[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
AMERICA'S ENERGY REVOLUTION: A NEW
PATH TO JOBS AND ECONOMIC GROWTH
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JUNE 26, 2013
__________
Serial No. 113-7
__________
Printed for the use of the Committee on the Budget
Available on the Internet:
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COMMITTEE ON THE BUDGET
PAUL RYAN, Wisconsin, Chairman
TOM PRICE, Georgia CHRIS VAN HOLLEN, Maryland,
SCOTT GARRETT, New Jersey Ranking Minority Member
JOHN CAMPBELL, California ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California JOHN A. YARMUTH, Kentucky
TOM COLE, Oklahoma BILL PASCRELL, Jr., New Jersey
TOM McCLINTOCK, California TIM RYAN, Ohio
JAMES LANKFORD, Oklahoma GWEN MOORE, Wisconsin
DIANE BLACK, Tennessee KATHY CASTOR, Florida
REID J. RIBBLE, Wisconsin JIM McDERMOTT, Washington
BILL FLORES, Texas BARBARA LEE, California
TODD ROKITA, Indiana DAVID N. CICILLINE, Rhode Island
ROB WOODALL, Georgia HAKEEM S. JEFFRIES, New York
MARSHA BLACKBURN, Tennessee MARK POCAN, Wisconsin
ALAN NUNNELEE, Mississippi MICHELLE LUJAN GRISHAM, New Mexico
E. SCOTT RIGELL, Virginia JARED HUFFMAN, California
VICKY HARTZLER, Missouri TONY CARDENAS, California
JACKIE WALORSKI, Indiana EARL BLUMENAUER, Oregon
LUKE MESSER, Indiana KURT SCHRADER, Oregon
TOM RICE, South Carolina
ROGER WILLIAMS, Texas
SEAN P. DUFFY, Wisconsin
Professional Staff
Austin Smythe, Staff Director
Thomas S. Kahn, Minority Staff Director
C O N T E N T S
Page
Hearing held in Washington, DC, June 26, 2013.................... 1
Hon. Paul Ryan, Chairman, Committee on the Budget............ 1
Prepared statement of.................................... 3
Hon. Chris Van Hollen, ranking minority member, Committee on
the Budget................................................. 4
Prepared statement of.................................... 6
Additional submissions:
Letter, dated June 20, 2013, CBO cost estimate on
H.R. 2231: Offshore Energy and Jobs Act............ 53
Follow-up letter, dated July 11, 2013, from Mr. Weiss 56
John W. Larson, vice president, Economics and Country Risk,
IHS........................................................ 7
Prepared statement of.................................... 8
Daniel J. Weiss, senior fellow, Center for American Progress. 11
Prepared statement, Internet address to.................. 13
Martin J. Durbin, president and CEO, America's Natural Gas
Alliance................................................... 13
Prepared statement of.................................... 15
Hon. David N. Cicilline, a Representative in Congress from
the State of Rhode Island, prepared statement of........... 52
AMERICA'S ENERGY REVOLUTION: A NEW PATH TO JOBS AND ECONOMIC GROWTH
----------
WEDNESDAY, JUNE 26, 2013
House of Representatives,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in room
210, Cannon House Office Building, Hon. Paul Ryan, [chairman of
the Committee] presiding.
Present: Representatives Ryan, Price, Garrett, McClintock,
Lankford, Black, Flores, Rokita, Woodall, Blackburn, Walorski,
Rice, Williams, Van Hollen, Schwartz, Pascrell, Ryan of Ohio,
McDermott, Cicilline, Lujan Grisham, Huffman, Blumenauer,
Schrader.
Chairman Ryan. Good morning, everyone. The hearing will
come to order. Before we turn to our hearing, I would first
like to recognize a very special person who has meant a lot to
this Committee over the last 12 years. I would like to
recognize Marsha Douglas, who will be retiring at the end of
this week. Marsha served both sides of the aisle as our chief
administrator for the past 12 years. And while Chris and I do
not agree on everything; it is true. We do not agree on
everything. We do agree on Marsha Douglas. Marsha, you have
been such a phenomenal asset to this committee. Your
institutional knowledge will be sorely missed. And on behalf of
the entire committee, I want to wish you and your husband all
the best in your upcoming retirement. Thank you, Marsha,
appreciate it.
Chris?
Mr. Van Hollen. Thank you, Mr. Chairman. And I just want to
underscore what the Chairman said, that we are united on some
things, and that is in our support for and respect for Marsha
Douglas. And as you said, Mr. Chairman, she has done a great
job helping members of this Committee on both sides of the
aisle and our staff, and has been a professional throughout.
And we really wish you the very best in your retirement.
Congratulations.
Mr. Pascrell. Mr. Chairman? Mr. Chairman, if I may.
Chairman Ryan. Sure.
Mr. Pascrell. Mr. Chairman, Marsha is a reflection about
the staff. And while we are talking about staff, Mr. Chairman,
I implore you, I implore you and the Ranking Member to do
everything you can. These staff members have not had a raise in
over three years. And I do not think it is inappropriate or out
of order to bring it up.
Chairman Ryan. It is, actually.
Mr. Pascrell. No, let me continue.
Chairman Ryan. No, sorry. We are going to start with the
hearing. I thought you were going to talk about Marsha.
Mr. Pascrell. Just a point.
Chairman Ryan. No, the gentleman is not recognized to get
into other issues. Thank you for your kind comments on Marsha.
Mr. Pascrell. Oh, this is very much the issue, Mr.
Chairman.
Chairman Ryan. Gentleman is out of order. That was off to a
good start.
Good morning, everybody. I want to thank our witnesses. I
want to thank Marty Durban, John Larson, and Dan Weiss for
coming with us today. We are happy to have you, and we look
forward to your testimony. This is a very important topic.
Now, energy is not really a big part of the federal budget.
It is a huge part of the family budget. We feel the pinch every
time we fill up our gas tank, every time we pay our heating
bills. Fact is, energy is critical to our economy. And we
cannot get out of this fiscal mess unless we have economic
growth. And energy production fuels economic growth. It creates
jobs, it increases wages, and it shrinks the deficit without
raising taxes on anyone.
Energy production is one of the best tools we have to grow
the economy and to pay down the debt. So today, we are going to
learn more about it. The change has been swift. Thanks to new
technology, we can tap resources long thought out of reach, and
we can do it in an environmentally-responsible way. We can
drill sideways and not just downward. We can break free
deposits locked in hard, dense shale. And as a result, one
study says our oil and natural gas reserves are over one-third
larger than previously thought. We are already seeing the
benefits. We are importing less oil, we are exporting more
natural gas, and, most importantly, we are putting more people
at work in America.
Take North Dakota. The Bakken shale has been home to an
economic boom. Employment in the area has grown by over a
third. The average pay has risen by over 50 percent to more
than $50,000, and all working families are benefitting, not
just those in the energy sector. North Dakota is creating more
jobs and better-paying jobs in fields like construction,
transportation, and food services. One McDonald's is offering
new hires a $300 signing bonus. And the surge of production is
lowering our energy prices. It is a boon for families,
especially the poor.
The news from North Dakota is very encouraging. I wish I
could say the news from Washington was the same. While
production on state and private lands is up since 2009,
production on federal lands is down. Now it is true that
production is higher than it was in the last year of the Bush
administration. But let's take a very close look at these
numbers. In 2008, production on federal lands was rising. We
were ramping up production, as we had been for years. Then, in
2009, President Obama took office, and he hit the brakes. He
started taking federal lands offline and slowly decreasing
their output. By 2011, his policies began to take effect.
Ever since then, production on federal lands has been
falling. The private sector is moving full steam ahead, but the
president, he is keeping his feet firmly on the brakes. It is
not just an accident. Just yesterday, the president announced
yet another attempt to limit energy production. In fact, one of
his advisors recently called for a, quote, ``war on coal,'' end
quote. The way the president seems to see it, we can do better
only if some of us do worse. While, if you ask me, the
president's proposal is a solution in search of a problem.
This Administration seems intent on picking winners and
losers in the energy sector. It wants to subsidize its favorite
industries, and it wants to regulate others out of existence.
But we should support working families' livelihoods. We should
not obstruct them. And there are some concrete steps that we
can take. Number one: We should open more federal lands to
production. Number two: We should shorten the wait time for
drilling permits. Number three: We should speed up the approval
of a process for natural gas exports. Number four: We should
resist the calls to impose punitive taxes on energy production.
If we take these steps, we can help lower energy costs for
working families. We can expand paychecks. We can reduce our
reliance on foreign oil. Think of what that would do for our
foreign policy challenges. And, finally, we can make a serious
dent in the deficit. That is what matters here in the budget
committee.
Mr. Larson's company, IHS, has estimated that shale, oil,
and gas production will increase government revenues at all
levels, local, state, and federal, hear this, by $2.5 trillion
between 2012 and 2035. Think about that.
I am especially interested in hearing your thoughts on how
energy production will help the federal budget in particular.
This is an historic opportunity. It presents a basic choice. Do
we let the energy revolution take its course, or do we cut it
short?
We have it right in front of us. It could do wonders for
our economy, wonders for families. The fact is we can grow the
economy right now, without raising anyone's taxes, without
increasing spending, without writing new regulations, if we
just let working families do their job and get these jobs. That
is the course we should take. With that, I would like to
recognize the ranking minority member, Mr. Van Hollen, for any
comments you might have.
[The prepared statement of Chairman Ryan follows:]
Prepared Statement of Hon. Paul Ryan, Chairman, Committee on the Budget
Good morning, everybody. To start, I want to thank our witnesses:
Marty Durbin, John Larson, and Dan Weiss. We're happy to have you. And
we look forward to your testimony.
Energy isn't a big part of the federal budget. But it's a huge part
of the family budget. We feel the pinch every time we fill up a tank of
gas. The fact is, energy is critical to our economy. We can't get out
of this fiscal mess without economic growth. And energy production
fuels economic growth. It creates jobs. It increases wages. And it
shrinks the deficit--without raising taxes on anyone. Energy production
is one of the best tools we have to grow the economy--and to pay down
the debt. So today, we're going to learn more about it.
The change has been swift. Thanks to new technology, we can tap
resources long thought out of reach. And we can do it in an
environmentally responsible way. We can drill sideways--not just
downward. And we can break free deposits locked in hard, dense shale.
As a result, one study says our oil and natural-gas reserves are over
one-third larger than previously thought. We're already seeing the
benefits: We're importing less oil. We're exporting more natural gas.
And most importantly, we're putting more people to work.
Take North Dakota. The Bakken Shale has been home to an economic
boom. Employment in the area has grown by over a third. The average pay
has risen by over 50 percent--to more than $50,000. And all working
families are benefiting--not just those in the energy sector. North
Dakota is creating more jobs--and better-paying jobs--in fields like
construction, transportation, and food services. One McDonald's is
offering new hires a $300 signing bonus. And the surge in production is
lowering energy prices. It's a boon for all families, especially the
poor.
The news from North Dakota is very encouraging. I wish I could say
the same for Washington. While production on state and private lands is
up since 2009, production on federal lands is down. Now, it's true that
production is higher than it was in the last year of the Bush
administration. But let's take a close look at the numbers.
In 2008, production on federal lands was rising. We were ramping up
production--as we had been for years. Then, in 2009, President Obama
took office--and he hit the brakes. He started taking federal lands
offline--and slowly decreasing their output. By 2011, his policies
began to take effect. Ever since then, production on federal lands has
been falling. The private sector is moving full-steam ahead. But the
President is keeping his feet firmly on the brakes.
It's not an accident. Just yesterday, the President announced yet
another attempt to limit energy production. In fact, one of his
advisers recently called for a, quote, ``war on coal.'' The way the
President sees it, we can do better only if some of us do worse. Well,
if you ask me, the President's proposal is a solution in search of a
problem. This administration seems intent on picking winners and
losers. It wants to subsidize its favored industries--and regulate
others out of existence. But we should support working families'
livelihoods. We shouldn't obstruct them.
And there are some concrete steps we should take. Number one, we
should open more federal lands to production. Number two, we should
shorten the wait time for drilling permits. Number three, we should
speed up the approval process for natural-gas exports. And number four,
we should resist calls to impose punitive taxes on energy companies. If
we take these steps, we can help lower energy costs for working
families. We can reduce our reliance on foreign oil.
And finally, we can make a serious dent in the deficit. Mr.
Larson's company, IHS, has estimated that shale-oil and gas production
will increase government revenue at all levels--local, state, and
federal--by $2.5 trillion between 2012 and 2035. I'm especially
interested to hear your thoughts on how energy production will help the
federal budget in particular.
This is a historic opportunity. And it presents a basic choice: Do
we let the energy revolution take its course? Or do we cut it short?
The fact is, we can grow the economy--right now--without raising
anyone's taxes, without increasing spending, without writing new
regulations--if we just let working families do their job. That's the
course we should take.
With that, I recognize the ranking member, Mr. Van Hollen, for his
opening remarks.
Mr. Van Hollen. Thank you, Mr. Chairman. I want to join the
Chairman in welcoming all of our witnesses today to talk about
this very important issue of our energy future, and its impact
on the economy and job growth. I should say at the outset that
the most immediate measure that this Committee and this House
could take right now to eliminate the drag on the economy is to
replace the sequester. And we have tried now eight times to get
a vote to do just that. The Congressional Budget Office
predicted that, as a result of the sequester, we will see
750,000 fewer American jobs by the end of this calendar year.
That is a self-inflicted wound. It should be unacceptable to
all of us. We should go to conference, as the law says, and
start resolving those issues right now.
Now the future of energy production in this country is a
huge opportunity, and that is why the president has put forward
his all-of-the-above energy strategy to focus on all homegrown
American energy sources. So let's look at the facts. U.S. oil
production is at its highest level since 1992. The Energy
Information Administration has shown that the annual oil
production from federal lands and waters has been higher every
year under President Obama than the last year of the previous
administration. And we are seeing a revolution in this country
of natural gas production. Federally-supported technology and
the ingenuity of the technology community has helped our
businesses drill more effectively and extract more natural gas.
In just seven years, U.S. natural gas production has increased
27 percent.
We have seen the first two nuclear reactors in a generation
approved in February 2012. And as a result of federal and state
policies, and the ingenuity of the private sector, we have seen
a dramatic jump in the production of renewable energy. In just
the last four years, we have doubled the amount of electricity
generated from the wind and the sun. The Bureau of Labor
Statistics estimates that in 2011, there were 3.4 million clean
energy jobs, an increase of 158,000 from the year before. Those
are jobs manufacturing wind turbines, installing solar panels,
and other jobs in that sector.
Now many of our Republican colleagues say they want to have
an all-of-the-above energy strategy, but what they are really
calling for, in most instances, is a fossil-fuels-only
approach. And that was reflected in the fact that their
presidential candidate in the last election opposed federal
incentives for the production of wind energy. A lot of
governors from a lot of those states, like the governor of Iowa
and others, said it was important for jobs in their states. But
the position taken at the federal level by many of our
colleagues is no to federal investments in clean energy policy.
And, in fact, if you look at the budget of our Republican
colleagues, they are slashing by 50 percent important national
investments in clean energy technologies. That is not an all-
of-the-above energy strategy; that is a status quo energy
strategy. And it is incredibly short-sighted for two reasons.
One is it totally ignores the costs of doing nothing when it
comes to global climate change. We know there are huge costs
attached to that. Just ask the insurance companies. We see a
greater frequency and intensity of major weather events,
whether they are droughts, whether they are forest fires as a
result of the droughts, whether they are floods; a whole series
of events that have a price. And so doing nothing in that area
has a cost.
Secondly, our major economic competitors, countries like
China, countries like Germany, recognize the importance of
investing in clean energy technologies as an important market
globally for the future. And right now, the Chinese are
investing more in that sector than we are.
I believe, as do hundreds of American businesses who
recently signed a statement saying that the United States
should rise to the occasion and challenge that dealing with
global climate change is, at the same time, a huge economic and
jobs opportunity for the United States. And we should not shy
away from that challenge. And that is why we should, Mr.
Chairman, adopt what is truly an all-of-the-above energy
strategy to develop responsibly homegrown energy sources, and,
at the same time, make better use of the energy we have by
taking steps to prevent wasteful practices. And by doing that,
we can make sure that the energy we do produce goes further,
and, at the same time, increase jobs and save consumers a lot
of money.
So, Mr. Chairman, I hope we will, going forward, change at
least what has been the pattern in this House of
Representatives, and truly focus on all those energy sources,
not simply a one-dimensional fossil fuel strategy. Thank you.
[The prepared statement of Mr. Van Hollen follows:]
Prepared Statement of Hon. Chris Van Hollen, Ranking Member,
Committee on the Budget
Thank you, Mr. Chairman.
And I want to join the Chairman in welcoming all of our witnesses
today to talk about this very important issue of our energy future and
its impact on the economy and job growth.
I should say at the outset that the most immediate measure that
this Committee, and that this House, could take right now to eliminate
the drag on the economy is to replace the sequester. And we have tried
now eight times to get a vote to do just that. The Congressional Budget
Office predicted that, as a result of the sequester, we will see
750,000 fewer American jobs by the end of this calendar year. That's a
self-inflicted wound that should be unacceptable to all of us. We
should go to conference as the law says, and we start resolving those
issues right now.
Now, the future of energy production in this country is a huge
opportunity. And that is why the President has put forward his all-of-
the-above energy strategy, to focus on all homegrown American energy
sources. So, let's look at the facts: U.S. oil production is at its
highest level since 1992; the Energy Information Administration has
shown that the annual oil production from federal lands and waters has
been higher every year under President Obama than in the last year
under the previous administration; and we are seeing a revolution in
this country of natural gas production. Federally supported technology
and the ingenuity of the technology community has helped our businesses
drill more effectively and extract more natural gas. In just seven
years, U.S. natural gas production has increased 27 percent.
We have seen the first two nuclear reactors in a generation
approved in February 2012. And as a result of federal and state
policies and the ingenuity of the private sector, we have seen a
dramatic jump in the production of renewable energy. In just the last
four years, we have doubled the amount of electricity generated from
the wind and the sun. The Bureau of Labor Statistics estimates that in
2011 there were 3.4 million clean energy jobs--an increase of 158,000
from the year before. Those are jobs manufacturing wind turbines,
installing solar panels, and other jobs in that sector.
Now, many of our Republican colleagues say that they want to have
an all-of-the-above energy strategy, but what they are really calling
for, in most instances, is a fossil fuels-only approach. And that was
reflected in the fact that their presidential candidate in the last
election opposed federal incentives for the production of wind energy.
A lot of governors from a lot of those states, like the governor of
Iowa and others, said that it was important for jobs in their states.
But the position taken at the federal level by many of our colleagues
is no to federal investments in clean energy policy. And in fact, if
you look at the budget of our Republican colleagues, they are slashing
by 50 percent important national investments in clean energy
technologies. That is not an all-of-the-above energy strategy--that is
a status quo energy strategy.
And it is incredibly shortsighted for two reasons. One is it
totally ignores the costs of doing nothing when it comes to global
climate change--we know there are huge costs attached to that. Just ask
the insurance companies. We see a greater frequency and intensity of
major weather events, whether they're droughts, whether they're forest
fires as a result of the droughts, whether they're floods--a whole
series of events that have a price. And so doing nothing in that area
has a cost.
Secondly, our major economic competitors--countries like China,
countries like Germany--recognize the importance of investing in clean
energy technologies as an important market globally for the future. And
right now, the Chinese are investing more in that sector than we are.
I believe, as do hundreds of American businesses who recently
signed a statement saying that the United States should rise to the
occasion and challenge, that dealing with global challenge is at the
same time a huge economic and jobs opportunity for the United States.
And we should not shy away from that challenge.
And that is why we should, Mr. Chairman, adopt what is truly an
all-of-the-above energy strategy to develop responsibly homegrown
energy sources, and at the same time make better use of the energy that
we have by taking steps to prevent wasteful practices. And by doing
that, we can make sure that the energy that we do produce goes further,
and, at the same time, increase jobs and save consumers a lot of money.
So, Mr. Chairman, I hope we will, going forward, change at least
what has been the pattern in this House of Representatives and truly
focus on all of those energy sources, not simply a one-dimension fossil
fuel strategy.
Thank you.
Chairman Ryan. Thank you. We will proceed in the order in
which we see. We will go with Mr. Larson, Mr. Weiss, and Mr.
Durbin. I would ask each of you, if you do not mind, to
summarize your testimony in five minutes so we can get to the
questions, and your full testimony will be included in the
records. So, Mr. Larson, the floor is yours.
STATEMENT OF JOHN W. LARSON, VICE PRESIDENT, ECONOMICS AND
COUNTRY RISK, IHS
Mr. Larson. Thank you, Chairman Ryan, Ranking Member Van
Hollen, and distinguished members of the Committee on the
Budget. It is an honor to speak with you today. I think as an
economist, this is one of the areas when I talk about what is
going on in the broader U.S. economy, that we really get to get
excited about the opportunities that are out there today. The
United States is clearly in the midst of an unconventional
revolution of oil and gas that is fundamentally changing our
energy position in the world. It is improving global
competitiveness for the United States, and it is helping to
stimulate a manufacturing renaissance.
Since 2009, our company, IHS, has engaged in several
studies to better understand the economic contributions
associated with this revolution. And we will be releasing a
further study in July that looks at the specific implications
for the manufacturing sector. However, the impacts that we have
quantified so far are impressive. At a national level, this
unconventional exploration and development activities supports
1.7 million jobs in 2012. And by the end of the decade, that
will grow to 3 million jobs.
In the process, it is also generating significant
government revenues. Nearly $62 billion in total government
revenues are for federal, state, and local in 2012. That will
grow to $111 billion in annual revenues by the end of the
decade. And as Chairman Ryan, you pointed out, that will
accumulate from 2012 to 2035 to $2.5 trillion in government,
federal, state, and local revenues.
There are also significant implications for states as well.
In fact, nearly 1.1 million jobs and $19 billion in state and
local taxes can be found in the 21 states represented by the
members of this very Committee. And states do not necessarily
have to have a play within their geographic boundaries to enjoy
these economic opportunities. The benefit is recognized through
a very long supply chain that supports this unconventional
activity. In fact, nearly 30 percent of the jobs identified in
our study were in states with no appreciable unconventional
activity.
For example, in Wisconsin, an important supplier of sand
and machinery to the unconventional industry, Wisconsin, in
2012, enjoyed 20,000 jobs and $330 million in state and local
taxes due to this unconventional activity. Similarly, in
Maryland, a state with long supply chains that also support
this activity, there were 12,000 jobs and more than $240
million in taxes and revenue. And lastly, in New York, a state
which currently bans unconventional activity, these supply
chains supported 44,000 jobs and $1 billion in state and local
taxes, particularly in areas like real estate, finance, and
insurance.
Equally impressive for the larger macroeconomic effects
attributed to the savings brought about by lower natural gas
prices and corresponding electricity prices. In our study, we
identified how these lower natural gas prices will increase
industrial production 2.7 percent by 2015, and 4.7 percent by
2035, as manufacturing industries that are energy-intensive
take advantage of our comparative advantage.
And these have real pocketbook effects on average American
families, as they enjoy these lower prices, which cascade
through the economy, resulting in savings to consumers in
annual disposable income, which will be up $1,000 by 2015, with
approximately 121 million American households; the savings of
$1,000 per average household equates to $121 billion in
aggregate savings to those households.
Where does this mean for manufacturing specifically? Well,
there are several factors that are contributing to the shift in
the delicate balance in favor of onshoring and fueling the
resurgence of manufacturing. First, the global wage rate for
many offshoring locations have significantly outpaced U.S. wage
increases and narrowed the gap, making the United States more
competitive on a per-hour basis. Second, in an increasingly-
advanced manufacturing world, technology is shifting the
balance away from the importance of low-cost labor and towards
high-skilled work forces, which the U.S. enjoys a comparative
advantage in. And third, a rapidly evolving energy landscape is
fundamentally shifting traditional economics around supply
chains.
Higher oil prices, which have tripled in the last decade,
have significantly increased transportation costs, making
offshoring less attractive. In the U.S., unconventional
revolution is creating significant competitive advantages for
energy-intensive industries, and industries that reply upon
natural gas derivatives and feedstocks. And as a result,
companies are now committing or planning to commit to hundreds
of billions of dollars in new investments in this country, both
domestic and foreign direct investment.
Although this unconventional revolution has already had a
major impact, fundamentally transforming U.S. energy supply and
contributing to the growth in government revenues,
manufacturing, and the wider economy, its significance will
continue to grow as it continues to unfold. These hearings
provide a timely opportunity for assessing that impact and
significance in its many dimensions. And I am pleased to
respond to the Committee's questions. Thank you.
[The prepared statement of Mr. Larson follows:]
Prepared Statement of John W. Larson, Vice President,
Economics and Country Risk, IHS \1\
Chairman Ryan, Ranking Member Van Hollen and distinguished members
of the Committee on the Budget, it is an honor to speak with you today
about America's new opportunity--the economic growth and employment
being fueled by our country's unconventional energy revolution.
---------------------------------------------------------------------------
\1\ John Larson is the Vice President and global leader for
customized analytic and economic solutions within IHS Economics &
Country Risk Group.
---------------------------------------------------------------------------
The United States is in the midst of an unconventional revolution
in oil and gas that, it becomes increasingly apparent, goes beyond
energy itself. Since 2009, our company has engaged in several studies
to better understand and accurately quantify the dramatic economic
contributions associated with this unconventional revolution. Today,
the exploration and production industry driving this unconventional
revolution supports 1.7 million jobs across a vast supply chain--a
considerable accomplishment given the relative newness of the
technology. That number could rise to 3 million by 2020. In 2012, this
revolution added $62 billion to federal and state government revenues,
a number that we project could rise to about $111 billion by 2020.\2\
What is now becoming clear is that the lower costs of energy brought
about by this abundant growth in energy supply is helping to stimulate
a manufacturing renaissance and improve the competitive position of the
United States in the global economy and further stimulating job
creation in the United States.
---------------------------------------------------------------------------
\2\ IHS, America's New Energy Future: the Unconventional Oil and
Gas Revolution and the United States Economy, vol. 1 National Economic
Contributions (October 2012) and vol. 2, State Economic Contributions
(December 2012).
---------------------------------------------------------------------------
where did the unconventional revolution come from?
The unconventional revolution has unfolded rapidly. As recently as
just a half-decade ago it was widely assumed that a permanent era of
energy shortage was at hand. The country, it seemed, was on a path to
spending several hundreds of billions of dollars more every year on
imports to meet oil and natural gas demand. How different things look
today.
US crude oil output, after a nearly 40 year decline, has increased
dramatically--by 46 percent since 2008.\3\ Net petroleum imports have
fallen from 60 percent of total consumption in 2005 to 36 percent in
the first four months of 2013. The decline is due, in part, to
moderating energy demand during the slow recovery in the wake of the
Great Recession. Greater fuel efficiency in autos and a slowing of the
growth in total vehicle miles will continue to constrain the growth of
demand. However, the decline in imports has also been achieved through
significant supply side changes resulting from that dramatic increase
in U.S. oil production. The largest element of this increase in
production comes from what has become the newest major advance in
energy development: tight oil. In fact, oil imports in 2012 would have
cost the United States around $70 billion more and increased our trade
deficit a little over 13 percent were it not for the increase in
production capacity brought about by tight oil since 2008.
---------------------------------------------------------------------------
\3\ Energy Information Administration, Monthly Energy Review (May
2013).
---------------------------------------------------------------------------
With respect to natural gas, in just seven years, US natural gas
production has risen from 51 billion cubic feet (bcf) per day to 66 bcf
per day--a 27 percent increase. This rapid rise was driven primarily by
shale gas production. In 2000, shale gas accounted for just 2 percent
of total natural gas production. Today, shale gas accounts for nearly
44 percent of total natural gas production. This rapid rise in
unconventional production has also enhanced US energy security. Five
years ago, due to constrained production, the United States seemed
locked into importing increasing amounts of liquefied natural gas (LNG)
and was heading towards spending as much as $100 billion dollars
annually on future imports. Now, these newly unlocked resources ensure
that the United States will need, at most, minimal LNG imports to
balance supply with demand. Instead of debates over US imports, there
is the prospect of exporting some of the domestic surplus, as well as
the potential for using natural gas in some classes of vehicles.
what is the economic impact of the unconventional oil and gas
revolution?
While various states had begun to home in on the economic
development aspects of shale gas and tight oil, it was only in last
several years that its significance for the national economy started to
come into focus. We have undertaken a series of studies to assess the
economic impact of the unconventional revolution. The first two--
released late last year--examined the national and state-by-state
impacts.\4\ We are now extending that study to assess the impact on
manufacturing--which will be released in July, 2013.\5\
---------------------------------------------------------------------------
\4\ IHS, America's New Energy Future: the Unconventional Oil and
Gas Revolution and the United States Economy, vol. 1 National Economic
Contributions (October 2012) and vol. 2, State Economic Contributions
(December 2012).
\5\ IHS, America's New Energy Future: the Unconventional Oil and
Gas Revolution and the Manufacturing Renaissance, vol. 3 (July 2013)
---------------------------------------------------------------------------
So far, this unconventional revolution is supporting 1.7 million
jobs--direct, indirect, and induced. Looking towards the future, the
industry will continue to contribute to strong job growth bringing the
total to 3 million workers by the end of this decade. At a time of
great concern about the federal budget, it is also important to note
the important revenue implications associated with this energy
revolution. Total revenues flowing to governments from unconventional
activity amounted to $62 billion last year and will rise to $111
billion by 2020. This does not include revenue from traditional oil and
gas activity. By 2035, unconventional activity is expected to have
generated nearly $2.5 trillion in cumulative government revenues since
2012.
It is also notable that, owing to the long supply chains, the job
impacts are being felt across the United States, including in states
without significant shale gas or tight oil activity.\6\ That is to say,
when it comes to unconventional activity, a state does not need to have
a major unconventional play within its geographic boundaries to benefit
economically from the activity. In fact, nearly 30 percent of all jobs
associated with the unconventional energy revolution are found in
states with no appreciable unconventional activity. For example:
---------------------------------------------------------------------------
\6\ Producing states are defined as those that are part of the 20
largest unconventional oil and natural gas producing plays in the US
Lower 48, such as the Bakken and Marcellus Shale plays. Non-Producing
states are not part of the 20 largest unconventional oil and natural
gas producing plays in the US Lower 48 and are not part of an emerging
oil or natural gas play in the 2012 to 2035 forecast horizon. These
states may be part of plays that are currently producing oil and/or
natural gas, but nevertheless are classified as non-producing states,
because current production is relatively small and the prospect for
future unconventional production is unknown.
---------------------------------------------------------------------------
Wisconsin is an important supplier of the special sands
required in unconventional extraction using hydraulic fracturing
techniques. Machinery manufacturers in the state also provide
significant oil and gas field machinery to the unconventional activity
around the country. As a result, in 2012 Wisconsin's economic activity
associated with unconventional production directly and indirectly
supported nearly 20,000 jobs and generated $330 million in state and
local taxes.
In Maryland, the 2012 economic activity associated with
unconventional activity indirectly supported nearly 12,000 jobs while
generating more than $240 million in taxes for state and local
governments.
In New York, a state that currently bans unconventional
activity, 44,000 jobs along with $1 billion in state and local taxes
can be attributed to activities supporting the supply-chain associated
with shale gas and tight oil in other states across the country in
2012.
A key reason for the profound economic impact of the unconventional
activity is the fact that it combines a capital-intensive industry with
a broad domestic supply chain. The United States is a leader in all
aspects of the unconventional industry, which means that most of its
suppliers are domestically-based, and that means a larger portion of
the dollars spent are supporting domestic jobs in trucking, steel
fabrication, aggregates, heavy equipment manufacturing, hotels,
housing, and restaurants, among others.
But there is now an even bigger positive impact for our economy
that is beginning to be recognized. In addition to these specific
contributions to the economy, there are larger macroeconomic effects
attributed to the savings brought about by lower natural gas prices and
corresponding electricity prices. In our study, The Economic and
Employment Contributions of Shale Gas in the United States, we
identified the following two important macro-economic implications
stemming from lower natural gas prices:
For U.S. based industries, the abundance of affordable
natural gas means lower input and feedstock prices. As a result,
industrial production--the measure of output from manufacturing,
mining, and utility industries--will increase 2.7 percent by 2015 and
4.7 percent by 2035.
For households, these lower prices cascade through the
economy, resulting in a $926 increase in annual average disposable
income between 2012 and 2015. By 2035, annual average disposable income
per household will have increased by more than $2,000.
manufacturing renaissance?
The impact on manufacturing is notable. Several factors are
shifting the economics in favor of on-shoring and fueling the
resurgence of manufacturing in the US. First, global labor wage rates
for many off-shoring locations have significantly outpaced US wage
increase, narrowing the wage gap. Second, in an increasingly advanced
manufacturing world, technology is shifting the balance away from the
importance of low cost labor toward higher skilled workforces. Third, a
rapidly evolving energy landscape is fundamentally shifting the
traditional economics around supply chains as:
(1) higher oil prices, which have tripled in the last decade, are
altering transportation costs and compelling companies to site
manufacturing locations closer to end markets making off-shoring less
attractive;
(2) the unconventional revolution in the US, which has ushered in a
new era of affordable and abundant domestic natural gas, is creating
significant competitive advantages for both energy intensive industries
and industries that rely upon natural gas derivatives as critical
feedstock to production.
As a result, companies are now committing or planning investments
that in total appear to range into hundreds of billions of dollars.\7\
The US chemical industry is particularly well positioned to capitalize
on the benefits of this unconventional revolution. This industry is
highly energy intensive using energy inputs, mainly natural gas and
natural gas liquids, as both the major fuel source and feedstock. The
US chemical industry's feedstock prices are now among the lowest in the
world. As a result, the US is gaining a decisive competitive advantage
in the cost of producing basic petrochemicals like ethylene, ammonia,
methanol, and their downstream derivative products.
---------------------------------------------------------------------------
\7\ American Chemistry Council, Shale Gas, Competitiveness, and New
U.S. Chemical Industry Investment--An Analysis of Announced Projects
(May 2013)
---------------------------------------------------------------------------
A large number of chemical companies, for instance, have announced
plans to build or expand facilities in North America with capital
expenditures totaling close to $100 billion.\8\ Will all be built? Time
will tell. But what is striking is that, just five years ago, these
companies would have scoffed if they had been told that they would be
investing back into the United States. The investments are coming both
from US based companies, which are ``on-shoring'' in response to lower
energy costs, and from foreign companies. Examples include:
---------------------------------------------------------------------------
\8\ IHS, Energy and the New Global Industrial Landscape: a Tectonic
Shift? (January 2013), p. 2.
---------------------------------------------------------------------------
General Electric which has announced more than a dozen new
manufacturing plants or expansions of existing facility including: (1)
a locomotive plant in Texas; (2) an aircraft engine composites factory
in Mississippi; and (3) appliance and lighting facilities in Alabama,
Kentucky, and Ohio.
Caterpillar, which is investing $120 million in a new
Victoria, TX, plant to make excavator machines--these devices will
replace excavators formerly manufactured at a Caterpillar facility in
Japan and shipped to the US.
Ford, which announced plans to bring back approximately
2,200 parts production jobs to the United States.
conclusion
Altogether, the unconventional oil and gas revolution has already
had major impact in multiple dimensions--beginning with U.S. energy
supply and costs and now extending to government revenues,
manufacturing, and the wider economy. Its significance will continue to
grow as it continues to unfold. These hearings provide a very timely
opportunity for assessing that impact and significance in its many
dimensions, and I am pleased to respond to the committee's questions.
Chairman Ryan. Thank you. Right in time, too. Mr. Weiss.
STATEMENT OF DANIEL J. WEISS, SENIOR FELLOW,
CENTER FOR AMERICAN PROGRESS
Mr. Weiss. Chairman Ryan, Ranking Member Van Hollen, and
distinguished members of the Committee, thank you for the
opportunity to testify today.
The subject of today's hearing is America's Energy
Revolution: A New Path to Jobs and Economic Growth. To most
Americans, the energy revolution has three main components.
First, responsibly develop the energy resources of today while
using them more efficiently. Second, invest in the new, cleaner
energy technologies of tomorrow, and funding them with ending
tax breaks for big oil companies. Third, reduce the public
health and extreme weather threats posed by toxic and carbon
pollution generated by the production and combustion of coal,
oil, and natural gas.
I will briefly review the Obama Administration's all-the-
above strategy that meets these three goals. First, responsibly
develop the resources of today. As the Chairman noted, U.S. oil
production is at its highest since 1992. Oil production for
federal lands and waters is higher three of the last four years
under Obama than under the last three years of his predecessor.
And the Congressional Budget Office says that 70 percent of the
oil and gas on federal lands is already open for development.
This oil production increases boosted direct oil and gas
employment by 155,000 people, or 11 percent, over the last four
years.
Because of the increase in domestic production, last year,
the United States imported only 40 percent of its oil, compared
to 57 percent in 2008. And coal mining jobs grew by 6 percent
between 2008 and 2012, according to the Labor Department. And
we are using these resources more efficiently. When the new
fuel economy standards are fully implemented in 2025, we will
use 2 million fewer barrels of oil per day, and drivers will
save the equivalent of $1 per gallon of gasoline. Under the
Recovery Act, we weatherized one million low-income homes to
make them more efficient, which will save each family $400 on
their utility bills every year.
Second, we need to invest in clean energy technologies that
create jobs, and we could fund this by closing special oil tax
breaks. As previously noted, the governors of Iowa, Oklahoma,
and Kansas have supported federal investments in wind energy,
which has led to growth in that field. Renewable electricity
generation has doubled over the last four years, and there are
200,000 employees in the wind and solar industry. The Labor
Department recently determined that in 2011, 3.4 million jobs
were associated with the production of green goods and
services. And we can pay for additional clean energy
investments by the elimination of tax breaks for big oil. The
five biggest oil companies made $250 billion in profits in the
last two years, and as of the end of 2012, had $70 billion in
cash reserves. They do not need their share of $40 billion in
tax breaks for big oil companies.
Third, we need to protect public health from pollution and
extreme weather. The pollution reductions from the mercury air
toxics standards for coal-fired power plants will save 11,000
lives annually, and prevent hundreds of thousands of asthma
attacks and hospitalizations.
Yesterday, President Obama announced his plan to reduce
carbon pollution from power plants by enforcing the Clean Air
Act. Power plants are the largest uncontrolled domestic source
of climate pollution. These reductions are essential to meet
our obligation to the next generation to reduce the threats to
public health and avoid the future growth of destructive
extreme weather.
President Obama has successfully pursued an all-of-the-
above energy strategy by increasing oil production, reducing
oil imports and use, and protecting public health from
pollution. In contrast, the House of Representatives has only
supported one element of an all-of-the-above strategy: the
expansion of oil and gas production. For instance, just last
week the House Appropriations Subcommittee on Energy and Water
proposed to cut investments in clean energy in half, and reduce
investment in breakthrough clean energy technology research
investments by 80 percent in its FY 2014 spending bill. And as
Mr. Van Hollen noted, the budget sequester has hindered oil
production for public lands due to funding cuts at the
Department of Interior that have slowed lease approval.
The House of Representatives has ignored oil use
reductions, slashed investments for new clean energy
technologies, and would eviscerate public health protection
from pollution. This is an oil-above-all strategy that would
benefit big oil companies at the expense of everyone else.
Hopefully, the House of Representatives will join President
Obama in supporting a true all-of-the-above energy strategy.
Thank you, and I look forward to your questions.
[The statement of Mr. Weiss may be accessed at the
following Internet address:]
http://www.americanprogress.org/wp-content/uploads/2013/07/
Weiss_Testimony.pdf
Chairman Ryan. Thank you. And it cannot be said that we do
not encourage a wide range of views here. Mr. Durbin.
Mr. Van Hollen. For the record, it is because you let us
pick a witness.
STATEMENT OF MARTIN J. DURBIN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICA'S NATURAL GAS ALLIANCE
Mr. Durbin. Chairman Ryan, Ranking Member Van Hollen, and
members of the Committee, thank you for the opportunity to
appear before you today. I am Marty Durbin, president and CEO
of America's Natural Gas Alliance. ANGA represents North
America's largest independent natural gas exploration and
production companies.
We work with industry, government, and customer
stakeholders to ensure the continued availability and increased
use of our natural gas resources for a cleaner and more secure
energy future. I appreciate the opportunity to join this
conversation on how domestic energy production is
revolutionizing the path of jobs and economic growth for our
country.
Just as natural gas is today a foundation fuel in terms of
our energy use, so is the natural gas industry a foundational
engine of U.S. job creation and economic growth. Mr. Larson's
already laid out the economic contributions from employment to
capital investment to government revenue. These contributions
are made possible by technological innovations led by hydraulic
fracturing and horizontal drilling that allow our nation to
safely and responsibly access vast domestic reserves of shale
gas that typically lie a mile or more below the earth's
surface.
Our natural gas resources exist in such abundance that the
U.S. has transitioned in just a handful of years from being a
net importer of natural gas to now being the world's largest
producer of this clean energy source. And there is now broad
consensus that the U.S. has enough natural gas to meet our
nation's growing energy needs for generations to come.
Unique among our nation's energy choices, natural gas is
used in every sector of our economy, from electric power
generation and industrial feedstocks to residential and
commercial uses and transportation.
With market forces driving this dynamic, natural gas is
delivering substantial contributions to core national
priorities. Among the highlights, this industry contributes
$113 billion annually to federal, state, and local government
budgets, funding critical government priorities. It supports 3
million American jobs. It is projected to help create nearly a
million additional jobs in the U.S. manufacturing sector alone
by 2025. It is primarily responsible for a reduction in U.S.
power sector carbon emissions to levels not seen since 1994.
And along with rising domestic oil production, natural gas is
helping lead our nation to energy self-sufficiency and
strengthen our energy security.
This impressive performance is made possible not only by
the abundant supplies of natural gas, but also by policies that
encourage safer, responsible development with appropriate
state-led oversight of this clean, low-cost American energy
source. To maximize these benefits to our nation, government
should exercise caution in imposing unnecessary costs on an
American industry that is providing so much economic value.
Given the extraordinary contributions that American natural gas
is making to our nation, we must ensure that federal policy
allows this incredible record of success to continue.
Two areas of significant potential impact are tax policy
and export policy. Natural gas development is a highly capital-
intensive industry. Like all other capital-intensive
industries, cost recovery is critical to its success. Cost
recovery is not a handout, a loophole, or a subsidy. So, for
example, erasing the intangible drilling cost deduction would
have a significant negative impact in both the short term,
primarily on U.S. manufacturing and industrial consumers who
rely on affordable natural gas to remain competitive, and the
long term, where it is projected that such a move would
actually decrease government revenue significantly beyond a 10-
year time horizon.
Export policy presents another opportunity to signal to the
marketplace that the U.S. government is disciplined and
consistent, both in its support of natural gas and the
principles of free trade. The Department of Energy's approval
of the Freeport, Texas LNG export terminal is a positive sign.
Timely approval of the remaining export permit applications is
needed to continue this progress, improve the U.S. trade
balance, and make significant headway toward the bold national
objective of doubling U.S. exports during this decade.
Natural gas is one of the bright spots in our economy. Free
trade principles, technology advances, and fair tax policies
will allow us to continue the success story.
So, thank you, again, for the opportunity to appear before
you. Our industry is proud of the contributions we make for our
nation, and we stand ready to work with this Committee, the
Congress, and the Administration to ensure a path forward that
allows natural gas to continue as a foundation of U.S. job
creation and economic growth for decades to come. Thank you.
[The prepared statement of Mr. Durbin follows:]
Prepared Statement of Martin J. Durbin, President and CEO,
America's Natural Gas Alliance
Chairman Ryan, Ranking Member Van Hollen and members of the
committee, thank you for the opportunity to testify on behalf of
America's Natural Gas Alliance (ANGA) and its member companies.
My name is Marty Durbin. I am President and CEO of America's
Natural Gas Alliance, which represents North America's largest
independent natural gas exploration and production companies. Our
mission is to promote the growing demand for and use of our nation's
vast domestic natural gas resources. In pursuing this mission, ANGA
works with industry, government and customer stakeholders to ensure the
continued availability and increased use of our natural gas resources
for a cleaner and more secure energy future.
I appreciate the opportunity to join this timely discussion on how
the nation's vast domestic energy resources are revolutionizing not
only the energy game, but also the path to jobs and economic growth for
our country as a whole.
summary
Just as natural gas is a foundation fuel in terms of our energy
use, so is the natural gas industry a foundational engine of U.S. job
creation and economic recovery. The industry contributes $113 billion
annually in government revenues, supports 3 million American jobs and
contributes $440 billion each year to the nation's economy.\1\
This contribution is made possible by technological innovations,
led by hydraulic fracturing with horizontal drilling, that are allowing
our nation to safely and responsibly access vast domestic reserves of
shale gas that lie typically a mile or more below the earth's surface.
Our natural gas resources exist in such abundance that the United
States has transitioned in just a handful of years from being a net
importer\2\ of natural gas to the world's largest producer of this
clean energy source.\3\
There is now a broad consensus that the U.S. has enough natural gas
to meet our nation's growing energy needs for generations to come. This
abundance has made possible stable, affordable prices for natural gas
consumers. Unlike any other fuel, natural gas is used in every part of
our economy--electricity generation, residential and commercial uses,
manufacturing feedstock and energy needs, as well as transportation
fuel--allowing natural gas to deliver value throughout the fabric of
our entire economy.
America's newfound abundance of natural gas has fundamentally
transformed the outlook not only for our economy, but also for our
nation's energy security. Market forces are helping deliver substantial
contributions not only to the U.S. Treasury but also to core national
priorities. Among the highlights, natural gas:
Contributes $113 billion annually to federal, state and
local government budgets;
Supports 3 million American jobs;
Is projected to help create nearly 1 million U.S.
manufacturing jobs by 2025;\4\
Is primarily responsible for a reduction in U.S. power
sector carbon emissions to levels not seen since 1994;\5\
Along with rising domestic oil production, is delivering
profound strides in the nation's energy self-sufficiency and security;
and
Is delivering $926 in annual savings to the average U.S.
household--savings in both electricity and home heating costs. And,
this figure is expected to grow to more than $2,000 per year by
2035.\6\
This impressive performance is made possible not only by the
abundant supplies of natural gas, but also by policies that encourage
safe and responsible development with appropriate state-led oversight
of this clean, low-cost American energy source.
To maximize these benefits to our nation, government should
exercise caution in imposing unnecessary costs on an American industry
that is providing so much economic value. To do so would have a
negative ripple effect through our economy and diminish the
contributions our natural gas industry can make not only to government
revenues but also to the U.S. economic recovery as a whole.
domestic energy development a rare bright spot in u.s. economy
Shale energy, including both domestic natural gas and oil
development, has been one of the brightest spots in our economy over
the past five years.
The growth we've seen and the opportunity ahead come from the
development of so-called ``unconventional'' natural gas resources,
chief among them shale gas. Shale gas was 35% of natural gas production
in 2011, and it's predicted to reach 52% by 2040.\7\
To offer a sense of the magnitude of this opportunity: In 2011,
total capital expenditures for the natural gas industry as a whole
reached $109 billion.\8\ In 2025, that figure will rise to $123
billion--for shale and other ``unconventional'' natural gas resources
alone.
This is an economic stimulus that will provide significant
additional revenues to government at all levels.
In addition, roughly half of all natural gas-related jobs today are
powered by shale resources. More than 800,000 additional jobs will be
created by 2025--again by shale and other unconventional natural gas
resources alone.\9\ It should be further noted that the high quality of
jobs created through shale gas is reflected in above-average pay--with
direct jobs spread across 31 shale gas-producing states paying $23-plus
per hour.
U.S. EMPLOYMENT--UNCONVENTIONAL NATURAL GAS (2010-2025)\10\
------------------------------------------------------------------------
2010 2015 2020 2025
------------------------------------------------------------------------
Direct...................... 237,968 333,776 403,472 400,958
Indirect.................... 327,000 479,488 593,817 598,497
Induced..................... 443,693 650,185 797,485 812,499
-------------------------------------------
Total................. 1,008,661 1,463,449 1,794,774 1,811,954
------------------------------------------------------------------------
In addition to those employed directly in the natural gas industry,
indirect employment tallies those who work in related industries in the
natural gas supply chain. Induced jobs represent jobs created by the
spending of the first two categories. These are conservative figures
that do not take into account the many unrelated American industries
that are flourishing in an environment of low-cost natural gas. These
include the estimated one million manufacturing jobs that are forecast
to be created through 2025 because abundant, affordable natural gas is
making American workers and U.S. companies more competitive in the
global marketplace.
natural gas contributes $113 billion annually in government revenues
In 2011, natural gas contributed nearly $113 billion in government
revenues. In addition to $53 billion to the U.S. Treasury, this
included $58 billion in contributions to state and local budgets\11\--
helping fund schools, law enforcement, hospitals and other local
priorities. For this reason, you see governors across the political
spectrum, from red states and blue states alike, enacting laws and
regulations that encourage responsible energy development in their
states. Additionally, the government--like all natural gas consumers--
has enjoyed substantial savings from reduced operating costs associated
with low-cost natural gas.
Here is the 2011 breakdown of government revenues from the total
natural gas industry:\12\
Federal Taxes: $53 billion
State and Local Taxes: $58 billion
Federal Royalty Payments: $2 billion
Total: $113 billion
Similar to the employment and capital expenditure projections,
shale gas will drive future growth in government revenue contributions
at all levels of government. In fact, federal, state and local
government revenues from shale and other unconventional gas production
will almost double from 2010 to 2025.\13\
GOVERNMENT REVENUES--UNCONVENTIONAL NATURAL GAS (2010-2025)\14\
[$ Billions]
----------------------------------------------------------------------------------------------------------------
2010 2015 2020 2025
----------------------------------------------------------------------------------------------------------------
Federal Taxes................................................... 16.5 24.2 29.7 30.3
Corporate Taxes (federal)................................... 3.7 5.5 6.7 7.0
Personal Taxes (federal).................................... 12.8 18.7 23.0 23.3
Federal Royalty Payments........................................ 0.9 1.2 1.2 1.5
State and Local Taxes........................................... 16.4 23.9 28.8 31.1
Corporate Taxes (state & local)............................. 10.5 15.6 19.0 19.7
Personal Taxes (state & local).............................. 2.2 3.2 3.9 4.0
Severance Taxes (state & local)............................. 2.6 3.6 4.1 5.0
Ad Valorem Taxes (state & local)............................ 1.1 1.6 1.8 2.3
-----------------------------------------------
Total Government Revenue.................................. 33.8 49.3 59.8 62.9
----------------------------------------------------------------------------------------------------------------
american natural gas abundance key to u.s. economic recovery
In setting sound fiscal policy, it is imperative to consider not
just industry jobs, investment and government revenue, but also the far
more broad and positive impact that abundant, affordable natural gas is
having throughout our economy. Unique among our nation's energy
choices, natural gas is used in every sector of our economy, through
its prominent roles in electricity generation, industrial and
manufacturing fuel uses (generally referred to as ``feedstock''),
residential and commercial uses and as a transportation fuel.
Natural gas accounts for more than 25% of our total energy use in
the United States. The fact that domestic dry gas production has
increased 20% since 2008,\15\ and wellheadprices have been reduced by
roughly half since 2008 has had a profound effect on the
competitiveness of a wide variety of American industries.
electricity generation
Natural gas accounts for 24% of our electricity generation
as of 2012;\16\
Electricity users on average have saved 8% since 2008
thanks to reliable, abundant and affordable supplies of natural
gas;\17\ and
Natural gas' cleaner profile across a broad array of
emissions is allowing utilities throughout the country to more cost-
effectively achieve environmental goals.
manufacturing feedstock
Natural gas accounts for 26% of energy used in the
industrial sector, including feedstocks;\18\ and
More than $110 billion of new or expanded manufacturing
projects have been announced through 2018 with low natural gas prices
cited as the reason for the additional capacity.\19\ This is a
manufacturing renaissance including chemicals, plastics, fertilizer,
steel, aluminum, tires and more.
residential/commercial uses
Natural gas accounts for 64% of energy used in
heating;\20\
Natural gas consumers have saved more than 30% in heating
costs since 2008.
This includes savings related to space and water heating, as well
as appliances, such as stoves and gas dryers, and these savings free up
cash flow to spend elsewhere.\21\
transportation
Natural gas comprises 0.1% of energy used in
transportation. However, its use in this sector is expected to grow
significantly over the next decade;\22\
Natural gas is the lowest cost transportation fuel
available on the market today.
Between 2010 and 2012, the average price of compressed natural gas
was $1.20 less than the gasoline gallon equivalent;\23\
For this reason, leading U.S. companies from Waste
Management to AT&T to UPS are converting their vehicles to run on
affordable, American natural gas;
Additionally, one in five city transit buses now run on
natural gas, with one in three new transit bus purchases being CNG
vehicles;\24\
Up to 30% of the nation's trucking fleet may run on
natural gas by 2020;\25\
And, just yesterday, ANGA unveiled four demonstration
dual-fuel passenger vehicles. They run on both gasoline and natural
gas. Their purpose is to show the potential range of consumer choices--
from luxury SUV to muscle car to commuter vehicles--that have the
performance American consumers expect, while adding the fuel efficiency
and significant cost savings that natural gas has to offer.
strong national interest in constructive policies
Given the extraordinary contributions that American natural gas is
making to our nation, we must ensure that federal policy allows this
incredible record of success to continue. Two areas of significant
potential impact are tax policy and export policy.
Natural gas development is a highly capital-intensive industry, and
like all other capital-intensive industries, cost recovery is critical
to the industry's success; it is not a handout, a loophole or a
subsidy. Erasing the Intangible Drilling Costs deduction would have a
significant negative impact in both the short term--primarily on U.S.
manufacturing and industrial consumers who rely on affordable natural
gas to remain competitive--and the long-term, where it is projected
that government revenue would decrease significantly beyond a 10-year
time horizon.
Export policy is another opportunity for the government to signal
to the marketplace that U.S. policy is disciplined both in support of
natural gas and in support of the principle of free trade. The
Department of Energy's approval of the Freeport, TX, LNG export
terminal is a positive sign. Timely approval of the remaining export
permit applications is needed to continue this progress, improve the
U.S. trade balance and make significant headway toward the bold
national objective of doubling U.S. exports during this decade. Without
affordable and abundant natural gas, this topic would not even be part
of our nation's dialogue. Free trade principles, technology advancement
and fair tax policies will allow us to continue this success story.
conclusion
Natural gas is one of the bright spots in our economy, and it's
important that we pull in a consistent and constructive direction to
continue this progress. ANGA's member companies are part of an industry
that contributes $113 billion per year to federal, state and local
government. Equally important, our industry supports 3 million American
jobs.\26\ Natural gas also is making strides in the nation's energy
security, and it is a primary reason that U.S. energy sector carbon
emissions are at 20-year lows. We believe that allowing markets to
continue to deliver this huge stimulus to communities across the nation
is an essential component in our ongoing economic recovery--and will
ensure an appropriate balance that both delivers ample revenues to
government and ensures natural gas can continue to be a foundation of
U.S. job creation and economic growth for decades to come.
endnotes
\1\ ``The Contributions of the Natural Gas Industry to the US
National and State Economies'' ANGA/IHS, 2012.
\2\ AEO 2005 vs. AEO 2012.
\3\ ``Annual Energy Outlook'', EIA, 2013.
\4\ ``Shale Gas: A Renaissance in US Manufacturing?. National
Association of Manufacturers and PriceWaterhouseCoopers, 2011.
\5\ EIA June 2012 Monthly Energy Review.
\6\ ``Economic and Employment Contributions of Shale Gas in the
United States.'' IHS, 2011.
\7\ EIA Annual Energy Outlook: 2013 Early Release.
\8\ ``The Contributions of the Natural Gas Industry to the US
National and State Economies,'' ANGA/IHS 2011.
\9\ ``The Economic and Employment Contributions of Unconventional
Gas Development in State Economies,'' ANGA/IHS, 2012.
\10\ ``The Economic and Employment Contributions of Unconventional
Gas Development in State Economies,'' ANGA/IHS, 2012.
\11\ ``The Contributions of the Natural Gas Industry to the US
National and State Economies,'' ANGA/IHS, 2011.
\12\ ``The Contributions of the Natural Gas Industry to the US
National and State Economies,'' ANGA/IHS, 2011. Note: This study covers
the natural gas industry as a whole (onshore and offshore, conventional
and unconventional resources.
\13\ ``The Economic and Employment Contributions of Unconventional
Gas Development in State Economies,'' ANGA/IHS, 2012.
\14\ ``The Economic and Employment Contributions of Unconventional
Gas Development in State Economies,'' ANGA/IHS, 2012. Note: This is a
tally of government revenues associated solely with unconventional
natural gas development. As such, these figures represent a subset of
overall natural gas industry government revenue contributions, which
totaled approximately $113 billion in 2011.
\15\ ``Annual Energy Outlook,'' EIA, 2013 & ``Annual Energy
Review,'' 2012.
\16\ ``Annual Energy Outlook,'' EIA, 2013.
\17\ ``Annual Energy Outlook,'' EIA, 2013 & ``Annual Energy
Review,'' 2012.
\18\ ``Annual Energy Outlook,'' EIA, 2013.
\19\ Company announcements, 2011 through May, 2013.
\20\ EIA, ``Annual Energy Outlook,'' 2013 & ``Annual Energy
Review,'' 2012.
\21\ EIA, ``Annual Energy Outlook,'' 2013 & ``Annual Energy
Review,'' 2012.
\22\ EIA ``Annual Energy Outlook,'' 2013.
\23\ Compiled data from ``Clean Cities Alternatives Fuels Price
Reports'', June 2010 to July 2012.
\24\ ``Transit on the Cutting Edge of Clean Technology,'' American
Public Transportation Association, September, 2012.
\25\ ``Energy 2020: Independence Day,'' Citigroup, 2013.
\26\ ``The Contributions of the Natural Gas Industry to the US
National and State Economies,'' ANGA/IHS, 2011.
Chairman Ryan. Thank you. Since you just finished last, Mr.
Durbin, I want to ask you a couple questions about natural gas
and about permitting. In 2012, the average application to
permit to drill on federal lands was processed in 228 days;
4,256 total permits were looked at, approved, in that year. By
comparison, in 2007, we had 196-day average turnaround for
permits, and 7,124 total permits. So that means the BLM, the
Bureau of Land Management, is taking 16 percent longer to do 60
percent of the work.
By contrast, states have a different track record. Their
processing times are far, far faster: North Dakota, 10 days;
Ohio, an average of 14 days; Colorado, an average of 27 days.
So we have got 10- to 27-day turnaround on permits in these
states, and 228-day average turnaround in the federal
government. What is the difference? What is the justification
or the reason, in your estimation, for the huge difference in
turning these permits around? And more importantly, what is the
range of estimates on what we now think we have on federal
lands versus, say, where we were in just 2007?
Mr. Durbin. Well, thanks for question, Mr. Chairman. And I
think there is no question that the, you know, permitting
timelines are one of the significant factors in providing
certainty for the industry. And I think that one of the
distinctions you can make here is that in the states where we
are operating, in many cases, you have got a regulatory
structure in place that has traditionally regulated oil and
gas, you know, production. So, frankly, I mean, that is a good
story. Then, you know, out at the state level, they have got
the appropriate expertise, and they know their, you know, they
know their state geology and hydrology and all the rest, and
are able to, you know, to be, frankly, just to be more
efficient in approving of the permits.
You know, we are not seeing that at the federal level, and
certainly that is an area where we would like to continue to
working with the Administration, with BLM, to find how can we
find ways of making that process more efficient. We are clearly
seeing more of the production move to where the permitting is
easier.
Chairman Ryan. And so that is basically the question, then.
So there are only so many rigs that are going to be available,
only so much drilling that will occur. And so if it is a 10-day
turnaround in some state, and a 228-day turnaround in the
federal government, is the federal government not basically
missing out on those kinds of revenues that we would get
through royalties and leases, because the path of less
resistance, the easier way to go, the natural place to deploy
your capital and your rigs is on private lands, say, North
Dakota, versus BLM land because it is fewer and it is longer.
And so then we are basically forgoing a lot of revenue that
could come to the government. Our last transportation bill
said, ``Put those resources, those federal revenues that come
from oil leases and royalties, into the Highway Trust Fund to
help us with infrastructure.''
So are we basically making a choice here, maybe not
intentionally, through the regulatory process to forgo that
revenue for the federal government and push this drilling into
the private area?
Mr. Durbin. I think there is no question that a speedier,
more certain process at the federal level would result in
greater production on those lands.
Chairman Ryan. Mr. Larson, your firm is very well-known for
its econometric models. It is widely cited, used quite a bit. I
was really moved by these numbers. I come from Wisconsin. We do
not have shale, so where I come from, people do not realize
that there may be a benefit, other than lower gas and oil
prices, people do not realize that there is an actual direct
benefit. You said there were 20,000 jobs in my state connected
to this? Thirty percent of the jobs created in your model are
from areas in the economy that are not directly related or not
from states that have this. Can you elaborate on that?
Mr. Larson. Yeah, basically what we do is we look at the
very supply chains that support the upstream exploration and
production activity, and so obviously, as you are going out and
doing these exploration and production activities, you need to
acquire a pipe-fitting machinery, power generators, sand,
aggregate gravel cement casing, and so there is this vast
supply chain across this country. The beautiful thing is, as
Mr. Durbin alluded to, is this is a homegrown technology, and
so what it means, when you look at sort of how the dollars flow
through our economy, those dollars are being spent domestically
on the providers of this technology here.
And so when we looked at our models, we found that the
supply chains reached far into all these other states. And so
even though you do not have a geographic play in your boundary,
you do get to tap into that supply chain, and, as I indicated,
20,000 jobs in your state, and about $330 million in tax
revenues, by virtue of some of the leading areas, like sand,
and aggregate, and machinery within your state in particular.
Chairman Ryan. So your model says 1.7 million jobs tied to
this industry in 2012 going up to 3 million by the end of this
decade?
Mr. Larson. That is correct, yes.
Chairman Ryan. So I want to get a sense of the revenue. So
this is where we kind of come in here in the Budget Committee,
which is, we have sort of old methodologies and old revenue
numbers with respect to what we could actually bring into the
federal government to help us with our deficit and debt
reduction. You mentioned $2.5 trillion in revenue between 2012
and 2035. Can you break that down? I know that is all levels of
government. Do you have a breakdown between state and local and
federal?
Mr. Larson. Yes, so what you are going to see is just
roughly a split of about 50/50, so you are going to see that
split roughly in half. One of the primary drivers of the source
of revenue is corporate, and then personal income tax, and so
that is where most of the revenue happens to be coming from,
but you can basically split that number into about 50/50
between the federal, and then the state and local. I do not
have the disaggregation between the states, though, and the
local.
Chairman Ryan. Okay, right, so about 1.25 trillion to the
feds through expanded use.
Mr. Larson. That is correct, roughly. That is correct.
Chairman Ryan. Give me a sense of how this helps the
average family. Give me a sense of, you mentioned $1,000, walk
us through how this works for the average family, and what I am
most concerned about is how does this affect low-income
individuals who live on total disposable income, who do not
have savings, who are living on complete disposable income? How
does this help them? How is this, this breakthrough boon, not
just for the industries involved, or not just for governments,
but how does it help the average consumer, particularly low-
income people?
Mr. Larson. Sure, a couple of examples. First, when you
think about energy, it is in inelastic demand. It is something
we have to have. So when you look at your disposable income,
you do not pick and choose how much you allocate to energy. You
really have to have energy; it is just a necessity, and so
there is a fairly high demand for it there. When you look at
that $1,000, those savings are recognized to families of all
incomes by virtue of the fact that we have lower energy prices
flowing through this. So it could be direct consumption, so
individuals who heat their homes through natural gas, or cook
through natural gas, or things of that nature; less direct
through power gen, which we have seen prices come down as a
result of this unconventional revolution, or the supply chain
of the material that is produced through these activities.
So you think about the petrochemical industry, which now
has a lot cheaper feedstock and derivative that goes into all
these goods and services we consume; those savings are passed
on to consumers as well. So you see this downward pressure on
the price of goods in the broader economy by virtue of this. So
there is one example.
The other example I point to is, the supply chain I talked
about, the reason that we see these jobs spread across the
country, expands into jobs that many people do not think of
touching immediately the energy industry. And so you pick a
state like North Dakota, an example that you used, Chairman
Ryan. Individuals in North Dakota are enjoying what we call the
induced effects of the earnings of those who are directly
employed in this exploration and production, or in the supply
chain, their income, they go out and they spend to live in that
economy, and they are employing people who are waiters,
waitresses, small businesses, and so there is a broad reach to
all individuals in American society from this.
Chairman Ryan. Yeah, so one of the things that we are
particularly sensitive, where I come from, in my state, we have
more jobs per capita tied to manufacturing than any other state
in the country. I think Indiana, I think we have some Hoosiers
here, I think Indiana has more manufacturing total, but in the
Midwest, we basically make things. And one of the problems we
have seen over, say, since the mid-'90s on, is a lot of
manufacturing going overseas, for labor and other reasons, tax
policy. But we are witnessing a sort of resurgence of our
manufacturing industry. We are seeing some of our manufacturing
coming back, and among the reasons they seem to cite is more
stable natural gas, more stable input prices. So that, to me,
says that there is not only a win-win, but a win-win-win, in
the fact that this can help us bring back the resurgence of our
manufacturing sector.
I just want to ask you one quick question about natural gas
and jobs, Mr. Durbin. You said that through shale gas
production the pay for these jobs averages around $23 an hour.
That is, you know, about three times the minimum wage. Is that
typical for these kinds of jobs, and what kinds of jobs are you
talking about when you mention this?
Mr. Durbin. It is an average, but it is typical. I mean,
you can look at anything, you were mentioning in North Dakota,
and that may be an outlier, but even there you can, with a high
school diploma and you have a CDL license, you can be making
$90,000 a year in North Dakota. But that is, again, even
acknowledging that may be an outlier, throughout the industry
the average numbers, the oil and natural gas industry,
especially in the upstream side, does pay above average wages.
And they are jobs that are not only good jobs coming into the
company, opportunities to move up, but jobs available for
almost every educational level.
So, again, it is an opportunity that, from an employment
standpoint, that is very broad, now across the country. The oil
patch is now all over the country. So we have got the
opportunity here to grow employment in this sector, very good-
paying jobs, opportunities for advancement, almost any
education level.
Chairman Ryan. Thank you. Mr. Van Hollen.
Mr. Van Hollen. Thank you, Mr. Chairman. And as the
Chairman pointed out, the development of natural gas in the
country has improved our competitive position. You do see more
manufacturers moving back to the United States to take
advantage of that, and that is all good news.
I would point out that as of right now, 83 percent of the
government lands, federal lands that are being leased, are not
being produced. In other words, they are not being productive.
People are not drilling for oil and gas on those lands. The
Republican bill that is coming to the floor of the House this
week would essentially open up all of our outer continental
shelf to drilling for oil and gas, without having learned any
of the lessons from the big oil spill in the Gulf, and, as I
pointed out, that is at a time when we have already got lots of
federal lands that have been leased that are not being produced
at all.
Now, and I would also say that despite the fact that that
Republican bill would essentially open up all the outer
continental shelf, according to the Congressional Budget
Office, and I would like to submit this for the record, Mr.
Chairman, the 10-year savings from that, 10 years is $1.5
billion in terms of the federal government. Well, obviously,
every cent counts, but that is not a dramatic increase. In
contrast, we have proposed that we eliminate the subsidies for
the big four integrated oil and gas companies as part of our
sequester replacement bill, and use some of those funds to
reduce the deficit but also to invest in some of these cleaner
technologies of the future that have been demonstrated to also
generate and create jobs.
And I would just point out, Mr. Chairman, that President
Bush said, when he was in office, and I am quoting, ``I will
tell you with $55 oil, $55 a barrel of oil, we do not need
incentives to the oil and gas companies to explore. There are
plenty of incentives.'' That was at $55 per barrel; we are now
at $105 per barrel. And in the Committee that is supposed to
make tough choices on behalf of the American public, I would
think that we would decide to get rid of those taxpayer
subsidies and put them to a higher purpose, and yet, at this
very moment, I believe, over in the Appropriations Committee,
as a result of the budget that passed this Republican House,
they are dramatically cutting our investment in cutting-edge
research in clean technologies, an 81 percent cut, as Mr. Weiss
pointed out, in the account that funds cutting-edge
technologies in clean energy. An over 50 percent cut in the
energy and efficiency investments, and that is compared to last
year.
So that just seems to me counterproductive at a time when
our major economic competitors are moving forward in this
important space. And Mr. Weiss, I would ask you if you could,
just to talk about what Germany is doing, what China is doing,
and the risk to the United States of falling behind in this
important area of energy production.
Mr. Weiss. Thank you, Mr. Van Hollen. Many of our economic
competitors are investing heavily in their domestic clean
energy industries. In 2011, for the first time since President
Bush left office, the United States actually invested more in
clean energy than China, but China was back ahead of us again
in 2012. In Germany, they are one of the leading countries for
the production of solar energy and solar equipment, even though
Germany has less sunshine than any state in the union except
for Alaska. In fact, Germany, last year, had 20 percent of its
electricity generated by renewable energy; of course, so did
Iowa. And so it is happening, but we need to keep investing in
those technologies to create jobs.
Mr. Van Hollen. One of the things we have done in this
country as a matter of public policy is to try to encourage the
development of fledgling industries, and then when they become
more mature industries, they are more on their own in the free
market, as it should be. Could you talk about the mismatch in
terms of our public investment through various incentives?
Between oil and gas, which I think everybody would agree is a
mature industry; I do not think anybody can suggest that the
big four integrated oil companies are going to do less if they
do not have the benefit of these big taxpayer subsidies. In
fact, their executives, just a few years back, testified to
such. But the cost of not investing in these other areas, and
the negative impact, we will see if we cut, for example, the
ARPA-E budget, which is the advanced research budget at the
Department of Energy, by 81 percent, as the Republican budget
would have us do.
Mr. Weiss. Yes, in fact, 35 years ago there was concerns
about a natural gas shortage in the United States, so the
Department of Energy, working with private gas companies,
worked together to develop the horizontal drilling and advanced
fracking technology that we are now using for the shale gas
revolution; that was due to public-private partnership led by
federal investment. The Nuclear Energy Institute recently did a
study and found that over the last 60 years, we have invested
$7 in the oil and gas industry for every $1 that we have
invested, through subsidies and other supports, tax breaks and
the like, $7 for oil and gas, $1 for renewable energy.
And it seems to me as you noted, that since oil and gas is
a very mature industry where the five largest integrated
companies have $70 billion in cash reserves where they spend
one-third of their profits buying back their own stock, they do
not need the $2.5 billion a year they get from the taxpayers in
order to continue to become successful companies. In addition,
it is important to note that those same companies are producing
less oil now than they did six years ago even though they are
making more money, and that is because through nothing of their
own doing, oil prices have risen and gasoline prices have
risen, so they can make more money producing less oil. They do
not need these $2.5 billion a year from us.
Mr. Van Hollen. Thank you, Mr. Weiss. Mr. Durbin, I mean,
your organization, and, again, I think that natural gas
development has been good for American competitiveness; you are
not opposed are you to investing in clean energy technologies,
I mean, in that kind of research, are you?
Mr. Durbin. No, certainly not. We are not opposed to
investing in clean energy technology. In fact, one of the facts
of the matter is, if not for natural gas, you will not have
solar and wind power out there. Because when the sun is not
shining and the wind is not blowing, you know, we are providing
that backup power. So you do not have one without the other.
But you have also got to look at the scale, and if we want
to power this economy going forward, we are simply not going to
be able to do it with solar and wind. And even as the president
pointed out yesterday, you know, since 1994, we have seen
natural gas production increase greatly, which, principally,
through market force has now driven economic growth, created
jobs, lowered emissions to the same level we had in 1994, while
lowering family energy bills and putting us in a position to
play a global role in energy policy, which helps us on a trade
standpoint.
Mr. Van Hollen. I agree with what you just said, and, as
you said, the president indicated yesterday he thought there
was a very important role for natural gas as part of an all-of-
the-above energy strategy. The reason I ask you the question is
because you look at the budget that is moving through this
House, you see dramatic cuts in the kind of investment in clean
energy technology. And I would just ask you if you are familiar
with the Department of Energy's SunShot initiative, which, as I
understand it, is designed to make sure a natural gas-fired
power plant can burn 20 percent less fuel using concentrated
sunshine. It seems to be a great example of the mix of solar
and natural gas. Are you familiar with that project?
Mr. Durbin. I am not familiar with it.
Mr. Van Hollen. Mr. Weiss, if you could just respond?
Mr. Weiss. Yes, one thing that is important to note is, the
program that is developing advanced storage for electricity
technology is the ARPA-E program that you mentioned just a
minute ago that is going to face an 80 percent budget cut under
the Appropriations bill, and that program, by the way, was
signed into law by President George W. Bush back in 2007.
Mr. Van Hollen. Thank you, Mr. Weiss. Thank you, Mr.
Chairman. I thank all the witnesses.
Chairman Ryan. Mr. McClintock.
Mr. McClintock. Thank you, Mr. Chairman. Mr. Larson, we
just heard the Administration's energy policy described as
``all of the above.'' Would you describe that as ``all of the
above''?
Mr. Larson. Well, I think there is a role for all the
energy sources to play.
Mr. McClintock. No, no, that is not what I asked. Is this
Administration approaching the most plentiful resources that we
have available, oil, gas, and coal, as an all-of-the-above
strategy?
Mr. Larson. I would just say that all these resources that
we currently have, the endowment we have, would have to be
considered as opportunities.
Mr. McClintock. Mr. Durbin, would you describe these as an
all-of-the-above strategy?
Mr. Durbin. Well, my concern, clearly, there are laid-out
roles for many different types of energy. Again, my concern is
that we have got all of these benefits coming from domestic
production, but then we see policies that may undermine our
ability to continue that progress, both through tax proposals
and other.
Mr. McClintock. It is not only not promoting an all-of-the-
above strategy, it is actually obstructing an all-of-the-above
strategy. Is that fair to say?
Mr. Durbin. I do not know if I would go that far, but I
think there certainly are concerns of being able to develop our
policies going forward.
Mr. McClintock. We are told that we need to ``invest,'' in
quotes, heavily in wind and solar because these are new
fledgling industries, but was solar photovoltaic cells not
first invented by French physicist Edmund Becquerel in 1839,
Mr. Larson?
Mr. Larson. Yes, solar has been around for a while, that is
correct.
Mr. McClintock. And in nearly 175 years of scientific
advancement, research development, and god knows how much in
public subsidies, have we yet invented a more expensive way of
producing electricity?
Mr. Larson. As an economist I cannot comment on that. I
just do not know the answer to that.
Mr. McClintock. Well, let me ask you this. Well, Mr. Durbin
you alluded to this, not only is solar much more expensive than
conventional sources, and wind much more expensive, and so we
pay a great deal more for them just to begin with; on top of
that, they are intermittent sources. Now we operate on an
integrated grid, meaning that the amount of electricity put on
the grid has to constantly match the amount of energy being
drawn, or the grid simply collapses. Is that correct?
Mr. Durbin. Correct.
Mr. McClintock. And because solar photovoltaic does not
work very well in cloudy conditions, for example, if a cloud
passes over a solar array, its energy production immediately
drops to zero. Does that not mean that we have to back up every
watt of this intermittent electricity with a watt of reliable
electricity by spinning turbines 24/7, ready to produce
electricity at a moment's notice, so we are paying twice for
that electricity at once, inflated prices for solar and wind to
begin with?
Mr. Durbin. That is correct.
Mr. McClintock. And secondly, on top of that, we have got
to keep conventional turbine generators moving constantly,
ready to back up that unreliable power at a moment's notice. So
we are paying twice for that power, is that correct?
Mr. Durbin. Correct.
Mr. McClintock. But then on top of that, we also have
transmission problems; because of the nature of solar and wind
electricity, we cannot transport them long distances over
conventional lines. Do we not have to then construct high-
voltage direct current lines to move this electricity over any
kind of significant distance?
Mr. Durbin. Yes.
Mr. McClintock. So we are paying, then, for a third time a
brand new transmission system for the sole purpose of carrying
this extremely expensive and unreliable power from where it is
produced to where it is consumed. Is that correct?
Mr. Durbin. That is correct.
Mr. McClintock. Does it make much sense to you for the
federal government to be obstructing the vast amounts of
conventional energy that we have right within our own borders,
while, at the same time, lavishing public funds on unreliable
and extremely expensive forms of electricity generation that
have been around for, in the case of solar, for 175 years, and
have not yet proven themselves after all that time?
Mr. Durbin. Clearly demonstrates the need to find a balance
here, where these other energy sources may make sense, in niche
applications, or, you know, in particular regions around the
country. But again, just to be able to provide the energy
needed by such an enormous economy, and that we now have the
opportunity with natural gas, domestic natural gas, to provide
that cleanly.
Mr. McClintock. Consumers are watching their electricity
prices skyrocket specifically because of these policies, and it
is about time that they were fully informed what is causing
that pain every time their utility bill arrives in the mailbox,
and it is precisely these policies supported and promoted by
this Administration and its adherence in this Congress. I yield
back.
Chairman Ryan. Thank you. Ms. Schwartz.
Ms. Schwartz. Thank you very much, and I appreciate this
hearing. As you can imagine, being from Pennsylvania, I am
keenly interested in natural gas and the role it will play and
can play in moving our economy, and offering us a cheaper
energy source, and also in, well, in growing jobs. I certainly
have been to visit one of the drilling sites in Pennsylvania,
up in northeastern Pennsylvania, and got to see, actually,
people working on the drilling rigs, and climbed up myself, got
on one of those asbestos jumpsuits that you have to wear to do
that. I will say there were jobs created and impressive skilled
workers. None of them happen to be Pennsylvanians; that is a
concern to us. They were all from, actually, this happened to
be a Canadian company, on that drilling rig. So that is an
issue for these homegrown jobs for us.
But I certainly, in contrast to the previous speaker, I do
believe very strongly, as do I think many Pennsylvanians and
many Americans, that it is important to reduce carbon emissions
and to have a diversity of energy sources. I think that it is
extremely important to us; we might not actually be doing the
drilling as it was pointed out, of natural gas, without an
interest in new sources of energy and an ability to go get it.
So that gas was there for a long time, we just did not have a
financially-feasible technology to go and drill it.
I think that Mr. Durbin might want to speak to that, but
the fact is that we are moving in a very important direction in
terms of energy efficiency and renewable standards that are
growing a marketplace for cleaner technologies; that wind, and
solar, and hydro, and biofuels all have great potential to be a
part of our portfolio of energy sources. I think all of you, at
least two of you would agree to that. There is no question.
But it is not mutually exclusive. Natural gas is important,
it is a cleaner fossil fuel, and that is important to us, and
it does have the opportunity, should we have distribution
lines, being able to get to businesses, and homes, and transit,
I mean, being able to convert some of our homes and businesses,
and I suppose having distribution lines matters quite a bit.
Not all of that is done yet, by any means, and I imagine you
would be interested in that. And I will say that the technology
and the growth in the way we do the drilling, and also
distribution and use of natural gas is something I hope we
continue to invest in and grow as well.
But as I say all that, as we do need this mix of a cleaner
fossil fuel and these renewables, there is a major concern on
the part of Pennsylvanians and most Americans, that we should
do this right, that the development has to be done right; that
we need to be able to assure Pennsylvanians, we are in the
thick of this, that our health will not be impacted, that their
health will not be impacted, that our water will not be
contaminated, and that we will be able to say that. It is one
of the reasons that I have signed on to the FRAC Act, which
requires disclosure of chemicals and transparency about what is
in the water and what comes out of the water that is used to
get this natural gas. There are issues raised about air
quality, due to methane emissions, and, of course, the issue of
deforestation.
So my question really is, as we move forward to capture
this very important natural gas, and to use it to drive the
economy, and lower prices, and grow jobs in Pennsylvania and
across the country, how do we assure, how can we be assured,
and I think this is a question for Mr. Durbin, that all
producers of natural gas are acting responsibly, that the
regulations reflect our best science, that enforcement and
monitoring natural gas extraction, and distribution, and use
are truly safe. And I think we are at a point where we cannot
yet say that, and I really wanted to offer you the opportunity
to share, I hope, in this mission to do this responsibly, and
do this drilling responsibly, and use natural gas responsibly.
Mr. Durbin. Sure, if I could respond. The good news is, the
industry agrees completely, we have to do this right. And the
fact is, they are. No activity is zero risk, but I think
Pennsylvania is a perfect example of where things are going
right. Former Governor Rendell, I think, did a spectacular job
of setting up a regulatory structure so that the production
that takes place in that state is done and is regulated well at
the local level. You have got experts on the ground. They made
changes to the existing regulatory structure to help address
specific concerns that came up through development in the state
of Pennsylvania. The Pennsylvania regulators continue to look
closely, all along the way, with regard to whether it was water
contamination, they have changed regulations there, and the
industry has complied.
Ms. Schwartz. So we are moving forward being able to say we
are going to learn from experience, we are going to be able to
change those regulations, and, of course, monitor them as well.
And you agree with all of that?
Mr. Durbin. Exactly. That is exactly how it has been done
and how it will be done going forward. Now your point before
about employment as well, again, Pennsylvania is also an
incredible example of the number of jobs that have been created
there. And I would say, I will not dispute that you were on a
site where you may not have seen some Pennsylvanians. But
having worked very closely with the building trades in
Pennsylvania, Frank Sirianni is the head of the Building Trades
Council in Pennsylvania, I think he will tell you, in fact, his
words to me were, they hope that if New York eventually gets
rid of the moratorium, that his brothers and sisters in New
York start complaining about how many Pennsylvanians are coming
to New York.
Ms. Schwartz. I look forward to working with you in the
future.
Chairman Ryan. Thank you. Ms. Black.
Mrs. Black. Thank you, Mr. Chairman, and I appreciate you,
Mr. Chairman, having this discussion that is so important as we
look at jobs and the kind of jobs that can be created and the
spur of the economy by the energy industry.
I want to go back Mr. Durbin to what the Chairman began his
questioning, and that relates to the process of getting the
approvals, and the amount of time that it takes for a state
versus the amount of time it takes for the federal government.
As the Chairman says, an average of 30 days, process
permitting, in a state, and with the federal government, it is
about 228 days. We know that states are doing permitting
processes on their own lands, on their state lands, and,
obviously, they have federal land there. States have done a
very good job in this permitting; they have been good stewards
of the environment, and they have shown that they are efficient
and timely in doing so.
My question for you is, would it not make sense to, since
the states, given their track record, very good track record on
the environmental issues and their efficiency, would it not
make sense to give them the ability to be able to do the
permitting of the federal land that is within their state?
Mr. Durbin. Well, again, as we talked about before, this
clearly cries out for greater attention to figure out why there
is such a huge discrepancy between the timing from the state
level and the federal level. And I do think that there is got
to be, at the very least, much closer coordination between the
federal regulators and the state regulators. There is just no
reason for such an enormous discrepancy in the timelines for
getting a permit approval. So just as we see, because there are
other environmental statutes that are implemented at the state
level, again, there are lessons to be learned here, and I think
this is an area of great opportunity to have that conversation
going on between the states, the federal agencies, and the
industry.
Mrs. Black. Well, I hear you say that there are lessons to
be learned, and that we need to continue to look at it, but do
you see any downside on allowing states being given the
authority through the federal government to make sure that
everything the state is doing is in coordination with the
state? Do you see any problems?
Mr. Durbin. No, I do not see a downside because, again, we
work very closely with the states, and do feel that they do a
very good job.
Mr. Weiss. Ms. Black, may I address that?
Mrs. Black. Yes, you may.
Mr. Weiss. Thank you. First, I would like to interject, I
know that the Chairman is very data-driven, and I try to be as
well. I would like to interject some data from the
Congressional Research Service on the very question of delays
which CRS found, the delays have been cut almost in half
between 2006 and 2011 for permitting. Secondly, CRS concluded
that you cannot compare permitting on state and private lands
with federal lands because the laws are different. Federal
lands are designed for multiple use, which not only includes
resource development, but also hunting, fishing, hiking,
recreation, et cetera. And so therefore, the federal government
has to look at more criteria than the states do because they
only look at, many states, at one thing, which is research
development. Thank you.
Mrs. Black. Well, I thank you, Mr. Weiss. I am not an
expert in this area by any means, but my reading on this topic
does show that, given the fact that the states have done such a
good job in the environmental, and, certainly, your point is
well taken that there are lands and specific things on those
lands, but if there were a council or some way that there could
be an approval by the state under their processing with the
federal government, it seems to me that we would move things
along a lot faster, and therefore have more jobs, which,
obviously, in the economy, this is very important to us. I
yield back.
Chairman Ryan. Thank you. Mr. Pascrell.
Mr. Pascrell. Thank you, Mr. Chairman. Mr. Chairman, your
party is bringing two bills to the floor this week, which would
once again seek to recklessly expand offshore drilling: H.R.
1613, the Outer Continental Shelf Transboundary Hydrocarbon
Agreements Authorization Act; H.R. 2231, the Offshore Energy
and Jobs Act. Contrary to what many of my colleagues would have
us believe, the president has pursued an all-of-the-above
energy plan, which has included a vast expansion of oil and gas
production. I share his belief that we need to make use of all
the resources available to us while we transition to renewable
sources of clean energy. We must make sure that all of our
energy production is conducted in a very specific manner, which
does not pose undue threats to our environment and our health
from oil spills to climate change.
In my home state of New Jersey, we have a vibrant tourism
industry centered at our shore, as well as a thriving
commercial and recreation fisheries. Currently, we are still
working to recover from Hurricane Sandy, which brought
tremendous devastation. The people of New Jersey know that we
cannot bring deep-water drilling for oil and gas to our shores.
The risk of a catastrophic oil spill shutting down portions of
our beaches is just too great. Thousands and thousands of New
Jerseyans rely on healthy shore and environment for their
livelihoods, far outweighing the benefits of offshore drilling,
which produces more profits for Wall Street than community
jobs.
Mr. Weiss, the Offshore Energy and Jobs Act, H.R. 2231,
includes language which would force the Secretary of the
Interior to conduct Lease Sale 220. This parcel of sea off the
coast of Virginia is less than 100 miles from the Jersey Shore.
Unilaterally opening up the Atlantic Ocean for drilling creates
unacceptable risks for communities up and down our coast, and
yet we are talking about trying to get the most out of this,
the most benefit for everybody, and the Administration's
policy, and I have certainly not been an advocate on many of
the Administration's proposals for energy or the environment,
but they have committed to ensuring that American taxpayers
receive a fair return from the sale of public resources.
As drafted, the revenue-sharing provisions in H.R. 2231
would ultimately reduce the net return to taxpayers in the
first place from development of the federal resources leased
under this bill, 2231. Consistent with the president's budget,
the Administration looks forward to working with the Congress,
they have said this, they have written this, to improve the
return to taxpayers from federal energy development through
royalty reforms--you heard the Ranking Member speak of that
before--incentives to diligent development, which we are doing
to some degree. Talk about obstructionism. Talk about
restrictions. We narrowed the incentives to diligent
development of oil and gas rather than expanding them, and the
improvements to revenue collection processes, which are not
found, by the way, in 2231.
Now, Mr. Weiss, with nearly 83 percent of the technically
recoverable offshore oil reserves in the United States already
available for leasing, correct me if I am wrong on the number,
83 percent, adequate opportunities for energy development
already exist. It is a hoax. You are listening to a hoax. That
is what we are dealing with.
Eighty-three percent of that specific area is available.
Does it make sense to push open new areas of our oceans to oil
and gas exploration when we can invest in finding alternatives
for the future? How do you respond to that?
Mr. Weiss. Thank you, Mr. Pascrell. Not only is the vast
majority of the offshore oil already open for leasing, but, in
fact, according to the Department of Interior, 70 percent of
the offshore acres that are already under lease are inactive.
In other words, oil companies are sitting on the leases.
Mr. Pascrell. And why are they doing that?
Mr. Weiss. The reason for that is once they have a lease,
the value of the oil that is in that lease can accrue to their
valuation of their company, which helps increase their stock
price even if they do not develop it.
Mr. Pascrell. Does that have anything to do with the cost
of the product and the final analysis?
Mr. Weiss. I am not sure how they calculate it, but
certainly, as oil prices go up, the value of that oil goes up,
and so, in fact, we have got lots of resources that are already
open, lots of resources under lease that are not being
developed, and that is where we ought to focus, rather than on
these other areas that have not yet been developed that have
economic value to keeping them for fisheries, and tourism, and
whatnot. Thank you.
Chairman Ryan. Thank you. Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman. I think it is fitting
that this hearing is being held today, which is the fourth
anniversary that the House of Representatives passed Cap and
Trade. That was the single act in 2010 that caused me to think
about running for Congress because I did not want to see our
country, particularly our government here in Washington, send
10 million to 20 million jobs to other countries.
So I am an accountant by training so I would like to look
at the sources and uses of funds when you talk about taking
taxes from one group, and then turning around and making
investments in another group. So let's go through the details
here real quick.
Mr. Larson, you are an economist, correct? Okay. So let's
assume that we raise taxes on American energy. What is the
impact on American paychecks? Are they going to be higher or
lower?
Mr. Larson. Yeah, in general, you will see costs of taxes
passed onto the consumers because of the inelastic demand.
Mr. Flores. And what is the impact on American jobs?
Mr. Larson. It is going to depend on how it impacts what we
will call the economically recoverable reserve base, and the
economics of that activity, and so if that tax increases the
cost or breakeven point on those economic resources, it would
reduce resource discovery and production.
Mr. Flores. And that would reduce our GDP. Presumably, then
deficits would go up. Family energy costs would go up. What is
the impact of higher energy taxes on American manufacturing
jobs?
Mr. Larson. Well, it is a global economy, and as I
mentioned in my statement, you know, there is a delicate
balance of a lot of different factors that contribute to
manufacturing in this country. You look at global wage rates,
you look at transportation costs, you look at our energy cost
domestically; all of those factors are in a balance of making
decisions to invest or not.
Mr. Flores. Right. Let me give you another personal
example. In Jewett, Texas, Nucor Steel has a great operation
where they recycle steel and make it into a usable product
again. Because of the boom in natural gas drilling and the
supply of natural gas, their cost per ton is down a dollar.
That makes them more competitive on the international stage.
Also means more great manufacturing jobs, not only in my
district, but in Texas, but in this country.
So let's talk about the uses of all this tax money that the
other side talks about in their all-of-the-above energy
solutions. They want to make investments. Let's go through the
status of some of the investments. How many jobs were created
by the $1.9 billion that was lost in Solyndra, Beacon Power,
Evergreen Solar, Spectra, Rod-Fisk [spelled phonetically],
Geronimo, WaterBound, Abound Solar, ECOtality, MXenergy, and
Schneider Electric? How many jobs do we still have from that
investment?
Mr. Larson. Our company did not investigate, do a study on
that, so I do not know.
Mr. Weiss. Mr. Flores, I happen to know the number.
Mr. Flores. I will get to that in a minute.
Mr. Weiss. Okay. Thank you.
Mr. Flores. Let me give you the job metrics that came from
the DOE study. It said that the Department of Energy has spent
$11 million per green job created since 2009. They spent $26
billion of taxpayer money, and created 2,298 jobs. Mr. Larson,
how long can we survive as an economy spending $11 million to
create a job?
Mr. Larson. Obviously, you want to be efficient in your
creation of jobs. That is important.
Mr. Flores. Okay. That is good. So that gets us kind of to
what the overall arching theme is: Who is better at making
investments in different things? I mean, you heard the other
side virtually saying the federal government should take full
credit for fracking. I agree that there was some basic research
dollars invested in fracking, but who took it to the next
stage? It was private industry that took it. It was private
industry that took it.
So, you know, the U.S. government can invest in basic
research, it can invest in applied research, it can invest in
venture capital, and also in private equity types of
investments. But where is it that the federal government does
the best, Mr. Larson?
Mr. Larson. In terms of?
Mr. Flores. Spending the dollars. It is in basic research.
Mr. Larson. Yeah, that is correct.
Mr. Flores. I mean, we have already seen what it has tried
to do in applied research. We have tried to see what it did in
venture capital with Solyndra and its brothers and sisters. The
reason this is important to me is that I am the largest
producer of residential solar power in Brazos County, Texas. I
did it because I could afford it. I did it because I am a
little bit kind of a geek on that type of stuff. And I can tell
you that because what it costs, net of any benefits that were
received, it will never, ever pay out for me.
So the question is, why would Congress decide that it can
be so smart that it wants to impose those costs on every
ratepayer in the country? Why would it want to impose those
costs on the taxpayers of this country? And the question is, it
should not, and I am going to stop it. Thank you. I yield back.
Chairman Ryan. Mr. McDermott.
Mr. McDermott. Thank you, Mr. Chairman. I started politics
in the last energy rush. It was called nuclear energy. I was in
the '70s in the state of Washington where the boom and bust of
the Washington public power system left its mark. We are now in
an energy rush here, and it is not surprising to hear the same
oil and gas refrains. We have been giving them breaks since
1913, and if it were not for the harmful health and
environmental effects of these fuels, it would make sense. But
we know what CO2 is doing, and the president has rightly
proposed an all-above strategy.
Now, I would not advocate that we stop all drilling or
abandon coal, but we have to mitigate the damage. I have
proposed two bills that address these: a sensible carbon tax at
the well head, or at the mine mouth; and a coal bill that would
address the environmental and health costs of transporting coal
all across the country to ship to the Chinese. But as we
explore our options for America's energy future, I hope
partisanship will not stand in the way and blind us to the
president's message, and would be willing to look at all the
options. We cannot let tradition or worse, special interests,
dictate our interests.
Solar energy, we have heard it kicked around here, I am
sorry Mr. McClintock left, and my friend is still sitting here,
but is very much in our future. It is the cleanest and most
abundant renewable energy source available. We put a slide up
and if you look at those columns, the top part, the light blue
part is the part of solar energy. That is the production, and
it is growing. In the last few years, you have had exponential
growth installed capacity by the colleague, and 2013 is on
track to have another record year.
Now, right now, we have enough solar capacity to power more
than 1.3 million average houses in this country. At the same
time, costs are falling. The average price of solar panel has
dropped 60 percent since 2011, and, not surprisingly, this
growing industry is good economics. And you will see the second
slide, in 2012, the solar industry poured more than 119,000
workers in the United States. That is up from 13 percent in
2011.
I also want to put another slide up there, and that one is
for solar reserve. I heard this business about when the sun
don't shine, there ain't no electricity from solar. That is not
true. That is a myth.
We are proving it right in Tonopah, Nevada, which is very
close to Mr. McClintock's district. Again, I am sorry he is not
here. They are producing on-demand stored solar energy. At this
plant, they have 600 workers on the ground, and have created
4,300 indirect and direct induced jobs. They generate more than
$73 million in local and state taxes in their first 20 years of
operation, and all in all, they will generate over $750 million
in private capital investments in Nevada. If growing the jobs
is not enough then let's take the world seriously here.
Consider the next slide. China has invested $34 billion in
government-backed financing for solar manufacturing, as
compared to our $1.3. If you go to Beijing, on some days, you
cannot drive your car because the air is so bad; they know what
is happening, and they are reacting to it, and in the United
States, we are sitting here sort of saying, well, we have got
this natural gas thing, and it is great. Let's go for it. But
it still produces CO2, folks. It is not clean energy. It is not
sustainable. It is not going to stop the growth of CO2 in the
atmosphere.
Now, I have a question, and I suppose, Mr. Durbin, it is
really directed to you. Will you guarantee to Ms. Schwartz and
I that there is no foreseeable detrimental health effects in
the fracking process?
Mr. Durbin. Mr. McDermott, I do not think any energy source
can make that guarantee for you. What I can guarantee for you
is that the industry has committed doing it safely and
responsibly, and working with the governments at the state
level and the federal level to make sure it is well-regulated.
Mr. McDermott. You do not want to work with this federal
government. This Congress has tried to repeal EPA about two
dozen times because they do not want to the federal looking at
the world. And the fact is, you are trying to move down to the
states where you know you can manipulate.
Mr. Durbin. That is just not fair, Mr. McDermott. We have
got federal laws that we have to follow for all of our
production, okay. So, now, we do believe that the regulation is
best done at the state level, but that does not mean there is
no federal regulation. We have still got all kinds of federal
laws that we have adhere to for every one of the wells that we
drill.
Mr. McDermott. Thank you, Mr. Chairman. We could have
another discussion on this.
Chairman Ryan. Yes. Thank you for your question. Mr.
Williams.
Mr. Williams. Yeah, Mr. Durbin. Thank you for being here.
Appreciate what you are doing. I am from Texas. Barnett Shale,
Eagle Ford, Cline are all normal names to us back home. I have
seen what the industry can do as far as creating jobs and more
taxpayers.
I, like so many of the people here, believe in all-of-the-
above approach, an all-American approach. The difference is I
believe the federal government has no role in it. I believe the
private sector will decide where we need to be the next 25, 50,
100 years, and I offer you to continue to work on that so we do
not have the Solyndras of the world fighting the fossil fuel
questions.
I guess my question would be to you, Mr. Weiss. You know a
lot about the industry. Have you ever been in the industry?
Have you ever been in the private sector? Have you ever been on
a rig?
Mr. Weiss. Yes, I have been in the private sector. No, I
have not been on a rig, but my family, like yours, is in the
auto business. I have a father-in-law and brother-in-law who
are both auto dealers.
Mr. Williams. Well, you and I are probably going to agree
on a lot of things then.
Mr. Weiss. I hope so.
Mr. Williams. You talked about the CAFE standards. Well,
the CAFE standards, if they go to where this Administration
wants them to go, will they create jobs or lose jobs?
Mr. Weiss. They will create jobs, according to studies that
have been done.
Mr. Williams. So people continue to buy more expensive
vehicles because of this?
Mr. Weiss. People will actually save money on their
vehicles, $8,000 over the life of a car, in lower gasoline
purchases.
Mr. Williams. That is fine. Another question is you have
talked about big oil. What should big oil make? You are
concerned about the cash they have in the bank and their
profits. What do you think big oil should make?
Mr. Weiss. I think every company in the United States ought
to be entitled to a fair profit. But the big five oil companies
in the last two years have made $250 billion in profits. They
are sitting on $70 billion in cash reserves. They do not need
$2.5 billion a year from taxpayers in special tax breaks.
Mr. Williams. You talked about they need to pay more taxes.
So you think their cash should go to the government rather than
R&D, research and development, and that will create more jobs?
Mr. Weiss. They are not investing in R&D, sir, for the most
part. They are investing some, a small amount, but a third of
their profits go to buying back their own stock.
Mr. Williams. Let me tell you. This is America. Profit is a
good word. Okay.
Mr. Weiss. It is. But they do not need tax breaks on top of
the huge profits, sir.
Mr. Williams. The next question I have is why, since you
are in the car business, why are electrical cars not selling
versus gas-powered vehicles, and why has the government had to
put so much subsidies to get them off the car dealers' lots?
Why is that?
Mr. Weiss. Well, first of all, the sales of the plug-in
hybrid Chevy Volt and the all-electric Nissan Leaf have
outstripped the sales of the Prius and Insight, which were the
first hybrid cars in America.
Mr. Williams. That is like saying 100 percent of nothing is
nothing.
Mr. Weiss. Well, now, there is over a million of those cars
on the road now. It is a startup technology that takes time.
Mr. Williams. But why is there government subsidy?
Mr. Weiss. Because there is a social benefit to our nation
of using less oil.
Mr. Williams. Now, the next thing I want to ask you is,
Apple makes more than big oil. What should their taxes be, and
what should their cash in the bank be?
Mr. Weiss. I am not familiar at all with the finances of
Apple, so I will let others address that.
Mr. Williams. Well, it is public. It is public, so maybe
you can research that and get back with me.
Mr. Weiss. I will be happy to.
Mr. Williams. Living in Texas, I am unaware of any jobs
created by wind, solar, bio, et cetera compared to oil and gas.
How do the jobs created by those energy sources create to what
we are creating in oil and gas?
Mr. Weiss. Well, first, I do not have the state-by-state
numbers. Texas does get over 10 percent of its electricity from
wind. It is important to note that the 1.6 million oil and gas
jobs nationwide, according to Bureau of Labor Statistics, half
of those jobs are people working in service stations.
Mr. Williams. But there is more people generated by oil and
gas than the others, I think you would agree with me there.
Mr. Weiss. Right now, there is. But, remember, half of the
1.6 million are people working in service stations.
Mr. Williams. All right. Another question. Should the
Keystone Pipeline be approved, and add 42,000 new jobs and
create more taxpayers to help reduce the deficit?
Mr. Weiss. According to the State Department, Keystone
Pipeline will create 35 permanent jobs, less than the roster on
a football team, and only 3,500 temporary jobs.
Mr. Williams. Thirty-five permanent jobs?
Mr. Weiss. Thirty-five permanent jobs, according to the
State Department. That is less than the roster of a football
team.
Mr. Williams. I see. Well, should the pipeline be built?
That was my question.
Mr. Weiss. I believe that it is all risk and no reward for
the American public, as you know, Mr. Williams.
Mr. Williams. No, I heard you. Without the success of the
energy industry, what would you think our economy would look
like?
Mr. Weiss. The energy industry is incredibly important. But
remember, there are costs to how we do business right now that
are not being paid for: in healthcare costs, in premature
deaths, in extreme weather events of a kind that hit Mr.
Pascrell's district last year.
Mr. Williams. Well, okay, you know, do you think bio, wind,
and solar could pay $15 at McDonald's? Do you think it could
create five-figure salaries to drive trucks? Do you think it
could help build roads and give charitable contributions to the
economy?
Mr. Weiss. Absolutely.
Mr. Williams. When?
Mr. Weiss. They are already doing it now. But they are new
industries. They are growing. It is like oil and gas a hundred
years ago.
Mr. Williams. I hope your family keeps selling. I yield
back.
Mr. Weiss. Thank you very much.
Chairman Ryan. I just want to correct the record. There are
53 people on a football team in the NFL, all right?
Who is next? Mr. Cicilline.
Mr. Cicilline. Thank you, Mr. Chairman. Mr. Chairman, I ask
unanimous consent that my opening statement be included as part
of the record.
Chairman Ryan. Yes.
Mr. Cicilline. Thank you.
I think the witnesses for being here, and if I can put some
of your testimony into a budget context, since this is the
Budget Committee. Some of the testimony today argues that
further domestic development of fossil fuels would generate
dramatic increase in government revenues and reduce the
deficit. For example, in his testimony today, Mr. Larson
projected that federal and state government revenues could
increase to about $111 billion by 2020 with a pro-development
strategy. But it seems to me that this projection fails to net
out the costs associated with this strategy.
The National Academy of Science has estimated total non-
climate change-related damages associated with energy
consumption from fossil fuels, and more than $120 billion
annually, mostly derived from health and wellness issues caused
by air pollution. In addition, the federal government spends
billions of dollars to ensure against risks associated with
climate change, invest in mitigation, and provide disaster
assistance to industries affected by carbon pollution-related
damages. In the last year, we have also lost revenues from
industries like agriculture, fisheries, and tourism in regions
that have been devastated by the effects of climate change.
So, I am wondering, Mr. Larson, if your forecast takes into
account these very real costs associated with fossil fuel
production, along with the potential increases in government
revenues?
Mr. Larson. Thank you for the question. So, first, let me
just characterize the nature of our study was not pro-growth;
it was on the current status quo of the current regulations as
they stand today, so it was basically the development that we
have currently seen today.
Mr. Cicilline. But my question is, in the calculation, do
you take into account the costs associated with this strategy?
Mr. Larson. We include in the calculations the regulatory
costs associated with the underlying activity that is required
to ensure that activity is done in a responsible fashion.
Mr. Cicilline. That is not my question. I am not talking
about the regulatory costs; I am talking about the impact that
we know from places like the National Science Academy, the cost
on health, on public health.
Mr. Larson. So, yes. Those are externalities. Those are not
included in this. But let me just say, the number you cited the
tax revenues; that did not include the GDP impacts, or the
other contributions from the industry.
Mr. Cicilline. So, Mr. Weiss, in your estimation, if we
include healthcare costs, these externalities, the economic
damages, and the other externalities that I have just
described, would increasing our reliance on oil and gas expand
or reduce the federal budget deficit in the long term?
Mr. Weiss. Well, I would have to look at the numbers, but I
think that, certainly, externalities need to be included.
Interestingly enough, not including externalities, right now,
wind and solar power are cost-competitive with new coal-fired
or natural gas power. So the reason why there is a disparity is
that the coal plants, which are very costly in terms of health
damages, are 45 years old on average. They paid for their land.
They paid for their facility. All they are paying for is their
fuel and their labor, and so that is why there is this
disparity in cost. But for new power, it is equal, not even
including externalities. Thank you.
Mr. Cicilline. Thank you. Now, staying within the budget
context, I would like to talk for a moment about some of the
benefits that we already provide the oil and gas industry. For
example, at the first quarter of 2013, the big five oil
companies are on pace to earn a combined $120.8 billion in
profits. And as my colleague said, I do not have any problem
with people making profits, but according to the Joint
Committee on Taxation, these same five companies pocket $2.4 in
tax breaks every year. And I know, Mr. Durbin, many of your
members are smaller companies. Would you say that this subsidy
to the most profitable oil companies is the most effective use
of the taxpayer resources in order to promote your industry and
your members?
Mr. Durbin. I am glad you asked the question because there
are no subsidies. That word keeps being used, but the companies
involved, whether it is the big five, the big four, or everyone
else here.
Mr. Cicilline. I called them tax breaks.
Mr. Durbin. Well, you also used the word subsidies.
Chairman Ryan. Let the gentleman answer your question.
Mr. Durbin. Either way, these are provisions in the tax
code that are available to all taxpayers, all average
businesses. Even some of the legislation introduced earlier
this year, you have time to offset sequester, you know, cuts by
taking it out of some of the oil and gas industry. In each
case, you look at where they went into the tax code, and
whether it was Section 199, LIFO accounting, or the duel-
capacity provisions, those are available to average taxpayers,
average businesses, so it points out the fact that these are
not special breaks for the oil and gas industry. These are
widely available, and in the case of our member companies that
are doing the natural gas production, the cost recovery is what
is so critical to maintaining our ability to keep reinvesting
in this country, creating those jobs, bringing cleaner energy.
Mr. Cicilline. Well, I would like to close, Mr. Chairman,
by saying the Budget Committee is responsible for examining the
impact of energy policy, and it would have on a wide range of
issues, and before we focus exclusively on expanding the fossil
fuel industry, we should evaluate the real cost of carbon
pollution, wasteful tax subsidies, and unused public land.
Chairman Ryan. Gentleman's time has expired. Mr. Lankford.
Mr. Lankford. Thank you. I need to just mention a couple
things. It is the benefit of being here through a lot of the
questions.
The thought of the Keystone Pipeline creating 35 jobs or
35,000 temporary jobs does not connect with the people in
Seminole County where the southern part of the Keystone
Pipeline is already under construction in my district. And I
can take you to the restaurants, to the little Western wear
store, to one business after another that is seen incredible
impact of that, and the thought that you are going to have a
2,500-mile pipeline overseen by 35 people managed on the line,
cutting trees, dealing with all the issues you have to do on
managing the line, inspecting it, running the pig through; that
you can do that with 35 people begs reality. And so there are
issues that are there in the middle of all this. Also, the
comment about the fact that energy companies are not doing a
lot of R&D, they are doing a miniscule amount; Mr. Durbin, for
the energy companies, how much R&D are they doing?
Mr. Durbin. I do not have a specific number for you, but
the oil and natural gas industry, for capital expenditures here
in the U.S., larger than any other industry out there.
Mr. Lankford. Right. The last number that I saw is that the
private oil and gas companies are doing 10 times the R&D on
renewable fuels than what the federal government is, yet the
federal government is the one that is always standing up saying
they are doing all the research on it, but the majority of that
research is actually being done by energy companies.
And also, this ongoing conversation that is happened today
that is a comparison of ``we do not get enough government
revenue in this'' overlooks the reality that the American
people's revenue is what we are after. This sense that we
cannot get enough federal tax dollars in from this, and so we
should not do this, I think we should first look and say, the
people in our districts all across America, will they benefit
from this? Is energy less expensive for them? Will this help
them afford gas? Will this help them afford groceries? Is this
better for them and for their children long term? Those are
questions that have to be answered as we go through this.
I am also astounded by the amount of conversation that has
happened through the course of the day today that I want to be
able to come back on. In 1979, Jimmy Carter, in his famous
malaise speech, said we have got to get our nation off of oil
and get to more coal usage. And so he made this big shift to
saying we have got to use more coal. We have got to get off
natural gas because we are running out of natural gas, so we
can do that. He also, during that speech, promised that by the
year 2000, with the policies that were set in place, by the
year 2000, 20 percent of America's electricity would come from
solar power. Mr. Larson, do you happen to know the percentage
of America, of our energy, that comes from solar power at this
point?
Mr. Larson. No, I do not have that number off the top of my
head.
Mr. Lankford. Mr. Weiss?
Mr. Weiss. It is a little bit less than 1 percent, but
remember, those policies were extinguished in 1981 with the
next administration. So it is unfair to hold his speech to that
standard.
Mr. Lankford. Well, I would be glad to be able to extend
out his policies and to be able to show you all the details on
that. It is not the issue of the policies; it is the
technology. So to say if we had dumped more federal dollars in
in 1981 that this technology would have come from the private
sector, we are in the same boat right now. We are in a
situation where I am not opposed to the use of all different
types of fuels.
Mr. Weiss. Well, Iowa gets 20 percent of its electricity
from wind.
Mr. Lankford. That would be great. How many acres would it
take of solar and wind to get 20 percent of New York City's
power from solar and wind?
Mr. Weiss. I have not looked at that, but, you know, we
have got to also have transmission. That is important, too.
Mr. Lankford. Mr. Durbin, do you know how many acres it
would take to be able to do 20 percent of New York City?
Mr. Durbin. I do not know the number.
Mr. Lankford. Do you know how many acres it takes of solar
or wind to be able to offset one natural gas power plant in the
small scale?
Mr. Durbin. It is significant, and that is the issue.
Mr. Lankford. It is about 20,000 acres. About 20,000 acres
are needed to be able to replace one small natural gas power
plant, and if you put a wind or a solar facility for gathering
electricity, you also have to do a natural gas facility, or a
coal facility, or something else. So you are not really
replacing, you are just adding to it. You just took 20,000
acres of American land offline to do that. So this
consideration of, you know, what do we do, one or the other?
You also have to take in the reality of what do you do for land
usage in the days ahead. How many acres do you really want to
take offline on this?
Let me ask you a question as well. Mr. Durbin, what is your
thought about exporting of natural gas?
Mr. Durbin. Well, I think it is a great question, and the
fact that we now have such an abundance of natural gas here is
the only reason we can even have the discussion about whether
or not we should be exporting LNG. And I think there is no
question we should be exporting LNG. As I mentioned in my
testimony, it is a good sign that DOE has now approved two
permits for export facilities. Our preference is, you know,
approve all of them that meet the criteria. Now let the market
figure it out how many are going to be built. And let's provide
this as another outlet to help us with balance of trade and
creating jobs here, both for the facilities themselves, for the
production, provides greater certainty to the producers
themselves. So I think we stand in a very strong position to
be, you know, a global natural gas, you know, provider,
especially to our allies.
Mr. Lankford. Thank you. I yield back.
Chairman Ryan. Thank you. Mr. Huffman?
Mr. Huffman. Thank you, Mr. Chairman. I have waited around
here not because I have any searing probative questions of the
witnesses, but rather to express a little bit of dismay as a
freshman member of Congress and of this Committee. The
testimony that we have heard, the statements that we have heard
today are very familiar to me. In fact, it is deja vu over and
over and over again because I am also a member of the Natural
Resources Committee, and we have seen this theater in hearing
after hearing in that committee, where witnesses from the oil
and gas industry are brought in, and in the face of all sorts
of irrefutable fact, they talk about how there are all these
problems with this Administration's energy policy that are
holding back growth.
When we actually look at the fact, and hear from people
like CRS that have used the right baselines and benchmarks, we
know irrefutably that production is up, that times, frankly, in
this industry have never been better. Profits are up. We are on
the verge of becoming an energy net exporter for the first time
in a generation because of the policies that we have had in
place under this Administration. And yet we continue to have
these pep rallies for the oil and gas industry while real
problems are simply, for some reason, off the table. We do not
even have a conference committee so we can move forward and try
to negotiate a federal budget, but we are here to have a pep
rally for the oil and gas industry who is experiencing record
profits.
We have got student loan interest rates about to double in
less than a week, but we are not talking about that, and the
overhang of that rising student loan indebtedness on our
economy. We are talking about something that has the public
leases that might be made available would have a tangential, at
best, effect on our economy because we already have all sorts
of public leases that are not even being used under the
policies of this Administration. We are not talking about any
number of things like the sequester and the people that are
actually suffering. We are here to talk about folks who are
experiencing record profits.
So I guess I just want to express dismay as a member of
Congress who would like to see this body solving problems
instead of rehashing these type of pep rallies for highly-
profitable industries that we have seen in the Natural
Resources Committee. We will go on this week to have a similar
experience with a bill to expand oil and gas drilling off our
coast and in the Arctic that has no chance of becoming law, and
in the face of all that theater, there are real problems that
we need to be solving, we need to be working together.
And I just want to express my hope that the next time we
come together, we might be able to talk about something like
the budget. We might be able to have conferees that can
actually go to work on getting things done. We might be able to
talk about solutions to the student loan indebtedness problem,
or maybe even the real costs that some of our failed energy
policies are foisting on the federal government, such as the
fact that we are experiencing more severe weather incidents
that have costs of greater than a billion dollars than ever
before, and the federal share of picking up the tab for that is
rising very dramatically. We do not ever seem to talk about
things like that.
So I would invite any of the witnesses who perhaps want to
speak about the cost of a failed climate policy and an energy
policy that has swung too far in the direction of carbon
emissions and fossil fuels.
Mr. Weiss. Thank you, Mr. Huffman. In the last two years,
the United States has experienced 25 extreme weather events
that each caused at least $1 billion worth of damages for a
total price tag of $188 billion, and that also includes 1,100
fatalities. During this time, the federal government spent $136
billion in disaster relief and recovery. Meanwhile, we spent
only $22 billion, or about $1 for every six for recovery, to
help make communities more secure from future extreme weather
events. So it has a huge impact both on our economy and on the
federal budget.
Mr. Huffman. Thank you. I yield back.
Chairman Ryan. Thank you. Mr. Rokita?
Mr. Rokita. I thank the Chairman. I thank the witnesses for
coming today. It has been very educational. I appreciate it.
One of the programs that I have started in my office is called
Red Tape Rollback, and it is my commitment to focus on what I
see as the second Constitutional duty of Congress, equally
important to passing laws, and that is to oversight the
executive branch, and particularly in terms of regulations. So
this Red Tape Rollback program allows me to account to my
voters and taxpayers for what we are doing in that regard.
And one company in particular comes to mind during this
discussion. It is called Buzzi Unicem USA. It is in
Greencastle, Indiana, and they are a cement plant. And they
burn probably 100,000 tons of coal per year, and in doing so,
create something called fly ash. Now fly ash is valuable. They
reuse it. Yet the EPA has recently started hearings to regulate
fly ash. You know, if the regulation is carried out, this would
cause this company to have to ship this fly ash out, which is
inherently less safe than if they burned it and reused it
safely within the plant.
So this is expensive. It costs jobs, it makes electricity
more expensive. So to Mr. Durbin and Mr. Larson, I would ask,
and I know at least one of you is an expert in natural gas, but
what other regulations are out there that come to mind that are
hurting jobs and costing more, making this cost more for
energy? Mr. Durbin?
Mr. Durbin. Well, Mr. Rokita, not to cite specific
regulations.
Mr. Rokita. No, I would like you to, if you know of any.
Mr. Durbin. Well, but, and I will have to play a little bit
of the new person card, having just started at ANGA in the last
two months, but, again, our members are directly involved in
the productions, in the exploration of productions, you know,
both on public lands and private lands. So, you know, clearly,
they have been very focused on BLM rules with regard to the
hydraulic fracturing that are still, you know, being proposed,
and as we have talked about, you know, earlier, just some of
the permitting opportunities for us to streamline that
permitting process. So, I mean, that is where I would put it.
Mr. Rokita. Okay. And then, now, your testimony does talk
about that, but would you mind getting more specific with me as
you get more comfortable with the job, and reply in writing so
I can work on some of these?
Mr. Durbin. I'd be happy to. Sure.
Mr. Rokita. Thank you. Mr. Larson, do you have anything to
add?
Mr. Larson. No, I think as our study looked at, we
basically looked at sort of the processes that they have
currently have unfolded, and we feel that with the current
regulatory system that is in place, you know, the opportunities
that we see now are being managed responsibly and can unfold in
that path. So I could not point to any specific regulations at
this time that I feel would need to change.
Mr. Rokita. Mr. Larson, sticking with you, as you may know,
the recent city report estimated that increased energy
production and the associated benefits will increase real GDP
from 2 to 3.3 percent by 2020, above what would have otherwise
been the case over the same period. Familiar?
Mr. Larson. Yes.
Mr. Rokita. Do you have any estimates on how increased
production will affect GDP?
Mr. Larson. Yes, our estimates are in a similar range, so
we are seeing a similar impact to GDP. You know, the
interesting thing will be really looking at how the trade will
unflow, and how much that will impact GDP. Obviously, GDP net
trade and imports are a key component of that GDP number, so as
we looked at it, we sort of looked at a very similar number by
2020, and a lot of that will be driven by both the domestic
manufacturing resurgence and our trade positions that we will
enjoy.
Mr. Rokita. Okay, I appreciate it. I yield back.
Chairman Ryan. Mr. Woodall?
Mr. Woodall. Thank you, Mr. Chairman. I appreciate it. Mr.
Weiss, it was actually your testimony earlier that brought me
back to the hearing today, and I appreciate it.
Mr. Weiss. I am glad to hear.
Mr. Woodall. If you are wondering if you had an impact
today, you absolutely did on me. A couple of things. I noticed
in your testimony that you said between 2008 and 2012, non-
hydrorenewable energy resources doubled in that period of time.
Mr. Weiss. Correct.
Mr. Woodall. My recollection is that our hydro resources,
though, dwarf all of those other renewables combined.
Mr. Weiss. Yes. Right now renewables are, I think, slightly
more than 4 or 5 percent of our total electricity generation.
Hydro, I believe, is about 8 or 9 percent of our electricity
generation.
Mr. Woodall. And do you know how much our hydrogeneration
capability grew over that same period of time?
Mr. Weiss. I am not under oath, so I will say I believe it
was static, but I would have to check.
Chairman Ryan. We can swear you in if you'd like.
Mr. Weiss. I am sorry? No, that is okay.
Chairman Ryan. All right.
Mr. Woodall. I believe it was static also.
Mr. Weiss. Yes. Although the president, you know,
yesterday, I believe, in his plan proposed to increase
hydroelectric generation from existing dams.
Mr. Woodall. From existing dams?
Mr. Weiss. That is correct.
Mr. Woodall. I think one of my great frustrations, I am,
you know, a conservative Republican from the deep south. Nobody
plays outside more than I do, and I am not embarrassed to talk
to folks about environmental protection issues because, again,
no one is more interested in protecting the Chattahoochee
National Recreation Area than those of us who live and play
along the Chattahoochee National Recreation Area. Again, my
recollection is we are a net energy importer today, still
bringing in oil from around the globe. Thinking about our
collective concern about climate change, are you aware of any
nation from who we are importing oil that does a better job of
environmental protection than we do here in the States?
Mr. Weiss. Well, I do not believe so, because the three
biggest importers are Canada, Mexico, and Saudi Arabia, and I
believe that we have a better regime in many ways, although
Canada has stricter power plant rules, and I believe they are
phasing out their coal-fired power plants in Canada. So I would
have to say Canada does in some areas.
Mr. Woodall. So when it comes to where we are going to
develop new exploration, if we care about protecting the earth
together, it seems to make sense that we would do more
exploration, more production here, North America, the U.S. and
Canada, so that we would be less dependent on folks that we
know do not do it in as an environmentally-sensitive way as we
do, but when I read through the testimony, I do not see your
support for doing those things, again, that we can agree we do
better than anybody else does.
What I found in two and a half years in Congress is we tend
to focus on those things that divide us. I have always said,
``Get me to energy independence, and I will talk about whatever
mix of energy you want to do, but until we get to energy
independence, I know I am importing it from people who care
less about the planet than I do.'' Why can we not get together
on doing that production here that we know will do it in an
environmentally-sensitive way up until we get to that energy
independence threshold?
Mr. Weiss. You know, I totally agree with you, Mr. Woodall,
and, in fact, I think we ought to be able to agree that, let's
develop our oil resources in the Gulf of Mexico in places that
are already open where 70 percent of the leases that are held
by oil companies are not being developed. Well, let's have, as
Mr. Markey has proposed, a ``use it or lose it'' policy. Let's
have them either, you know, they get the leases, you know, do
their exploration to see if there are resources there, have
them develop them. If not, they lose the leases.
Mr. Woodall. And tell me about that. Again, for folks who
agree on the need to protect the planet, why is it more
desirable to encourage BP to develop in this currently
undeveloped lease lot than to develop in this as yet unleased
lot? If it is going to be new development in either case, why
would we not leave it to oil and gas professionals to develop
in whatever the areas there are where they believe those fields
will be most productive?
Mr. Weiss. Well, the good news is, it is like really
setting in the banks, it is because that is where the oil is.
You know, the Department of Energy said the vast amount, I
believe it is about three-quarters, a little bit less, of our
offshore oil resources are already open for development, and
companies already have leases on them, but they are not
developing them. Let's get them to develop them, or give back
the leases so somebody else can.
Mr. Woodall. But allowing them to lease more areas for more
development disadvantages the environment how?
Mr. Weiss. Because places, like in the bill that is going
to be considered on the floor of the House, is going to open up
development into very economically-sensitive areas, and areas,
for example, off the coast of Virginia where we also have a
national security interest in being able to make sure that our
ships from the Norfolk Naval Yard are able to do their military
exercises and whatnot. So let's focus where the development
already is.
Chairman Ryan. Ms. Blackburn.
Mrs. Blackburn. Thank you, Mr. Chairman. I thought it was
interesting. Mr. Huffman talked about having a pep rally. I
think that some of us need to be having a pep rally for the
American worker, and for American jobs, and for American energy
independence around this place. I do not understand this
negative attitude that some people bring to these Committee
hearings. Good Lord, have mercy.
As vice chair of the Energy and Commerce Committee, I look
at the issues you are dealing with, and I have a couple of
specific questions I want to get answered and on the books. But
Mr. Weiss, I am going to come to you. Mr. Markey is supporting
the use it or lose it policy. You know, a lot of people could
not activate into those leases because of lawsuits. Would you
favor doing away with environmentalists being able to throw
these lawsuits on those that are trying to do exploration work
that have these leases?
Mr. Weiss. Absolutely not, because these are waters that
belong to all Americans, not just those who lease for the
resources underneath it.
Mrs. Blackburn. Resources do belong to all Americans. You
are exactly right. So what ties up the hands of so many of
these oil companies is the fact that you have got these
environmentalists who go out here, and they sue, sue, sue, sue,
sue to get what they want, to slow progress, and to cause the
expenditures of hundreds of thousands of dollars in fighting
these lawsuits over years and years and years. So, therefore,
it is not something that could be done in an expedient or an
affordable manner.
Mr. Durbin, has energy production increased on federal land
under this Administration or not?
Mr. Durbin. Well, again, as the Chairman pointed out in his
opening statement, we have seen production go down on federal
lands during this Administration.
Mrs. Blackburn. Okay, I think that it has gone down by
about 6 percent; in natural gas production, it has declined
about 21 percent. Is that correct?
Mr. Durbin [affirmative].
Mrs. Blackburn. Okay. Mr. Weiss, did you have something you
wanted to add?
Mr. Weiss. Yes, if you do not mind. Thank you. That is not
correct. According to the Energy Information Administration,
oil and gas production from offshore and public lands is higher
in all four years of this Administration.
Mrs. Blackburn. That was not my question. It was federal
land production.
Mr. Weiss. That is what I said. Federal lands and waters.
Mrs. Blackburn. Federal lands.
Mr. Weiss. Oh, federal lands only? It has also been higher
than the previous administration. I would be happy to submit
this for the record if you would like.
Mrs. Blackburn. I think that you should submit it to the
record because what we have is that it has declined 6 percent,
and that natural gas has declined 21 percent. And then let's
talk about private land, what the production has done on
private land under these policies.
Mr. Durbin. Well, again, as we discussed earlier in the
hearing, I think that, you know, we have seen private and state
land production increase significantly, and that is, again, not
only the resource being there, but the certainty of the
regulatory process and the streamlined permitting that allows
the industry to, you know, to get in and produce these lands.
Mrs. Blackburn. Okay, thank you.
Mr. Larson. It is up 36 percent on non-federal lands.
Mrs. Blackburn. On non-federal lands?
Mr. Larson. That is correct.
Mrs. Blackburn. Mr. Larson, one of the things that we hear
at Energy and Commerce in the Commerce Manufacturing and Trade
Committee is people who are offshore in manufacturing or have
had to offshore would like to bring that back on shore. They
are concerned about IP protections or lack thereof in certain
components of the world, and they would love to come back with
that. So talk to me a little bit about natural gas prices and
the impact that that is having on domestic manufacturing, what
you are seeing there.
Mr. Larson. Yes. So domestic natural gas prices, basically,
you could look at them as roughly a third, on average, of our
global competitors, and so it is creating a strong resurgence
in manufacturing, and as you point out, there are a lot of
different reasons right now behind this. I would characterize
what is going on domestically with our natural gas prices as a
necessary but not sufficient component to onshoring. It is
something that if you look at the various components of a
desire to protect IP, desire to shorten supply chains, a desire
to have production near end markets so that you can speed your
research and development, and you look at sort of tax
regulations and other factors as well as energy, all of those
combined have sort of developed in a way now that with this
energy opportunity and lower costs, it is really contributing
this now breakeven point where you are seeing onshoring return.
And we do see a significant increase in the industrial
production, particularly in those energy-intensive industries,
the chemicals, the petrochemicals, the downstreams. And so
those will really be the forerunners of this manufacturing
renaissance in this country.
Mrs. Blackburn. Thank you. Mr. Chairman, I yield back.
Chairman Ryan. Thank you. Dr. Price. Oh, yeah, that is
right. Ms. Walorski.
Mrs. Walorski. Thank you, Mr. Chairman. Thank you,
gentlemen, for your remarks today. My question kind of goes
back to what the Chairman was asking when we were talking about
manufacturing jobs in places in the Midwest. I am from Indiana,
and coal plants in Indiana are the heart of Indiana's economy;
provides almost 90 percent of Indiana's electricity. Almost 30
percent of Indiana's GDP is from manufacturing. This is
dependent upon coal-fire/electric generation. So when we talk
about jobs in the state of Indiana, we are right smack dab in
that situation. I am talking about coal, primarily coal.
So based upon what the president talked about yesterday,
what technology is there that is in place today to allow coal
plants to keep operating while meeting new emission standards
that will be mandated by the president's new energy proposal?
Anybody? Go ahead.
Mr. Weiss. Well, first, I just want to say that my wife is
an alumni of Indiana University.
Mrs. Walorski. All right, she is a Hoosier.
Mr. Weiss. She is a Hoosier and I am a Wolverine, so
sometimes we battle during basketball season.
Mrs. Walorski. That is great conversation.
Mr. Weiss. But in any event, the technologies that exist
today that could help companies reduce their emissions is
energy efficiency because some utilities, like Duke Energy, are
helping their customers use less electricity, which, in fact,
reduces emissions. So that is existing technologies today that
could help them reduce their carbon pollution.
In addition, we have, in the past, supported investments in
carbon capture and storage technology that would help companies
burn coal 85 to 90 percent cleaner, but, unfortunately, they
are very expensive. You know, the Waxman-Markey Bill that
passed four years ago today, as someone pointed out, would have
included billions of dollars to help subsidize the development
and commercialization of carbon capture and storage technology
for big coal plants, but, unfortunately, because that did not
become law, there has been really no money besides what was in
the Recovery Act that has helped subsidized that.
Mrs. Walorski. Let me ask you this. In the state of
Indiana, we have coal gasification. And coal gasification, at
the time, was state of the art, breakthrough technology, and
still, we use it today. Do you see coal gasification being able
to pass the test of the new emissions in the Obama plan?
Mr. Weiss. Well, the Obama plan basically does not exist
yet. What he did yesterday was say, ``We are going to start to
develop that plan.'' But yes, coal gasification can have a
role. In addition, there is a technology called co-firing,
where you take some biomass, twigs, leaves, and all of that
stuff, and add it to your coal, and that will also reduce
emissions. So yes, there is an array of technologies. One other
technology that exists that will help reduce emissions is
investments in solar and wind electricity because that is
another technology that exists today. It is cost-competitive
right now compared to new coal or natural gas plants, and it
will also help reduce emissions.
Mrs. Walorski. Well, my concern still, though, is jobs
because these are gigantic; when you are speaking of these
costs, these are gigantic costs. And when we talk about these
kinds of costs in a place like Indiana, we are talking about
huge jobs and a huge degradation in jobs. We are also talking
about, we have one of the lowest utility rates in the nation,
which has helped us become, really, the fifth state in this
entire nation on job creation.
So my concern is back to this issue of overregulation. In a
state that is a manufacturing state, in a place where you are
driven by coal, how in the world does a state like ours survive
with an overreaching hand into regulation? Because, I mean,
from anybody's perspective, have not we seen, and have not we
seen from what you guys have studied, that overregulation
continues to decrease jobs in places like manufacturing?
Mr. Weiss. Actually, it has not. The Bureau of Labor
Statistics looks at this every quarter, and the last quarter
that they have data for found that for the 400,000 new
unemployment claims that were filed, I believe 726, or less
than two-tenths of 1 percent, were due to government regulation
of any sort: environmental, health.
Mrs. Walorski. Sorry to interrupt, but I would say those
two-tenths of 1 percent have been streaming into my office, and
they are all from the state of Indiana, because I have heard
all of them. Mr. Durbin?
Mr. Durbin. Well, again, I am obviously here on behalf of
the natural gas industry and have nothing to say against the
coal-powered plants, and I understand and acknowledge the need
for us to have a diverse fuel portfolio for power generation.
But I will say that, you know, natural gas does provide another
opportunity here to have not only an abundant, affordable fuel
source that is going to be able to provide, you know, the power
for all of that manufacturing in Indiana, but also with reduced
emissions.
Mrs. Walorski. Yeah, I appreciate it. Mr. Larson?
Mr. Larson. I think we have not looked at the proposals
around the coal, obviously, but I think there are two important
points I would just illuminate on. The first is, obviously, any
time you take capital and retire it, there is a loss to society
from the early retirement of capital that has to be quantified
and evaluated. That is the first.
The second thing is there is clearly a value in power
generation diversity, and when you look the ability to commit
to different fuel switching as hedges against price shocks is a
very important component of our power gen capability that we
have inherited today, and it is an important thing to evaluate
in any policy that would change that diversity.
Mrs. Walorski. Thank you. Thank you, Mr. Chairman.
Chairman Ryan. Thank you. Dr. Price.
Mr. Price. Thank you, Mr. Chairman, and I want to thank you
for holding this hearing. I think it is hugely important. This
nation has been blessed with remarkable resources, and the fact
that policymakers, some policymakers in this town, do not want
to utilize those in a responsible, environmentally-sensitive
way to the benefit of all citizens is really astounding.
Our friends on the other side talk about them having an
all-of-the-above energy plan, and the president having an all
of the above energy plan, and that may be technically accurate.
The problem is it is none of the below. Nothing do they desire
below the ground, and so the challenges that we have got can be
met with the remarkable resources that we have, but we are not
being able to utilize them.
I think it was Mr. Rokita who asked you, Mr. Weiss, about
why, maybe it was Mr. Woodall, why not open up new offshore
leases, and he says, ``Well, the reason that the current leases
ought to be utilized because that is where the oil is.'' Mr.
Weiss, do you have any idea how much production, energy
production, oil production, was in South Dakota 15 years ago?
Mr. Weiss. No, but I do know that 20 percent of their
electricity now is from wind energy.
Mr. Price. That was not the question. That is all right,
though.
Mr. Weiss. Well, you asked me about energy production in
South Dakota, and that wind energy electricity did not exist.
Mr. Price. Mr. Weiss.
Mr. Weiss. Sorry. Sorry. Go ahead.
Mr. Price. The jobs that have been created in South Dakota,
the remarkable ability of that state to turn around its
economy, it has been phenomenal, phenomenal with the use of
resources. The fact of the matter is we did not know 15 years
ago what kind of energy resources there were in South Dakota,
in North Dakota. And the fact is that we do not know what is
off the shore either. But there are people who do, and they say
that there are great opportunities there to be able to utilize
the remarkable resources that are offshore in an
environmentally-sensitive way, in a positive way, to not only
bring about energy production, but to create jobs and to
improve the economy.
Can you pull up the slide, because I want to talk very
briefly about the Keystone Pipeline because I think the number
of jobs that it would create and the amount of revenue that it
would bring in to the federal government is remarkable. These
are current pipelines in the United States, oil pipelines
underground. Mr. Weiss, do you know which one is the Keystone
Pipeline?
Mr. Weiss. Well, it is hard to see because my eyes are
getting bad, but I believe it would show the southern leg from
Cushing, Oklahoma down to the Gulf Coast, which is under
construction. The northern leg is not under construction, so it
ought not be on that.
Mr. Price. The fact of the matter is that Keystone does not
show up there.
Mr. Weiss. Right, that is what I said.
Mr. Price. Yeah, because it had not been built yet. But the
important point of this slide is that look at the number of
pipelines that are under land right now. We have got an
opportunity to gain significant increase in job creations,
significant increase in the ability to refine North American
fuel, and we are letting it stand by the wayside, not because,
not because there is an environmental problem. There is a
political problem. In fact, Keystone was accepted all the way
up every single chain of the policy side in this Administration
until it got to the political question, and then they said,
``No, we cannot do that.'' And the nation understands that. The
nation understands that this Administration is blocking job
creation and blocking energy production in this country for
political reasons; not policy reasons, political reasons.
Mr. Larson, I am amazed by those who do not talk about the
economics of this situation as well, right now with offshore
energy production being significantly limited. And there is a
recent study that, I believe by Wood Mackenzie, that says that
the policies that promote domestic development of oil and
natural gas including access to offshore federal areas that
have been kept off-limits could create 1 million new jobs and
generate $127 billion in revenue to the federal government. You
talked about GDP. Would you touch on the revenue creation for
the federal government if we were to open up these areas?
Mr. Larson. We have not looked at all these offshore
potentials. I will say that we did a study that looked at the
Gulf of Mexico in particular, and found just the Gulf of Mexico
in what is currently under development down there, it is
contributing about 560,000 jobs and $70 billion a year in
annual revenue. So, you know, that just gives you an idea of
the scale of what the offshore opportunity looks like from an
economic context, but we have not looked at the other areas
that are under question for opening up.
Mr. Price. And the economic benefit to the United States of
increasing domestic energy production, fossil fuels, as long as
it is done in an environmentally-sensitive way is real,
correct?
Mr. Larson. It is. I mean, so you can look at where we
were, the roughly 1.8 million barrels in unconventional oil
that we could develop last year, probably about $70 billion in
offset for imported oil. So that drops right down to your
bottom line of your GDP, and, obviously, it is allowing us to
meet domestic demand and fuel domestic jobs to meet that
demand.
Mr. Price. Thanks, Mr. Chairman. Makes sense for workers,
makes sense for the government.
Chairman Ryan. Thank you. This is very helpful. I
appreciate the numbers we have been presented to the Committee.
It is very illustrative of what the potential is. We need some
more perspective like this because the CBO has been a little
low on the numbers, from what we can tell. I appreciate the
perspective from the industry, and I appreciate the perspective
from your community as well, Mr. Weiss. So thank you very much,
everybody, for this hearing. Hearing is adjourned.
Mr. Weiss. Thank you for having me.
[The prepared statement of Mr. Cicilline follows:]
Prepared Statement of Hon. David N. Cicilline, a Representative in
Congress From the State of Rhode Island
Thank you Mr. Chairman. First, I want to thank our witnesses for
being here today to discuss a wide range of topics related to our
nation's energy policy.
If I can, I'd like to put some of your testimony into a budget
context. Some of the testimony today argues that further domestic
development of fossil fuels would generate dramatic increases in
government revenues and reduce the deficit. For example, in his
testimony, Mr. Larson projected that federal and state government
revenues could increase to about $111 billion by 2020 with a ``pro-
development strategy''.
On the surface, this looks like a potential way we could shrink our
nation's budget deficit. But I wonder if this projection is really
taking into account the billions of dollars in costs associated with
carbon pollution and the already tremendous subsidies we provide to
fossil fuel companies both through our tax code and access to our
public lands.
After all, the Budget Committee is responsible for examining the
impact any energy policy would have on a wide range of costs, across
the federal government.
First, it may be useful to discuss some of those hidden, external
costs that result from a singular focus on increasing fossil fuel
production. For example, in 2010, the National Academy of Sciences
estimated total non-climate change related damages associated with
energy consumption at more than $120 billion in one year. And this is
non-climate change related, meaning it is mostly the result of health
and wellness costs.
We know air pollution leads to higher rates of mortality and
respiratory problems. As a result, the federal government oftentimes
picks up the tab for hospital admissions, increased expenditures on
medications and many other health costs associated with carbon
pollution.
In addition, the economic damages associated with fossil fuel
emissions and the resulting changes in our climate are far-reaching.
Carbon pollution has imposed real costs on many natural industries,
including our nation's fisheries and agricultural economy.
Damages from climate change also impact our tourism economy and the
resilience of businesses. Just ask local businesses on the Jersey Shore
still recovering from Hurricane Sandy or folks affected by the BP Oil
Spill in the Gulf of Mexico. Let's not forget that the federal
government spends billions of dollars to insure against these risks,
invest in mitigation and provide assistance to industries affected by
climate change related damages.
These are the real costs associated with a fossil fuel development
strategy. And it comes on top of the $120 billion in health care and
other non-climate change related costs.
Any honest budget projection should account for these real,
tangible costs. The numbers demonstrate that it may be worse for the
bottom-line than you seem to imply.
In addition, a constant, singular focus in Congress on expanding
our fossil fuel capabilities has led to some real waste. For example,
after the first quarter of 2013 the big five oil companies are on pace
to earn a combined $120.8 billion in profits. And yet, according to the
Joint Committee on Taxation, these same five companies pocket $2.4
billion in tax breaks every year.
In addition, last year the Department of Interior issued a report
assessing how many federal lands leased for oil and gas development
remain idle. The amount of waste is staggering. Out of 36 million acres
leased offshore, only about 10 million acres are active meaning 72% of
these acres are fully idle. Onshore, an additional 20.8 million acres,
or 56% of leased acres, are not active. Moreover, approximately 7,000
approved permits have not yet been drilled. These lands are an
important, tangible asset.
In the end, focusing so intensely on promoting additional
development of fossil fuels has prevented us from diligently monitoring
the investments both in terms of land and tax subsidies that we are
providing the oil and gas industry. And it is preventing us from truly
evaluating the costs associated with carbon pollution.
I hope, today, we can assess the budgetary impact of further oil
and gas production thoughtfully, honestly, and with a real
understanding of the math and facts on the ground. If we do that, I
think we will all come to the conclusion this is a bad deal.
[Additional submissions of Mr. Van Hollen follow:]
June 20, 2013.
congressional budget office cost estimate
H.R. 2231: Offshore Energy and Jobs Act
As ordered reported by the House Committee on Natural Resources on June
12, 2013
summary
H.R. 2231 would revise existing laws and policies regarding the
development of oil and gas resources on the Outer Continental Shelf
(OCS). It would direct the Department of the Interior (DOI) to adopt a
new leasing plan for the 2015-2020 period, require auctions of leases
in certain areas in the Atlantic and Pacific OCS, and reduce the
department's discretion regarding which regions would be included in
future lease sales. Under this bill, some of the offsetting receipts
from leases issued in newly available areas would be spent, without
further appropriation, to make payments to states. Finally, H.R. 2231
would direct DOI to collect fees from certain firms that operate in the
OCS and to implement various administrative reforms.
CBO estimates that enacting H.R. 2231 would reduce net direct
spending by $1.5 billion over the 2014-2023 period. Pay-as-you-go
procedures apply because enacting the legislation would reduce direct
spending. In addition, CBO estimates that implementing the bill would
cost $40 million over the 2013-2018 period, assuming appropriation of
the necessary amounts. Enacting this bill would not affect revenues.
H.R. 2231 contains no intergovernmental or private-sector mandates
as defined in the Unfunded Mandates Reform Act (UMRA) and would impose
no costs on state, local, or tribal governments.
estimated cost to the federal government
The estimated budgetary impact of H.R. 2231 is shown in the
following table. The costs of this legislation fall within budget
functions 950 (undistributed offsetting receipts) and 300 (natural
resources and the environment).
[By Fiscal Year, in Millions of Dollars]
----------------------------------------------------------------------------------------------------------------
2014 2015 2016 2017 2018 2014-2018
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING\a\
Estimated Budget Authority.............................. -55 -70 -90 -265 -190 -670
Estimated Outlays....................................... -55 -70 -90 -265 -190 -670
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level........................... 5 15 15 5 3 43
Estimated Outlays....................................... 1 14 15 7 3 40
----------------------------------------------------------------------------------------------------------------
a. CBO estimates that enacting H.R. 2231 would reduce direct spending by $1,515 million over the 2014-2023
period.
basis of estimate
For this estimate, CBO assumes that H.R. 2231 will be enacted near
the beginning of fiscal year 2014 and that the necessary amounts will
be appropriated for each fiscal year.
Direct Spending. CBO estimates that enacting H.R. 2231 would reduce
net direct spending by $1.5 billion 2014-2023 period. That estimate
reflects the budgetary effects of provisions that would change the
terms and procedures governing the OCS leasing program, authorize
direct spending for payments to states, and require firms to pay annual
fees for federal inspections of their operations in the OCS.
Payments for OCS leases and the proceeds from inspection fees would
be recorded in the budget as offsetting receipts, which are treated as
a reduction in direct spending. Because oil and gas production usually
occurs several years after a lease is issued, CBO expects that most of
the estimated increase in offsetting receipts over the next 10 years
would result from bonus bids and rental payments. Most royalty
collections associated with those leases would occur in later years.
Such estimates are subject to considerable uncertainty, however,
because the legislation would affect leasing activity in areas that
have not been available for oil and gas development for more than 25
years.\1\
---------------------------------------------------------------------------
\1\ For more information about factors affecting OCS leasing
activity, see Congressional Budget Office, Potential Budgetary Effects
of Immediately Opening Most Federal Lands to Oil and Gas Leasing,
August 2012. http://go.usa.gov/bQwH
---------------------------------------------------------------------------
OCS Leasing Activity. H.R. 2231 would revise DOI's current leasing
plan for the OCS and limit the department's future discretion in
determining where and when auctions for access to those leases should
occur. CBO estimates that implementing those changes would increase
gross offsetting receipts by $1.2 billion over the 2014-2023 period
above the amounts expected under current law.
Under current law, most OCS leasing decisions are made
administratively--in consultation with industry and states--for five-
year planning periods. H.R. 2231 would reduce that administrative
discretion by requiring DOI to auction leases for at least half of the
available acreage in areas that the government estimates to contain
certain quantities of oil or gas resources. In addition, the department
would have to conduct three specific lease sales within two years of
enactment: one off the coast of Virginia, one off the coast of South
Carolina, and another for leases in the Santa Barbara and Ventura
basins in the California OCS that could be developed by using existing
offshore facilities or from onshore drilling sites. Finally, DOI would
be required to adopt a new leasing plan for the 2015-2020 period that
would replace the current leasing plan for the 2012-2017 period.
Leasing in the Atlantic and Pacific OCS. Enacting H.R. 2231 would
primarily affect leasing activity in the Atlantic and Pacific OCS. CBO
estimates that implementing the bill would increase gross offsetting
receipts from leasing in those areas by about $1.0 billion over the
next 10 years relative to our most recent baseline estimate of receipts
under current law. This estimate of receipts attributable to the
legislation reflects CBO's expectation that such leasing would generate
proceeds of about $1.8 billion over fiscal years 2014 through 2023
under the bill.\2\ However, CBO expects a portion of that amount--$0.8
billion--will be collected under current law. CBO's baseline estimate
is less than the amount we estimate from enacting H.R. 2231 for two
reasons. First, the current leasing plan for the 2012-2017 period does
not include any auctions in the Atlantic and Pacific OCS. Second, the
probability of such leasing occurring after 2017 under current law is
uncertain because federal and state administrative policies toward
leasing change over time.
---------------------------------------------------------------------------
\2\ CBO's estimate of the receipts from leasing in the Atlantic and
Pacific OCS are roughly proportional to the bonus bids that CBO expects
will be collected over a comparable period of time for regions in the
Central and Western Gulf of Mexico and the Beaufort and Chukchi Seas in
Alaska, which are available to be leased under current law and policy.
The estimate also assumes that the pace of leasing would be consistent
with past trends for areas with undiscovered resources that are
geologically dispersed over large areas. Finally, based on the
conclusions of a 2011 report sponsored by the American Petroleum
Institute, CBO assumes that the amounts paid by bidders per barrel of
oil equivalent (BOE) for resources in the Atlantic and Pacific would be
about half the amounts expected to be paid for resources in the Arctic
National Wildlife Refuge or the Eastern Gulf of Mexico.
---------------------------------------------------------------------------
Leasing in Other OCS Regions. H.R. 2231 also would affect leasing
in areas that are temporarily unavailable because of statutory or
Presidential restrictions. The Gulf of Mexico Energy Security Act of
2006, for example, prohibits leasing of about 4.4 million acres in the
eastern and central Gulf of Mexico until June 30, 2022. In addition,
the Bristol Bay area in the North Aleutian Basin in Alaska was
withdrawn from consideration through 2017 by the President. CBO
estimates that requiring auctions after such restrictions expire would
increase gross offsetting receipts by about $0.2 billion over the 2018-
2023 period. Most of that increase is estimated to result from
additional leasing activity in the Gulf of Mexico in fiscal year 2023.
CBO estimates that enacting H.R. 2231 would have no effect on
proceeds from areas that are included in the current leasing plan for
the 2012-2017 period because DOI routinely auctions more than half of
the available acreage in those areas. Those areas include the central
and western Gulf of Mexico and the Beaufort Sea, Chukchi Sea, and Cook
Inlet in the Alaska OCS.
Receipt Sharing. H.R. 2231 would authorize certain payments to
states affected by OCS activities in areas that would be made available
for leasing by this bill and that are outside the central and western
planning areas in the Gulf of Mexico. Under H.R. 2231, the percentage
of lease payments paid to states would depend on the location and
timing of the lease sales. For example, Virginia, South Carolina, and
California would receive 37.5 percent of the gross proceeds from the
three auctions specified in the bill. Elsewhere, states would receive a
12.5 percent share of the gross proceeds from eligible leases issued
under the five-year plan that would take effect in 2015; 25 percent
from leases issued under the subsequent five-year plan; and 37.5
percent from leases issued thereafter.
CBO estimates that the receipt-sharing provisions in H.R. 2231
would increase direct spending by $0.3 billion over the 2014-2023
period. That estimate reflects CBO's expectation that such payments
would be limited to leases issued in areas that are not included in
DOI's current leasing plan for 2012-2017, such as the Atlantic and
Pacific OCS. Under this bill, funds would be disbursed to states the
year after receipts are collected.
Inspection Fees. H.R. 2231 would direct DOI to collect annual fees
to cover the cost of inspecting OCS facilities and drilling operations,
subject to certain conditions. The bill would specify the amounts due
for various types of activities and would allow DOI to adjust those
fees for inflation in future years. Amounts collected under the bill
would be deposited in a new fund in the U.S. Treasury and would be
available to DOI if appropriated in annual appropriation acts. DOI's
authority to collect the fees would expire at the end of fiscal year
2022.
Based on information from DOI, CBO estimates that collecting the
inspection fees in H.R. 2231 would increase offsetting receipts by
about $0.6 billion over the 2014-2022 period, after adjusting for
inflation. The appropriation act for fiscal year 2013 authorized DOI to
assess and collect similar inspection fees, but that authority expires
at the end of this fiscal year. For this estimate, CBO assumes that the
inspection fees authorized by H.R. 2231 would take effect in fiscal
year 2014 and extend through fiscal year 2022.
Spending Subject to Appropriation. CBO estimates that implementing
H.R. 2231 would cost about $40 million over the 2014-2018 period,
assuming appropriation of the necessary amounts. Based on spending
patterns for similar activities, CBO estimates that DOI would spend
about $32 million over the 2014-2018 period to develop a new five-year
plan and complete the environmental, geologic, and economic assessments
associated with conducting lease sales in new areas.
In addition, H.R. 2231 would establish two new executive positions
at DOI, an Under Secretary and an Assistant Secretary, who would
oversee the development of mineral resources on federal lands. The bill
also would require the agency to administer drug tests for certain
employees who do work related to DOI energy programs. Based on
information regarding the salaries for executive positions and support
staff within the federal government and the cost of providing drug
tests at other federal agencies, CBO estimates that implementing those
provisions would cost about $1 million a year over the 2014-2018
period.
Other provisions would codify organizational changes that were
implemented by DOI in 2012, subject to certain modifications. Although
the duties of the bureaus created by the bill would be similar to those
established under current law, H.R. 2231 would assign different names
to two of the three entities. Based on information from DOI on the cost
of the previous reorganization, CBO estimates that implementing those
name changes would cost a total of about $3 million over the next five
years because the agencies' websites, regulations, and administrative
personnel materials would need to be formally modified.
Finally, CBO estimates that implementing H.R. 2231 would have no
significant effect on the discretionary cost of inspecting OCS
operations over the 2014-2018 period but would change the budgetary
treatment of certain inspection fees. In recent years, the authority
for DOI to collect fees for OCS inspections was provided in annual
appropriation acts, and the proceeds were netted against the
discretionary appropriation. Under H.R. 2231, the proceeds from such
fees would be treated as a reduction in direct spending until the fee
provisions in the bill expire at end of 2022.
pay-as-you-go considerations
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting direct
spending or revenues. The net changes in outlays that are subject to
those pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2231
[As ordered reported by the House Committee on Natural Resources on June 12, 2013]
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
-------------------------------------------------------------------------------------------------------------------
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013-2018 2013-2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact...... 0 -55 -70 -90 -265 -190 -155 -155 -155 -140 -240 -670 -1,515
--------------------------------------------------------------------------------------------------------------------------------------------------------
intergovernmental and private-sector impact
H.R. 2231 contains no intergovernmental or private-sector mandates
as defined in UMRA and would impose no costs on state, local, or tribal
governments.
estimate prepared by:
Federal Costs: Kathleen Gramp (OCS leasing activities); Jeff LaFave
(DOI reorganization)
Impact on State, Local, and Tribal Governments: Melissa Merrill
Impact on the Private Sector: Amy Petz
estimate approved by:
Theresa Gullo
Deputy Assistant Director for Budget Analysis
July 11, 2013.
Hon. Chris Van Hollen, Ranking Member,
House Committee on the Budget, 210 Cannon House Office Building
Washington, DC 20515.
Dear Ranking Member Van Hollen: Thank you very much for the
opportunity to testify at the Budget Committee hearing on ``America's
Energy Revolution: A New Path to Jobs and Economic Growth'' on June
26th. I was honored to be included in this important discussion, and I
thought that the hearing was very productive.
Several committee members raised questions about domestic oil and
gas production from federal lands and waters. I would like to submit
the following information for the hearing record that addresses these
questions.
The Energy Information Administration report ``Sales of Fossil
Fuels Produced from Federal and Indian Lands, FY 2003 through FY 2012''
determined that oil production from federal lands and waters has been
higher during every year of the Obama administration compared to 2008,
the last year of the Bush administration.\1\ The average annual oil
production from federal areas is also higher under President Obama
compared to President Bush. EIA reports that from 2009-2012 oil
production from federal lands and waters averaged 648.8 million barrels
per year compared to an annual average of 623.5 million barrels from
2003-2008--a four percent increase during the current administration.
---------------------------------------------------------------------------
\1\ Energy Information Administration, ``Sales of Fossil Fuels
Produced from Federal and Indian Lands, FY 2003 through FY 2012,''
(2013), available at http://www.eia.gov/analysis/requests/federallands/
pdf/eia-federallandsales.pdf.
CRUDE OIL PRODUCTION FROM FEDERAL LANDS AND WATERS, FY 2003-FY 2012
------------------------------------------------------------------------
Crude oil & lease condensate (millions of
Year barrels)
------------------------------------------------------------------------
2003........................ 679
2004........................ 670
2005........................ 638
2006........................ 571
2007........................ 618
2008........................ 565
2009........................ 647
2010........................ 723
2011........................ 629
2012........................ 596
------------------------------------------------------------------------
Source: Energy Information Administration\2\
Although natural gas production on federal lands has been lower
under President Obama compared to President Bush, it is because newly
available shale gas resources are largely on state and private lands.
---------------------------------------------------------------------------
\2\ Ibid.
---------------------------------------------------------------------------
In 2012, Adam Sieminski, the administrator of the Energy
Information Administration, testified before the House Energy and
Commerce Committee that:
Because the shale resource basins are largely outside of the
Federal lands, so too is shale production. In this case, the geology is
working in favor of non-Federal landowners.\3\
---------------------------------------------------------------------------
\3\ Adam Sieminski, Testimony before the Subcommittee on Energy and
Power of the Committee on Energy and Commerce, August 2, 2012,
available at http://www.eia.gov/pressroom/testimonies/sieminski--
08022012.pdf.
---------------------------------------------------------------------------
Additionally, an assertion was made during the hearing that the
process for approving oil and gas permits on federal lands has become
longer. A 2013 Congressional Research Service analysis ``U.S. Crude Oil
and Natural Gas Production in Federal and Non-Federal Areas'' examined
this concern. CRS determined that the process has significantly
improved under the current administration.
In 2006 it took the BLM [Bureau of Land Management] an average of
127 days to process an APD [application for drill permit], while in
2011 it took BLM 71 days. In 2006, the industry took an average of 91
days to complete an APD, but in 2011, industry took 236 days.
Some critics of this lengthy timeframe highlight the relatively
speedy process for permit processing on private lands. However, crude
oil development on federal lands takes place in a wholly different
regulatory framework than that of oil development on private lands. * *
* a private versus federal permitting regime does not lend itself to an
`apples-to-apples' comparison.\4\
If you have any questions about this information or my testimony,
please contact me. Thank you again for the opportunity to present our
views before the House Budget Committee.
---------------------------------------------------------------------------
\4\ Marc Humphries, ``U.S. Crude Oil and Natural Gas Production in
Federal and Non-federal Areas,'' (Congressional Research Service,
2013), available at http://energycommerce.house.gov/sites/
republicans.energycommerce.house.gov/files/20130228CRSreport.pdf.
---------------------------------------------------------------------------
Sincerely,
Daniel J. Weiss,
Senior Fellow and Director of Climate Strategy.
cc: Chairman Paul Ryan; Hon. Honorable Marsha Blackburn
[Whereupon, at 12:09 p.m., the committee adjourned subject
to the call of the Chair.]