Witnesses:
Harold Hamm
CEO, Continental Resources
Daniel Ahn
Chief Commodity Economist, Citigroup
John Freeman
Managing Director, Raymond James & Associates
John Purcell
Vice President for Wind Energy, Leeco Steel, 
Daniel Weiss
Senior Fellow, Center for American Progress Action Fund
Mark Mills
Senior Fellow, Manhattan Institute
Peter Howard
President and CEO, Canadian Energy Research Institute

 

Subcommittee Members Present:
Edward Whitfield (R-KY), Subcommittee Chairman
Bobby Rush (D-IL), Subcommittee Ranking Member
John Sullivan (R-OK)
Steve Scalise (R-LA)
Pete Olson (R-TX)
David McKinley (R-WV)
Mike Pompeo (R-KS)
Morgan Griffith (R-VA)
Joe Barton (R-TX)
Kathy Castor (D-FL)
Edward Markey (D-MA)
Gene Green (D-TX)
Lois Capps (D-CA)

 

Full Committee Members Present: 
Fred Upton (R-MI), Full Committee Chairman
Henry Waxman (D-CA), Full Committee Ranking Member

 

On September 13, 2012, the House Committee on Energy and Commerce Subcommittee on Energy and Power held the 28th day of a series of hearings titled “The American Energy Initiative” to discuss the outlook for achieving North American energy independence within the decade. Due to technological advances within the industry, mainly hydraulic fracturing and horizontal drilling, North America has been the fastest growing oil and natural gas producing region of the world for the last 5 years.

 

Chairman Edward Whitfield (R-KY) opened the hearing celebrating the possibility of North American energy independence within the decade remarking, “It was not long ago that we were repeatedly told that we would have to live with declining U.S. and North American oil production.” Hesaid the geopolitical implications alone as justification for achieving energy independence through increased North American oil and gas production and stated that energy independence alone would “succeed where the economic stimulus package has failed,” and would lower the price of gas at the pump. The chairman referred to the creation of clean jobs as “wishful thinking” compared to the jobs the oil industry offers.  Whitfield lamented the President’s rejection of the Keystone XL Pipeline and called for an end to the government “crackdown” on hydraulic fracturing. 

 

In his opening statement, Ranking Member Bobby Rush (D-IL) praised the Obama Administration for their 2011 Blueprint for a Secure Energy Future which would put the nation on-track for energy independence and promote job creation through renewable energy sources, clean coal and natural gas. Rush emphasized that unlike Republican Presidential Candidate Mitt Romney’s energy plan based on the “simplistic Sarah Palin drill baby drill” mantra, the President’s proposal “endorses safe and responsible production of domestic energy sources” and considers climate change. Rush referenced  the nine percent decrease in oil production required by 2025 under the Obama Administration’s greenhouse gas and fuel economy standards and expressed his hope for “ a valid and honest” discussion of the North American energy independence. 

 

Fred Upton (R-MI), chair of the full committee, remarked that the energy revolution in the oil and gas fields “will accomplish more for the American people than Solyndra and all other federal stimulus giveaways combined” referring to the former U.S. solar panel manufacturing company that received $535 million in loan guarantees from the Department of Energy before filing for bankruptcy in 2011. He emphasized that North American energy independence will not cost the American people “a single dime”, and accused the Obama Administration of refusing to “get out of the way.” He pointed out that while President Obama was “trying to convince the Americans that Solyndra’s new solar panels would take the world by storm and create green jobs,” hydrocarbon “game changing energy breakthroughs have quietly continued to unfold in places like the Bakken Formation and other state and private lands where the federal government has little or no role.” Upton said the opportunity is at hand for “liberation” from the Organization of Petroleum Exporting Countries’ (OPEC) control, to create new jobs, and decrease the price of gas at the pump and that “this subcommittee has initiated legislation to remove the Obama Administration’s obstacles to North American energy independence” in the past. Upton declared that “we will continue to fight for increased leasing on federal lands, streamline the permitting process and we’re not going to give up on the Keystone XL pipeline.”

 

Daniel Ahn, Chief Commodities Economist for Citigroup, testified that “North America has recently become the fastest growing hydrocarbon producer and exporter in the world and this trend should accelerate to the end of the decade.” He referred to this as an “energy renaissance” caused by the decline in domestic consumption and success of new technology to unlock previously inaccessible resources. He stated that new U.S. oil and gas production could decrease the current U.S. deficit could by two thirds, strengthening the credibility of the U.S. dollar. He stated that global oil prices could fall by 15 to 20 percent. He concluded by remarking “a minor industrial revolution is in the making in the American heartland” which is testament to “the bounty of our natural resources.”

 

John Freeman, managing director for Raymond James & Associates, opened his testimony by stating that “for the first time in over 50 years, there is clear visibility on how oil independence can be achieved within a foreseeable period of time.” He described oil independence as a sustained trend, driven by the private sector, and mentioned that Congress has the potential to “play a constructive role” by supporting industry efforts. He noted that the U.S. contributed more barrels to the global oil supply than any other country between 2008 and 2011 despite the deepwater drilling moratorium in 2010 and 2011 as a result of the BP Deepwater Horizon blowout. Freemen emphasized that his team forecasts the U.S. to become the largest producer of oil in the world before the end of the decade. He expressed his concern for the “graying of the oil patch,” referring to the aging workforce in the field. The average age of a U.S. petroleum engineer is around 50 years old and the supply of young professionals is insufficient to replace them upon retirement. He asked Congress to consider ways to encourage the interest of young people in the field. He asked that Congress remove regulations which slow the process of obtaining permits, especially those pertaining to federal lands using the Keystone XL pipeline as an example of a project that was stalled by permitting. He concluded by saying “We are the largest producer of natural gas in the world, the second largest producer of coal and in the next several years we will become the largest oil producer in the world. The future has never been brighter for achieving energy independence.”  

 

In CEO of Continental Resources Harold Hamm’s testimony, based on his 45 years of experience in oil and gas exploration, he recommended Congress develop more reasonable and consistent environmental regulations, encourage the development of federal lands and provide tax relief to oil industries in order to achieve energy independence in North America. Hamm made the subcommittee aware that his company, Continental Resources, is one of the top 10 petroleum liquids producers in the U.S. and that he is an energy policy advisor to  Romney. He impressed upon the subcommittee the wealth of the resources in America by stating that there are 139.6 billion barrels of economically recoverable oil, which is sufficient to replace imports from the Persian Gulf, and 1445.3 trillion cubic feet of technically recoverable natural gas in the U.S. He noted that over the last 15 years the U.S. has transitioned from importing 60 percent of our oil to 45 percent through technological advancements which provide access to previously unattainable immobile oil and marveled that this “new technology allows us to drill two miles down, turn right, drill another two miles and hit a target the size of a lapel pin.” Hamm highlighted the creation of high paying jobs, increased tax revenues in addition to independence from foreign oil as the benefits of these technological advancements. He asked that Congress invest in the oil and gas industry and open federal lands and offshore areas for development, both of which would require a paradigm shift in the regulatory regime.

 

John Purcell, the Vice President for Wind Energy of Leeco Steel asked for the immediate extension of the Production Tax Credit (PTC) which is set to expire at the end of this year. Purcell said if the PTC is not extended, 37,000 jobs will be lost industry-wide while extension of the PTC would create tens of thousands of jobs. Purcell reiterated extension of the PTC is “crucial for regaining our nation’s leadership in new technology and innovation” and would “help secure our nation’s energy future” by diversifying our energy portfolio. He concluded his testimony by stating, “The wind industry is on the verge of becoming competitive without the PTC, but failing to extend it immediately would prevent us from finishing the job.”

 

Daniel Weiss, a senior fellow at the Center for American Progress Action Fund (CAP Action) opened his testimony by urging Congress to consider climate science when developing energy policies and that not doing so “is like setting your house on fire to stay warm.” Weiss continued by saying, “This year the polluted climate struck back with the worst U.S. drought in over 50 years and the third  hottest summer ever measured and the drought has cost us at least $5 billion in crop damages so far.” He brought up the CAP Action finding that the Flight 93 Memorial in Stoystown, Pennsylvania would be vulnerable if federal regulations were relaxed. He dismissed the notion that increased production of oil in the U.S. would lower the cost of gas at the pump because oil prices are set by the world market and the Environmental Protection Agency (EPA) has found no correlation between prices at the pump and U.S. oil production. Weiss dismissed the idea that the Keystone XL pipeline would increase energy security since a significant proportion of the tar sands transported from Canada will be exported to Europe or South America. In his concluding remarks, Weiss suggested that clean energy could be paid for by ending the $2.4 billion annual special tax brakes for the “Big Five” oil companies which made $60 billion dollars in the first half of 2012 alone.

 

In his testimony, Mark Mills, a senior fellow at the Manhattan Institute proposed that the U.S. could fuel the world just as it currently “feeds the world” as the largest supplier of grains. He informed the subcommittee that “policies that accelerate hydrocarbon production could create at least 3 million jobs and $3 to $7 trillion in economic benefits and would completely reset energy geopolitics.” He remarked that the U.S. can “literally drill, dig, build and ship its way out of the current economic and job malaise.” He remarked that this can only be accomplished if energy policies adopt a pro-export policy, “establish a single federal portal for approval of all major energy projects” and suspend all rules except those with “near-term safety relevance.” Mills warned that “the energy future isn’t inevitable” and the U.S. could either “become a major player in the world energy markets” or else “other nations will step up to fill the void.”

 

Peter Howard, the President and CEO of the Canadian Energy Research Institute testified on the state of Canada’s hydrocarbon industry and informed the subcommittee that Canada would require five pipelines to reach their production capacity. There are three pipelines currently “on the books” to be constructed, the Keystone XL, Trans Mountain Expansion, and Northern Gateway pipeline, all of which have faced significant resistance from various entities resulting in an unclear outcome. He offered a multitude of statistics in regards to Canada’s oil production.

 

Chairman Whitfield began the discussion period and asked Hamm to comment on the size of U.S. hydrocarbon reserves by elaborating on the discrepancy between what is classified as known or proven reserves and what the actual recoverable reserves might be. Hamm answered that President Obama says we have 2 percent of the world’s oil reserves, yet the U.S. produces 12 percent of the world’s production oil each day.  Hamm highlighted that there are known resources they cannot claim.

 

Ranking Member Rush commented that the Obama Administration has been viewed as hostile towards the oil and natural gas industry. Rush asked Weiss and Purcell if they thought this was a valid viewpoint. Weiss answered that some people may agree because the Obama Administration has set new standards for worker and environmental safety and that the predictions made by Raymond James & Associates of increased oil production in the U.S. include these new regulations. Weiss noted that the Obama Administration is focusing on eliminating tax breaks for the oil industry, some of which go back to 1916 and were intended for a young industry. Weiss reiterated that the $2.4 billion given in tax cuts to the “Big Five” oil companies would be more appropriate supporting the wind industry, which is in a similar state to the oil industry 100 years ago, through extension of the PTC.

 

 Rush then asked Purcell to explain why Congress should invest in renewable energy and wind energy. Purcell answered saying that his industry created 75,000 jobs and that $15 billion in private investments have come in over the last four years. Purcell said that Congress should extend the PTC to protect these jobs and investments. Representative Joe Barton (R-TX) responded by saying that he supported the PTC in 2005 but feels that wind power is now a conventional and mature source and therefore it is not acceptable to spend $1 to $1.5 billion in tax credits on it. Purcell responded that he and his colleagues feel that wind energy is experiencing a “renaissance” just as the oil and gas field is and urged that it is at risk without the renewal of the PTC.

 

Representative Gene Green (D-TX) noted that Canada is a net exporter of oil and is energy independent but their prices are controlled by world events and asked Ahn and Freeman how they came to their conclusions that gas prices would go down. Ahn responded saying that decreases in gas prices are projected because of the addition of new supplies and decrease in world consumption. He said that this is a global trend for which the U.S. is “at the heart and forefront of.” He also explained that the decrease in global consumption is due to other countries such as China making energy efficiency a key goal. Freeman agreed and added that the price of oil is down $17 per barrel in Texas where local production has increased.

 

Representative Mike Pompeo (R-KS) asked if there is any chance that the U.S. will be experiencing a decline in resources as was the thought over the last 25 to 30 years. Mills responded by saying that the resources were always there, but that new technology has “unleashed” resources that were previously unrecoverable. Mills mentioned that 100,000 new patents in the hydrocarbon industry have been published in the last 5 years while there have been only 60,000 for non-hydrocarbon technology. Pompeo questioned Purcell’s business management by asking if he regretted building a business model knowing the PTC was set to expire, therefore resulting in layoffs. Purcell responded that he did not, and remarked that the oil industry has received support for a long time.  

 

Representative Kathy Castor (D-FL) praised the success of the Obama Administration for the increases in domestic hydrocarbon production. She asked Weiss to comment on the perception that the U.S. energy sector is stagnant. Weiss answered that the Raymond James & Associates report is encouraging because it indicates the oil and natural gas industry can grow without expanding into public lands. Weiss reiterated that the Flight 93 Memorial is a location where oil leases are already held and would be at risk in the Romney Energy Plan which would put states in charge of deciding if federally owned lands would be opened for drilling.

 

Representative David McKinley (R-WV) commented that when scientists study the Dust Bowl of the 1930’s, they do not discuss atmospheric carbon dioxide as the cause and referred to climate change as “based on ideology and not the facts.” McKinley asked Weiss if “he thought Americans could afford higher energy bills.” Weiss replied that the cost to health should be considered in the price of energy. These costs include an increase in mercury contamination as well as in the frequency of asthma attacks. Weiss mentioned a Harvard study that demonstrates asthma attacks increase with air pollution. McKinley insisted that you cannot tell that an increased in frequency in asthma attacks is from increased outdoor air pollution and continued “there is more mercury in a can of tuna fish than in fly ash and we eat the tuna fish not the fly ash.”

 

Representative Morgan Griffith (R-VA) Weiss’s comments about drilling in federal parks and explained that the Romney Plan is meant to  increases the use of federal lands for oil and gas production to over 3 percent, but excludes national parks and sacred sites. He called for permitting the Keystone XL pipeline and relaxing federal regulations. Griffith called on Mill to comment on how in all previous energy revolutions we “didn’t cut the legs out from the older industry.” Mill remarked that we have made oil and gas production cleaner with new technology and that it would be “marvelous if 20 percent to 30 percent of the world’s energy came from renewables, but that still leaves the 60 percent to 70 percent.”

 

Representative Edward Markey (D-MA) described the Romney Energy Plan as “oil above all” instead of “all of the above” and urged for improved energy efficiency instead of increased oil and gas production. Markey asked Hamm if he agreed that Mitt Romney energy plan is subsidy based. Hamm disagreed saying the nation’s energy selection should be market based. Markey pointed out that subsidies for oil and not for wind is not market based.

 

Representative Rush asked Mills what he thinks about the “climate change speed bump on this expressway” of oil and natural gas. Mills replied that industry leaders support environmental and safety measures, but are looking for regulations that are simple, coherent and sensitive to time. He commented that if the “U.S. ceased to exist by tomorrow or got all of its energy from renewable resources, the consumption of hydrocarbons will still go up.” Mills pointed out that “someone else would supply those hydrocarbons” and the U.S. might as well be the one to provide since the U.S. would benefit from the creation of jobs and geopolitical ramifications as well as produce the oil and gas in a cleaner manner. Representative Griffith concluded that he believes in all of the above, and that we should “get out of the way of people like Mr. Hamm” to ensure that our children and grandchildren do not inherit “a lesser America.”

 

Opening statements, witness testimonies and an archived webcast of the hearing can be found on the House Committee on Energy and Commerce web site.