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FULL COMMITTEE HEARING ON

SMALL BUSINESS ENERGY PRIORITIES

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

OCTOBER 17, 2007

Serial Number 110-52

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

Thompson, Frank, National Association of Home Builders ................................. 4

Cropps, Mitchell, the Air Conditioning Contractors of America andThe Plumbing-Heating-Cooling Contractors Association .................................................... 6

Rodriguez, Miguel, the American Institute of Architects ..................................... 8

Fuller, Lee, Independent Petroleum Association of America ............................... 10

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 30

Chabot, Hon. Steve .................................................................................................. 32

Thompson, Frank, National Association of Home Builders ................................. 34

Cropps, Mitchell, the Air Conditioning Contractors of America andThe Plumbing-Heating-Cooling Contractors Association .................................................... 41

Rodriguez, Miguel, the American Institute of Architects ..................................... 45

Fuller, Lee, Independent Petroleum Association of America ............................... 52

Statements for the Record: 

The Heating, Airconditioning & Refrigeration Distributors International 

(HARDI) ................................................................................................................ 60

The National Propane Gas Association (NPGA) ................................................... 62

(V) 

(1)

FULL COMMITTEE HEARING 

ON SMALL BUSINESS 

ENERGY PRIORITIES 

Wednesday, October 17, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:05 a.m., in Room 

2360, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[chair of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Cuellar, Altmire, Braley, 

Clarke, Ellsworth, Sestak, Higgins, Chabot, Bartlett, Akin, Westmoreland and Fallin. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

ChairwomanVELA ́ ZQUEZ. Good morning. I now call this hearing 

to order, entitled Small Business Energy Priorities. 

Our Nation’s small business owners face many challenges in operating a successful company. The rising cost of energy continues 

to be one of the major concerns. As negotiations begin on comprehensive energy legislation in the coming weeks, it is critical to 

ensure that small firms, whether as producers or consumers of energy, are included in those discussions. 

Today’s panelists will outline their priorities as Congress moves 

toward a final product. This hearing presents an opportunity to 

identify outstanding matters and solicit the input of the small business community. Our Nation’s energy policies are a public/private 

partnership and will only work if small firms are able to carry 

them out. 

In August, the House took a major step towards greater energy 

independence when it passed H.R. 3221, the New Direction for Energy Independence, National Security and Consumer Protection 

Act. This legislation included the input from 10 different House 

Committees. It encourages the development of new technologies, 

promotes greater conservation and efficiency, and calls for more 

green energy production. 

H.R. 3221 contained key initiatives from this Committee that 

will assist small businesses improve their energy efficiency. With 

guarantees and lower fees on SBA loans, more small businesses 

will be able to purchase efficient technology. 

The House-passed bill also creates private equity investment 

companies that will spur funding for additional renewable fuel production. It also requires that the SBA set up a national effort to 

2

educate entrepreneurs on potential energy-efficient products and 

techniques that can save businesses money. These are just a few 

of the targeted measures aimed at small firms. 

This hearing would allow us to assess the direct and indirect impact of some of the proposed changes. Our focus will be on working 

to address the unique concerns of small businesses. Representatives of the construction, maintenance, installation and the designing industries are here to talk about how these reforms can work, 

but only if they are properly implemented. The goal of the comprehensive legislation is to move America forward toward increasing energy supplies and creating smarter usage. This will reduce 

overall energy consumption and greenhouse gas emissions, all 

while moving our economy in the right direction. Small businesses 

obviously will have an enormous role in achieving these goals. 

Based on the testimony from the panelists, it is critical that the 

Federal Government and affected industries have an ongoing dialogue to implement this shift in policy. There must be flexibility in 

these reforms that allow small businesses to work with regulators 

to craft workable standards even after the bill is signed into law. 

Small firms have been at the forefront of energy efficiency and 

the development of new technologies. From breakthroughs in green 

design and construction to the development in cellulosic ethanol, 

small businesses are the leaders in the field. They have not only 

been involved in the push for efficiency, but now have a role as 

suppliers of energy. The energy legislation being examined only 

seeks to build upon these efforts. 

I look forward to hearing the small business community’s recommendations to improve upon the final comprehensive energy 

package. The Committee can draw on this as this Congress works 

to increase our Nation’s energy independence. I appreciate the witnesses coming here today to talk about this important issues, and 

I look forward to today’s discussion. 

ChairwomanVELA ́ ZQUEZ. I now yield to Mr. Chabot for opening 

remarks. 

OPENING STATEMENT OF MR. CHABOT 

Mr.CHABOT. Thank you, Madame Chair. And thank you for holding this important hearing. We also want to thank all of the witnesses for being here. We will get to your testimony very shortly. 

Energy is the lifeblood of the economy. U.S. economic prosperity 

is closely tied to the availability of reliable and affordable supplies 

of energy. Even when increases inefficiency are taken into account, 

significant increases in demand are projected into the future. It is 

not just the United States that is going to need more energy in the 

coming years. Our traditional energy supplies will be increasingly 

strained by dramatic growth in global demand. By the year 2030, 

the world’s energy needs will increase by an estimated 70 percent. 

We have had several hearings on this topic throughout this year, 

and every single small business person who has testified in this 

room has all said essentially the same thing: The recent volatility 

in the energy markets have put a tremendous strain on all of them, 

on all of our small businesses. Small businesses are in the same 

boat as the rest of us, only theirs is sinking a little faster because 

small businesses work on very thin profit margins. Even the smallVerDate 0ct 09 2002 09:41 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\38209.TXT LEANN
3

est fluctuations in cost can be a matter of making a profit that 

month or going into the red. 

Increasing our focus on developing new alternative fuels and energy sources such as ethanol, biodiesel, solar and wind energy will 

be critical in our making progress on this issue. There can be little 

doubt that increased demand and consumption of renewable fuels 

has had a positive impact on our Nation’s economy, including small 

businesses. It is quite apparent, however, that the United States 

must work towards a balanced and diversified energy policy, including locating and developing our own domestic sources of fossil 

fuels and improving our nuclear energy technology in order to meet 

our needs and reduce our dependence on foreign sources of energy. 

Disturbingly, we import two-thirds of the oil we consume, much 

of it from OPEC and much of it from some of the more unstable 

areas of the world, Iran, Iraq, Saudi Arabia, Kuwait, United Arab 

Emirates. It goes on and on. Additionally we import oil from Nigeria and Venezuela. At the same time, the number of refineries operating in the United States has decreased from 324 back in 1981 

to 148 now. With fewer than half the refineries we had back in 

1981, and without building a new refinery since 1976, our energy 

problem is on track to become an energy crisis. Think of that, not 

having built an oil refinery in 30 years. That is just unacceptable. 

Simply put, we must balance incentives and research into new 

renewable fuels that will eventually replace our current reliance on 

fossil fuels with ensuring we have an abundant and affordable 

source of energy right now. Unfortunately, I don’t believe that the 

major energy bills that we have considered this year have achieved 

this balance. I do not believe that these bills create any new energy 

at all. And if anything, it makes fossil fuel energy more expensive, 

which in turn will make us even more dependent on foreign 

sources. 

I am thankful that we have such an esteemed panel here to discuss the specifics of this bill with us this morning and to see what 

the experts outside the government think about the direction we 

are taking on energy policy, and I look forward to the testimony 

this morning. I want to thank the witnesses and, again, thank the 

Chairwoman for holding this hearing, and I yield back. 

ChairwomanVELA ́ ZQUEZ. Thank you.

ChairwomanVELA ́ ZQUEZ. And I now recognize Mr. Altmire for the 

purpose of introducing Mr. Thompson. 

Mr.ALTMIRE. I want to thank all the witnesses for being here 

today, especially—I have a constituent. And I want to thank the 

Chair for allowing me the opportunity to introduce and welcome 

the constituent from my district, Mr. Frank Thompson of Cranberry. 

Mr. Thompson is president of Sweetwater Builders, a residential 

home builder and land developer company in greater Pittsburgh. 

He has a lifetime of experience in the home building industry and 

has served on the executive board of the National Association of 

Home Builders since 1993. Mr. Thompson has been honored by the 

National Association of Home Builders for his work in the building 

code development process, and he has received numerous awards 

4

from the Pennsylvania Builders Association, including the Distinguished Achievement Award in 2005. 

Recognized as an expert in the area of residential construction 

and land development, Mr. Thompson has previously testified before Committees of both the House and the Senate to talk about 

housing industry issues. 

So I would like to thank Mr. Thompson for joining us here today, 

and I look forward to hearing his testimony. 

ChairwomanVELA ́ ZQUEZ. Mr. Thompson, welcome. And you will 

have 5 minutes to make your presentation. And all the witnesses’ 

testimony will be made part of the record, without objection. 

STATEMENT OF FRANK THOMPSON, OWNER, SWEETWATER 

BUILDERS, CRANBERRY TOWNSHIP, PENNSYLVANIA, ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS 

Mr.THOMPSON. Thank you. 

Good morning, Madame Chair, Ranking Member Chabot. Jason, 

thank you for your very kind remarks and other distinguished 

members of the Committee. 

My name is Frank Thompson. I am a fourth-generation smallvolume home builder and land developer in a suburb of Pittsburgh, 

Cranberry Township. I am here representing the National Association of Home Builders, which represents over 235,000 member companies employing millions of individuals in the home building, remodeling, multifamily and light commercial construction industry. 

I appreciate this opportunity to discuss with you ways to promote 

residential energy efficiency and the negative impact that section 

9031 of the House energy bill will have if enacted on thousands of 

small businesses that comprise the majority of our Nation’s housing industry. 

Home builders recognized long ago that energy efficiency is in 

the best interest of the Nation’s economy, environment and security. Small builders play an especially crucial role in implementing 

and participating in voluntary efficiency programs. A couple of 

those programs are the U.S. Department of Energy and the EPA 

has the Energy Star program, and DOE also has a Building America program. In addition to that, there are numerous other volunteer programs, some through companies, some through States, 

some through locals. There is a wealth of participation by our 

membership in these programs. We are proud to participate in 

these programs, and we think they have had a tremendous impact 

on building energy-efficient housing in this country. 

Another valuable incentive for promoting residential energy is 

the New Energy-Efficient Home Credit, which was enacted as part 

of the Energy Policy Act of 2005. This tax incentive shifts builders 

towards greater energy savings in new home construction through 

a $2,000 tax credit to a home builder who constructs a qualified 

home. Small builders are particularly interested in this as we 

found this incentive particularly useful because of the flexibility we 

have to react to marketplace preferences. We are building a lot of 

custom homes, and we can incorporate these features that do have 

the tax incentives into the home, saving our customers thousands 

of dollars in future utilities. 

5

Unfortunately, the credit is set to expire at the end of 2008, and 

language to extend it was not included in either the House or Senate energy bills. NAHB strongly encourages Congress to permanently extend the New Energy-Efficient Home Credit. And I would 

suggest that you consider expanding the amount that is available 

and certainly look at it as it relates to existing housing. 

As a member of the International Code Council, I work with 

thousands of individuals, businesses, and government agencies, including the Department of Energy and FEMA, that devote their 

time and expertise to craft benchmarks for building soundness, 

safety, health and, of course, energy efficiency. The ICC’s lengthy 

Development Committee and voting processes are designed to ensure integrity and inclusiveness, and DOE is an integral part of 

that. In fact, the 2006 International Energy Conservation Code is 

actually a major revision of the previous energy code that was 

drafted by the Department of Energy. 

Of course, the roles of State and local governments is also critical 

in this process as they are the ones on the ground that ultimately 

implement the codes and make necessary modifications for local geographic needs, a right given to the States in the United States 

Constitution. Because structural and efficiency needs are different 

in different areas of the country and need to be flexible for each 

State, it is crucial that the code process remains open, be based entirely upon consensus and be protected from encroachment by any 

Federal agency. 

Generally the provisions on updating State building codes in section 9031 of the House energy bill create a number of technical and 

economic problems, particularly for small builders. And I have cited 

those in my written testimony. This section requires States to 

adopt certain stringent construction codes and standards, and then 

requires them to prove that they are 30 percent above the energy 

code in terms of savings by 2007, and 50 percent above code by 

2020. If States do not meet these, then DOE steps in and drafts 

modified building codes incorporating these increases for the 

States. This completely undermines the State authority and sets 

Federal benchmarks for efficiency and building codes that do not—

may not realistically account for specific geographic needs or incorporate practical enforcement provisions. 

This section would negate the efficiency goals currently determined by the consensus code process, impose excessive cost, and set 

up an administrative requirement that is likely to be impossible to 

undertake. Furthermore, home buyers are very sensitive to upfront costs for a new home, particularly for efficiency features that 

often have long payback periods. This mandate would simply increase costs for new homes, making them even more unaffordable, 

and if they can’t afford that new home, they are going to stay in 

an existing, less efficient homes. 

ChairwomanVELA ́ ZQUEZ. Mr. Thompson, your 5 minutes expired. 

But if you want to summarize. 

Mr.THOMPSON. I will be happy to, Madam Chair. 

I appreciate this opportunity to come before you and testify on 

your concerns, and be happy to answer any concerns you have. 

Thank you. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

6

[The prepared statement of Mr. Thompson may be found in the 

Appendix on page 4.]

ChairwomanVELA ́ ZQUEZ. Our next witness is Mr. Mitchell Cropp. 

He is the President of Cropp-Metcalfe, a heating, cooling and 

plumbing company established in 1979 and based in Maryland, 

D.C. And Virginia. Mr. Cropp is representing the Air Conditioning 

Contractors of America and the Plumbing-Heating-Cooling Contractors National Association. ACCA and PHCC represents over 15,000 

contractors and HVAC personnel. 

Welcome, sir. 

STATEMENT OF MITCHELL CROPP, PRESIDENT, CROPPMETCALFE AIR CONDITIONING-HEATING-SECURITY, ON BEHALF OF THE AIR CONDITIONING CONTRACTORS OF AMERICA 

Mr.CROPP. Thank you, Madam Chairman Vela ́zquez, and Ranking Member Chabot and members of the Small Business Committee. Thank you for the opportunity to provide testimony on the 

pending energy legislation and its impacts on the contractors and 

small businesses of the heating, ventilating, and air conditioning 

and refrigerating industry, referred to as HVACR. 

My name is Mitchell Cropp, and I am president of CroppMetcalfe, a heating, cooling and plumbing service company with 

four branches that serve both residential and commercial clients in 

the Washington, D.C., metropolitan area. I have been involved in 

the HVACR industry for the past 50 years. I come before you as 

a member of both the Air Conditioning Contractors of America and 

Plumbing-Heating-Cooling Contractors Association. I am a past 

president of the Virginia chapter of PHCC and a past chairman of 

the ACCA in 1998. Together these two contractor groups represent 

tens of thousands of HVACR contractors, distributors and manufacturers across the country. 

Let me begin by saying that ACCA and PHCC are strong advocates of energy-efficiency standards and have a long history of promoting energy efficiency. Every day thousands of ACCA and PHCC 

members help homeowners, small business owners and building 

managers realize the comfort and the cost benefits of energy-efficient HVACR equipment. 

Our industry overwhelming supports routine increases in the 

uniform Federal appliance efficiency standard for heating and cooling products as described under the Energy Policy and Conservation Act, EPCA, and as amended by the National Appliance Energy 

Conservation Act. 

As you are aware, the House and Senate energy bills as passed 

propose to allow the Department of Energy to authorize regional 

standards for commercial and residential heating and cooling products. This is unprecedented. And I am very concerned about those 

provisions and their potential impacts on the HVACR industry. 

Imposing regional standards for heating and cooling products 

would erase decades of consensus agreement on products covered 

under the NAECA between manufacturers and energy efficiency 

advocates, and the harmful impacts would trickle down to the hundreds of thousands of small businesses in the HVACR industry, 

7

which include manufacturers, distributors, contractors and both the 

commercial and residential consumers that they serve. 

The idea of regional standards may sound reasonable. It seems 

logical that a furnace in Maine would be different than the one in 

Florida. But regional standards are not very practical for consumers or small businesses. From my viewpoint, I see regional 

standards increasing the cost of high-efficiency heating and cooling 

products to the consumer, creating an unenforceable rule that gives 

a leg up to the unlicensed contractors, and placing an undue burden on the small businesses that struggle in a very competitive 

market. 

Let me explain. As you would expect, a higher efficiency air conditioning product, higher SEER on the air conditioning side, is 

more expensive to manufacture and install; therefore, it would be 

more expensive for the consumer. Recently the minimum seasonal 

energy efficiency ratio, or SER, of all air-conditioning systems increased from a 10 SER to a 13 SER. Contractors and distributors 

are still adjusting to the unforeseen and unintended consequences 

due to this transition. 

A survey of contractors found that consumers chose more often 

to repair or maintain older, less efficient equipment instead of upgrading to the high-efficiency SER 13 units due to the increased 

costs of the higher-efficiency product. As a result, the national inventory remains older and less efficient, including equipment that 

contains refrigerants that use CFCs, HCFCs, which are known 

ozone-depleting substances. 

Regional efficiency standards will also lead to higher costs for 

equipment and installation of heating products. Higher-efficiency 

furnaces are not a plug-and-play product. They are more expensive, 

they are labor-intensive to install, and they are not always practical. A high-efficiency conventional furnace requires special vending needs that may necessitate costly and time-consuming demolition and renovation. Often this is not practical for the installer or 

for the consumer. High-efficiency furnaces are not practical in 

many applications. 

There are also other implications to other appliances. For example, upgrading to a higher-efficiency furnace may involve relining 

a chimney to accommodate a water heater. A survey of contractors 

found that with installation and labor costs, consumers can expect 

to pay anywhere between 20 and 50 percent more for a high-efficiency condensing furnace. 

ChairwomanVELA ́ ZQUEZ. Mr. Cropp, your time is up. 

Mr.CROPP. Thank you. 

ChairwomanVELA ́ ZQUEZ. But during the question-and-answer period, you will be able to make any points that at this point you 

haven’t made. 

Mr.CROPP. That will be fine. Thank you. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

[The prepared statement of Mr. Cropp may be found in the Appendix on page 6.]

ChairwomanVELA ́ ZQUEZ. Mr. Mike Rodriguez is the next witness. 

He is the president of Rodriguez Architects in Coral Gables, Florida. Mr. Rodriguez also spends time with architecture students 

8

serving as a part-time lecturer at the University of Miami. He is 

representing American Institute of Architects as an officer of the 

board of directors. AIA represents over 80,000 licensed architects 

and emerging professionals. 

Welcome. 

STATEMENT OF MIGUEL A. RODRIGUEZ, PRINCIPAL, 

RODRIGUEZ ARCHITECTS, INC., ON BEHALF OF THE AMERICAN INSTITUTE OF ARCHITECTS 

Mr.RODRIGUEZ. Thank you, Madam Chairwoman, Ranking Member Chabot, members of the Committee. Good morning. 

I am Mike Rodriguez, an architect, small business owner and 

vice president of the American Institute of Architects. Since nearly 

half of our AIA members own or work for small business firms, we 

appreciate all that the Committee does for the small business concerns of this country. 

One of the most important issues facing my firm, as well as 

countless small businesses across the country, is energy. Increases 

in energy prices are apparent in the form of surcharges being 

passed on by virtually every vendor and supplier we use, yet our 

ability to pass on these costs, particularly in a professional services 

environment with long-term design contracts, is severely limited, if 

at all possible. 

The AIA strongly supports policies, programs and incentives that 

encourage energy conservation and efficiency. We believe that by 

the year 2030, all new buildings and all significantly renovated 

buildings should be carbon-neutral. Many organizations have 

adopted these principles as well, including the U.S. Conference of 

Mayors, the National Association of Counties and the Alliance to 

Save Energy. 

Today I will discuss a number of important provisions included 

in legislation before Congress that promote energy efficiency, especially as it relates to the built environment and small businesses. 

Before I get into specifics however, it is important to understand 

why energy efficiency is so important to small businesses. 

By constructing energy-efficient building systems and technologies, businesses can reduce monthly energy bills, improve 

worker productivity, increase worker retention and improve the 

well-being of building occupants. And businesses that show a commitment to the environment often find that is a competitive edge 

among consumers as they become increasingly attuned to the wellbeing of the planet. In short, energy-efficient design is not only 

good for the environment, but good for the bottom line. 

To put this policy into action, one of the AIA’s major legislative 

priorities for 2007 has been to extend the energy-efficient commercial buildings tax deduction. This provision provides building owners, many of whom are small business people, with a Federal tax 

incentive to install energy-efficient systems in their buildings or to 

construct new energy-efficient buildings. 

Currently some energy-efficient systems are more expensive to 

design and build and install than traditional counterparts. For this 

reason, the initial increased capital costs can dissuade owners, especially business owners like me who often do not have access to 

the additional up-front cash necessary to install these systems that 

9

are sometimes costly. The energy-efficient commercial buildings tax 

deduction addresses this situation and provides owners the financial incentive needed to build in an energy-efficient manner. 

The AIA strongly supported the enactment of this tax deduction 

in 2005; however, it can only be claimed for buildings placed into 

service by December 31, 2008. And as it often takes several years 

to move from the building’s initial design stage to final completion, 

many of the buildings on the drawing boards today will not be 

placed into service until long after the deduction has expired and 

therefore will be unable to reap the intended tax benefits. 

In order to ensure that this vital incentive will make a difference, we believe it must be extended. In addition, we believe 

that the value of the deduction should be deepened from the current $1.80 per square foot to at least $2.25 per square foot. This 

will make it an even bigger incentive for building owners. We recognize that deepening this incentive increases the cost to the 

Treasury, but I propose to you that the cost of failing to act to reduce our energy consumption is far greater to our community, to 

society and the planet itself. 

We are pleased that the House extended the tax deduction until 

2013 in its energy bill. I understand the Senate’s energy bill does 

not include any tax incentives for energy efficiency; however, the 

Senate Finance Committee did approve a tax package that not only 

extended the deduction, but also deepened it to $2.25 per square 

foot. The AIA urges Congress to include both the extension and a 

deepening of the energy-efficient commercial building tax deduction 

in its final bill. 

The energy bill passed by the House also includes a number of 

other important provisions that will help provide incentives for energy-efficient practices and educate business owners on the benefits 

of energy efficiency. The AIA strongly supports the provisions 

under title 3 of the bill and commends this Committee and especially Subcommittee Chairman Shuler for the diligent efforts in 

crafting the legislation. 

We have presented Committee staff with some suggestions on 

how to make this title even stronger, and I ask permission to include our recommendations into the hearing record. Today, however, I would like to focus on two of these provisions. First, section 

3005 would allow Small Business Development Centers to apply for 

grants to carry out sustainability initiatives. Many business owners 

I have worked with are simply unaware of technologies, strategies 

and materials that will reduce their business energy use. Education is key. 

Madame Chairwoman, I recognize that my time has expired. 

Thank you all for the time that you have allowed me. I would be 

happy to answer questions. 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Rodriguez. 

[The prepared statement of Mr. Rodriguez may be found in the 

Appendix on page 8.]

ChairwomanVELA ́ ZQUEZ. Our next witness is Mr. Lee Fuller. He 

is vice president of government relations for the Independent Petroleum Association of America, IPAA, who represents independent 

oil and natural gas products and service companies across the 

10

United States. IPAA addresses issues in the exploration and production segment of the industry. 

Welcome, sir. 

STATEMENT OF LEE FULLER, VICE PRESIDENT FOR GOVERNMENT RELATIONS, INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA 

Mr.FULLER. Thank you very much, Madam Chair, members of 

the Committee. 

The Independent Petroleum Association of America does represent independent petroleum and natural gas producers. IPAA’s 

producer membership is comprised of companies ranging from 

large, publicly traded companies operating in the upstream segment of the industry to small, individually owned companies. Most 

employ fewer than 20 employees. 

Independent producers drill 90 percent of American oil and natural gas wells, produce approximately 82 percent of American natural gas and produce about 68 percent of American oil. Within this 

production are America’s marginal wells. The operation of these 

wells is dominated by small business owners of IPAA. The overwhelming number of wells in the United States falls into this category. Approximately 85 percent of America’s oil wells and 70 percent of America’s natural gas wells are marginal wells. Equally significant, though, while individually small, collectively they provide 

about 19 percent of America’s oil production and 10 percent of 

America’s natural gas production. 

Before addressing the specific House energy legislation, it is essential to understand the role of oil and natural gas in America’s 

energy supply. Currently oil and natural gas account for about 65 

percent of America’s energy supply. Looking forward, energy demand growth will be essential to the growth of the U.S. economy, 

and all forms of energy will be needed. 

Global climate-related initiatives can create shifts in the energy 

supply mix. However, oil and natural gas will continue to be key 

components, and American oil and natural gas offer the most national security. Congress needs to clearly understand the implications of global climate strategies in the energy mix as it considers 

different options. 

Recently a Natural Gas Council study of a typical aggressive 

global climate bill showed that natural gas demand would increase 

between 20 and 30 percent by 2030. Consequently, if Congress 

moves forward with global climate initiatives, it needs to fully understand that natural gas demand increases will be a logical result 

and, correspondingly, that natural gas supply needs to be addressed at the same time. 

Turning to H.R. 3221, a bill that has been characterized as a 

down payment on global climate policy, at issue is how H.R. 3221 

addresses these essential energy challenges. Not only does it fail to 

advance the need to develop more American oil and natural gas, it 

reverses progress that has already been made. No bill can be considered a down payment on global climate that has one of its key 

objectives curtailing the development of natural gas. 

Title 7 of H.R. 3221 contains nine sections specifically designed 

to reduce access to American natural gas on Federal lands. The 

11

first four of these provisions repeal or adversely modify provisions 

of the Energy Policy Act of 2005 that were passed to allow development of important natural gas resources underlying these areas. 

Just 2 years after enactment, and just as the implementation of 

these provisions is occurring, H.R. 3221 would change them. 

The next four provisions would add new burdens to the development of natural gas underlying on-shore Federal lands. 

The final provision would override years of efforts to develop natural gas leasing on former naval oil shale reserves. 

Taken together, these sections represent an irrational policy of 

curtailing the very actions that are needed to meet future natural 

gas demands. 

Title 13, the revenue title of H.R. 3221, is similarly counterproductive. To put a perspective on this issue, IPAA does not oppose tax expenditures designed to encourage the development of 

American energy, energy efficiency or energy conservation. However, IPAA rejects the concept that increasing taxes on oil and natural gas is essential to develop other energy options. 

As described previously, oil and natural gas will continue to be 

an essential component of America’s energy supply. Independent 

producers largely develop their capital through the wellhead. That 

is. Their capital for investment in new production and in maintaining existing production comes from the sale of the oil and natural 

gas that is produced. Moreover, independent producers have a history of reinvesting their income back into new production. When 

taxes are increased, investment in American production diminishes. This is exactly the consequence of section 13001 of H.R. 

3221. 

The JOBS Act of 2004 created a deduction for investment in the 

United States. Section 13001 would deny this deduction solely for 

the investment in oil and natural gas. Here the case is crystal 

clear. The deduction is only available for American investment, and 

its denial means that those dollars were taken from American investment. U.S. oil and natural gas production will be diminished. 

The effect on small businesses is twofold. For those small business oil and natural gas producers, investment dollars are taken 

away. For small business consumers, the availability of American 

oil and natural gas is diminished. 

In conclusion, IPAA’s small business members have been actively 

engaged in producing American oil and natural gas. What do they 

need from energy policy? Among their clear needs are access to the 

resource base in America and access to the capital to develop it. 

H.R. 3221 not only fails to support these needs, but aggressively 

rejects them. 

Thank you very much. 

ChairwomanVELA ́ ZQUEZ. Thank you, sir. 

[The prepared statement of Mr. Fuller may be found in the Appendix on page 10.]

ChairwomanVELA ́ ZQUEZ. Mr. Cropp, I would like to address my 

first question to you. The energy bill that passed out of the House 

proposes an implementation of regional appliance efficiency standards. How would the implementation of regional standards affect 

12

the air conditioning industry? And can you talk to us about some 

of the challenges these different standards may present? 

Mr.CROPP. In the regional makeup, the way I understand it—for 

instance, if I am in multiple regions, it requires the contractor—

number one, the burden is put on the contractor, first of all, to 

have the products for each region. And therefore, if one is a less 

efficient region versus the other, it puts a tremendous burden on 

us for space, for carrying parts on vehicles and, of course, the storage of such. The manufacturers themselves have suppliers to furnish us the products, and they are—they will have their same 

headaches as we have. 

When you look at the high-efficient products, though, we look at 

it as can the consumer—or is the savings enough, whether or not 

it is cost-effective, it is a return on their investment. In many applications, we can look at 2- or 3-, maybe as much as $4,000 difference than a current 80 percent furnace to go to a 90 percent furnace. I am talking about furnaces at this point. And it is hard to 

justify that the life of that furnace is 15 to 20 years, will they get 

that return, and what did we really save? 

Certain applications such as townhouses and condos and what 

have you, it is very difficult to run your flues or get your flues for 

aesthetics and so forth, cost-effective. It is not that. In certain applications, we are just going to struggle in the industry. We are 

concerned about the regulation itself that says you have got to have 

this size. Who is going to police it? Is it the county’s, the local jurisdiction’s? There is not a police force out there to regulate that and 

control it. 

ChairwomanVELA ́ ZQUEZ. In terms of regulating efficiency standards, in your opinion, what do you view as an ideal structure? 

Mr.CROPP. I think the 80 percent furnace level right now is a 

good standard to work towards to have. When you start going over 

that, the requirements for the application and so forth really challenges us as to whether or not it is cost-effective. I think if there 

was more maybe energy credits or tax incentives for the consumer, 

maybe they would afford it, could afford it, would do it. 

ChairwomanVELA ́ ZQUEZ. If regional standards were implemented, the Department of Energy will have to create a new system. What impact would regional standards have on your industry, 

small firms and consumers? And also can you tell the Committee 

why it is important for the Department of Energy to consult with 

the industry in implementation of regional standards? 

Mr.CROPP. Your last question there about consulting with the industry itself, from my many years in this industry, I have always 

had a problem with setting regulations and had a problem with the 

manufacturer designing the product and so forth and not consulting the people that put it in, the people that are in direct contact with the consumer themselves. It would be a tremendous challenge in the training arena to be sure personnel are properly 

trained to take and install such products, and more so in the application of the products is where the challenges come. 

When you look, again, as I mentioned earlier, about stocking 

product, I think you—in regional situations we open up the arena 

of possibly people bringing in products from one region to another 

region, and it really does not meet the standards of that region. We 

13

call these people sort of bootleggers or people that do not follow the 

codes and regulations. Unless there is going to be a method of policing this in some way, shape or form, I see the regulation not 

working. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Rodriguez, in your testimony you spoke about the energy-efficient commercial building tax deduction, and this provision is set 

to expire at the end of 2008. As it stands now, the House bill will 

extend this program until the year 2013. Can you talk to us about 

the incentives this tax deduction creates, and what will happen if 

not extended? 

I also would like for you to talk to us about—if you had been able 

to assess the impact that this deduction has had in your industry 

since it was created in 2005. 

Mr.RODRIGUEZ. I would be happy to, Madam Chairwoman. I 

think the—what happens if it is not extended is actually pretty 

clear. The intention of the bill was to make this credit available 

widely. The mere time involved in development of a project from 

its initial conception, design, permitting, construction and occupancy, which is when you can actually claim the credit, is just so 

long that the time period—most of the buildings in design today, 

as I stated, just simply will not meet the time requirements. The 

extension is necessary in order to allow that. It is also necessary 

to make it a more memorialized deduction, if you will, so that people can rely on it being there when they actually put their buildings into service. 

I think it is too easy to say, well, you know, it is meaningless 

to me because I am not going to be done in time. The longer extension in possible—I would like it be permanent, but 2013 is a step 

in the right direction. 

As for the impact, I think when you talk about the effect of the 

additional cost that is borne in order to implement certain energyefficient provisions, it is just nice to be able to plan—it is a way 

of amortizing the cost. It is a tax credit. You won’t get it initially, 

you still have got to front the money, but at least you know and 

you can rely on that money being there, and the burden of carrying 

the debt on whatever it is that you are doing will be reduced by 

that. I think it is a win-win on all sides, and I want to repeat, because I don’t think it is important—it is important to repeat this 

as often as possible. Failing to act will have far greater cost impacts than acting now will. And you can say that almost across the 

board. And it is very critical that we not take this opportunity to 

make that happen. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Now I recognize—I have other questions, but I am going to allow 

for the Members to be able to make questions, and then I will come 

back on the second round. 

Mr. Chabot? 

Mr.CHABOT. Thank you very much, Madam Chair. 

Mr. Thompson, I will begin with you if I can. You mentioned that 

the permanent extension of the new home energy credit which is 

not currently in the bill could have a pretty significant impact on 

home builders, and would you go into that a little bit? 

14

Mr.THOMPSON. Sure. Of course, this tax credit has not been 

available for a very long. The IRS was delayed in clarifying the 

guidelines, and, of course, now it is ready to expire in 16 months. 

We are just getting up to speed here and seeing more and more 

builders taking advantage of the tax credits that are available 

under it, passing savings—future savings on to their customers. 

The $2,000 is far less than what it should be, and it needs drastically expanded as it relates to existing homes. 

I had an experience recently where a customer was trying to do 

some energy improvements on their existing home, a 130-year-old 

house, and chose to insulate the ceiling. It was about a $1,200 improvement. The energy tax credit for doing that was about $60. It 

basically had no impact on the customer making a decision to make 

that improvement. 

I will suggest to you, and it would be borne out by facts, that by 

focusing more on existing houses, which have a far greater use of 

energy than on the most new homes being constructed, we can get 

a lot more bang for our buck in terms of investment in energy savings. 

Mr.CHABOT. Thank you very much. 

Mr. Cropp, in your written testimony you mention that when 

people are forced to install a more expensive high-efficiency HVAC 

system, they are more inclined to try to fix the older unit than get 

the more expensive one. How often does this happen? How common 

is that observation? 

Mr.CROPP. We just recently did some checking for the industry 

to report back to them, and one of them was compressor expenses, 

a component part of the air conditioning unit engine. It is the heart 

of it. And we found within the last 12 months that over—we have 

increased selling of just the replacement compressor itself by over 

25 percent. And this means that in the past, we were able to convince the consumer that if the compressor warranties run out, that 

it is more economical for you to get a complete system. They are 

now opting out to go with a new compressor because of the increased costs. 

The cost of the product is not just that in the HVAC—in the cooling cycle. For instance, the sizes have increased to the point we 

now need two people to move them around to the backyards, or 

they are even to the size that the standard vehicles—or vans, they 

won’t fit inside the vans. So we have had to increase that cost to 

get box trucks. And even down to the point that some gates at people’s homes, we can’t get them through the gates, so they either 

have to take the gates down, or we have to get a small crane to 

lift them over the backyard. So some people think they ought to be 

getting these products smaller, but they are getting them larger. 

But we thought it was—back to your original question. A 25 percent increase in compressor sales is very high for us, and we think 

the trend will continue to be that way to replace the engine now—

the compressor and not the entire system. 

ChairwomanVELA ́ ZQUEZ. Would the gentleman yield? 

Mr.CHABOT. I will be happy to yield. 

ChairwomanVELA ́ ZQUEZ. Mr. Cropp, this Committee reported a 

portion of the energy bill that provides for affordable loans for the 

purchase of energy efficiency appliances. Do you believe that the 

15

up-front costs may help more small businesses purchase these appliances? 

Mr.CROPP. I really do. I think the more that we can offer less expensive loans, it certainly helps us give them terms, will also give 

them credits, more tax credits, to put that investment into that 

building by putting the HVAC products more current, high efficiencies, yes, I think it definitely will help. 

ChairwomanVELA ́ ZQUEZ. Thank you. Yield back. 

Mr.CHABOT. Thank you. Reclaiming my time. 

Mr. Rodriguez, you mentioned in your written testimony that 2 

years ago the American Institute of Architects adopted a policy 

calling for the immediate reduction of the amount of greenhouse 

gas-producing energy that buildings use. Is this something that you 

all did on your own, or was it something that came from here in 

Washington? 

Mr.RODRIGUEZ. No, sir. We did not do it strictly on our own. It 

also did not come from here in Washington. It is actually a consensus that we built over time with several allied groups, probably 

one of the most notable ones, Mr. Ed Mazria’s Architecture 2030. 

But it is a consensus opinion that was built with a lot of input, and 

also supported our process for establishing positions is broad-based 

and includes notification requirements and public comment from 

our members. So really our entire membership chimed in on those 

requirements. 

Mr.CHABOT. But it wasn’t something you were directed from 

Washington to do? You and your colleagues and associations did it 

on your own? 

Mr.RODRIGUEZ. No, sir. That is correct. 

Mr.CHABOT. Thank you. 

And finally, Mr. Fuller, in your testimony you mentioned that 

3221 fails to advance production of domestic energy, and you mentioned a number of reasons why. First of all, could you comment 

on the quote—or at least you hear it oftentimes—you know, when 

you tax something at a higher rate, you essentially get less of it. 

I think that was one of the points that you were making in additional taxation on some of the things that you all do; is that correct? 

Mr.FULLER. Yes, sir. One of the frustrations that we have as this 

debate has moved forward on energy policy has been the concept 

that seems to be so prevalent, that there is a need to increase taxes 

on oil and natural gas production. Prices are high, that is true, but 

for our companies to put the money that they need into new production, they need as much revenue as they can get because they 

put it back into the ground. 

There was a study done in 2000—or 2004 that showed that independent producers were—the top 50 were reinvesting 150 percent 

of their American cash flow back into American production 

projects, which means that if you are reducing their cash flow by 

$1, you are losing $1.50 in additional U.S. investment. 

That is exactly what this bill would do. It would take away investment that is actually—must be going into the United States 

and use that for tax purposes. That doesn’t get us more production. 

Without more production, you are not going to see the additional 

supply that would have an effect of responding to the market deVerDate 0ct 09 2002 09:41 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\38209.TXT LEANN
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mand that we do not see disappearing for oil and natural gas. We 

see oil and natural gas being a deep part of any energy supply mix 

going forward. Not saying that other things don’t need to grow; the 

strong world economies thrive on energy. That is what they need, 

and we are going to need all the energy we can get in this country 

to build the economy we need for the future. 

Mr.CHABOT. Thank you. I yield back. 

ChairwomanVELA ́ ZQUEZ. Ms. Clarke? 

Ms.CLARKE. Thank you very much, Madame Chair. I want to 

thank you and Ranking Member Chabot as well as my colleague 

Congressman Shuler for your leadership and hard work in passing 

H.R. 2389 out of this Committee. 

I want to thank the panelists for their testimony and assisting 

us to grapple with the 21st century national energy policies and 

concerns. 

This bill, which later moved to energy legislation H.R. 3221, 

seeks to help small businesses develop energy efficiency practices 

and spurs investment in the production of alternative energy. It is 

clear to many of us that it is not easy and perhaps not even feasible for small businesses to step up to the plate to do their part 

to protect the environment. The financial demands associated with 

this task can be cost-prohibitive. But this bill provides loans, education and investment to small firms to help them become more energy-independent. It also provides good energy practices by modifying existing Small Business Administration programs to provide 

more flexible loan terms to small businesses that are developing or 

utilizing new technologies. 

I support these measures in the bill because they are smart and 

efficient ways to increase the flow of capital to small business development and acquire energy-efficient technologies. We must 

make energy-efficient technology more affordable and accessible to 

defeat the effects of global warming. This should a goal for this 

generation; shifting this burden to future generations is simply not 

an option. 

So I want to ask to Mr. Rodriguez, as you know, many small 

businesses have small profit margins, so the companies’ bottom line 

is very important to them. However, it is difficult to find ways to 

lower their energy costs without enough capital and personnel to 

resolve their problem. What do you believe would be the impact of 

requiring the Small Business Administration to develop a Federal 

program for educating small firms about energy efficiency? 

Mr.RODRIGUEZ. Thank you for the question. You are hitting at 

something that is near to my heart, the concept of education, of 

making information available. 

In my written testimony, and part of what I cut out to stay on 

time of my oral testimony, I tell the story of a very small project 

that we just completed for a repeat client who needed to simply 

add a restroom to his market in order—because he discovered this 

is a young man, entrepreneur, in business 6 months has a market 

that also serves food. He discovered he wasn’t making money on 

the market, but the food was making him money, and it was bringing people to the market. But in order to increase the seats, he had 

to add restrooms. 

17

And the process of doing that, we suggested to him, because we 

had to move the existing water heater, that he replace it with a 

new tankless, much more efficient water heater. And he was all 

over it. However, that cost was $2,000, which may not seem like 

a whole lot, but when you look at the magnitude or the lack of 

magnitude of this renovation, it was a huge piece of his overall 

cost. So the finance piece is important, but just having the access 

to the information that enabled him to realize that there was another option there other than moving the same old water heater 

over is key. 

I would like to also say that we also favor expansion of the section 3005 provisions regarding the Small Business Development 

Centers to allow them to provide information on design, on building 

design, not simply construction. Design is where true energy savings begin. And there is a lot that can be done with design that 

can mitigate—with all due respect to my colleagues, mitigate the 

need to spend a lot more money on MEL systems. If there is information on design, if design can play a part earlier on, then we can 

take steps in the designing of the building itself, siding it, how you 

focus openings in the building to capture breezes, how you protect 

against solar. All of that can help ultimately reduce the energy cost 

and help reduce the initial cost of implementing those features. 

So that part is key, and we do believe and support fervently that 

the portion of it be expanded. Again, it is building on education because information is power, and small businesses—and I am one—

we are tasked enough already with all of the mundane portions of 

what we do. There is just not enough time. It has got to be ready, 

it has got to be available. 

Ms.CLARKE. Madam Chair, I want to make one final question to 

Mr. Fuller. The great thing about—Mr. Fuller, this question is directed to you. The great thing that I found about Congressman 

Shuler’s bill is that it will not only help small businesses cope with 

rising costs, but will increase investment in small businesses that 

are developing renewable energy solutions. Are you opposed to any 

bill that will reduce the country’s dependence on foreign oil? 

Mr.FULLER. No, not at all. We are primarily focused on developing American resources. That is what my members do. We develop 90 percent of the wells in the United States. We think we 

have serious energy security issues in this country because we are 

too dependent on foreign oil imports, and we are starting to grow 

on foreign gas imports as well, much of which comes from unstable 

areas, as someone pointed out earlier. 

The point we are trying to make is that oil and natural gas will 

continue to be a major component of our energy supply mix. We 

can do all these other things, and we need to, but we are still going 

to need oil and natural gas. American oil and natural gas is the 

most secure that we can get. So we shouldn’t be diminishing our 

ability to produce American oil and natural gas while we are trying 

to reach all these other policy objectives. That is our concern. 

Ms.CLARKE. Thank you, Madam Chair. 

ChairwomanVELA ́ ZQUEZ. Mr. Bartlett? 

Mr.BARTLETT. Thank you very much. 

Mr. Fuller, recognizing that in spite of vastly improved technologies for discovering oil, like 3-D-size-making computer modVerDate 0ct 09 2002 09:41 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\38209.TXT LEANN
18

eling, every year on the average since 1980, we found less and less 

oil. Now our discoveries year by year are a small fraction of what 

they were in 1980, as you know. Recognizing that history, if you 

could pump ANWR, the reserves in ANWR, and offshore tomorrow, 

what would you do the day after tomorrow? 

Mr.FULLER. Well, I think what you are trying to suggest is that 

we need to be looking for other types of energy sources, and we 

agree with that. But we also believe that there are significant reserves still left in the United States that can be developed. For example, there is about, I think, 390 or so billion barrels of oil that 

we still have in areas that we have already developed, yet much 

of it hasn’t been extracted because the technology do it is not advanced enough to move forward and to get that oil. For example, 

one of the areas that has been recently researched that has shown 

potential in that regard is the use of carbon dioxide. 

Mr.BARTLETT. Let me ask you a question, sir. Isn’t $87 a barrel 

of oil a pretty good incentive for developing these new technologies? 

The point I am trying to make is that the world’s experts believe 

that we have probably found 95 percent of all the oil we will ever 

find. Pumping ANWR and offshore tomorrow leaves nothing in reserve for the day after tomorrow. 

I have 10 kids, 16 grand kids and 2 great-grand kids. Not with 

my vote, but this Congress is going to bequeath to them the largest 

intergenerational debt transfer in the history of the world. 

Wouldn’t it be nice if I left my kids, my grand kids and my greatgrand kids a little energy? I think so. 

In a former life, I was a home builder, and the other three witnesses are all in one way or another involved in home building. 

And I would contend that we are doing is satisfying ourselves that 

we are—that we are addressing the problem of energy with what 

we are doing in home building, and yet three of the most productive ways of saving energy in our homes I see in a very, very small 

percentage of homes. 

What percent of the new homes built are passed as solar? We do 

really dumb things in our home design. We put in 6-inch walls 

with R-19 insulation, and then half of the street-facing windows, 

which may be north, or half of the street-facing walls, which may 

be north, are windows. No matter what kind of window you put in, 

a triple-glazed window is an awful heat source. It is a big hole 

through which heat goes compared to a wall. 

What percent of our homes are passed as solar? 

Mr.RODRIGUEZ. If you are addressing the question to me, sir, I 

don’t have the answer, but I will tell you it is minuscule. 

Mr.BARTLETT. It is minuscule, and it is a huge, huge way to save 

energy. 

What percentage of our homes have a solar water heater on the 

roof? It is a huge way of saving energy. What percentage of them 

have a solar water heater on the roof? 

Mr.RODRIGUEZ. That is correct. And again, I don’t have a specific 

number. I will tell you with respect to that—that is an interesting 

question. The percentage usage was higher. As we began to increase our reliance on electricity, and energy prices were reduced, 

it started to drop, and now we are starting to see it come back up 

again. 

19

Mr.BARTLETT. The usual heat pump is tied to the air, which 

means that when I am air conditioning my home in the summertime, I have to heat up the 100-degree air temperature outside. 

When I am heating my home with the heat pump in the wintertime, I am having to cool the 10-degree air outside. That is pretty 

dumb, isn’t it, compared to tying my heat pump—we call it geothermal. It is not geothermal. We are not tying it to the magna of 

the Earth, but we are tying it to the Earth, which is 56 degrees 

all year long. That seems awfully cool in the summertime and awfully warm in the wintertime. 

How many of our heat pumps are tied to the Earth? 

Mr.RODRIGUEZ. Minuscule amount. 

Mr.BARTLETT. Why are we kidding ourselves we are doing something about energy efficiency when just three of the most efficient 

ways, the most dramatic ways of saving energy appear in almost 

none of our homes? 

Mr.RODRIGUEZ. If I may, Mr. Bartlett, I think that is your biggest opportunity, is to provide the opportunity for people to avail 

themselves of that through a variety of ways. First of all, you address design. I am here to tell you that we are not designing things 

the way we are supposed to be designing them, but there are an 

awful lot of factors that have to be considered when you make that 

statement, and it is not just pure design. 

We also have to deal with available technologies, so if we don’t 

provide technologies to be broadened and beyond that to look towards new technologies, not making existing technologies better, 

although that is also a part, then that is an opportunity wasted. 

That is your greatest opportunity and, I would submit also, challenge. You have to be able to look at the future and that future is 

not tomorrow; it is X number of days, months, years, maybe decades ahead. 

ChairwomanVELA ́ ZQUEZ. Mr. Bartlett, your time has expired, but 

I will recognize you for 2 more minutes. 

Mr.BARTLETT. We can have another round, Madam? 

ChairwomanVELA ́ ZQUEZ. Yes, we do. 

Mr.BARTLETT. Let me close this round then by saying that we are 

just giving lip service to energy conservation and leadership has responsibility, and we are behaving as leaders—you all are leaders 

in your industries, we are leaders here. We are behaving no more 

responsibly than the parent who gives their kids cookies because 

that is what the kids want. Leadership has some responsibility, 

and we are not exercising that responsibility from the top down. 

We are not exercising that responsibility relative to energy. 

Thank you very much. I look forward to a second round. 

ChairwomanVELA ́ ZQUEZ. Mr. Ellsworth. 

Mr.ELLSWORTH. Madam Chair, I am still inspired by Mr. Bartlett’s comments. I will just associate myself with his comments and 

go to the next round. 

ChairwomanVELA ́ ZQUEZ. Ms. Fallin. 

Ms.FALLIN. I guess what I would like to know, and I missed a 

portion of the early on testimony and I apologize, I was at other 

committee hearings, but what can we do, and maybe you have already covered this, but in light of knowing our energy demands 

throughout the world and in light of knowing what our housing in 

20

the United States, how much of the energy it picks up and the 

price of gas and oil, and foreign countries that may be unfriendly 

to our United States, that we are depending so much on foreign energy, what can we do as a nation to help our families, our consumers, our homeowners use more of the new technology? I have 

heard a lot about the tax credits and extending those, but are there 

other things that we can do as Members of Congress that will 

maybe ease up some of the burdens that we put upon business for 

the research development that can encourage the energy efficient 

technologies to be used in our homes? 

Any of you. Yes, sir. 

Mr.THOMPSON. Ms. Fallin, I think one of the other suggestions 

the National Association of Home Builders would advance is that 

we need to explore opportunities through financing. Energy efficient mortgages, they have been around for about 15 years, but we 

really don’t see much activity in them. And I don’t have all the answers today for you on that, but I would welcome a dialogue on 

how we could make them more mainstream in the marketplace and 

have an impact on bringing these expensive technologies to the 

mainstream and affordable to America’s home buying consumers. 

Ms.FALLIN. I am going to ask, you are saying we have had those 

kind of mortgages in the past? 

Mr.THOMPSON. Yes, they have been around for about 15 years. 

They are not very widespread in their use. You don’t see a lot of 

banks or lenders that are even offering them. 

Ms.FALLIN. If I may ask, Madam Chairman, what stops consumers from getting those mortgages? What is the burden or red 

tape that keeps us from utilizing those more? 

Mr.THOMPSON. I don’t think there has been enough differential 

in the rates that they provide or the amount of loan that you can 

obtain that has made enough difference in the marketplace for people to reach out for them, but I really think there is an opportunity 

to market them, to improve the advantages to customers considering these energy efficient investments in their home and bringing 

them to the mainstream. 

Ms.FALLIN. If I may, Madam Chairman, are there any rules or 

regulation or hoops that we make home builders, architects, anyone who deals in energy efficiency that you have to jump through 

that would—and we want to conserve energy, we want to be conservation conscious, but are there any things that we do in our 

rules and regulations throughout the Federal Government that 

don’t make sense, that we could look at in Congress that would improve our energy efficiency in our homes? 

Mr.RODRIGUEZ. If I may, this may sound a bit pie in the sky, but 

there is a point there, I think we have to provide incentives for ingenuity. I don’t think we do enough of that, so how do we do that? 

As I said earlier, we have to look further into the future than we 

are looking. We have to stop talking about stuff and get on with 

it. 

You know, one of my favorite lines is the Paperwork Reduction 

Act, which added about 2 inches at the bottom of the form to inform us of the Paperwork Reduction Act. 

There is no one particular person to blame. That is kind of one 

of those common-sense things that we kind of missed. But the 

21

greatness of this country has traditionally been its ingenuity, and 

yet it seems whenever we provide funding or do anything to provide incentives for ingenuity, we weigh it down with reporting requirements, with the forms or with the thresholds that have to be 

crossed. I think anything we do has to be done with that in mind, 

keep that down, recognizing that you have to exercise proper stewardship without necessarily sinking the ship by adding too much 

ballast. 

We have to keep that in mind and do everything we can. If we 

can reward ingenuity, I think that is pretty global and you would 

address a lot of the items that we are talking about here today. 

Ms.FALLIN. Thank you, Madam Chairman. 

ChairwomanVELA ́ ZQUEZ. Mr. Thompson, almost everyone here 

are talking about the fact that education and information has to be 

part of the equation when we talk about energy and conservation. 

How can we achieve greater energy efficiency? The legislation that 

the House sought to increase this type of awareness, but there may 

be a concern that it also could create a regulatory burden, and the 

gentlelady was making reference to that. 

If this legislation requires home builders to obtain additional energy analysis to indicate whether they meet or exceed the revised 

energy efficiency levels, what possible effect could this have on 

your industry? 

Mr.THOMPSON. I think a couple comments there would be that 

the States would have a great deal of difficulty in implementing 

the requirements to show that their code meets the 50 or 30 percent over code requirement. So the simpler the codes can be, the 

easier they can be to comply with, the less certification that there 

needs to be, the less expensive certification, the easier it will be for 

small businesses to be able to meet those requirements. 

Larger businesses will probably have an economy of scale that 

will help them in that respect, but it will be particularly onerous 

on the smaller businesses through the complexities. 

The ICC code development process takes this into account and I 

think the consensus process that we have there really tries to bring 

to the building codes a reasonable degree of simplification and options flexibility, so that for regional differences you can find what 

is going to be the most cost effective way to achieve on energy efficiency. 

ChairwomanVELA ́ ZQUEZ. And if this means that costs are going 

to be incurred, who would be the one paying for that, builders in 

this case or consumers? 

Mr.THOMPSON. Well, as a builder, if you want to stay in business 

you have to pass those costs on to your buyers. So it will be the 

American home buying consumer who will pay for that, or they will 

say it is not worth the investments in a new home, I am going to 

buy an existing house, which will be less energy efficient. So we 

have to strike the right balance there that continues to improve the 

energy efficiency of the overall stock. 

ChairwomanVELA ́ ZQUEZ. Mr. Rodriguez, in your testimony you spoke about increasing the tax credit from $1.80 cents to over $2 

per square foot. Can you talk to us about why this is necessary if 

many builders are already utilizing the tax credit and how will this 

increase promote greater energy efficiency? 

22

Mr.RODRIGUEZ. We are not seeing the significant use of the credit on the commercial side. The deepening of it simply makes it 

more worthwhile and in a sense we are promoting rewarding energy efficiency rather than mandating it or regulating it. So the expansion of the credit will have that effect by making it a more viable piece that comes back, but we are just not seeing it being used 

tremendously, and part of that also has to do with the extension. 

ChairwomanVELA ́ ZQUEZ. Uh-huh. 

Mr.RODRIGUEZ. We can’t minimize that, but we think it is critical 

to make it real, to make it worthwhile. It is not a dissimilar response to the mortgage answer that was given shortly before. It is 

just a matter of it is less meaningful at its current rate than it 

would be at the higher. 

ChairwomanVELA ́ ZQUEZ. Mr. Chabot. 

Mr.CHABOT. Thank you, yeah, just a couple of final questions. 

Mr. Fuller, you mentioned, I think, that there are 390 billion barrels of oil that we already know about, but at this point because 

of the state of technology we can’t tap into because they are either 

too deep or for some reason. Can you expound upon that a little 

bit? 

And also, Roscoe mentioned ANWR, for example, in passing. I 

think we have—estimates vary but I believe it is around 16 billion 

barrels of oil there. I think what you said the numbers there, you 

know it certainly grabs your attention when you consider that 

ANWR is around 16 billion barrels and you are talking about 390 

billion barrels of oil that are already discovered but we can’t get 

to for one REASON or another. Could you expound upon that a little bit? 

Mr.FULLER. Yes, I’ll try to do that. Essentially you have to look 

at the history of the development of oil in the United States. Much 

of the early development, turn of the last century and early on into 

about half of the last century was at a time we didn’t understand 

as a science of producing oil as well as we do now. So the production that was done, prices were very low. The structure that was 

controlling how fast things could be produced was in its infancy. It 

developed over time, but what happened was a lot of oil was left 

in the ground because we produced maybe 10 percent of a field. 

We have been working since then to try to figure out ways to enhance that oil recovery, and we have used a number of different 

technologies called typically secondary or tertiary coverage. Some 

of those involve using produced water to try to flood more oil out 

of a formation using the oil floating on water concept. 

Recently we have started to see various types of gas technologies, 

nitrogen, carbon dioxide, as mechanisms to try to force this basically oil that is still left in these old fields into production. Much 

of that has happened in marginal wells, very small producing 

wells, because they have depleted over a long period of time. Much 

of that is done by the small business component of my membership. 

One of the challenges that they have is that as small businesses 

they don’t have a huge research and development capability, they 

have virtually no research and development capability. So even 

though the price of oil may be high, this is a technology question, 

this is a question of how do you develop the technologies to be able 

to go after those types of reserves that haven’t been produced well. 

23

One of the areas that we have worked with a lot with the Congress on is trying to maintain the research and development component of the Department of Energy’s fossil energy program for oil 

and natural gas, which the administration wants to zero out. They 

view it as a some form of a program that subsidizes the big oil companies. It is not. They do their own research and it is proprietary. 

My members don’t get to utilize it. 

The kind of research that could be done, for example, on utilizing 

carbon dioxide, which is an issue that is getting a lot of attention 

in the global climate context, to bring more of that oil into production is an area that we think bears a significant potential. The Department of Energy has done studies suggesting that significant 

amounts of that oil can be produced, and that is an area that we 

need to go back to again and again and again, because as we learn 

more things about the nature of developing oil, developing natural 

gas, the potential for getting that 300 or 90 billion barrels out and 

into American production can be a big asset to this country. 

Mr.CHABOT. Thanks. 

And then finally, again Roscoe mentioned a couple things which 

I thought were quite interesting relative to this whole thing, and 

Roscoe, by the way, is a nuclear physicist, right? 

Mr.BARTLETT. No, physiologist. 

Mr.CHABOT. One of those things that a lot of us are not terribly 

familiar with and so we defer to Roscoe’s knowledge. Although I 

have to say Roscoe said he’s got 10 kids, 16 grand kids, I think he 

has personally been responsible for sort of the energy depletion in 

our country, but in any event, more power to you, Roscoe. 

But Roscoe talked about the solar energy and solar homes and 

how few that we actually have, the percentage, et cetera. And I actually had the opportunity a while back to go and personally tour 

kind of an experimental new solar home that is actually a nun in 

my district out at Mount Saint Joseph, the college, that she along 

with volunteers and others help and literally built, which is very 

impressive and I strongly encourage anybody to look into the research that she has done, et cetera. 

But at the practical level where somebody would say in Ohio, for 

example, use to a great extent solar energy for heating water or for 

heating their home or whatever, could anyone on the panel who 

wants to take this up, could you discuss the practicalities involved 

there of say doing it in Cincinnati or Cleveland, which is in the 

northern part of Ohio obviously versus, say, Arizona where may be 

more practical. What are we talking here dollars and cents? And 

why don’t more people do it in cooler climates in like say Ohio compared to say Arizona. 

Mr.RODRIGUEZ. If I may address that, first of all clearly the sun 

shines every place to a lesser or greater degree, but one of the more 

interesting tidbits of data that I heard was Seattle, whom everybody knows is rainy and cloudy 300 some odd days of the year. I 

wish I had good command of the numbers, but the point was that 

the solar effect on one wall of a typical home in Seattle given the 

lack of sunshine, if you will, that they receive was still enough to 

generate all the solar—all the power that the home needed to run 

and be off the grid. It may actually be producing in excess. 

24

What are the barriers here? So the first answer to your question 

is solar is good anywhere. Maybe not in the deep caves somewhere, 

I might not put a solar ray on the bottom of a missile silo, but certainly where we would be using them. 

The problem with solar right now is, I would say, the major one, 

is cost. The technology is advancing, production is not increasing 

and we all know the supply/demand thing. Oddly enough photovoltaic cells, the key ingredient is silica, the key ingredient in computer chips, and we all know what happened to the price of computer chips as supply grew. 

We need to find a way to reward greater production of 

photovoltaics to bring that cost down to where it is manageable. 

I just did this for my own home in Miami. I didn’t implement it, 

I have been running costs to see what point it reaches where it 

warrants the investment in it. The last time I did it was a couple 

years ago, and I estimated about $60,000 to deploy a solar array 

that would power the house, a small house, 2700 square feet. I recently did it, it is now about 30,000, and it is at the point where 

I am actually thinking seriously. It is probably not as cheap as I’d 

like it, but I also like to walk the walk. So I am looking at doing 

that. But if we get that down, then solar homes become much more 

viable. 

Mr.CHABOT. Mr. Cropp, would you want to weigh in on that? And 

how would that compare, the 60 or 30,000, to what it would take 

to have the appropriate heating and air conditioning for a home of 

say 2700 square feet, as Mr. Rodriguez said? 

Mr.CROPP. We are not experienced in doing solar, but in some of 

the seminars that I have attended—

Mr.CHABOT. I am sorry, what I meant was how would that compare with not going solar, doing the traditional route? I am talking 

about some comparison, because he said 60 and then you got it 

down to 30? 

Mr.RODRIGUEZ. It is about 30 now. 

Mr.CHABOT. So what would a comparable 2700-foot size home 

cost for the furnace and air conditioning as well. 

Mr.CROPP. You were looking at the entire house? 

Mr.RODRIGUEZ. Yes. 

Mr.CROPP. See, he’s talking the entire house. I would be talking 

just one portion of the house, but on a HVAC side the high efficient 

AC, a furnace, which would be minimal in the location that he’s 

talking there, you are probably looking at anywhere from about 10 

to $14,000 installation. That would give you a very high efficient 

system. 

The other area that was mentioned earlier about geothermal, it 

all boils down to the cost of the product and the cost of the installation and some of these costs. The reason the industry is not pushing it and aggressively going after it in certain locations is just 

that, what it costs to drill a hole or what it costs for the labor. The 

products themselves, if we can give incentives to the manufacturers 

or to the people that are producing these products, then there is 

a chance they can get these products cost effective. 

Mr.RODRIGUEZ. If I may add, Mr. Chabot. 

Mr.CHABOT. Yes. 

25

Mr.RODRIGUEZ. I want to bring our attention back to the holistic 

approach I talked about earlier, to build on Mr. Cropp’s response. 

There is one direct effect that installing a more energy efficient 

heating cooling system would have on a solar application, and that 

is it reduces power consumption, it reduces the draw. By reducing 

the draw the solar system can be sized down, which in turn reduces the cost of the solar system for installation. So the key is to 

look at not just installing a solar array, and saying we can be as 

inefficient as we want because we are doing it, although I suppose 

I probably couldn’t argue with that, because I would think the sun 

is renewable and we don’t face having to deal with it not being renewable. But if we can make water heating more efficient, the appliances more efficient, the HVAC system more efficient, every 

other piece of that house more efficient, it means you have to build 

a smaller solar array, drops that cost. 

Mr.CHABOT. Thank you very much. 

Mr.THOMPSON. If I could add one comment to that. I agree that 

you need to take both steps. The problem is that now you have 

added cost in the higher expense of the passive solar system or the 

geothermal system. In order to keep the cost somewhat curtailed 

of that we have also spent significant dollars on reducing the consumption in the house. So we have actually increased costs on both 

sides of the equation there. And so it becomes very difficult for 

America’s home buying consumer to be able to afford it. Please put 

some incentives in place in the marketplace and the Tax Code that 

can help them better afford it. 

Mr.CHABOT. Thank you very much. I appreciate it. It has been 

a very informative panel. I think you have all done a very excellent 

job, thank you. 

ChairwomanVELA ́ ZQUEZ. Mr. Sestak. 

Mr.SESTAK. Thank you, Madam Chair. I apologize, I read your 

material and then I listened to your testimony and then I had to 

step out for another meeting. And so I don’t think I have much to 

offer except maybe an overarching question. And I mean this in an 

agnostic way. And perhaps, sir, Mr. Rodriguez you could answer 

first and then Mr. Thompson. 

To some degree when you listen to your testimony or read it, the 

crossover point becomes important, you feel we can get there to 

where it is an incentive, and there seems to be significant hesitation about that, because I do see two goods here, the environment 

and truly a global issue and a national issue and the impact upon 

small business is how you achieve it. And I strongly do believe in 

the environment as one of, you know, the major survivable issues, 

so to speak. 

How would you address that in the crossover point, because your 

testimony says you can get there, and his point is, boy, I will tell 

you, you know, it is kind of okay right now, let’s keep it volunteer, 

you know, before we—I mean this in an agnostic way. 

Mr.RODRIGUEZ. And it is taken that way and I appreciate the opportunity to address it. I want to keep beating the holistic hammer. 

Another thing we have to do is stop making other decisions to proceed entirely on initial cost. We have to look at the life cycle of that 

building, in this particular reference that we are talking about a 

home. 

26

Now, if I could build you a home, that was completely off the grid 

and it would cost you nothing in energy to operate, doesn’t that affect the overall cost of the home? It may cost you more to buy, 

there’s no question about that, so then the question becomes at 

what point do those two lines meet? How much more are you willing to pay for a home? Let’s not increase the cost of the home. 

I think we have to give a little more credit to the American consumer. They are not all as dumb as we sometimes think they are. 

If you make the case on a holistic basis and you say we can build 

you a home that is going to save you energy, you are going to be 

healthier because we have daylight in it and good air quality, we 

have appliances that don’t kill you with energy usage and you will 

be able to run it for no money at all so you’re not going to have 

to pay the electric utility X amount of money, or let’s not say zero, 

let’s say 10 percent of what you are paying no now, at some point 

that becomes a pretty easy decision, doesn’t it? 

I will hit on one other thing, one of the biggest barriers that we 

have and I think more so in commercial than in residential because 

our homes are our homes and the average time in a home is—well, 

the last I read is 7, it is probably a little less now in years, and 

people are people and they want to be mobile. When it comes to 

commercial, we are making financing and construction decisions for 

our buildings on a 5-year cycle. It’s very difficult to make a case 

for life cycle overcoming the initial cost to build something if we 

are looking at keeping this 5 years. Well, what happens to the poor 

guys that buys it on the fifth year and first day because they then 

inherit. When we talk about mortgages, how those decisions are 

being made and encouraged, looking at buildings as lasting more 

than 5 years. What would have happened if the folks who built the 

building right now would have designed it for a 5-year life? Think 

about it. Okay. 

Mr.SESTAK. Okay. Yes, sir. 

Mr.THOMPSON. We are already incorporating life cycle considerations into the energy efficiency that we incorporated into houses 

already. The building codes look at it from that approach on a regular basis. So we can continue to focus on that, but we can’t keep 

it focused solely on new homes. If we are to meet these tremendous 

energy savings that we hope to, it can’t be on the backs of only new 

homes, only new commercial buildings, unless we look at the entire 

stock, existing stock of buildings that we have and how we can improve their energy efficiency. We do not have hope of beating the 

ambitious goals that are being laid out. 

Mr.SESTAK. I went to visit the only green school in Pennsylvania 

in Radnor, and there are 600 wells where it goes down and the 

water comes up. I just went out there one day to visit and you are 

right about this crossover point, they don’t reach it until beyond 

that 7-year point where someone doesn’t get it back, and I think 

that is key and we don’t do that well in government, because it is 

appropriations every year. 

But sir, for me can you be part of it so that the standards can 

rise some, I mean not only but to some degree you got to where 

you were, we are not where we were in 1930, so is there another 

step to be done? 

27

Mr.THOMPSON. Well, I think we are looking far beyond a 5 or 7-

year life cycle for energy efficiency already. In work that I’ve done 

and NAHB has done with the Department of Energy, 15 to 30-year 

life cycle is the way we have looked at different energy improvements. 

I offered geothermal heat pumps to many of my customers. 

Here’s how much it costs, here is what the projected payback is, 

and I find very few, when armed with that information, make the 

choice to spend the additional money for the geothermal system. 

Perhaps we need to educate the public better, perhaps we need to 

put other incentives in place that will help more of those people 

make those decisions to be more energy efficient. But I will tell 

you, the builders are out there making those options available to 

our home buying consumers. 

I also wanted to mention that there is a DOE solar decathlon on 

the mall going on right now. There are several solar houses out 

there in the 500,000 to $1 million price range. 

Mr.SESTAK. I thank you very much. Those are very important. I 

hear the same argument made by dealers of CAFE standards for 

cars. I guess it is coming to grip with how does everyone contribute 

so everyone benefits, that is the hard part, without anyone being 

hurt badly. Thank you very much. 

ChairwomanVELA ́ ZQUEZ. Time has expired. 

Mr. Bartlett. 

Mr.BARTLETT. Thank you. Rather than to the high cost of geothermal heat pumps, almost every time we build a house we dig 

a big hole. It is to put a basement in the house. Why don’t we just 

put these pipes under the footer and under the basement floor and 

insulate over it? Wouldn’t that be a pretty cheap way to link it to 

the Earth? 

Germany has somewhere between mediocre and poor insolation, 

that is not insulation, which is the amount of sunshine you get, 

and yet Germany is the leading country in the world in installing 

solar panels. 

How many of you know who M. King Hubbert was? Anybody? 

What a pity it is and it is not your fault. M. King Hubbert was a 

Shell Oil Company geologist who 51 years ago this year, the 8th 

day of March in San Antonio, Texas, gave what will in a few years 

be recognized as the most important speech given in the last century and he addressed a group of oil engineers, and so forth, in San 

Antonio, Texas. And he told them that the United States in 14 

years, by 1970, would reach its maximum oil production. 

At that time the United States was king of oil. We were producing and exporting more oil, I think, than any country in the 

world. And he told them that in just 14 years we would reach our 

maximum oil production. Shell Oil Company begged him not to do 

that. It was a silly thing to say and it would make them look silly. 

He was ridiculed for a number of years, and then right on target 

in 1970 we reached our maximum oil production. 

Mr. Fuller, in spite of drilling more oil wells in our country than 

all the rest of the world put together, we have 530,000 operating 

oil wells in our country. We have more than four times as many 

oil wells in the Gulf of Mexico than all of Saudi Arabia. In spite 

of all those oil wells we now produce about half the oil. As a matter 

28

of fact, for the lower 48, which is what M. King Hubbert predicted, 

we now produce less oil, about half the oil that we did in 1970. 

It was mentioned in the opening remarks that by 2030 we will 

have a 70 percent increase for the demand in oil. There will not 

be 70 percent more oil, just 2 percent growth, and growth in the 

world is now increasing more than that because of China, India 

and the Third World trying to industrialize. Just 2 percent growth, 

doubles in 35 years, it is four times bigger in 70 years, it is 8 times 

bigger in 105 years and it is 16 times bigger in 140 years. There 

isn’t even a prayer that we will have anything left. We are not 

going to have half the oil that we have now in 140 years. 

As a matter of fact, another great speech given in the last century was given by the father of our nuclear submarine, Hyman 

Rickover, to a group of physicians in St. Paul, Minnesota. That was 

just 50 years ago this last year. His widow sat in the gallery when 

I commemorated that speech on the floor of the House. 

He predicted that in 8,000 years of recorded history the age of 

oil would be but a blip in the history of man. At that time we were 

100 years into the age of oil, now we are 150 years into the age 

of oil. 

How many of you know that your government has paid for four 

major studies on energy futures of the world and that they are now 

systematically ignoring the counsel of SAIC studies called the 

Hurst report, Corps of Engineers study done for the Army, the 

GAO study done—I asked for it through our Science Committee—

and the National Petroleum Council which the President asked for, 

and every one of those reports said that the peaking of oil—by the 

way, oil production has been constant for the last 30 months, increasing demand, constant production, increasing cost. About every 

one of those four studies concluded that oil peaking was either 

present or imminent with its potentially devastating consequence. 

Do any of you know anything about those four studies? Again, 

what a pity. It recognizes the absence, Madam Chair, of leadership 

in our country. 

I thank you very much for holding this meeting. Energy I think 

will be the overarching issue in this decade. We have about 20 people running for President and not one of them mentions energy. I 

pulled up their Web sites on energy and the comments there run 

from silly to really silly for most of them. 

So thank you very much for holding this very important hearing 

and thank you for your testimony, gentlemen. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

I just want to move a little bit away from the whole oil discussion, Mr. Fuller, and I would like to ask you to address my last 

question and it is regarding high natural gas prices could have a 

significant negative impact on agriculture in rural America, and 

the agriculture sector is a large consumer of natural gas, using it 

for everything from producing nitrogen fertilizer to drying grain. 

Farmers are doing their part to reduce natural gas consumption by 

installing renewable energy and energy efficiency systems and by 

adopting best management practices to optimize fertilizer use. 

What can be done to bring more stability in prices for natural 

gas and for rural America? Are there alternatives to natural gas 

usage either in the short or long term? 

29

Mr.FULLER. I can’t speak to the last point because I don’t know 

about the alternatives. What we are tending to see is natural gas 

is in a commodity market, commodity market reacts to supply and 

demand, and that is what has caused a lot of the volatility. It is—

over the past several years we are seeing two dynamics probably 

flowing. One is in conventional gas, which is the classic type of formation that has been developed for decades and decades, we face 

significant increases in decline curves. The ability to produce and 

find that gas is increased. And so say 15 years ago the average annual decline rate was about 16 percent overall, now that average 

annual decline rate is over 30 percent. That means that to stay 

even in the United States we have to find and develop and get online new natural gas supplies that exceed the amount that we annually produce from the Gulf of Mexico, which is a world class area 

for natural gas production. That challenge is what then has the effect of creating the demand-supply interaction that we have seen. 

Now recently what we have started to see is as we were developing more unconventional gas, which comes from types of formations that haven’t been developed until perhaps the past 15 years, 

things like shales and tight sands, those tend to have a slower decline rate and we have seen the increase go up. 

We are actually probably seeing for this year the first time in 

quite a while a small increase in natural gas production. Without 

more supply, we are either faced with demand destruction to bring 

the market back into alignment or—and therefore we are going to 

continue to see the kind of volatility that has existed for the past 

several years. 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Fuller. Definitely this 

has been a fascinating hearing and I want to thank all the witnesses for your participation. 

Would you like to add? 

Mr.CHABOT. Very briefly, Madam Chair. I would just note that 

neither you, nor I, nor the panel, nor anybody in the room other 

than Roscoe knew who the heck M. King Hubbert was. I thought 

this was a very informative hearing and I want to thank you for 

holding it, and I want to thank the panel for discussing this important topic with us. I yield back. 

ChairwomanVELA ́ ZQUEZ. And I just would like to say that yes, 

there have been concerns that have been raised regarding H.R. 

3221, the energy package that was reported out of the House. And 

I just want to make sure that some of the incentives that are contained in that bill are adequate in terms of promoting efficiency in 

this country, also that some of the changes that will be implemented in some other areas are done in a way that are workable. 

So I will be drafting a letter, sending it to the relevant parties, 

and I will make that letter available to the members of the committee, raising some of the concerns that were expressed here this 

morning and any member who wants to be part of that letter is 

welcome to do so. 

I ask unanimous consent the members have 5 legislative dates 

to enter statements and supporting materials into the record. Without objection, so ordered. 

This hearing is now adjourned. Thank you. 

[Whereupon, at 11:50 a.m., the committee was adjourned.]

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