that 30 or 40
years from now that we have this same conversation again about
coal and begin to shift back again and to see what happens on
that.
What is the lifetime of a power-generating facility? What's
the typical life expectancy for them?
You need to get your microphone turned on there. Sorry.
Mr. Hand. We've talked about that many times in our board
rooms and especially because it--we look to see what the
depreciation costs are. The coal plants can be updated. We
believe that 50 years on a coal plant is a reasonable lifetime
for it to be--technology is something that--at times gas is an
area where technology may have caused the--to shorten that to--
as far as a base-load generation on the older gas plants
because of the combined cycles and the lower amount of fuel
that it--natural gas it takes to create that kilowatt hour.
Mr. Lankford. So whatever means it may be, let's say if the
plant was built in the 1990s, and it was expected to be a coal
plant for a 50-year time period on that, pushing them down and
pushing them out is very difficult to do, obviously, with
capital costs. And then also you're planning a decade ahead of
time for construction of new production. So that becomes a--a
significant burden in the past.
Can anyone begin to define now as far as a breakout for me
of the cost of, let's say, electricity, of where it would break
out, the cost that's actually delivered to the consumer, what
part of that is the fuel, what part of that would be regulatory
costs, what part of that would be the delivery costs of that?
Anyone give an estimation?
Mr. Hand. I have some costs that we actually experienced
through Western Farmers, what their costs were. That would not
be the same for every utility, but I can give their numbers for
last year.
Mr. Lankford. Okay. Do you have those at hand, or do you
want to submit those?
Either way. I have them here.
Go ahead. List some of those out.
Mr. Hand. The coal was 2.6 cents. The combined using,
combined cycle natural gas, this was at a lower gas cost than
today, but during 2012 was 2.5 cents. This--the simple cycle
was 3.2 cents for natural gas. Combustion turbine, 3 cents. We
did purchase some hydro, which had an all-in cost of about 1
cent. Our purchased wind, which was about 12--almost 13
percent, was an average cost of 3.9 cents, which we would
consider that all as a fuel cost.
Then we had other purchased power, which we--in the 2.7
cent range for the fuel portion of the kilowatt hour.
Mr. Lankford. Okay. And a typical kilowatt hour purchase is
how much, so the actual charge to the consumer? The charge to
the consumer is how much for a kilowatt hour?
Mr. Hand. For just the fuel component?
Mr. Lankford. Just the total cost to them. They are paying
how much?
Mr. Hand. Just to the--for the generation of the kilowatt
hour, not including distribution cost----
Mr. Lankford. I'm talking about how much the consumer pays.
Mr. Hand. How much the consumer pays?
Mr. Lankford. Yes, sir.
Mr. Hand. A residential consumer on our system with an all-
in cost would be around 9-1/2 cents.
Mr. Lankford. Okay.
Mr. Hand. I don't have that number exactly in front of me.
Mr. Lankford. All right. Thank you for that.
Mr. Simmons, you made several--several comments about
gasoline itself and about increasing supply on Federal lands.
You also referenced the President during his State of the Union
made a very strong comment about increasing production on
Federal lands and decreasing the regulatory environment. You
made a comparison between State and Federal regulations.
What do you experience right now or are seeing in the
reduction of oil and natural gas as far as the--the pressure
towards Federal regulations versus State primacy and State
regulations?
Mr. Simmons. Well, especially in the area of hydraulic
fracturing, the Federal--hydraulic fracturing is regulated by
the States because it deals with groundwater. It always has
been regulated by the States. And the Federal Government, now
the Bureau of Land Management wants to regulate it on Federal
lands. That will definitely increase costs. And according to
one study, it would cost over $250,000 per well for the Federal
Government to do that.
And the Federal--the hydraulic fracturing is the critical
technology. So far it has not been regulated by the Federal
Government, and that's one of the reasons that we're seeing
dramatic increases of oil and natural gas production.
Mr. Lankford. Okay. Thank you.
Ms. Speier.
Ms. Speier. Thank you, Mr. Chairman. And thank you all for
your testimony.
I'm trying to find some consensus here. And we're talking
about the high costs of energy for families and employers. And
three of you, Ms. Carmody, Mr. Trisko, and Mr. Weiss, all spoke
about the LIHEAP program. So let's see if we can get some
consensus here on LIHEAP.
It was a $5.1 billion program. It has since been cut. I
don't know to what extent it's been cut. If we're really trying
to help the low-income people in this country not spend 20
percent of their income on energy, LIHEAP is part of the
solution; is it not?
Ms. Carmody. Yes. Ranking Member Speier, from our point of
view, NASUCA has consistently for any number of years supported
full funding of LIHEAP. In my testimony I did mention the $5.1
billion cost figure and the fact that it's down to, I believe,
around 3.4 billion at this time. This is not sufficient from
our purposes or for our low-income consumers to provide
adequate funding.
One of the things that we have noted in the State of
Maryland, certainly over the past 4 to 5 years, are a few
things. One, of course, is the significant increase in the
number of applicants for energy assistance; that is, that they
meet the income guidelines. Because of reductions in State
funding and private donations, there are actually lower dollars
available to supplement LIHEAP from the State level. So what
this means is that the average benefit that our customers in
Maryland are getting between LIHEAP and State contributions is
running around what it was in 2002 and far less than it was in
2008. So we do support full funding, and NASUCA's on record as
doing that.
Ms. Speier. Thank you.
Mr. Trisko?
Mr. Trisko. Thank you, Ranking Member Speier.
My paper submitted for the record notes that LIHEAP's
current funding level, about 3.4- or $3.5 billion, is
equivalent to 6 percent of the total residential energy bills
that I've calculated for the year 2013 for the income category
of gross income $30,000 or less.
Ms. Speier. So only 6 percent of those making $30,000 or
less actually access it.
Mr. Trisko. Only 16 percent.
Ms. Speier. Sixteen.
Mr. Trisko. Pardon me. The 6 percent number is $3-\1/2\
dollars represents 6 percent of the total energy bills,
residential energy bills, for households with gross incomes of
$30,000 or less. In other words, it only scratches the surface.
But also bear in mind that the participation rate in the LIHEAP
program is only 16 percent; that is, only 16 percent of those
households that qualify for LIHEAP assistance actually apply
for and receive it. So there's a serious lack of participation
in the program in addition to an apparent lack of adequate
funding. And it's my understanding generally that all of the
major energy associations support adequate funding----
Ms. Speier. All right.
Mr. Trisko. --for LIHEAP.
Ms. Speier. Thank you.
Mr. Weiss, do you have anything to add to that? Or I'm
going to ask you another question.
Mr. Weiss. Just very briefly that I would observe that the
$1.6 billion funding cut for LIHEAP is less than the $2.4
billion a year that the Big Five oil companies received in
special tax breaks, according to the Congress' Joint Committee
on Taxation.
Ms. Speier. Okay. Thank you for that comparison.
Let me ask a question of all of you: How many of you
believe in climate change? Let's just go down the line. Mr.
Hand?
Mr. Hand. Yeah.
Ms. Speier. It's not a trick question, yes or no.
Mr. Hand. To say that I don't believe that climate ever
changes would be to deny history. I believe history as far as
far as full climate change.
Do I--am I convinced that man is the----
Ms. Speier. All right. Thank you. You're not certain man
is.
I'm running out of time. I just want to make sure everyone
gets the question answered, and then I have a question for Mr.
Weiss. And I don't think I'm going to be able to ask it.
Go ahead.
Ms. Carmody. Yes. I would just note that in 2007, a NASUCA
resolution did indicate that there was a growing scientific
consensus on the need to reduce emissions of greenhouse gases,
and did cite a number of reports and studies on climate change.
And I will decline to offer my personal views since I'm here on
behalf of----
Ms. Speier. All right. Thank you.
Mr. Trisko.
Mr. Trisko. Ranking Member Speier, I am in an even more
difficult position. And I would speak on my own behalf. I have
attended for the past 20 years every United Nations
International Framework Convention on Climate Change meeting,
and it is abundantly clear that unilateral actions by the
United States on CO2 reductions would have no meaningful
impact on future concentrations of global CO2. Further, any
actions----
Ms. Speier. All right, Mr. Trisko, my time has expired.
Mr. Weiss.
Mr. Weiss. Yes. There is an overwhelming scientific
consensus that climate change is real, it's here, and it is
caused by human activity burning fossil fuels.
Mr. Lankford. Mr. Simmons.
Mr. Simmons. Yes, I believe in climate change.
Ms. Speier. Mr. Chairman, I regret that I'm going to have
to leave temporarily to participate in a press conference that
is bipartisan in nature. So I will return as soon as possible.
Mr. Lankford. Thank you.
Mr. Walberg.
Mr. Walberg. Thank you, Mr. Chairman. And thank you to the
panel for being here.
Mr. Trisko, appreciate the fact that you're a man of
numbers and statistics.
The President stated in his State of the Union Address we
produce more natural gas than ever before; nearly everyone's
energy bill is lower because of it.
Do you believe that nearly everyone's energy bill is lower
once EPA's regulations go into effect?
Mr. Trisko. Congressman, I believe that one of the most
telling statistics noted in my testimony, in the submitted
testimony, is that EPA's current MATS rule, the Mercury and Air
Toxic Standard rule that Mr. Weiss referred to, has an
estimated annualized cost by EPA of some $9.6 billion annually.
And that compares to EPA's estimate of the annual costs of all
prior Clean Air Act regulations on the utility sector of $6.6
billion.
Mr. Walberg. All prior.
Mr. Trisko. All prior. So this one regulation alone exceeds
the costs of all prior Clean Air Act regulations.
And we are basically now confronting a chain of future
regulations, including potential regulations on water intake,
on coal ash, and whatever is determined with respect to
existing source emissions of CO2, that could potentially dwarf
the cost of that 9.6 billion.
So looking forward, the expectation in terms of impacts on
electric bills is for increases both in current and real
dollars.
Mr. Walberg. How much----
Mr. Weiss. Mr. Chairman.
Mr. Walberg. Let me continue on here.
How much can Americans expect their electricity bills to
increase in the next couple of years, based upon those figures?
Mr. Trisko. I believe that it's--the EIA publishes a series
of projections in their long-term energy outlook in which they
take into account the EPA regulations. I don't know the average
annual rate of increase offhand. Mr. Weiss does.
Mr. Weiss. May I answer?
Mr. Chairman--sorry, Mr. Walberg, the Energy Information
Administration projects that electricity costs will remain
essentially flat over the coming 10 years.
Mr. Walberg. Well, it will be interesting to see it
essentially flat. I'd be delighted, but hearing the figures
about this eclipses all previous regulations, I'd find that
hard to believe. But thank you.
Ms. Carmody, can you please go into some detail on NASUCA's
June 2012 resolution on EPA regulations and also what prompted
it?
Ms. Carmody. Yes. Thank you, Mr. Walberg.
As I mentioned previously, we've got members from over 40
States in the United States, and as you can imagine, they come
from every region of the country, you know, certainly, the
Midwest the Northeast, West, Southeast. And the individual
members and States have different perspectives. The resolution
that came out in June of 2002, and this is the one that
recommended, you know, or urged the EPA to certainly factor in
cost impacts in terms of looking at compliance deadlines, this
was a result of a--lots of discussion and an attempt to reach
consensus of agencies with different perspectives on a broad
point of view to protect consumers basically across the
country. And we were not able certainly to reach agreement on
the EPA regulations themselves because of varying points of
view.
But we all recognized as individual State agencies that
deadlines or compliance deadlines, if they are too rapid, can
impose certain rate shocks and abrupt cost impacts on
consumers, particularly in certain States. And that was the
impetus for passing the resolution to urge that these factors
be taken into account as we're moving forward with
environmental regulations.
Mr. Walberg. Thank you.
Mr. Hand, I notice in your testimony you have troubles with
the lesser prairie chicken and the costs that could come from
that. I've got troubles in my district with the Eastern fox
snake and siting of the new--new proposed Fermi nuclear plant.
But let's move over to Utility MACT. Will regulations like
Utility MACT increase the costs of electricity that you provide
to your customers, and what implications does that specifically
have in rural areas?
Mr. Hand. Yes, that will, because it will require
additional capital investments that have to be paid for. And
one of the things I'd address about--I'm glad you asked me
about rural areas. We serve our roughly 90 percent resident--
farm residential with about 40 percent of that group retired.
Many are homes that are not the most energy efficient. And
approximately half of the homes being built in our area today
are mobile home manufactured housing that do not have the same
potential to be energy efficient. We're very concerned about
the people that are there today and the ones that are coming,
because many of these homes are there because that's all the
people could afford to put there, and their electric bills we
see many times in the hot months and cold months far exceed
their house payments.
Mr. Walberg. Thank you. Thank you, Mr. Chairman. I mean,
these, as recognized in rural America, are lower-income and
middle-class families that we are talking about here and the
impact of these regulatory costs.
Mr. Lankford. Ms. Carmody, before we move on, I want to be
able to check one thing in your reference. You reference a 2002
report on that. Did you mean the 2012?
Ms. Carmody. If I said 2002--I think I have to recall
what--we do have a 2012 resolution. And that was the one that I
just discussed with the compliance deadlines. If I said 2002,
my apologies. I need to correct it to 2012.
Mr. Lankford. That is great. A decade in Federal time is no
time at all. I just wanted to make sure your record was clear
on that. Thank you.
I want to be able to recognize for 5 minutes a new member
of the panel Mr. Horsford. You are welcome to be able to do
questioning for 5 minutes. Thanks for being here.
Mr. Horsford. Thank you very much, Mr. Chairman. It is my
pleasure. And this is a very important discussion today, as it
affects all of us as consumers, both residential as well as
businesses.
And I would like to ask each of you quickly to just touch
on energy production from a renewable energy standpoint. I am
from Nevada. Over 80 percent of our land is controlled by BLM.
And we have an abundance of wind, solar, geothermal resources,
and can be a net exporter of energy. And I am of the view that
we need all of our energy resources to be considered on the
table in a fair and equitable manner. So I would like to ask
you to just touch on briefly renewable energy production as
part of the equation here.
Mr. Hand. I would be glad to. And I would just say in
Oklahoma, the Western Farmers, our power supplier, we were the
first utility in Oklahoma to embrace the large wind farm, sign
the first contract with them, and bring it into our system. We
have continually added to that at every opportunity.
We have had some concern over how much we can bring in just
to manage the system and keep it stable, but it has been more
than we thought. And we consider it, as I said earlier, a
hedge.
Again, now, there are costs, such as the transmission to
move it, that kind of gets blended in and don't get charged to
that. But we believe that is part of coming forward with a
balanced energy program.
The mention of the lesser prairie chicken not only affects
us and the ability to build transmission lines to move this
power, it is going to affect the ability to build the wind
generators where they are needed.
Mr. Horsford. Thank you.
Ms. Carmody. Thank you. I am here, and I stated earlier
before you entered the room, in my official capacity on behalf
of the National Association of State Utility Consumer
Advocates. So I did want to make a distinction between that,
that I am speaking on the association's behalf.
In the resolutions that I referred to in my written
testimony and orally today, those resolutions do contain
support for the inclusion of different and diverse energy
resources in long-term planning, generation planning. And in
those resolutions we do identify renewable resources as part of
that diverse portfolio.
Mr. Horsford. Okay. Let me just break in so that I don't
take up all the time.
On the question, though, of the Federal land, Mr. Simmons,
I know you touched on it, Mr. Weiss, I don't know if you have
any additional comments. So the focus was more on natural gas.
But what about Federal land use for renewable energy
development? Again, I have one county in my rural part of my
district where over 90 percent of that county is controlled by
the BLM, and, therefore, they cannot enter into local
agreements for development for renewable energy without a lot
of BLM involvement. So what's your perspective on that, Mr.
Weiss?
Mr. Weiss. Well, first, under the current administration,
they met a goal of siting 10,000 megawatts of renewable
electricity on Federal lands. Second, there is vast potential
on Federal lands for additional renewable electricity. We
actually did an analysis on it, and I would be happy to submit
it for the record. And third is that one of the things that the
current administration did is they sped up the paperwork
process for getting approval of wind or solar facilities on
Federal lands.
Mr. Simmons. If I may, obviously renewables have positive
and negatives, as all sorts of energies. With renewables it is
frequently the cost. And in the case of the Federal lands, it
is so difficult to do any type of activity, any type of energy
production on Federal lands, that even when it comes to solar
or wind that the administration would like to expedite on
Federal lands, it is still very difficult and time consuming.
One thing that would--I think would definitely be a
positive for all sorts of energy is to streamline the process
for all types of energy, and that way, you know, we can be able
to use the Federal lands in a more multiuse method.
Mr. Horsford. Mr. Chairman, I agree with the need for us to
look at streamlining the process. I know the Interior, under
the leadership of Secretary Salazar, has done yeoman's work and
made tremendous progress, but there is much more that can be
done. And on behalf of a State that is controlled by more than
80 percent by the BLM, we need to have this discussion in ways
that really produce some solutions for local governments and
States that want to have more control over the development of
our resources.
Mr. Lankford. I would completely agree on that. People
asked me about the State of the Union Address and where I found
common ground with the President, and he listed and articulated
very clearly he wanted to be able to speed up the regulatory
process and the speed of that for Federal lands for both oil
and gas and renewables. And we would welcome that and work in
any way we can with the administration for that. So thank you
for your testimony.
Mr. DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman.
Mr. Simmons, oil refineries on the east coast and the Gulf
of Mexico have had difficulties with expeditiously getting oil
to their facilities. What would more pipelines like the
Keystone XL mean for gasoline prices?
Mr. Simmons. Well, the problem with the refineries on the
east coast is that for years they have been dependent on Brent
crude, oil that is transported from--essentially from the North
Sea, and traditionally that has been cheaper oil. And for the
last few years, it has been much more expensive. In fact, for a
while a couple years ago, it was--the refined products were
actually cheaper than the cost of the oil itself.
What more pipelines to those facilities means is that you
can move the cheap, low-cost oil that's being produced in the
Bakken and in other parts of the country, or all the way from--
all the way from the oil sands in Canada to those refineries,
giving them access to low-cost energy--low-cost oil supplies.
And here is the price difference. Brent crude is currently $110
a barrel. The cost per barrel for the oil coming out of the oil
sands is about $50 to $55 a barrel. So when you can buy a
barrel of oil for $55, or, you know, it will obviously cost
more after pipelining costs, but you are still able to make
money compared with buying from Brent Sea crude. And that is
why the pipelines matter, is to move it to where there is spare
refining capacity.
Mr. DesJarlais. Do you think it is realistic, then, that we
can build more reliable and efficient transmission systems even
to the east coast? Obviously, the Keystone would be an asset, I
think you would agree. Can we build pipelines to the east coast
as well?
Mr. Simmons. Oh, sure. Sure. What matters is reliable
supply, that it makes sense to make those multimillion-dollar
and multibillion-dollar investments.
Mr. DesJarlais. Thank you.
Mr. Hand, many people say that since the United States now
has a lot of natural gas that we do not need to use coal
anymore. Is this accurate?
Mr. Hand. Me working in an area where we have to deal with
the price of electricity every day, and have been doing that
for a long time, I remember when the price of natural gas after
Katrina went to nearly $15, and the price of electricity
followed it very rapidly. I have seen many changes with
favoring oil. I believe that it is important that we have a
diversified supply of energy. But we know that we have an
abundant amount of coal in the ground that is available, and I
don't believe we should ever ignore that valuable resource.
Mr. DesJarlais. Now, you serve rural and underserved areas.
If we were to limit the co-op from burning coal, how will the
underserved rural areas receive their electricity?
Mr. Hand. When you say limit, that concerns me greatly,
because as I regularly read even in Oklahoma, we have had one
major utility negotiate a settlement, I don't know how far it
has gone, with the EPA to shut down a coal plant. I continue to
see that across the country, where more coal plants are being
shut down. Today we don't have the capacity to be able to
supply all the needs with those plants, and you don't bring
them online tomorrow.
Mr. DesJarlais. So regulations are seriously preventing or
limiting your ability now, and that would get much worse. In
other words, it's the regulations right now that are a major
hindrance for you and your ability to provide services?
Mr. Hand. Today we are only beginning to see the costs of
some of the control technologies that we are having to put in.
The CO2 issue and how strict it is on existing plants could be
a matter of rationing in our area.
Mr. DesJarlais. Are there even--I guess that would bring me
to my next question. Are there any other sources of electricity
even available in some of your areas if you didn't have coal?
Mr. Hand. Well, they would rapid--I don't believe there is
that much capacity, especially with today's transmission
system, to be able to move it in. Today much money is being
spent in the area of transmission to better move power, but
today we have become so dependent--and not so much more than
other States, I don't mean to claim that--as the part of our
capacity that comes from coal-fired generation. It would be an
extreme hardship.
Mr. DesJarlais. Okay. Thank you, Mr. Chairman. I am going
to try to get just a few bonus points, so I yield back.
Mr. Lankford. Thank you, Mr. DesJarlais.
Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
In this very room this morning the GAO reported on its--or
testified here on its, quote, ``annual high risk report.'' And,
you know, normally we are looking at things like Medicaid or
Medicare, and, of course, all of those things are always there.
Number one on its list was climate change. So here we had a
government agency known for its objectivity which not only
spoke about the increasing evidence of climate change, but went
further and spoke of what I can only call shocking exposure of
the Federal Government, leave aside all the rest of us, because
of the amount of land the government owns, because the
government, of course, must give assistance all over the
country, and because of the unpredictability of what had been
rare, which has now become routine, extreme climate episodes.
Now, I noticed on page 3 of your testimony, Mr. Weiss, you
speak about higher gasoline prices due to Middle East unrest
and speculation, and then you go into some of the unrest in the
Middle East. I am interested in the speculation. It's going to
be very hard to come to grips with the unpredictability of
climate change and what the Federal Government ends up having
to do. But analysts for some time have told us that
notwithstanding what's happened in the Middle East in the
recent year or so, that speculation accounts for as much as a
third, or almost a third, of the price of gasoline. Is there
anything that a free-market government can do in light of that
kind of inflation that is absolutely useless and hard to
justify?
Mr. Weiss. Thank you, Ms. Norton.
A couple years ago the head of Exxon Mobil testified to the
Senate Finance Committee that the price of speculation, which
are people investing in oil futures who do not plan to take
physical possession of the oil, so they are different than end
users such as an airline who actually has to buy the physical
oil, that speculation was responsible for anywhere from $20 to
$40 a barrel of the price of oil, and at that time the price of
oil was about $100 a barrel.
In fact, last year McClatchy did an analysis that found
that two-thirds of the trades in the oil futures back in the
winter of 2012, when we were having unrest in the Middle East
and Libya, was due to speculators who were making two-thirds of
the trade, end users were one-third of the trade.
Fortunately, the Commodity Futures Trading Commission has
new authority under the Dodd-Frank law to be able to limit the
ability of speculators to drive up prices based on the fear
that the price is going to keep rising. They have not really
been put into place yet, but they are being implemented now by
the CFTC. So hopefully that will limit the ability somewhat of
speculators to drive up the price, which makes the end users
like the airlines and other industries have to pay more for
their oil.
Ms. Norton. Not to mention you and me.
Since there is much we can't control, the increasing
evidence of gas prices going up when we least expect it has, of
course, led to much concern about what you've just described. I
can only hope that--and I don't know how they do it--but
however they control this speculation will help us, it seems to
me, at least in the long run on that portion of the issues with
gas prices that comes from inflated speculation.
Yes, Mr. Weiss?
Mr. Weiss. One initiative the President announced on
Tuesday night was the Energy Security Trust, which would be
funded by oil and gas royalties paid to the Federal Government
for oil owned by all Americans that they then take off of our
lands. And that money would be invested in alternatives to oil,
like electric vehicles and recharging stations and natural gas
trucks.
And one of the ways to help protect people from gasoline
and oil price volatility is to give them other options of other
fuels, whether it's electricity, natural gas, or investment in
public transit. That will make people less subject to the
volatility that comes from gasoline.
Ms. Norton. Thank you very much, Mr. Weiss.
Mr. Lankford. Thank you.
Mr. Farenthold.
Mr. Farenthold. Thank you.
And I would like to actually follow up on that for a second
with Mr. Weiss. We talk about the increased income that is
potential to the Federal Government for the exploitation of the
oil and gas and other natural resources under public land, but
we see time and time again the regulatory burdens make it next
to impossible to do that.
Now, ignoring for a fact that we spent that money two or
three times already with the programs the President was
outlining--I think there has been talk about spending that
money to repair our aging transportation infrastructure, be it
fixing roads, bridges, or, you know, even going so far as to do
high-speed rail--what is--what do you see as the holdup here,
and how do we fix it? I will let Mr. Weiss and Mr. Simmons both
take about 30 seconds at that one, if you please.
Mr. Weiss. Thank you, sir.
Well, in fact, as I mentioned earlier, oil production on
Federal lands under the first 3 years of Obama were about 13
percent higher than oil production on Federal lands and waters
under the last 3 years of President Bush.
Mr. Farenthold. Compared to a substantially higher number
on private land.
Mr. Weiss. Pardon?
Mr. Farenthold. A substantially higher increase on private
land.
Mr. Weiss. Understood. But it's still increasing on public
land as well.
Second, just lack week the Department of Interior put up
for auction another 37 million acres of leases.
Mr. Farenthold. I am from Texas, I understand the oil and
gas industry. We have a lot of--it's no problem getting the
lease; it is getting the permit to drill that's the problem and
the permit to do the operations. You have operators whose
leases--have to beg for extensions of their leases because they
can't get the permits.
Mr. Weiss. Can I add one quick thing?
Mr. Farenthold. Quickly.
Mr. Weiss. One way to speed that process is to provide more
resources to the people who are to review the permits over at
the Department of Interior and make sure they have the bodies
they need to do the work.
Mr. Farenthold. Or additionally get rid of some of the
regulations.
Mr. Simmons.
Mr. Simmons. Well, yes. Instead of--follow much more of the
States model. The model from the Texas Railroad Commission, for
example, is a much better model about if we're actually serious
about increasing oil production and natural gas production on
Federal lands.
And, you know, Mr. Weiss mentioned that oil production in
the last 3 years of the Obama administration were higher than
the Bush administration, and the question is why? Well, it has
to do--those were all--80 percent of the production, of the oil
production, on Federal lands comes from offshore. Almost all of
that is deepwater offshore that where a lease was issued during
the Clinton administration and the Bush administration,
unfortunately. And sadly, that is--I mean, that's why we had an
increase, not because of unfortunately----
Mr. Farenthold. And I don't mean to rush you and cut you
short. I have a lot of questions, because this is an issue I'm
passionate amount.
I'd like to go to Mr. Hand for a second. I was intrigued,
as I was preparing for your questioning, reading your
testimony. You talk about how as you grew up, your energy was a
wood-burning stove, and how despite the fact you work for an
electric company, your mom still doesn't like to turn on the
air conditioning because the electricity is so expensive.
And this is something that I see is a real problem is we've
gotten the low-hanging fruit on people lowering their energy
costs. I mean, we've been doing it since the Carter
administration. Take gasoline, for example. It's almost doubled
in price since President Obama. There's not a lot of ways you
can cut your gasoline consumption. You cut out your unnecessary
trips, but there are very few unnecessary trips now. People
don't have the time or the money to go on vacation. You go to
work, you go to school, you go to the doctor's office. There's
no real way to cut it. Really it's just turning off the air
conditioning, getting very uncomfortable.
So I guess my question is what are we missing for how do
people lower their energy costs through what they can do? Or do
we just need to force the price down through, you know, more
production and lower cost?
Mr. Hand. One of the things that--a number I heard earlier,
which I'm sure is right, which I had some of this in my
testimony, I had to dig it out, but that only 16 percent of the
eligible customers were availing themselves of the LIHEAP
program.
Mr. Farenthold. So existing programs. There are some ways
to----
Mr. Hand. No, I am not going that direction. I'm saying we
still have a lot of people who will themselves still don't just
automatically sign up. Now, some people get pushed into it, and
it becomes a way of life for them. But we still have the
majority who are within that 84 percent who want to take care
of themselves, and they do it by reducing their use.
Mr. Farenthold. I'm sorry, I have less than a minute. I
want to get one more question in to you, and that has to do
with wind. You indicated that your cost of purchasing wind is
in line with the fuel costs that you use for gas and other. But
isn't that held substantially lower by the production tax
credit, and without that tax credit, wind would not be
competitive just on a free-market basis?
Mr. Hand. That is exactly right. I think it is 2.2 cents
that comes into----
Mr. Farenthold. So almost double the price of the wind
energy.
Mr. Hand. And another point of the cost of wind, and,
again, I am not--wind is good for--wind production is good for
Oklahoma.
Mr. Farenthold. I've got a ton of wind farms in the
district I represent.
Mr. Hand. But that cost doesn't have assigned the
additional transmission costs that are being imposed to bring
that wind into the mix.
Mr. Farenthold. I don't want to go over my time. I
appreciate your answering my questions, and thank you very
much.
Mr. Lankford. Thank you.
And I am going to yield to Mr. Massie in just a moment, but
Mr. Hand brings up a point there about 16 percent of the people
that are eligible for LIHEAP don't use it. And that has come up
several places. And that's because people in Oklahoma are like
many places in the country, they don't want to take Federal
assistance when they don't have to. They would rather work
hard, save, be efficient than use Federal assistance because
they want to earn it on their own. It's still a unique American
characteristic, and is very much so in Oklahoma as well.
Mr. Massie.
Mr. Massie. This question is for Mr. Hand. I am from
Kentucky, and I was recently informed by a CEO of a power
company in Kentucky that they built a state-of-the-art clean-
coal facility, within the past 2 years it's come online; but
that currently, even though this thing was eligible for tax
credits 2 years ago, it would be illegal to build today. But it
was so state-of-the-art, it qualified for these tax credits.
Is it true that the New Source Performance Standards
effectively keep us from building another coal plant today? And
if that's not true, what is the technology that exists, if any
of the other members are aware of it? And what would that add
to the cost per kilowatt hour? Mr. Hand first.
Mr. Hand. I don't know that I can fully answer your
question. About 3 years or 4, in that time frame, but in the
early 2000s, there were three new coal plants proposed in
Oklahoma. None of them have been built. And they were canceled
before the New Source Review. I assume that's talking about the
50 percent reduction in CO2. I'm not aware of any technology
that does that today. I don't believe the sequestration is even
greatly accepted as a possibility.
Mr. Massie. Any of the other Members like to comment?
Witnesses?
Thank you.
Mr. Trisko. Congressman Massie, yes, happy to respond. The
proposed EPA greenhouse gas New Source Performance Standard
applicable to coal and natural gas combined cycle plants is
based on an emission rate limit of 1,000 pounds of CO2 per
megawatt hour. That is a rate that can be met by natural gas
combined cycle plants, but not by coal plants without the use
of carbon capture and storage technology. That technology has
not been commercially demonstrated in this country, according
to the interagency task force report on CCS technology.
Now, with reference to the incremental costs of CCS, EPA's
estimate in this rulemaking is that the application of CCS
technology to a new coal plant would increase the cost of power
produced by the plant by 80 percent. I think it is, therefore,
on its face clear that such a plant could not be commercially
viable in today's market; in other words, could not be
financed, could not be permitted, could not be operated.
Mr. Massie. Yes, Mr. Weiss.
Mr. Weiss. Thank you, Mr. Massie.
I would just observe that after the Senate failed to pass a
comprehensive climate energy legislation in 2010, which
included that bill as well as the one that passed the House,
the American Clean Energy and Security Act, both included
significant subsidies to help coal plants build the very first
commercial-scale carbon capture and storage technology.
Because, as with any technology, it is very expensive when you
first start it, so let's get some experience. Copious
subsidies, billions of dollars. But after that bill failed,
some of the larger utilities, for example, I believe, Southern
Company, had pilot carbon capture and storage projects going at
power plants, and they shut them down because they knew they
weren't going to have to do any cleanup.
So what you would need to do to be able to address this in
the way that you just described is to create a system that
requires cleanup, but also provides revenue in the way that the
American Clean Energy and Security Act does to help them build
the first CCS facilities.
Mr. Massie. So whether it was--the burden was placed on the
consumer or the taxpayer, you're saying it would cost billions
of dollars to develop this technology.
Mr. Weiss. Yes. But there is also, as we were talking about
earlier, substantial economic costs for leaving climate
pollution unchecked: extreme weather, health, smog, tropical
diseases. Those also have real costs for our economy.
Mr. Massie. Thank you very much. I yield back my time, Mr.
Chairman.
Mr. Lankford. Thank you.
Let me do a quick round of questions on a couple things,
because I'm trying to sum up some of the things that we've
dealt with today.
There seems to be two different perspectives on how do we
get to the cost of energy to the consumer and the affordability
of that. One seems to be trying to find a way to increase
affordability by continuing to increase subsidies for some so
that those who can't afford it continue to get Federal
subsidies to be able to offset the rising costs. The other one
is to try to determine why does it cost so much, and why are
the costs going up, and to deal with that for everyone.
Now, those divergent, different opinions that say we
continue to allow costs to rise on everyone and then just
subsidize more heavily a smaller amount, I think it would make
more sense to try to find what can we do to solve the problem
of rising energy costs and be able to determine how to fix that
for everyone. Does that make sense? The issues that we deal
with on it are how do we get to those things? And I understand
there is a diverse perspective of both infrastructure, of
trying to get fuel to market, of trying to make sure it's clean
and efficient, trying to deal with health issues that we have
as a Nation. I get all that. But I think our best course of
action would be to say, how do we make this more affordable for
everyone?
And I think it goes back to something Mr. Hand mentioned an
hour ago, and that is the diversification of fuel. When the
cost of one goes up, you supplement it with another one. And
when the other one goes down in cost, you begin to offset that.
If we ever push to getting to one type of fuel, or a couple
types of fuel, we are in trouble, I think, as a Nation. So a
diverse fuel package seems to be essential in this process, and
trying to find that correct formula on that.
There were a couple things that came out as well that I
heard. One was dealing with the last 3 or 4 years of oil and
gas production.
Now, Mr. Simmons, you had mentioned as well the permitting
issue. And I think we can't leave that unchecked. A typical
permit takes about how long on Federal lands to acquire that
permit?
Mr. Simmons. I don't know the total time for the permit. It
is not too long for the first permit for the lease, but then
you have to do a NEPA analysis.
Mr. Lankford. Right. I understand. But before you start,
though, when you actually poke a hole in the ground and get
going, how long does that take?
Mr. Simmons. It's years. But I would have to get back to
you on that.
Mr. Lankford. So are we talking 4, 5, 6, 7 years?
Mr. Simmons. It could be.
Mr. Lankford. Mr. Weiss, how long do you think it is?
Mr. Weiss. I believe, and I know I'm under oath so I'm
saying I believe, that the permit time has been collapsed
dramatically under the current administration down to about 150
days. It takes about 5 to 7 years from the time an acre
offshore is leased.
Mr. Lankford. What about onshore?
Mr. Weiss. Much less. I don't know the time. But offshore
takes 5 to 7 years because these are very complicated----
Mr. Lankford. Right. I understand. Those are complicated
and became more complicated when BP made some errors that they
have now admitted to and complicated it even more. Onshore it
is several years in the process. So it's interesting to note
that the Federal land increase of oil production in the first 3
years of the Obama administration is not due to permits that
were started during the Obama administration. Those are permits
that were started in a previous administration and then now
we're facing production.
The better question long term will be how much production
of oil and gas is there on Federal lands in the last 3 years of
the Obama administration--that will be the most telling part of
the administration's opinion about it-- and in the first 3
years of the next administration, whoever they may be.
Mr. Weiss as well, oil and gas production in the United
States, up or down in the last 5 years?
Mr. Weiss. It is up. It the highest it has been since, I
believe, 1996.
Mr. Lankford. CO2 emissions up or down in the United States
in the last 5 years?
Mr. Weiss. CO2 emissions are down for three reasons. One is
the new fuel economy standards means that people are emitting
less carbon from their cars. Second, the switch from coal to
natural gas for electricity generation.
Mr. Lankford. Replacing that because of cost. It's cheaper
now.
Mr. Weiss. Yes, because of cost.
And third is increased energy efficiency. Demand for
electricity is basically flat even though our economy is
growing steadily.
Mr. Lankford. Terrific. Has our Nation met the Kyoto
Protocol? Though we didn't sign off on it, have we met the
standards of the Kyoto Protocol?
Mr. Weiss. I couldn't tell you that, but we are halfway to
meeting the goal that President Obama articulated in 2009 of a
17 percent CO2 reduction below 2005 levels by 2020. We're at
about a 9 percent reduction right now.
Mr. Lankford. The understanding of this is there is a sense
of we have all these increased storms, we have all these
increased things, we are meeting the Kyoto Protocol. We've
dramatically reduced carbon emissions not because of the
mandates in cap-and-trade, but because of price. Natural gas
has come online. It has become easy to be able to get access
to, or easier. I say it's been easy; I'm not the one actually
drilling a horizontal well and trying to hit something as big
as a suitcase 4 miles away with a drill bit. So I can say easy
for me on that. But the challenges that we face as a Nation are
being solved by the technology, not by a government mandate as
much.
Mr. Weiss?
Mr. Weiss. Mr. Chairman, the fuel economy standards were
due to a mandate worked out with the auto companies, but it was
possible under a law passed under President George W. Bush, the
Energy Independence and Security Act, which did mandate an
increase in fuel economy standards.
Mr. Lankford. Sure. No, I understand. I was talking
specifically about coal versus natural gas. Yeah. That's
correct.
And then the issue of speculation that you mentioned
earlier. You mentioned the cost of speculation, which I agree,
there is speculation that is going on that becomes a serious
issue. If we are North American energy independent, and we are
not speculating on what happens in the Middle East, and we're
dealing with more west Texas intermediate crude than we are
Brent and other prices on it, because what's happening is from
Canada, the United States, and Mexico, how does that affect
speculation on the market for us?
Mr. Weiss. Well, the State Department looked at that
question with regards to the Keystone XL pipeline and concluded
that building the pipeline would have no impact on the amount
of oil that we consume here or on its price or the price of its
products.
Mr. Lankford. Not on consumption. I'm talking about--
because the Keystone doesn't get us to independence. The
Keystone basically does the equivalent of removing our
dependence on Venezuela. So the amount that would come in from
Canada----
Mr. Weiss. Actually, even less than that.
Mr. Lankford. Right. The amount that comes in from Canada,
which Canada seems to be a pretty good trading partner since
the whole War of 1812----
Mr. Weiss. They are our number one----
Mr. Lankford. Yeah, since the War of 1812 was settled, we
seem to get along pretty well with Canada since then.
Mr. Weiss. And they were British back then, too.
Mr. Lankford. I know. That's what I'm saying. So since that
time period, they have been a very reliable trading partner for
us, and great relationship, much more so than Venezuela. So we
have not only the issue of price, but we also have the issue of
long-term relationships between us and Venezuela versus us and
Canada. That possibility of bringing fuel in there brings us
one step closer--let's say 15 years from now, due to increased
production, we're able to achieve North American independence,
where it's Canada, Mexico, and the United States only for oil
and gas. How does that affect price? That is not the State
Department report. Mr. Trisko, you have a response to that I'm
seeing?
Mr. Trisko. Mr. Chairman, I would like to add that in
addition, moving in the direction of an all-domestic energy
supply would also tremendously--would greatly reduce, if not
eliminate, this country's national security vulnerabilities
with respect to its imports. And in terms of the costs
associated with maintaining that defense structure in the
Middle East and elsewhere in the world, those benefits alone
would justify moving in the direction of a domestic energy
supply.
And I note that in that regard I concur totally with your
opening remarks in this line of questioning, which suggested
that an ``all of the above'' approach is what we need. What we
do not need in order to effectuate this goal of a domestic
self-sufficiency is a policy that precludes the construction of
state-of-the-art coal plants, which represent the largest
single fossil energy reserve on the planet.
Mr. Lankford. Right. Right.
Ms. Norton.
Ms. Norton. Thank you very much.
Now, we have information that I'm going to say startled me
that in 2011, the United States--when you speak of we could get
this all-domestic oil supply--in 2011, the country exported
more gasoline and diesel and oil-based fuels than it imported.
This apparently was the first time that we were a net exporter
since 1949.
Now, oil is traded on an international market. So I don't
understand this notion that somehow we could be an island unto
itself, and that will take care of oil prices. Mr. Weiss,
perhaps you could speak to that.
Mr. Weiss. Yes, you're right. In fact, the export of
refined product, diesel and gasoline predominantly, has
continued to increase since 2011. As you know, U.S. law
prohibits, for the most part, exports of crude oil, because
that's seen as a--it's related to our energy and economic
security. I would observe that, you know, one of the things
that the chairman talked about was price volatility. One of the
reasons why we have--we're so tied to--we're so harmed by price
volatility for gasoline is because it's basically the only
transportation fuel that we have. We do have a diverse set of
fuels for electricity, not for transportation. That's why we
need to invest a lot more in developing these alternatives to
oil to use for transportation.
Ms. Norton. Such as?
Mr. Weiss. Such as electric-powered vehicles, natural gas
buses and trucks, and, of course, public transit, which we have
a great system here in your city.
But it's important to note that--Mr. Lankford, you were
talking about government subsidies--in fact, every new and even
mature energy technology that we have had in this country in
the last 100 years has received heavy government subsidies. For
example, the oil and gas industry has received $80 in subsidies
going back to 1919 for every $1 that the renewables industry
has received. And so I think it's a smart strategic move to
invest in research and development and deployment of some of
these technologies that can get us less hooked on gasoline as a
transportation fuel.
Ms. Norton. Yes, Mr. Simmons.
Mr. Simmons. I don't think anyone is saying that if the
United States--if we were an island to ourselves in terms of
oil production, if we produce all this oil domestically, that
we will be 100 percent insulated from global oil--from global
oil markets. I mean, oil, as has been stated, is a globally
traded commodity, but what producing more oil at home does is
it makes us more resilient, and it also reduces the global
spare capacity.
One of the problems, and this was particularly a problem
during the Libya crisis, was that there was very little global
spare capacity. If somewhere else besides Libya had stopped
producing oil, prices would have spiked even more. By having
the United States and other very stable countries like Canada
producing more oil, it means that there's much less of a risk
when these, you know, geopolitical situations happen.
Ms. Norton. Yeah. Everybody wants us to be less dependent
on foreign oil. So I think we can all agree on that. On the
price, on the price, I'm not sure it would make any difference.
Yes, Mr. Weiss?
Mr. Weiss. Representative Norton, you're absolutely right.
As long as the oil price is tied to the world market, which is
controlled by a cartel, the OPEC cartel provides 40 percent of
the world's oil, it is going to be hard for us to produce our
way to lower prices. Look at where we are right now. We're
producing the most oil in 15 years, yet gasoline prices are
high. Why? Because the world oil price is high. The Washington
Post just reported a couple days ago that since 2011, the world
has increased 2 million barrels of oil a day in terms of
production, half of that is from the U.S., but yet oil prices
remain high. Why? Because there's also been growing demand. So
as long as it is a worldwide market and a worldwide price
controlled by a cartel, it's going to be hard to do that.
Gasoline is a bit of a different story. It is much more of
a local and regional price because of refining measures, the
kinds of things that Mr. Simmons was discussing.
Ms. Norton. Thank you very much, Mr. Chairman.
Mr. Lankford. Would the gentlelady yield?
Ms. Norton. I'd be glad to yield.
Mr. Lankford. It's the two of us left, so we can field
whatever questions we would like from here.
But it is interesting to me that oil production
specifically, when we get into this, we're now at a spot it
wasn't that long ago 60 percent of the oil that we were using
in the United States was imported. Now 60 percent of the oil
that we're using in the United States is from the United States
on that. And we're pushing over 80 percent of the oil that
we're using in the United States is from North America only.
And so we're only 20 percent away from being North American
energy independent, which I think is the first step towards
being American energy independent.
The last forecast I saw from the energy statistics showed
that just 32 percent--in just 10 years, 32 percent of the oil
we're expecting to be from the United States only, as far as
the imports coming from outside the United States. So it's a
very significant jump that is happening right now based on the
current technology and what's happening.
Mr. Weiss, I did have to smile at one of your statistics
about the tax treatments between oil and gas and all the
renewables and going back to 1919 to compare those. I don't
remember a lot of solar subsidies that were occurring in the
1920s. So I would encourage you to take that statistic and
bring it a little more up to date on it.
I do remember as a high school student paying attention to
what was happening during the administrations there, and even
as a middle school student, and seeing the solar panels that
were on the White House at that point. I have no opposition to
solar and to wind and every other technology, but comparing
some of the subsidies that are the start-up subsidies--and I
get that--for some of these renewables to some of the tax
treatments that are normal business treatments for oil and gas
is a little bit of a jump in between. And if you look at the
top five energy companies in the world versus the top five
technology companies in the world, the top five technology
companies make more and have greater--like the 199s--greater
subsidies, if you would want to call them that, as far as tax
treatment.
So, there is a fairness system to make sure that we keep
all the stats and everything all clean and consistent on that.
So, Ms. Norton, I want to close up unless you have any
other final comment. I do appreciate the witnesses coming. I
appreciate all the time that you spent not only getting here,
but in your written statements, which were extensive. And I
appreciate the research and the insight in that. And I look
forward to getting a chance to hear if you have any other
additional follow-up comments. Feel free to submit those for
the record.
Mr. Lankford. With that, this hearing is concluded.
[Whereupon, at 2:45 p.m., the subcommittee was adjourned.]
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