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ENERGIZING HOUSTON: SUSTAINABILITY,

TECHNOLOGICAL INNOVATION, AND

GROWTH IN THE ENERGY CAPITAL

OF THE WORLD

FIELD HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND

ENVIRONMENT

COMMITTEE ON SCIENCE AND

TECHNOLOGY

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

FEBRUARY 29, 2008

Serial No. 110–79

Printed for the use of the Committee on Science and Technology

(

Available via the World Wide Web: http://www.science.house.gov

(II)

COMMITTEE ON SCIENCE AND TECHNOLOGY

HON. BART GORDON, Tennessee, Chairman

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

MARK UDALL, Colorado

DAVID WU, Oregon

BRIAN BAIRD, Washington

BRAD MILLER, North Carolina

DANIEL LIPINSKI, Illinois

NICK LAMPSON, Texas

GABRIELLE GIFFORDS, Arizona

JERRY MCNERNEY, California

LAURA RICHARDSON, California

PAUL KANJORSKI, Pennsylvania

DARLENE HOOLEY, Oregon

STEVEN R. ROTHMAN, New Jersey

JIM MATHESON, Utah

MIKE ROSS, Arkansas

BEN CHANDLER, Kentucky

RUSS CARNAHAN, Missouri

CHARLIE MELANCON, Louisiana

BARON P. HILL, Indiana

HARRY E. MITCHELL, Arizona

CHARLES A. WILSON, Ohio

RALPH M. HALL, Texas

F. JAMES SENSENBRENNER JR.,

Wisconsin

LAMAR S. SMITH, Texas

DANA ROHRABACHER, California

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

FRANK D. LUCAS, Oklahoma

JUDY BIGGERT, Illinois

W. TODD AKIN, Missouri

JO BONNER, Alabama

TOM FEENEY, Florida

RANDY NEUGEBAUER, Texas

BOB INGLIS, South Carolina

DAVID G. REICHERT, Washington

MICHAEL T. MCCAUL, Texas

MARIO DIAZ-BALART, Florida

PHIL GINGREY, Georgia

BRIAN P. BILBRAY, California

ADRIAN SMITH, Nebraska

PAUL C. BROUN, Georgia

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

HON. NICK LAMPSON, Texas, Chairman

JERRY F. COSTELLO, Illinois

LYNN C. WOOLSEY, California

DANIEL LIPINSKI, Illinois

GABRIELLE GIFFORDS, Arizona

JERRY MCNERNEY, California

MARK UDALL, Colorado

BRIAN BAIRD, Washington

PAUL KANJORSKI, Pennsylvania

BART GORDON, Tennessee

BOB INGLIS, South Carolina

ROSCOE G. BARTLETT, Maryland

JUDY BIGGERT, Illinois

W. TODD AKIN, Missouri

RANDY NEUGEBAUER, Texas

MICHAEL T. MCCAUL, Texas

MARIO DIAZ-BALART, Florida

RALPH M. HALL, Texas

JEAN FRUCI Democratic Staff Director

CHRIS KING Democratic Professional Staff Member

MICHELLE DALLAFIOR Democratic Professional Staff Member

SHIMERE WILLIAMS Democratic Professional Staff Member

ELAINE PAULIONIS PHELEN Democratic Professional Staff Member

ADAM ROSENBERG Democratic Professional Staff Member

ELIZABETH STACK Republican Professional Staff Member

STACEY STEEP Research Assistant

(III)

C O N T E N T S

February 29, 2008

Page

Witness List ............................................................................................................. 2

Hearing Charter ...................................................................................................... 3

Opening Statements

Statement by Representative Nick Lampson, Chairman, Subcommittee on

Energy and Environment, Committee on Science and Technology, U.S.

House of Representatives .................................................................................... 6

Written Statement ............................................................................................ 7

Statement by Representative Ralph M. Hall, Ranking Minority Member,

Committee on Science and Technology, U.S. House of Representatives ......... 9

Statement by Representative Roscoe G. Bartlett, Member, Subcommittee on

Energy and Environment, Committee on Science and Technology, U.S.

House of Representatives .................................................................................... 10

Statement by Representative Gene Green, Member, Committee on Energy

and Commerce, U.S. House of Representatives ................................................. 12

Prepared Statement by Representative Adrian Smith, Member, Committee

on Science and Technology, U.S. House of Representatives ............................. 14

Panel I:

Mr. John Hofmeister, President, Shell Oil Company

Oral Statement ................................................................................................. 14

Written Statement ............................................................................................ 17

Biography .......................................................................................................... 19

Mr. Bill White, Mayor, City of Houston

Oral Statement ................................................................................................. 19

Written Statement ............................................................................................ 21

Biography .......................................................................................................... 22

Mr. Thomas R. Standish, Group President of Regulated Operations,

CenterPoint Energy

Oral Statement ................................................................................................. 23

Written Statement ............................................................................................ 25

Biography .......................................................................................................... 26

Discussion

The Role of the Federal Government ................................................................. 26

How Can We Make Oil Production Cleaner? ..................................................... 27

A Timeline for the Smart Grid? .......................................................................... 28

Ultra-Deep Drilling and the Energy Policy Act of 2005 ................................... 29

The Domestic Manufacturing Tax ...................................................................... 30

Balanced on the Razor’s Edge: Strategies for the Future ................................. 31

The Low Income Housing Energy Assistance Program .................................... 34

Shell’s Emissions Clarified .................................................................................. 35

Panel II:

Dr. Walter G. Chapman, W.W. Akers Professor; Director, Energy and Environment Systems Institute, Rice University

Oral Statement ................................................................................................. 36

Written Statement ............................................................................................ 39

Page

IV

Dr. Walter G. Chapman, W.W. Akers Professor; Director, Energy and Environment Systems Institute, Rice University—Continued

Biography .......................................................................................................... 40

Mr. C. Michael Ming, President, Research Partnership to Secure Energy

for America (RPSEA)

Oral Statement ................................................................................................. 40

Written Statement ............................................................................................ 43

Biography .......................................................................................................... 44

Dr. Robert L. Hirsch, Senior Energy Advisor, Management Information Services, Inc.

Oral Statement ................................................................................................. 45

Written Statement ............................................................................................ 46

Biography .......................................................................................................... 48

Dr. Robert C. Harriss, President and CEO, Houston Advanced Research Center

Oral Statement ................................................................................................. 49

Written Statement ............................................................................................ 51

Biography .......................................................................................................... 53

Discussion

Technology Commercialization Challenges ........................................................ 53

H.R. 5146, Invest in Energy Security Act .......................................................... 54

Benefit of R&D in Peak Oil Scenario ................................................................. 55

Peak Oil and Climate Change ............................................................................. 55

The Changing Role of Government Research .................................................... 56

Strategies: Will Conservation Work? .................................................................. 57

Appendix 1: Answers to Post-Hearing Questions

Mr. John Hofmeister, President, Shell Oil Company ........................................... 66

Mr. Thomas R. Standish, Group President of Regulated Operations,

CenterPoint Energy ............................................................................................. 68

Dr. Walter G. Chapman, W.W. Akers Professor; Director, Energy and Environment Systems Institute, Rice University ...................................................... 69

Dr. Robert L. Hirsch, Senior Energy Advisor, Management Information Services, Inc. ................................................................................................................ 70

(1)

ENERGIZING HOUSTON: SUSTAINABILITY,

TECHNOLOGICAL INNOVATION, AND

GROWTH IN THE ENERGY CAPITAL OF THE

WORLD

FRIDAY, FEBRUARY 29, 2008

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT,

COMMITTEE ON SCIENCE AND TECHNOLOGY,

Washington, DC.

The Subcommittee met, pursuant to call, at 10:38 a.m. in Baker

Hall, Suite 120, James A. Baker III Institute for Public Policy,

6100 Main Street, Rice University, Houston, Texas, Hon. Nick

Lampson [Chairman of the Subcommittee] Presiding.

2

3

FIELD HEARING CHARTER

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

COMMITTEE ON SCIENCE AND TECHNOLOGY

U.S. HOUSE OF REPRESENTATIVES

Energizing Houston: Sustainability,

Technological Innovation, and

Growth in the Energy Capital

of the World

FRIDAY, FEBRUARY 29, 2008

10:30 A.M.–12:30 P.M.

JAMES A. BAKER III INSTITUTE

RICE UNIVERSITY

HOUSTON, TEXAS

Purpose

On Friday, February 29, 2008 the House Committee on Science and Technology,

Subcommittee on Energy and Environment will hold a hearing entitled, ‘‘Energizing

Houston: Sustainability, Technological Innovation, and Growth in the Energy Capital of the World,’’ at the James A. Baker III Institute for Public Policy, Rice University, Houston Texas.

The Subcommittee’s hearing will explore how the energy industry and cities like

Houston are working to address challenges in areas such as energy supply and security, global climate change, and rapid economic growth.

Witnesses

Panel I:

Mr. Bill White, Mayor of the City of Houston, will discuss City of Houston initiatives to encourage energy conservation and clean energy technologies, while preserving the Houston region’s competitiveness in an increasingly global marketplace.

Mr. John Hofmeister, President of the Shell Oil Company, will discuss energy

challenges facing the Nation, and the major technical barriers to deploying a range

of energy options including conventional and unconventional oil and gas and alternative energy resources.

Mr. Thomas Standish, President of Regulated Operations, CenterPoint Energy, will

discuss the importance of federal funding of research and development to realize the

potential of Smart Grid technologies, and other energy efficiency and emissions reductions efforts CenterPoint has underway in Houston.

Panel II:

Dr. Walter Chapman, Director of the Energy and Environment Systems Institute,

Rice University, will describe how university-based research can provide new opportunities in conventional and unconventional oil and gas exploration, as well as renewable energy technologies. Professor Chapman will also address the funding challenges for energy research and need for education and outreach programs in energy

fields.

Dr. Robert Harriss, President & CEO, Houston Advanced Research Center, will

discuss research and technology development efforts in the Houston area to mitigate

global climate change impacts of the region; to reduce energy consumption of homes;

businesses and heavy industry; and encourage sustainable development.

Dr. Robert Hirsch, Senior Energy Advisor, Management Information Services Inc.,

will discuss the economic implications of oil shortage scenarios, how government

and the energy industry should address a crisis of peak oil, and the potential impact

of various energy technologies.

4

Mr. Michael Ming, President, Research Partnership to Secure Energy for America

(RPSEA), will discuss the potential of public-private research and development efforts to access previously unrecoverable reserves of energy in ultra-deepwater offshore and unconventional onshore oil and gas reservoirs.

Background

As the sixth largest metropolitan area in the U.S. with a population of 5.5 million,

the greater Houston region continues to undergo rapid economic expansion and population growth. In every decade since 1850, the City of Houston’s population has

grown by at least 29 percent. This growth is due largely to Houston’s proximity to

raw materials, sea ports, and related infrastructure. Houston is a major port for agricultural exports and a center for oil and natural gas research, exploration, and

production. However, with this rapid development come immense challenges to consumers, city planners, local energy providers, and local industries that must stay

competitive in an increasingly global marketplace. Witnesses on the first panel will

discuss how local initiatives in cities such as Houston can address these issues.

The challenge for all stakeholders lies in the need for the U.S. to obtain more energy from a variety of domestic sources, enhance the energy efficiency of communities and industry, become less reliant on energy sources and technologies that

have an adverse effect on the environment, and to integrate these often-competing

factors into policies and practices that lead to a more sustainable economy. The

push for new technologies is especially urgent given the geopolitical and market

forces that threaten global energy supplies and economic stability, finite fossil fuel

reserves, the direct and indirect costs of energy to consumers, the looming threat

of global climate change, and probable regulation of carbon dioxide emissions.

Given the magnitude and complexity of global energy use, research and development must begin to address these competing needs soon for technologies to penetrate the market and have an impact on our long-term energy and environmental

goals. Complex challenges also call for a refined approach to energy R&D, one that

incorporates the expertise and resources of the Nation’s universities, government research labs, and private industry into cohesive efforts to overcome major technical

barriers. Witnesses on the second panel will address how new models for technological innovation, including public-private research partnerships, and universitybased basic research can be integrated overcome grand technical challenges in sustainable development.

Houston and Energy Technology

Houston has grown to support a number of diverse industries in sectors such as

aerospace and chemicals production, yet energy remains the largest sector accounting for an estimated 48 percent of the region’s employment. According to estimates

by the Greater Houston Partnership, Houston’s energy industry includes the headquarters for 17 Fortune 500 energy companies, more than 3,600 energy related establishments, 13 of the Nation’s 20 largest natural gas transmission companies, 600

exploration and production firms, more than 170 pipeline operators and hundreds

of energy-sector product manufacturers. This concentration of energy companies and

expertise in the area has allowed the region to be a leader in international energy

technology markets, beyond its role as a producer of oil and gas from the Gulf of

Mexico. Houston has evolved into a global oil-technology development and distribution center, providing advanced oil and gas technologies for development of oil fields

in the Middle East, the North Sea, Malaysia, Indonesia, South America and West

Africa.

While it will continue to be a center for the petroleum industry in the U.S. Houston, along with the rest of the state of Texas, is rapidly becoming a focal point for

renewable energy and energy efficiency technology development. Wind energy is one

of the most promising and commercially viable renewable resources. The wind industry in Texas grew substantially after a 1999 State law that required a base percentage of electricity sold by utilities in the state to be generated from renewable

sources. Since then, Texas has surpassed the rest of the country in installing wind

capacity, allowing cities like Dallas (40 percent) and Houston (20 percent) to acquire

a significant portion of their purchased electricity from renewable sources. The utilization of renewables and end-use energy efficiency measures will be further optimized by the deployment of ‘‘Smart Grid’’ technologies that integrate new communications and control functions into the electricity distribution grid. Located at the

center of a nationwide fuel distribution and agricultural transportation network,

Houston is also quickly becoming a hub for the biofuels industry with several of the

country’s major biofuels firms located in the region.

The City of Houston has also encouraged the use of renewable energy technologies

and energy efficiency at the local level. The City has integrated renewable energy

5

technologies into local infrastructure. For example, school crosswalks use solar energy and in 2005, Mayor Bill White announced plans to convert a substantial portion of the City’s fleet of cars, pickup trucks and sport utility vehicles to hybrids

by the year 2010. Houston also hosted the first conference on Carbon Emissions

Trading with the British Consulate-General and the Greater Houston Partnership

in January 2007.

Ultra-Deepwater Research and Development

The hearing will also examine efforts underway to increase our domestic production of natural gas and other petroleum resources in ultra-deep offshore waters and

in unconventional onshore formations. As offshore production declines in the shallow

waters of the Gulf of Mexico, industry is looking to produce from oil and gas resources in deep-water (depths of 200–1,500 meters) and ultra-deepwater (depths

greater than 1,500 meters). According to the Minerals Management Service, untapped fields on the outer continental shelf could account for 86 billion barrels of

oil and 420 trillion cubic feet of gas.

Establishing wells at these depths, however, presents significant technological

challenges. Simply characterizing these reservoirs requires improved exploration

and depth imaging technologies. Drilling under these extreme conditions will be a

more daunting challenge. As it will require extensive seafloor infrastructure, more

research is needed in new production materials and architectures, and the integration of multiple systems including power distribution and data communication.

In May 2006, the Research Partnership to Secure Energy for America (RPSEA)

located in Sugar Land was selected to administer R&D contracts for the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Program established in Section 999 of the Energy Policy Act of 2005. The law mandated new

oil and gas research and development program with funding totaling near $500 million for ten years derived from royalties, rents, and bonuses from federal onshore

and offshore oil and gas leases.

6

Chairman LAMPSON. This hearing of the Energy and Environment Subcommittee will now come to order, and I wish all of you

a good morning.

It’s with a great deal of pleasure that I welcome my fellow Committee Members, Congressman Hall, Congressman Bartlett, and we

have others that are going to be joining us, also Congressional colleagues who are not on the Committee who will be coming, and our

distinguished panel of experts.

I welcome you all here to Rice University for what will undoubtedly be a lively and engaging conversation about the grand challenges that we face in energy. We have the pleasure of welcoming

some Members here who are not on the Science Committee; and as

they come, I will let you know who they are. I do ask unanimous

consent that our colleagues be permitted to join us on the dais and

participate in the hearing. Without objection, it is so ordered.

I would like to offer my sincere thanks to Rice University President Leebron and to the James A. Baker, III, Institute for Public

Policy for offering this very impressive facility to the Committee for

our meeting today.

So why, you might ask, is the United States House Committee

on Science and Technology holding a hearing in Houston, Texas?

Well, for one, my colleagues and I have ample opportunities in

Washington, D.C. to hear from a myriad of experts, lobbyists, and

interest groups; but the real way to gauge the importance of an

issue and the impacts of our policies is to step away from Washington, D.C. and talk to folks in the field—consumers, government

and energy leaders, researchers, and the general public. This is our

chance to take our show on the road and to hear from local leaders

and experts who just happen to be the international authorities in

their fields, and then to get these important perspectives on the

Congressional record for the benefit of Congress as we continue

what will be an endless effort to craft good energy policies.

While I may be a little biased, I can’t imagine a better place to

have an open and honest discussion about energy than in the energy capital of the world, Houston, Texas. More specifically, Houston has long been associated with the oil-and-gas energy that provides the backbone of our economy and helps to make our quality

of life the envy of the world. Oil and gas will absolutely continue

to play this vital role for the foreseeable future. Until we have better alternatives or, as one witness will testify to today, our global

supplies simply cannot meet our growing demand, we should not

be at all bashful in aggressively pursuing the cutting-edge technologies that will unlock previously unrecoverable hydrocarbon reserves. But we all must acknowledge, it is a new world, with a new

range of environmental, economic, and energy-related challenges

that threaten our very way of life.

Whether you are most concerned with skyrocketing energy costs,

$100-a-barrel oil, global climate change, energy security, job security, air quality, or competition from emerging nations, the one

thing that we can all agree on is that the status quo is simply not

sustainable and that we must adapt to this constantly shifting energy landscape. The world will not stand still for us. Our future

will be determined by our ability to implement sound but aggressive policies accompanied by robust government and private investVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00010 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
7

ment in developing the entire range of advanced technologies and

deploying them in the marketplace.

The city leaders in Houston are well aware of the difficulties of

balancing often competing priorities in energy, economy, and sustainability. Our local economy, more than any in the country, is dependent on the wellbeing of the thousands of energy-related firms

located here; but the demands we face as a community are really

not unique. Just as any healthy company will adapt to changing

market needs and regulatory pressures, so, too, must the region

look at this new energy paradigm and find opportunity in these

changes, and strength in our unparalleled capacity for innovation.

Houston has a good foundation to work from, as Texas happens

to have some of the country’s most progressive requirements for renewable electricity generation, allowing to us install more wind energy than all the other states combined. In fact, the American

Wind Energy Association predicts that two thirds of the growth in

U.S. wind energy will happen in Texas. There is also no shortage

of sunlight in Texas to take advantage of solar energy as it becomes cost-competitive. Texas is not only leading the country in

production in growth of wind energy but our production of biofuels

and other biobased products, most especially biodiesel, will solidify

our leadership role in diversifying the Nation’s supply of cleaner

energy and greener raw materials. In fact, after this hearing, some

of us will get on a bus and travel to Oakridge North, where we’ll

see firsthand the Nation’s first electric generation plant to run entirely on biodiesel. It may be one plant and one technology, but it

represents a critical step in revolutionizing how we think about,

use, and produce energy in the United States.

There are probably no three people more qualified than this first

panel to speak to the issues that Houston and, for that matter, the

Nation faces in reconciling our energy needs with our economic

foundation and environmental health. The President of Shell Oil

Company and the former head of the Greater Houston Partnership,

Mr. John Hofmeister, knows, as well as anyone, the realities of the

world’s grand energy challenges and how the magnitude of these

challenges should not excuse us from taking aggressive action here

at home. We’re honored and privilege to have Mayor Bill White to

discuss initiatives that the City of Houston is pushing to make our

homes, businesses, and industries more efficient, and to encourage

innovation to keep Houston competitive in the global marketplace.

Mr. Tom Standish’s long and distinguished career at CenterPoint

Energy can provide us the kind of nuts-and-bolts perspective on the

technology needs to optimize the electricity grid as we continue to

experience unprecedented growth in energy demands. We look forward to your testimony and to that of our second panel of distinguished experts.

With that, I will turn it over to the Ranking Member of the

Science and Technology Committee, Congressman Ralph Hall from

Rockwall, Texas. Thank you for joining us.

[The prepared statement of Chairman Lampson follows:]

PREPARED STATEMENT OF CHAIRMAN NICK LAMPSON

This hearing of the Energy and Environment Subcommittee will now come to

order.

8

Good morning. It is with great pleasure that I welcome my fellow Committee

Members, my Congressional colleagues from the Houston area, and our distinguished panel of experts to Rice University for what will undoubtedly be a lively

and engaging conversation about the grand challenges we face in energy and the

exciting research being explored to meet these challenges.

I would like to offer my sincere thanks to Rice University President Leebron, and

to the James A. Baker III Institute for Public Policy for offering this impressive facility to the Committee.

So, why, you might ask, is the U.S. House Committee on Science and Technology

holding a hearing in Houston, Texas?

While I may be a little biased, I cannot imagine a better place to have an open

and honest discussion about energy than in the ‘‘Energy Capital of the World,’’

Houston. But that is not the only reason.

My colleagues and I have ample opportunities in Washington to hear from a myriad of experts, lobbyists, and interest groups. But, each of us realize the best way

to gauge the importance of an issue, and the impacts of our policies, is to step away

from D.C. and talk to folks on the frontlines—consumers, government and industry

leaders, researchers, and the general public. This is our chance to take our show

on the road and hear from the local leaders and experts who just happen to be international authorities in their fields, and then record these important perspectives in

the Congressional Record for the benefit of the country as we continue what will

be an endless effort to craft good energy policies.

Texas, and more specifically Houston, has long been associated with the oil and

gas industry. This industry, which directly and indirectly employs 1.3 million Texans, or 10.5 percent of the workforce, provides the backbone of our economy and

helps make our quality of life the envy of the world.

Oil and gas will absolutely continue to play this vital role for the foreseeable future. We may someday have better alternatives or, as one witness will testify to

today, we may find that our global supplies cannot meet our growing demand. Until

then we should not be at all bashful in aggressively pursuing the cutting-edge technologies that will unlock previously unrecoverable hydrocarbon reserves. At the

same time we must embrace new technologies that can make our use of fossil fuels

cleaner and more efficient.

But, as we all must acknowledge, it is a new world with a new range of environmental, economic and energy related challenges that threaten our very way of life.

Whether you are most concerned with skyrocketing energy costs, $100 oil, global climate change, energy security, job security, air quality, or competition from emerging

nations, the one thing we can all agree on is that the status quo is simply not sustainable, and that we must adapt to this constantly shifting energy landscape. The

world will not stand still for us. Our future will be determined by our ability to implement sound but aggressive policies accompanied by robust government and private investment in developing the entire range of advanced energy technologies, and

then deploying them in the marketplace.

The city leaders in Houston are well aware of the difficulties of balancing often

competing priorities in energy, economy, and sustainability. Our local economy,

more than any in the country, is dependent on the wellbeing of the thousands of

energy-related firms located here. But the demands we face as a community are

really not unique. Just like any healthy company will adapt to changing market

needs and regulatory pressures, so too must the region look at this new energy paradigm and find opportunity in these changes, and strength in our unparalleled capacity for innovation.

Houston has a good foundation to work from. Texas happens to have some of the

country’s most progressive requirements for renewable electricity generation, allowing us to install more wind energy than all the other states combined. In fact, the

American Wind Energy Association predicts that two-thirds of the growth in U.S.

wind energy will happen in Texas. There is also no shortage of sunlight in Texas

to take advantage of solar energy as it becomes cost-competitive.

Texas is not only leading the country in production and growth of wind energy,

but our production of biofuels and other bio-based products, most especially biodiesel, will solidify our leadership role in diversifying the Nation’s supplies of cleaner energy and greener raw materials.

In fact, after this hearing some of us will get on a bus and travel to Oak Ridge

North, where we will see first-hand the Nation’s first electric generation plant to

run entirely on biodiesel. It may be one plant, and one technology, but it represents

a critical step in revolutionizing how we think about, use, and produce energy in

the U.S.

9

We look forward to the testimony of our witnesses and with that, I will turn it

over to the Ranking Member of the Science and Technology Committee, Mr. Ralph

Hall.

Mr. HALL. Mr. Chairman, thank you. It’s your good luck and my

good luck, too, that I can just barely speak. I’m honored to be here

with Mayor Bill.

(To Mayor White) You were a page, you know, when I first met

you; and my how you’ve grown. Both of you. And the Chairman always has the right to speak as long—you notice he didn’t yield

himself so long. He just started talking. When he said it all, there

wasn’t really any reason for me to say hardly anything; and I will

be brief.

I’ll start out by telling you I’m the oldest guy in the United

States Congress. I’m 84. I ran three miles before I left Rockwall

this morning. I do it every morning. (Applause).

You know, God gives everybody something. He gives women

beauty and good intelligence. He gives men handsome features and

ranches and things. He gave me stamina, and I guess that’s good

to have.

When I turned 80, the President gave me a party, over in the

Oval Office; and all he did was tell old man jokes. I didn’t like that

at all.

[Laughter.]

He told one story about a fellow that was 93 and he was a great

golfer and he could knock that ball a mile but he got to where he

couldn’t see where it went. He told his wife he had to quit golfing.

She didn’t want him to quit golfing, and he didn’t want to. She

said, ‘‘You know, my brother-in-law, Orville, is 98 and he can’t play

golf, doesn’t play golf, but he likes exercise and he has the best vision of anybody I know. He can still see like he did when he was

35 or 40 years old. Why don’t you take him with you and let him

watch where the ball goes when you hit it.’’

He did, and the very first day, he hit a ball that went up way

high in the air and soared. He was standing there. ‘‘Orville do you

see it.’’

‘‘Yeah.’’

‘‘You watching it.’’

‘‘Yeah.’’

‘‘Has it landed yet.’’

‘‘Yes. It’s just landed.’’

He said, ‘‘Where did it go.’’

‘‘I don’t remember.’’

Those are the kind of jokes I have to tolerate all the time, but

I am glad to be here and honored to be here. My voice will play

out in just no time, but I thank you for having the hearing here

in Houston and in Harris County, in this area.

I think, like you, it’s important to highlight the very vital role

that your city, the city of Houston, the State of Texas as a whole,

one of ten states that produces energy for all the rest of them, the

position we play in the world of energy. Our state’s always been

known as an oil- and gas-producing state, and I’m proud of what

we’ve contributed to the Nation’s energy supply and the leadership

we’ve shown in renewable energy as well.

10

I’d be remiss if I didn’t point out something that many of you

know better than I do. There’s a war on energy today. A war exists

out there on energy. It’s in vogue to knock energy. It’s in vogue to

knock fossil fuels, and some do it for different reasons. Some are

sincere. Others, in my opinion, their elevator just doesn’t go quite

to the top. There are others, you know, who want to write a book

or make a buck writing a piece or making a speech for somebody.

Some want a Nobel Peace Prize, but it’s a shame because we have

to rely on fossil fuels for a long, long time. It makes sense to; and

if we don’t wise up pretty soon and start drilling in ANWR and

start drilling offshore and pay attention to the ultra-deep legislation that Nick helped passed, and know that we have to rely on fossil fuels for a while—of course, we have to keep seeking technology

to make them less destructive—and that’s something that we all

have to do and we will do. But there is that war and right now,

because of that war, China’s allowed to be unfettered in their

search off the coast of Florida, with the help of Cuba; and we can’t

drill there. There’s just something wrong with that.

If we don’t start drilling in ANWR—and they say protect beautiful, perfect little ANWR. I heard it said that to say that is—and

we want to drill on 2,000 acres. It’s equivalent to saying that if you

put a dollar bill in the end of Texas stadium, it will ruin the whole

stadium. That’s how ridiculous it is. We need to be doing that. It

might keep our kids out of a war.

That’s a tangent I’m off on; but in addition to that that you want

us to talk about today, efficiency and conservation, I’ve always believed in the importance of a reliable domestic supply of oil and

gas. Therefore, I have always been a proponent of research and development that will secure that for our country. It’s for this reason

that I’m especially looking forward to the testimony of Michael

Ming of Research Partnership to Secure Energy for America.

The ultra-deep program has been a labor of love for me. I feel

strongly about its worth and its potential for recovering substantial

reserves of oil and gas. I will say that I, unfortunately, have to

leave the hearing early and I won’t get to hear Mr. Ming probably,

but I do want to welcome our other witnesses, Bill White, Mayor,

it’s an honor to see you and hear you. I’ve read the testimony, and

I look forward to hearing you.

With that, Roscoe, thank you. Gene Green, thank you.

And welcome to Texas. He’s my neighbor, right across the hall

from me in the Rayburn Building. Thank you, Mr. Chairman. I

yield back the time that you didn’t yield to me. You didn’t say it,

but I thank you.

Chairman LAMPSON. I can only imagine how long he would have

taken or what he would have said if he had all of his voice. Always

great, Ralph. Thank you so much for being here.

From the State of Maryland, Congressman Roscoe Bartlett. I recognize you for the time that you will consume.

Mr. BARTLETT. Thank you very much. I’m very pleased to be

here. You know, I was thinking as I rode down here in the plane

this morning—I got up at 3:30 this morning to leave at 4:00 o’clock

to catch a 6:00 o’clock plane, so I’m happy to be here—that we really shouldn’t be coming to Houston today, the energy capital of our

country, to talk about energy when oil is over $100 barrel, gold is

11

$970, and our dollar is probably at its lowest level in a very long

time.

This saga began in Texas, interestingly enough, 52 years ago, the

6th day of March when M. King Hubbert gave a speech, that I

think will shortly be recognized as the most important speech given

in the last century, to a group of oil people in San Antonio, Texas.

At that time the United States was king of oil—I think producing

more, consuming more, exporting more than any country in the

world. M. King Hubbert told the assembled group there that in

about 14 years, by 1970, that the United States—and he was talking about the lower 48—would reach its maximum oil production.

No matter what we did, we could produce no more oil after that.

Right on schedule in 1970, we reached our maximum oil production; and in spite of finding a lot of oil in Alaska—and I’ve been

to Dead Horse and seen the beginning of that four-foot pipeline

through which, for many years, 25 percent of our domestic oil

flowed—and in spite of finding a lot of oil in the Gulf of Mexico

where we have about 4,000 oil wells—which, by the way, is more

than four times as in the country of Saudi Arabia—today we

produce about half the oil that we produced in 1970. I noted that,

in response to the Arab oil embargo of ’73, that Texas stepped up

its production and produced 3.4 million barrels a day. Thank you.

That was a big help. Today Texas produces 934,000 barrels of oil.

Another very famous speech was given, and that will be 51 years

ago, the 14th day of this May; and I would encourage you, if you

haven’t read this speech, to do a Google search for Rickover and

energy speech, and a really interesting speech will pop up. Hyman

Rickover noted that we were in the age of oil, and he had no idea

at that time how long the age of oil would last. Now we know pretty much how long the age of oil will last, but he said that how long

it lasted was important in only one respect, that the longer it

lasted, the more time we had to plan a transition to other sources

of energy.

Now, the same M. King Hubbert who predicted that we would

peak in 1970, predicted that the world would be peaking about

now. The question I’ve had in my mind for several years now is:

Why, if he was right about the United States, shouldn’t there have

been some concern that he might just be right about the world?

Shouldn’t we have been doing something about that?

There have been four major studies paid for by your government

and ignored by your government. The first of these studies was the

big SAIC report—and Dr. Hirsch is here and will testify at our

next panel—known as the Hirsch Report, published in ’05. The second was the Corps of Engineers, and theirs issued, I think, in September of ’05. Last year there were two reports, the Government

Accountability Office and the National Petroleum Council. In different words, each of these reports said that there was a very high

probability that the world was either at or would be shortly at peak

oil, that the consequences could be devastating. The Hirsch Report

said the world has never faced a problem like this. There is no

precedent in history to prepare us for what will happen or what we

should do.

Just very recently, the two major entities in the world that track

the production of oil have issued a report. This is the International

12

Energy Agency and the Energy Information Administration, an

arm of our Department of Energy. They have issued a recent report

showing that oil production worldwide has been flat for at least the

last 30 months. During those 30 months, oil went up from, what,

about $40 a barrel to $100 a barrel.

I say that we shouldn’t be here talking about this because we

have now blown 28 years when we should have been anticipating

this and doing something about it. By 1980, we knew darn well

that M. King Hubbert was right about the United States because

we had already reached Hubbert’s peak and were sliding gently

down the other side. If he was right about the United States, why

shouldn’t he be right about the world?

Now, incredibly, our solution to this problem is go out as quickly

as we can, find the little bit of oil that remains out there, and then

pump it dry. I have 10 kids, 16 grandkids, and two greatgrandkids. If we could pump ANWR and offshore tomorrow, what

would we do the day after tomorrow.

Thank you very much, Mr. Chairman, for holding this hearing.

We need to have these around the country. We need to engage the

people. Thank you all very much. I see you’re putting up extra

chairs. Thank you so much.

[Applause.]

Mr. HALL. Would the gentleman yield to one question?

Mr. BARTLETT. I’d be happy to yield, sir.

Mr. HALL. When ANWR was voted down, I had to call Boone

Pickens and tell him. Do you know what his answer was?

Mr. BARTLETT. What was his answer?

Mr. HALL. It will still be there.

Mr. BARTLETT. Sir, it’s like money in the bank which is yielding

really huge interest. Why in the devil would you want to take it

out and spend it now.

Chairman LAMPSON. Thank you, Dr. Bartlett.

Our colleague on the Energy Committee, not on this Energy Subcommittee on Science, Congressman Gene Green from Houston,

Texas.

Mr. GREEN. I want to thank my friend Congressman Lampson

for holding this hearing in Houston on energy. Between Congressman Lampson and Ralph Hall and I—Roscoe, we’ll have an interpreter for you because we all understand Texan where we’re from.

It’s an honor to be here and participate in the hearing. I think

it’s so pertinent, considering what the House considered just this

last week and, actually, four times over the last 12 months. It’s no

secret why Houston is known as the energy capital of the world.

The energy industry is a cornerstone of our economy and our way

of life. Many of the world’s largest and most innovative energy

companies reside in Houston, supported by a highly skilled workforce, strong partnerships between our local universities, including

Rice, and businesses to help address the needs of our job base.

Understanding the importance of the energy industry to our local

economy helps me better represent our district in Congress; and

our district is basically east of downtown Houston, which the energy corridor, I know, is I–10 West, but I consider the refineries

and energy plants that Congressman Lampson and I share in East

Harris County, the energy corridor. I’m not a Member of the House

13

Committee on Science and Technology, but I do serve on the Committee on Energy and Commerce and with a broad jurisdiction over

our nation’s energy policy, and that I share with Congressman

Hall.

I’ve always believed that a balanced national energy policy must

have three basic points: Energy conservation and efficiency; research and development in new clean-energy technologies; and environmentally responsible domestic energy production.

First, the simplest and most effective way to reduce our needs for

energy is to consume less energy and use it more efficiently. With

new technologies, conservation does not necessarily mean doing

without. Energy companies understand this fact and are working

to reduce their greenhouse gas emissions by using less energy-intensive practices. Companies are employing co-generation, or combined heat and power technology, to harness the heat released by

making energy products, to produce their own electricity. Advanced

computer software is being utilized in refineries to optimize the energy consumption, as well as technology to reduce the wasteful flaring of gas. In fact, every time I go over the Beltway 8 bridge, or

610 bridge, or even the Fred Hartman bridge, and I see a flare, I’m

worried because that’s product that’s being lost and also going into

our air.

Second, I believe we need to invest in clean energy technologies

that will wean us off our dependence on foreign fuels. Texas is a

wonderful example of using this innovation to become the Nation’s

leader in wind energy production. Oil and gas companies need to

instead be recognized as energy companies and continue investing

in alternative energy sources. Wind, solar, geothermal, biofuels and

other sources all deserve additional research and development by

the private sector and the Federal Government to become cost-competitive in the marketplace. In fact, we need all of these sources

to continue a growing economy in our country. Shell Oil, a witness

at today’s hearing, is breaking ground with research in hydrogen

production and supply chains, a long-term but critical approach to

meeting our future needs.

Lastly, I believe we must continue to responsibly develop America’s energy resources. We can’t increase renewable energy if we

take an unrealistic approach to oil and gas. We will fail to provide

Americans with adequate supplies of fuel and energy at affordable

prices. Energy companies have invested heavily in technological innovation to enhance our environmental performance and capabilities. Directional drilling technology allows more wells to be drilled

from a single drill rig. Infrared and laser technology can be utilized

to monitor refinery emissions and to minimize releases. Global satellites and 3–D seismograph technology are helping reduce environmental disturbance and surface impact before drilling begins.

None of these strategies alone will be enough to protect our economic competitiveness and our sustainability. Through all of these

efforts, the Houston energy industry has continued to fulfill the

needs of our nation. That’s good news because energy security is

also our job. It’s an issue of economic security and our national security. With that innovation and smart growth strategies, Houston

will remain the energy capital of the world in years to come, and

14

I would hope this hearing will set the stage for Congress to be able

to provide that leadership.

So thank you again for holding this hearing literally in our back

yard.

Chairman LAMPSON. Thank you, Congressman Green. I appreciate it.

I would ask unanimous consent that all additional opening statements that may be submitted by other Members of the Committee

be included in the record. Without objection, so ordered.

[The prepared statement of Mr. Smith follows:]

PREPARED STATEMENT OF REPRESENTATIVE ADRIAN SMITH

Thank you, Mr. Chairman. Every day, Americans and Nebraskans rely on energy

in a variety of forms. We take this power for granted, but if we are to maintain

an affordable and secure supply of energy we must create an environment which

attracts innovators and inventors, who, like Thomas Edison, will brighten our future.

Our ultimate goal is affordable energy independence. To accomplish this we will

need a diverse portfolio of energy options. We must not allow our policies to choose

winners and losers in energy solutions. There is a lot of talk about energy sustainability in terms of the environment, but we also must ensure our future energy options are economically sustainable.

Energy efficiency is one means to this end. We are competing with China’s and

India’s burgeoning demands for foreign oil, but I am encouraged by the vision of private organizations such as the X Prize Foundation which offers a monetary incentive to inspire innovation in energy efficient vehicles. When the prize is awarded

to the first 100 miles per gallon vehicle, one will be able to drive across my home

State of Nebraska on just 4.5 gallons of fuel.

While it is true that oil and gas companies have posted profits this year, this is

good news for American investors who are the primary owners of these companies.

More than 29 percent of oil company stocks are owned by mutual funds, 27 percent

by pension funds, 23 percent by individual investors, and 14 percent by Individual

Retirement Accounts. In other words, everyday Americans own a share of these

profits. We need policies which will encourage more domestic drilling and the expansion of technologies which will facilitate recovery of oil from currently inaccessible

sources.

There are myriad other technologies which need to be explored and developed including smart grids, fuel cells, solar power, wind power (including growing transmission and dealing with intermittency), biofuels (both corn and cellulosic), clean

coal, coal gasification, nuclear power, hydropower, and other technologies not yet

imagined.

Thank you, Mr. Chairman, and I look forward to working with you to further policies which will promote research, development, and entrepreneurship to expand

technologies which empower energy consumers with more choices, more efficiency,

and more affordable options.

Chairman LAMPSON. Now, as our witnesses should know, you all

have five minutes for your spoken testimony. Your full written testimony will be included in the record for the hearing; and when you

have completed your testimony, we will begin with questions. Each

Member will have five minutes to ask questions.

Mr. Hofmeister, would you begin, please.

Panel I:

STATEMENT OF MR. JOHN HOFMEISTER, PRESIDENT, SHELL

OIL COMPANY

Mr. HOFMEISTER. Good morning, Chairman Lampson, and Ranking Member Hall, Member Bartlett, and Member Green. I’m John

Hofmeister. I’m President of Shell Oil Company, and I appreciate

15

the opportunity to speak today as part of the field hearing the Subcommittee is holding here in the energy capital.

My remarks today will focus on the short-term, medium-term,

and long-term needs in the United States, how Shell anticipates

the mix in the energy supply changing in the coming years and the

evolving contribution Shell will make to meeting America’s energy

needs for decades to come.

Shell has been a part of the Houston energy industry since the

mid-1960s. In the Greater Houston metropolitan area, more than

13,000 Shell and Motiva employees go to work every day to bring

energy to millions of Americans. Their work includes service at

nearly 500 retail stations in the Houston area and 44 Jiffy Lube

locations. As one of the Houston’s largest employers, Shell is a stalwart in the community.

Houston’s a vibrant city with a rapidly expanding economy and

population fueled by energy. The energy market in Houston reflects

the worldwide energy market in many respects. We recognize the

challenge here and around the world of providing enough energy to

meet rising demand in an environmentally and socially responsible

manner. We are committed to managing the impact of our exploration and production and conserving energy where we can.

America has a strong and growing demand for energy. Every second of every day, the United States consumes 10,000 gallons of

oil—every second of every day—enough to fill a backyard swimming pool. We use 20 railcars of coal a minute in this country, and

enough cubic feet of natural gas each day to build a tower to the

Moon and back 25 times.

We’re balanced on a razor’s edge of growing demand and tightening supply. Shell wants to help provide abundant affordable energy as far into the future as we can imagine.

We consider abundant affordable energy a cornerstone of America’s energy security, but we recognize that achieving this goal will

require aggressive short-term, medium-term and long-term planning.

Short-term. First, I would like to outline the short-term U.S. Energy needs and the steps Shell recommends for the next decade. In

the short-term, the United States will remain a fossil-fuel-based

economy because very simply we cannot attain the commercial

scale and infrastructure needed to meet energy needs as I’ve described through alternative energy. We won’t have the pipeline system to pump ethanol. We won’t have the transmission lines to

bring hundreds of gigawatts of wind from remote, windy plains and

mountains to cities. That kind of scale and infrastructure won’t be

available for decades to come. Largely for this reason, the International Energy Agency estimates that under a business-as-usual

scenario, alternative energy will account for only 8 percent of U.S.

Energy use in five years.

In the short-term, then, we need more oil and gas now to meet

growing demand. We can meet that demand in two primary ways.

First, we can responsibly develop the more than 100 billion barrels

of technically recoverable oil and gas in this country that are currently off limits due to federal policy. Unless we intend to increase

our reliance on foreign oil, we must have increased access to America’s own energy resources, both onshore and on the outer contiVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00019 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
16

nental shelf. Shell is committed to developing any resources in an

environmentally sound and responsible manner.

Second, we can increase the supply of natural gas to our country

by using liquefied natural gas (LNG) technology that allows us to

store and ship gas safely in a liquid state. As a nation, we must

put aside our resistance to building the infrastructure necessary to

receive LNG, especially on the east and west coasts. In addition to

these two important avenues, we must continue researching environmentally sensitive and commercially feasible ways of developing

unconventional oil-and-gas resources, including the trillion barrels

of oil that remain trapped in shale in Colorado, Wyoming, and

Utah.

In the medium-term, Shell anticipates that in the medium-term,

between the next 10 to 25 years, oil and gas will remain the primary energy sources, but biofuels and wind will play greater roles

in meeting energy demands. Shell is one of the world’s largest distributors of biofuels and one of the first companies to invest in second-generation biofuels that use cellulosic materials that do not

compete with food crops. However, we are very concerned about the

provisions of the Energy Independence and Security Act of 2007

that mandate a more than fivefold increase in the amount of alternative fuels such as ethanol, from 7.5 billion gallons a year in 2012

to 36 billion gallons a year in 2022, to the Nation’s energy supply.

Wind offers another solution to carbon dioxide emission challenges and to increasing our energy diversity. In this country, Shell

Wind Energy now has interest in or operates eight wind farms in

six states. Wind technology, however, is often limited by lack of

transmission systems to move the wind energy from remote hills

and potential offshore wind farms to connect with the electric grid.

We need sound federal and State policies that support new transmission systems to enable this technology to be adopted more widely.

Also during the medium-term, Shell believes that our nation

must move to clean coal technology, using our most abundant natural resource to generate electricity in a way that allows us to

manage carbon dioxide emission. However, the introduction of this

technology is hampered by the need for large, up-front capital investments. Public policy is needed to create the enablers to stimulate the production of clean coal technology and associated carbon

capture and storage.

Over the longer-term, spanning 25 years and beyond, Shell anticipates that the U.S. economy will continue to depend on oil and

gas, with an ever-growing contribution from alternative fuels. We

will see a strong growth of the clean fuels mentioned in the medium-term, but we will in the long-term see more alternative fuels,

that are in their infancy now, become commercially viable components of the overall energy mix. Hydrogen is an example.

Hydrogen is the world’s most plentiful element, and it’s part of

the Shell portfolio of future low-carbon fuels. As a fuel, hydrogen

offers the potential to substantially reduce emissions, reduce our

reliance on fossil fuels, and increase America’s energy security.

There are obstacles to be overcome, but we think hydrogen could

become a commercially viable transport fuel in the coming years.

Shell is developing hydrogen supply chains which in the longerVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00020 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
17

term may rely increasingly on renewable sources of energy. We

partner with car manufacturers and local and national governments to coordinate the construction of hydrogen fueling stations in

areas where fuel-cell vehicles are being introduced. In the United

States, those include Los Angeles and the New York City metropolitan areas.

Since 2004, Shell has operated an integrated gasoline/hydrogen

station in Washington, D.C., not far from Capitol Hill. Last year

we opened a hydrogen station in White Plains, New York, and plan

to open our first hydrogen station in Los Angeles this Spring. It

will probably take a couple of decades to make hydrogen a commercially available option. However, for our grandchildren’s children,

it may become the standard fuel of choice.

Clearly, Shell believes that alternative energies will play an increasing role in the energy mix. We are planning for it. We invest

a significant portion of our profits into developing energy technologies. We believe our commitment to technology and innovation

distinguishes us from many of our competitors, but we must approach our energy challenges realistically. Because of the extensive

lead time and financial commitment required to bring new technologies to market fossil fuels will remain at the core of global

economies for the foreseeable future. Shell does not see that as an

either/or proposition; it is a both/and proposition. The balance between conventionals and alternatives will be established by what

is possible in the future. We will need all of those energy sources

and others to fuel the world.

As a nation, we face tough choices to balance our energy needs,

our economic well-being, our quality of life, and our respect for the

environment. At Shell, we are firmly committed to bringing energy

security to America and specifically to the citizens of Houston.

Thank you.

Chairman LAMPSON. Thank you, Mr. Hofmeister.

[The prepared statement of Mr. Hofmeister follows:]

PREPARED STATEMENT OF JOHN HOFMEISTER

Good morning Chairman Lampson, Ranking Member Inglis, Members of the

House Science Subcommittee on Energy and Environment and other Members of the

U.S. House of Representatives joining this hearing. My name is John Hofmeister.

I am the President of Shell Oil Company. I appreciate the opportunity to speak

today as part of the field hearing the Subcommittee is holding here in the energy

capital of the world, Houston, Texas.

My remarks today will focus on the short-term, medium-term and long-term energy needs in the United States, how Shell anticipates the mix of the energy supply

changing in the coming years and the evolving contribution Shell will make to meeting America’s energy needs for decades to come.

Shell has been a part of the Houston energy industry since the mid-1960s. In the

greater Houston metropolitan area, more than 13,000 Shell and Motiva employees

go to work every day to bring energy to millions of Americans. Their work includes

service at nearly 500 retail stations and 44 Jiffy Lube locations. As one of Houston’s

largest employers, Shell is a stalwart of this community.

Houston is a vibrant city, with a rapidly expanding economy and population

fueled by energy. The energy market in Houston reflects the worldwide energy market in many respects. We recognize the challenge here—and around the world—of

providing enough energy to meet rising demand in an environmentally and socially

responsible manner. We are committed to managing the impact of our exploration

and production and conserving energy where we can.

America has a strong and growing demand for energy. Every second of every day,

the United States consumes 10,000 gallons of oil—enough to fill a swimming pool.

18

We use 20 rail cars of coal a minute and enough cubic feet of natural gas each day

to build a tower to the Moon and back 25 times. We are balanced on a razor’s edge

of growing demand and tightening supply.

Shell wants to help provide abundant, affordable energy as far into the future as

we can imagine. We consider abundant, affordable energy a cornerstone of America’s

energy security. But we recognize that achieving this goal will require aggressive

short-term, medium-term and long-term plans.

Short-term:

First, I would like to outline the short-term U.S. energy needs and the steps Shell

recommends for the next decade. In the short-term, the United States will remain

a fossil-fuel-based economy because, very simply, we cannot attain the commercial

scale and infrastructure needed to meet energy needs through alternative energies.

We won’t have the pipeline system to pump ethanol. We won’t have the transmission lines to bring hundreds of gigawatts of wind from remote windy plains and

mountains to cities. That kind of scale and infrastructure won’t be available for decades to come. Largely for this reason, the International Energy Agency estimates

that under a ‘‘business-as-usual’’ scenario, alternative energy will account for only

eight percent of U.S. energy use in five years.

In the short-term then, we need more oil and gas now to meet growing demand.

We can meet that demand in two primary ways. First, we can responsibly develop

the more than 100 billion barrels of technically recoverable oil and gas in this country that are currently off limits to development due to federal policy. Unless we intend to increase our reliance on foreign oil, we must have increased access to America’s own energy resources both onshore and on the Outer Continental Shelf. Shell

is committed to developing any resources in an environmentally sound and responsible manner.

Second, we can increase the supply of natural gas to our country by using liquefied natural gas technology that allows us to store and ship gas safely in a liquid

state. As a nation, we must put aside our resistance to building the infrastructure

necessary to receive LNG, especially on the East and West Coasts.

In addition to these two important avenues, we must continue researching environmentally sensitive and commercially feasible ways of developing unconventional

oil and gas resources, including the trillion barrels of oil that remain trapped in

shale in Colorado, Wyoming and Utah.

Medium-term:

Shell anticipates that in the medium-term—between the next 10 to 25 years—oil

and gas will remain the primary energy sources, but biofuels and wind will play

greater roles in meeting energy demands.

Shell is one of the world’s largest distributors of biofuels and one of the first companies to invest in second-generation biofuels that use cellulosic materials that do

not compete with food crops.

However, we are very concerned about the provisions of the Energy Independence

and Security Act of 2007 that mandate a more than five-fold increase in the amount

of alternative fuels, such as ethanol, from 7.5 billion gallons a year in 2012 to 36

billion gallons a year in 2022 to the Nation’s energy supply.

Wind offers another solution to carbon dioxide emission challenges and to increasing our energy diversity. In this country, Shell WindEnergy now has interest in or

operates eight wind farms in six states. Wind technology, however, is often limited

by lack of transmission systems to move the wind energy from remote hills and potential offshore wind farms to connect with the electric grid. We need sound federal

and State policies that support new transmission systems to enable this technology

to be adopted more widely.

Also during the medium-term, Shell believes that our nation must move to clean

coal technology—using our most abundant natural resource to generate electricity

in a way that allows us to manage carbon dioxide emissions. However, the introduction of this technology is hampered by the need for large, up-front capital investments. Public policy is needed to create the enablers to stimulate the production of

clean coal technology and associated carbon capture and storage.

Long-term:

Over the long-term, spanning 25 years and beyond, Shell anticipates that the U.S.

economy will continue to depend on oil and gas with an ever-growing contribution

from alternative fuels. We will see a strong growth of the clean fuels mentioned in

the medium-term, but we will, in the long-term, see more alternative fuels that are

in their infancy now become commercially viable components of the overall energy

mix. Hydrogen is an example.

19

Hydrogen is the world’s most plentiful element and is part of the Shell portfolio

of future low-carbon fuels. As a fuel, hydrogen offers the potential to substantially

reduce emissions, reduce our reliance on fossil fuels and increase America’s energy

security. There are obstacles to be overcome, but we think hydrogen could become

a commercially viable transport fuel in the coming years. Shell is developing hydrogen supply chains, which, in the longer-term, may rely increasingly on renewable

sources of energy. We partner with car manufacturers and local and national governments to coordinate the construction of hydrogen fueling stations in areas where

fuel cell vehicles are being introduced. In the United States, those include the Los

Angeles and New York City metro areas. Since 2004, Shell has operated an integrated gasoline/hydrogen station in Washington, D.C., not far from Capitol Hill.

Last year, we opened a hydrogen station in White Plains, New York, and plan to

open our first hydrogen station in Los Angeles this spring. It will probably take a

couple of decades to make hydrogen a commercially available option. However, for

our grandchildren’s children, it may become the standard fuel of choice.

Clearly, Shell believes that alternative energies will play an increasing role in the

energy mix. We are planning for it. We invest a significant portion of our profits

into developing energy technologies. We believe our commitment to technology and

innovation distinguishes us from many of our competitors.

But we must approach our energy challenges realistically. Because of the extensive lead time and financial commitment required to bring new technologies to market, fossil fuels will remain at the core of global economies for the foreseeable future. Shell does not see that as an ‘‘either-or’’ proposition. It is a ‘‘both-and’’ proposition. The balance between conventionals and alternatives will be established by

what is possible in the future. We will need all of these energy sources, and others,

to fuel the world.

As a nation, we face tough choices to balance our energy needs, our economic wellbeing, our quality of life and our respect for the environment. At Shell, we are firmly committed to bringing energy security to America—and specifically to the citizens

of Houston.

Thank you.

BIOGRAPHY FOR JOHN HOFMEISTER

John Hofmeister was named President of Houston-based Shell Oil Company in

March 2005. In this position, he heads the U.S. Country Leadership Team, which

includes the leaders of all Shell businesses operating in the United States.

Hofmeister became President after serving as Group Human Resource Director of

the Shell Group, based in The Hague, The Netherlands.

Prior to joining Shell in 1997, Hofmeister served as Vice President, International

Human Resources, for AlliedSignal (now Honeywell International), based in Hong

Kong. He joined AlliedSignal in 1992 as Vice President of Human Resources for its

aerospace business.

From 1988 to 1992, Hofmeister was employed with Northern Telecom, where he

became Vice President of Human Resources in 1990.

Hofmeister began his career in 1973 in the international marketing and sales department of the General Electric Lighting Business. During his 15-year career with

GE, he held a variety of marketing, manufacturing, and human resources positions

in five GE major businesses, including locomotives, telecommunications, factory automation and electric motors.

Hofmeister serves as the Chairman of the National Urban League. He is a member of the U.S. Department of Energy’s Hydrogen and Fuel Cell Technical Advisory

Committee and also serves on the boards of the Foreign Policy Association, the

United States Energy Association, and the National Association of Manufacturers.

He is a fellow of the National Academy of Human Resources, and a member of the

American Petroleum Institute’s Executive Committee and Policy Committee.

Hofmeister also served as 2007 Chairman of the Greater Houston Partnership.

Hofmeister earned Bachelor’s and Master’s degrees in political science from Kansas State University.

Chairman LAMPSON. Mayor White, you are recognized for your

time in the presentation.

STATEMENT OF MR. BILL WHITE, MAYOR, CITY OF HOUSTON

Mr. WHITE. Thank you, Mr. Chairman. I’ve submitted a written

statement, and I’ll just visit with you about a couple of high points

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and maybe pick up on a comment, a couple of comments the Members made.

You know, too often we make the mistake of thinking that the

answer in energy policy is all of one thing—like it’s all on the supply or all on the demand side. Because, Mr. Chairman, you and the

staff, we had such an excellent presentation on supply, I’m going

to mainly talk about the demand side; but that’s not posed as an

alternative. I’ve been involved in every aspect of the energy business as a business person, and I will tell you that we need a lot

of supply if we’re going to accomplish our goals of trying to bring

down utility bills and gasoline prices and make our nation more secure. We will have fewer emissions as we move forward, for reasons that I’ll explain; but here’s what we can do.

I’m going to focus on two big things on the demand side. No. 1,

oil is used as a transportation fuel. Congress made a step in the

right direction, a step in the right direction, with these CAFE

standards that the last Congress passed.

Look, as a staff member of Congress working with Chairman

Dingell in the first Subcommittee on Energy and Power, I helped

write some of the first CAFE standards in 1975. If you go back—

Mr. Bartlett talks about great energy speeches—go back and look

at Gerald Ford’s State of the Union Address in 1975 where he summoned this nation to make this a national challenge, and Congress,

on a bipartisan basis, worked to craft something that was significant.

Some of the folks that are around, not many of us—I was a

young kid—but Alan Greenspan was a White House staffer and

George Mitchell represented the IPAA, Chairman Dingell was the

first Chairman of that committee, and we did that. You know what

happened when we did that? For light-duty vehicles, we almost

doubled auto fuel mileage within ten years. Now, they carved out

later exceptions to make sports utility vehicles; but, you know, me

and my kids and my wife, we drive vehicles that get twice the

miles per gallon in the city of Houston—which is not some exotic,

weird city, it’s a mainstream city. We’re using hybrids for our civilian vehicles. We’re converting our buses to hybrids, getting good

fuel economy. You know what would happen if within ten years the

automobile fleet of this country were able to get double the miles

per gallon? You know what would happen? We would reduce the

petroleum consumption by six million barrels a day from what it

otherwise would be, and that would create a downward pressure on

price compared to what would happen if the world was having a

demand for six million barrels a day more. We all benefit from

that.

So thank you, and keep your eye on that ball because there’s

nothing that we can do.

Mr. Bartlett, I agree with many issues involving access, but you

made the point just right. I was one who was skeptical about

Hubbert’s speech for a long time. I’ve been in the business. He

proved himself right, for the right reasons; and I think he’s in the

ballpark on the world oil demand. So we need to be anticipating

this, and this is not supply versus demand because, believe me, if

you don’t have supply, the depletion occurs far quicker than that.

If we want to maintain our standard of living, then we need to be

21

working on both sides and even higher auto fuel—everything else

is small on transportation fuel, supply and demand, compared to

what you do with automobile transportation.

Next, buildings. Buildings consume a lot of energy. In Houston,

this Spring, we will adopt the most forward-looking, technically advanced, aggressive building codes in the Nation. I’m not the mayor

of Aspen or Oakland. This is a city that is a working city with a

diversity of views, that’s very business-oriented; but we’ve found

here in Houston that if you design buildings, using the state-of-theart energy standards, they can consume 20 percent less. We’ve

done it with our own city buildings for the last four years. I looked

at the numbers. It doesn’t cost very much more, and you save a lot

of energy. Some of the companies here, without any mandate—but

if you had standards from, let’s say, local government and State

governments, something that we all have an interest in the Nation,

we could cut the growth in demand for electrical power in this nation significantly. Why? Well, you know buildings account for a

substantial percentage in both our homes and our offices of our

power consumed.

That has two advantages which I think the people we represent

like. No. 1, as you drop demand, you reduce utility bills; and last

time I checked, that is not a bad thing. It can reduce utility bills

more than any tax cuts I’ve seen for a long time. No. 2, you will

have fewer emissions. That is not a bad thing. I do not know anybody who’s for emissions. At most, somebody says, well, it’s a necessary price of growth. So building efficiency standards is something where we can do a lot. In Europe, sometimes they’ve done

better than us. There’s states and localities that have done better

than others, but I think that Congress needs to take a look at that.

Finally, renewables. We talked about solar and wind. They have

a role to play, an increasing role. They will not displace all other

hydrocarbons, and I mention this, too, at the end. I think the time

to act is now. I think the country’s ready for this. I think it will

be ready in the next session of Congress, on a bipartisan basis, to

move forward for doing some things that result in real change in

the way we approach energy in our country. If we do so, our economy will be stronger, there will be more American jobs, less balance-of-payments deficits, and we will have fewer emissions. Thank

you.

[Applause.]

Chairman LAMPSON. Thank you, Mayor White. That was a very

good presentation.

[The prepared statement of Mr. White follows:]

PREPARED STATEMENT OF MAYOR BILL WHITE

Good morning Chairman Lampson, Ranking Member Inglis, Members of the

House Science Subcommittee on Energy and Environment and other Members of the

U.S. House of Representatives joining this hearing. My name is Bill White. I am

the Mayor of Houston, Texas, and am pleased to be speaking before the Subcommittee today.

Houston, the fourth largest city in the country, is growing and prosperous, with

more than two million residents. We have added a quarter-million new jobs to our

economy of the last four years and have seen our population grow in excess of five

percent annually over the past several years. This includes nearly 100,000 relocations from the Katrina disaster. The Gross Area Product has also grown by 5.2 percent annually from 2004 through 2007. Houston is the Nation’s No. 1 seaport in forVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00025 Fmt 6633 Sfmt 6621 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
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eign tonnage, and No. 2 in total tonnage. Houston is home to almost two dozen Fortune 500 companies, second only to New York.

Houston is an important microcosm of the world economy as witnessed by its dramatic growth over the past five years. In order to sustain our City’s prosperity as

well as that of the rest of the world, we need to de-link growth from resource consumption. Not doing so will lead to dire consequences, some of which we are already

seeing. Energy prices have nearly doubled over the past few years and they will not

stop here. Gasoline prices have gone from $1.50 to $3.00, electric power rates have

gone from 6–8 cents/kwh in the 1990s to 12–15 cents/kwh today. The supply-side

trend is only going to get worse. We need to fix this problem now.

The City of Houston is aggressively addressing the issue of decoupling regional

growth from energy consumption. The path forward for us is two-fold: energy efficiency and renewable energy. A watt conserved, or a gallon not used, is the lowest

cost form of energy generated. We avoid $600/kwh by not building excess generation

capacity and save 5.5 cents/kwh in avoided energy supply costs. Similarly, by migrating to more fuel-efficient vehicles or hybrids or eventually plug-in hybrids, we

can make a real difference in our fossil fuel consumption. The complement to our

energy efficiency efforts is the City’s embracement of renewable energy, which is

carbon free, pollutant free, and geo-politically free.

Let me give you some specific examples of what we are doing here in Houston

on Energy Efficiency. We are upgrading our commercial and residential building

codes to make our new buildings more energy efficient. The City already has a resolution passed in 2004 that requires all new City facilities and major renovations

over 10,000 sq. ft. to be LEED certified. We are also weatherizing existing homes

through a ‘‘neighborhood by neighborhood’’ residential energy efficiency program. So

far we have done more than 2,000 homes over the past 18 months and expect to

do 3,000 this year, all in low-income neighborhoods, in partnership with

CenterPoint. Homeowners have seen a 10–15 percent heat-adjusted reduction in

their kwh consumption with summer months as high as 20 percent.

The City of Houston has itself taken a leadership role in embracing energy efficiency and renewable energy procurement for its facilities. The City of Houston is

the first Clinton Climate Initiative and C40 city to implement large-scale, energy

savings performance work to retrofit 11 million square feet of city facilities including office buildings, convention center, libraries, fire stations, police stations, health

service centers, and multi-service centers. We expect to see a 20–30 percent reduction in our energy consumption for these facilities. These energy efficiency efforts

will be complemented with our renewable power procurement program. The City of

Houston has purchased 262,800,000 kwh annually from Texas wind farms, or 20

percent of our consumption, under a fixed-price contract for delivery over the next

five years. That is over 1.3 billion kwh in total, and our goal is to double that number.

The City of Houston is also leading several grass-root efforts to inspire, educate

and call to action our community at large. The City, in partnership with the American Institute of Architects, is hosting the region’s first ‘‘Green Consumer Expo’’ to

showcase energy efficient products and services that are available here locally. The

Expo, scheduled this April, is free and open to the public. We are also developing

a Youth Job Corp program for this summer to have young people hand out over

250,000 CFLs and energy efficiency tips door to door. Last year with the Power to

People Campaign we handed out 10,000 CFLs.

Finally on fuel-efficient vehicles, the City’s goal is to have 50 percent of non-emergency, administrative fleet, roughly 2,800 vehicles total, to be hybrids. Currently we

have 440 hybrids. Metro will purchase approximately 100 hybrid electric buses each

year over the next three years, dramatically improving the fuel efficiency and emission control of our mass transit network. We are also working with our airport systems to migrate their fleets to clean fuel vehicles. For the general population here

in Houston, we need help from the Federal Government to raise fuel standards even

more aggressively.

BIOGRAPHY FOR MAYOR BILL WHITE

Mayor White’s leadership has brought Houston together, as shown by his overwhelming re-election to a third term. He uses business practices every day at City

Hall to improve service and get things done.

He has aggressively attacked our community’s most difficult challenges, such as

investment in neighborhood drainage, reform of municipal pensions, holding the line

on property taxes with rate cuts and increased senior exemptions, attacking crime

hot spots and even faster removal of stalled vehicles to reduce wrecks and traffic

congestion.

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Americans witnessed Mayor White’s hands-on management style when he helped

lead Houston’s competent, compassionate response to Hurricanes Katrina and Rita.

Now in his third term, Mayor White is accelerating work to revitalize our City’s

most neglected neighborhoods, with foreclosure and hundreds of new housing starts

on thousands of abandoned properties. He also initiated a program to weatherize

thousands of homes in older neighborhoods, saving homeowners an average of 20

percent on their electricity bills.

In addition, Mayor White has aggressive programs to enforce pollution laws, reduce the flooding impact of new developments, raise high school graduation rates,

and encourage more flexible working hours.

Before serving as Mayor, White built one of the region’s most successful businesses. Previously he served as Deputy Secretary of Energy of the United States,

where he helped diversify national energy supplies and saved taxpayers billions of

dollars with management reforms. Earlier in his career, he helped build and manage one of the Nation’s most successful law firms.

For decades Mayor White and his wife Andrea have helped lead numerous charitable and civic organizations. The Whites are parents of three students and attend

St. Luke’s United Methodist Church.

Chairman LAMPSON. I was remiss in not making a comment in

two introductions. Obviously none of this would happen without

the professional staff that we have. Here, representing the Minority side, is Elizabeth Stack; and on the Majority side is Chris King.

I just wanted to acknowledge them and thank you for the work

that you do, and your colleagues on our Committee staff, as well

as the staffs of all of the Members who are here. They do a tremendous job. They do the work of our offices.

Now, Mr. Standish, you’re recognized for your time.

STATEMENT OF MR. THOMAS R. STANDISH, GROUP PRESIDENT OF REGULATED OPERATIONS, CENTERPOINT ENERGY

Mr. STANDISH. Thank you, Mr. Chairman. I wish to really follow

on with what the Mayor was saying and talk in a little bit of detail

on the focus on the electric grid and some very remarkable convergence that’s under way that I think is going to completely reshape

how we make electricity and how it’s consumed.

I’d like to make a comparison back from about the same time

that if Orville Wright came back today and looked at a plane, he

would be astounded at the progress of a modern airliner compared

to the airplane he flew. If Thomas Edison came back today, he

would be astounded that the electric grid he built is exactly the one

that’s in place today. We’ve essentially made no change to it.

There’s a good reason why that’s so. A large central plant has

served us well for a long period of time, but things have changed

today and the concerns of very high fuel prices, of clean air, require

a very different electric grid. What we’re beginning to see is the development of a digital communications system that overlays the existing electric grid, what’s being called a Smart Grid, and the ability to link individual energy consumptions to the Internet will completely change the way we view our use of electricity in three ways.

For residential and commercial consumers, those consumers will

be able to set consumption patterns and have this Smart Grid act

to minimize their electricity consumption and their cost. In the

movement that exists today towards a very large number of small

sources of electricity, like plug-in hybrid cars, solar panels, and

eventually fuel cells, we need some mechanism to be able to keep

track of and communicate with this very large number of individual sources. It will require a massive communication network to

24

optimize the efficiency of these resources as well as to properly

build and credit those generation sources. And third, this Smart

Grid gives another ability which is to create a self-healing grid—

that is, a grid that can automatically detect problems, reroute the

power flows, so that, for most consumers, power outages will last

a matter of seconds.

All of this technology exists today. I’m very proud to say that

CenterPoint is one of the leaders in the world in developing a pilot.

We currently have 10,000 very highly advanced meters deployed

around the city that are capable of two-way communication and

also communication within the house to allow the consumers to

control devices within their home. This has been a very successful

pilot. We’ve developed a technology center devoted to the Smart

Grid. This technology center, I think, to emphasize the newness of

it, is that we have conducted over 290 tours of this technology center today. By way of that, I would like to invite this committee, if

you are in Houston again, to be able to come down and really see

what the future of electric system operations will be.

I’d like to touch on a couple of points, too, that are happening

in Houston, that the mayor touched on. We have implemented energy efficiency programs that are in some cases mandated, in some

cases sponsored by the government, to over 29,000 homes in the

Houston area. These energy efficiency upgrades are currently saving $12 million a year in energy costs. With the help of the City

of Houston, we’ve deployed this to 4,700 hard-to-reach, low-income

homes that are saving those individuals over a million dollars a

year. The EPA Energy Star program has been very successful here.

In fact, every year that that program’s been in place, CenterPoint

Energy has won the Energy Star award; and we are very proud to

say that there are over 121,000 homes constructed in the Houston

area that meet the Energy Star standard.

Finally, Mr. Chairman, I would like to make two requests of the

Committee. As you know, Title XXIII of the 2007 Energy Act was

directed toward Smart Grid, and in there it funded $100 million for

research and development towards Smart Grid. I would ask this

committee to work towards appropriating the dollars for that research and development. The ability to accelerate these funds and

move forward with our research and development work will be one

of the single largest keys to making energy efficiency a common

event across all of this country.

To that end, my second request goes simply to technical standards, your ability of this committee to support the development of

common technical standards. We currently have this very interesting convergence that’s occurring. You have the electric cars coming from the automobiles. You have utilities interested in this. You

have appliance manufacturers beginning to see the ability of these

appliances to talk to the Internet, as well as the electrical equipment manufacturers. The ability of your committee to promote a

common standard so that across the country, we’ll all be plugging

in the same devices the same way and communicating the same,

will again accelerate the application of the Smart Grid.

Now, Mr. Chairman, the electric utility industry is not a very interesting business except when the power goes out, I guess, and it

gets that way, but I think we’re on the verge of changing that comVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00028 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
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pletely because I do believe in the next ten years or so we will see

a complete renewal of our ability to use electricity and how it’s consumed.

So with that, I thank you and appreciate the time to testify before your panel.

[The prepared statement of Mr. Standish follows:]

PREPARED STATEMENT OF THOMAS R. STANDISH

Good morning. My name is Tom Standish. I am Group President of Regulated Operations for CenterPoint Energy. I appreciate the opportunity to testify for the electric and gas delivery industry as we work towards improving both energy efficiency

and the environment.

Today in the United States, we are in the beginning stages of the digitalization

of the electric grid—a grid which is essentially unchanged since the time of Thomas

Edison. A digital communications grid overlaying the electric grid—or a Smart Grid

as it is often called—brings the efficiency and information of the Internet to electricity consumers as well as to the operators of the electric grid. Technology exists

to allow every electricity user to have real time information about their usage and

bill amounts. Consumers will be able to actively manage their usage through inexpensive smart devices that will attach to any of the appliances in the home including the thermostat. Utilities and regulators will offer real time pricing that will be

automatically acted upon by the smart meters within the parameters set by the consumer. Tests conducted by the Department of Energy in the Northwest United

States have shown a 15 percent reduction in energy use can be achieved by providing real time usage and billing information, real time pricing signals and the

ability of the Smart Grid to cycle appliances within limits set by the consumer. Further an analysis of data in Texas indicates that a five percent reduction of electric

load during the peak hours of usage will double the available reserve of generation

in the state. This not only produces an enormous savings to consumers in deferred

power plant construction, it also produces significant clean air benefits as the lowest

efficiency power plant will operate less.

The movement away from central power stations toward a broad array of distributed generation such as solar panels, plug-in electric vehicles and, eventually, fuel

cells can only be accomplished through a smart electric grid. For example, these innovations will require the grid to identify and track the billing and credits of electric

vehicles that can be charged or discharged at any location, anywhere in the country.

The grid must also be able to sequence these devices so that individual power lines

do not become overloaded.

This same technology will also allow the utility the intelligence throughout the

electric grid to allow real time monitoring which will detect failures and reroute

power flows to allow the grid to become self-healing. Our studies have shown that

with the addition of smart sensors and computer controlled switches, both of which

exist today, power outages for most consumers will last less than a minute.

I speak with confidence about the Smart Grid because we at CenterPoint Energy

are proud to be among the leaders in the world in developing advanced metering

and intelligent grid technology. CenterPoint was the first utility to develop a Technology Center devoted solely to research and implementation of Smart Grid technology. We currently have ten thousand highly advanced meters deployed and have

completed our pilot study of the system feasibility. To date we have conducted over

two hundred and ninety tours of our Technology Center and we invite this committee to visit our Technology Center and see the state of the art in electric system

design. We have worked closely with IBM on communications and software design

and with ITRON on the advanced electric meters to create a system that we believe

will have a broad appeal nationwide.

I would like to briefly cover other efforts that are underway in the Houston area.

Over 24,000 customers participated in our Energy Efficiency programs, reducing

their annual electric bills by over $12 million as a result. In conjunction with the

city of Houston, we have developed programs to upgrade the energy efficiency of

4,700 hard-to-reach low income home owners resulting in annual savings of $1 million. This program has been highly successful in reducing the utility bills for those

who can least afford them. Also CenterPoint ENERGY STAR New Home program

one of most successful in the country having received the EPA national ENERGY

STAR award for seven consecutive years. Since the program started in 2001,

121,000 ENERGY STAR homes have been constructed in Houston.

Finally, I would ask the Committee to consider two requests. First, as you well

know, Title XIII of the 2007 Energy Act provides $100 million of R&D money for

26

Smart Grid technology. I would ask that you seek the funding of this research as

soon as possible. The Research and Development money available for Smart Grid

programs such as ours can greatly accelerate the understanding, practical application and deployment of these new technologies.

And second, I would ask that you work towards establishing technical standards

for the Smart Grid. The greatest value will come if all participants, utilities, automobile manufacturers, appliance manufacturers and electric equipment providers

are working toward the same concepts concerning which component performs which

function. The CenterPoint Energy Technology Center was founded on the principle

of open communication architecture that allows any equipment manufacturer to design equipment that will communicate with any other similarly design equipment.

CenterPoint Energy would welcome the opportunity to participate on the Department of Energy’s Advisory Council to help develop these standards.

This is an exciting time for an industry that is rarely exciting. Ten years ago few

of us envisioned how many uses would be found for the Internet. Applying the same

technology to the power grid will produce unthought-of opportunities for the efficient

and clean use of energy. Thank you for the opportunity to present. This concludes

my testimony.

BIOGRAPHY FOR THOMAS R. STANDISH

Current Position: Group President, Regulated Operations. In this role Tom is responsible for the company’s regulated electric transmission and distribution system

and our regulated natural gas operations. Tom also serves as a member of the

CenterPoint Energy Executive Committee.

Previous Positions: Standish began his career with the company in 1984 and

served in various management positions in marketing, rates and research, regulatory relations, and engineering. He formerly served as Senior Vice President of the

company’s electric delivery system before he assumed the position of President of

CenterPoint Energy Houston Electric in 1999.

Education and Accreditation: He earned a Bachelor’s degree in electrical engineering from the University of Texas at Austin and a Master’s degree in business

administration from the University of St. Thomas. He is a registered professional

engineer in the State of Texas.

Affiliations and Honors: Standish is a member of IEEE and is the immediate

past-Chairman of the Board of Directors for the Greater Houston Area American

Red Cross. He is also a current member and past-Chairman of the Salvation Army

Houston Area Command. Standish serves as a member of the Board of Directors for

the University of St. Thomas, and Rebuilding Together Houston (formerly PSI

Homesavers). He is a past member of the Board of Directors for the Electric Reliability Council of Texas (ERCOT), the Texas Energy Coordination Council, the Edison Electric Institute (EEI) Transmission Access & Power Supply Task Force, the

Association of Electric Companies of Texas’ (AECT) Policy Committee, the U.S.

Chamber of Commerce’s Regulatory Affairs Committee, the Governor’s STEPP Committee on Utilities, Strake Jesuit College Preparatory, the Saint Agnes Academy

Board of Directors, and the Juvenile Diabetes Research Foundation–Houston chapter Board of Directors. He has also served on the EEI Rate Research committee and

as vice chairman of the ERCOT Engineering Subcommittee. He holds two patents

dealing with electronic controls.

Personal: Tom is married with three children and is a native Houstonian.

DISCUSSION

Chairman LAMPSON. Thank you very, very much for all of you for

taking the time to come. We’ll move into our question-and-answer

period; and I yield myself the first five minutes.

THE ROLE OF THE FEDERAL GOVERNMENT

Let me start with you, Mayor White, if I may. Drawing from

your former role as the U.S. Deputy Secretary of Energy, how do

you think the Federal Government could better serve local and

27

State governments in efforts to address these grand energy challenges that we speak of.

Mr. WHITE. Well, I think, first, that there needs to be a retention

of the programs such as the weatherization program that currently

exists. I know some have talked about eliminating it. Personally,

I know that it’s a little controversial, but sometimes I think that

hot-weather states may get a bit of the short end on the equity

funding. I think there should be strict standards of accountability,

and I think those who do it and administer it in the most cost-effective way should get a little bit more money so that it shouldn’t

be just sort of an entitlement allocation based on this. For example,

our program, about $950 a household we’re averaging, about over

10 percent annual savings, 20 percent at peak, because we do it

like a manufacturing operation, not like some kind of government

program. So that would be one thing that we need to retain.

The other is that you could help us and give us some flexibility

on those areas where we may be preempted—and this is a technical matter—but come up with innovative standards on appliances

and devices and help both State and local governments where

states and local governments want to go farther than federal law

permits. Often the regulated industries, with high-powered lobbyists and lawyers, try to sue to prevent local governments and State

governments from taking innovative steps, by claiming that federal

law preempts those actions.

Now, in some case, I’d say view it on the merits, but I would just

give you an example. I’m not endorsing, but I’m just giving you an

example. If we were to say that in urban areas such as Chicago,

L.A., and Houston that there would be certain requirements for the

railroad engines coming in here and they could use certain devices

where we have emissions problems to begin with. Then if we have

a standard, then we would like some help from the Federal Government, rather than always running into the industry saying, oh, you

can’t do that because you’re preempted by federal legislation.

You know in, of course, California right now—I know it’s not

Congress—but the Administration is suing California to prevent

them from having more aggressive rules on automobiles, where

they’re trying to adopt more quickly the hybrid technologies that

Mr. Standish is talking about. The Federal Government is suing

California, saying that we don’t want you to do that because that’s

our game.

So thank you. Those would be some ways.

Chairman LAMPSON. Thank you very much.

HOW CAN WE MAKE OIL PRODUCTION CLEANER?

Mr. Hofmeister, what steps is Shell taking to make both production and the end use of oil cleaner and more efficient.

Mr. HOFMEISTER. Congressmen, there are a number of actions

under way, and have been for almost a decade now, in which Shell

has taken aggressive means to improve its own efficiency footprint.

A good example would be in the recently announced expansion of

the Port Arthur, Texas, Motiva refinery which, when completed,

will more than double the size of an already large facility, from

300,000 to more than 600,000 barrels a day. We’re operating in a

way that will get every bit more molecule out of the barrel, by imVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00031 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
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proving the efficiency of the processing of those molecules, and at

the same time reducing the emission footprint on a per-barrel basis

so that with the doubling of the expansion of that facility, we will

actually see a net improvement in the emissions per barrel that

come out of that production process. It’s mostly through efficient

use of our own energy consumption to make product that we’re currently able, in refineries around the world, to find a more efficient

use of production of energy.

In addition to that, if the smart wells that we are developing are

designed in a way to get more extraction from underground wells,

enhanced oil recovery is another means by which we are improving

the efficiency of the production of crude oil and natural gas from

underground; but in the use of transport fuels, I think there’s an

interesting story to be told as well—that is, our laboratories and

the chemical engineers in our laboratories are continuing to work

on new and different catalyst materials which, when introduced

into the gasoline or the diesel fuel, produce both more efficient use

of the energy and cleaner use of the energy so that at the emissions

tail pipe, you see the benefit but also in the miles per gallon, you

see the benefit. We work very closely with auto manufacturers to

make sure that what we’re doing in the fuels is compatible with

the engine design and the engine materials, but I think we can report over the last decade significant improvement—and while I’m

not trying to sell the product here, if you’ve ever tried the Shell V

Power product, which is the high-test gasoline, this is perhaps one

of the most efficient fuels in the world. We can move on from there

as well. For example, gas to liquids, which is a major innovation

in bringing middle distillate fuel from natural gas into the diesel

supply chain. It is a very, very clean and efficient use of energy in

diesel engines. I think I’ll stop there.

A TIMELINE FOR THE SMART GRID?

Chairman LAMPSON. Thank you very much. I have a minute, so

your next entry will then be shortened. Let me ask. Potentially, the

Smart Grid technology is really impressive; but the benefits will

undoubtedly come in stages. So what do you see as the first step

in establishing a smarter grid and how will it progress from there

and what kind of time horizons do you see for wide-scale adoption

of these technologies?

Mr. STANDISH. Very quickly, I think the first steps will be the introduction of this smart meter in the home. That communication,

if you simply have a device that sits on the counter in the house

and shows the customer how much they’ve spent to date in the

month, by the end of the month, what their expected bill would be

if you continue to consume at that rate, that price signal, I believe,

is the best energy efficiency item we can introduce in the electricity

business. I think that will be the first thing, and you’ll see this immediate feedback—the customer will see the immediate feedback of

the price signal, and that will be the first step.

Chairman LAMPSON. Can it also be connected to the Internet?

Mr. STANDISH. Yes, sir. You can do it to the home or you can do

it on the Internet. You could sit in your office and control the thermostat in your home; and that step, time-wise, we expect to be in

full deployment of this by January of ’09, the end of this year, probVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00032 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
29

ably taking somewhere in a four-year time frame to deploy the two

million meters that would be in this area.

Chairman LAMPSON. Thank you very much.

Mr. Hall, you’re recognized. Five minutes.

ULTRA-DEEP DRILLING AND THE ENERGY POLICY ACT OF

2005

Mr. HALL. Thank you, Mr. Chairman. I can still talk a little.

We’ve heard testimony about the Energy Policy Act of 2005, and

I think most of you are well aware of Section 999 of that act that

referred to the ultra-deep. I think most of you are aware of the fact

that there’s been some efforts on the part of the Administration to

knock out those provisions that were in that act. I’d like to point

out, Mr. Chairman—and I know you agree with me because you’ve

been standing side by side with us to try to defend that act and

to retain that opportunity to get, what, 60 or 70 years of gas from

the ultra-deep that we can’t get now, and the act itself calls for the

technology to get that, and that technology to be paid for with energy that we know is there that we can’t get to the top now. It’s

a win-win situation. No increase in taxes to the people that it will

benefit. So it doesn’t make sense to me to try to knock that out.

There’s been two major efforts to knock it out after it’s been

signed by the President. Joe Bartlett and I flew out to New Mexico

with him to sign that act, and since that time there’s been a lot

of efforts to repeal that part. So far we’ve fought them off. I think

it makes so much sense because it doesn’t cost anything. There’s

energy there that we won’t get if we don’t get the technology. The

technology is paid for there with energy that we do get; and for

anybody, that ought to make sense. I don’t understand it, but there

is an effort to knock that out and we’re still fighting that. There

was an effort on the floor some year ago, I guess, or eight or nine

months ago; and it was turned down, I think, almost two to one.

So I guess that’s the question that maybe I might have of Mr.

Hofmeister. How do you feel about the likelihood of the team that’s

working along that line and the efforts to knock that out, when it

makes very little sense to knock out something that we could use

to obtain long years of gas from a system that we’re not getting

anything out of now to speak of?

Mr. HOFMEISTER. Congressman, the first thing I would comment

upon is that ultra-deep technology and projects that move us into

the ultra-deep area are long-term projects. These projects take

years of engineering and design.

Mr. HALL. How many years?

Mr. HOFMEISTER. It could be anywhere from three to seven

years.

Mr. HALL. That’s my understanding.

Mr. HOFMEISTER. What is extraordinarily unhelpful is what

would be called perhaps zigzag federal policy on support or nonsupport of specific laws. Once enacted, we in the industry, we take

that as the governance that we should follow and then we begin

to build business plans around what legal enablers there are. When

we see uncertainty or when we see zigzagging in a law this year

modified the following year or repealed in the subsequent year, it

plays havoc with our planning process, which ultimately hurts our

30

energy security because we don’t do anything. So if we see uncertainty, we’re not going to spend hundreds of billions of dollars in

pursuing something.

A project I would point to specifically which Shell is undertaking

as we speak is a project called Perdido, which is very close to the

Mexican border in the southern Gulf of Mexico, southern and western Gulf of Mexico. We’re operating in 8,000 feet of water, which

is unprecedented for normal production operations. The reservoir

itself is 28,000 to 32,000 feet under the surface of the Earth once

we get to it. This is a project in which Shell will spend $1 billion

before producing a single gallon of crude oil—not a barrel—just a

gallon of crude oil. A billion dollars sunk into this project is predicated on quite a number of financials. We believe it’s a prolific region, and we have plans to expand in that region quite significantly. If, however, laws change and make this project no longer

financially as viable as it once was, we’ll move on to something else

but America will be denied that energy in case we do.

Mr. HALL. But you do understand there’s been no zigzagging in

the actual thrust. There’s been zigzagging in the efforts to thwart

the thrust, that have failed. The reason they’ve failed is we’ve put

the word ‘‘shall’’ in there, I think, nine times in the last paragraph.

Every time someone from Department of Energy—and I’m very

fond of the Secretary of Energy—I think he’s a great member of the

President’s cabinet—but they understand what the word ‘‘shall’’

means and there’s been no deviation from that, nor any zigzagging,

and there shouldn’t be and I don’t think there’s going to be.

So those are the things that I’m very interested in because if

we’re ever to rid ourselves of our problems and our fear of Saudi

Arabia turning on us—they provide, what, 40 percent of the 60 percent that we have to rely on people that don’t like us and we don’t

really trust—this would get us a long way down the road to easing

that problem. I don’t understand why anybody’s against it, and

we’re going to fight our really you-know-whats off to keep that on

the books. Every time a Department of Energy guy comes over

there to testify about this, I read those five or six or seven shalls

to him and they agree to it, that it’s in the books, they’re complying

with it, and it’s an ongoing thrust at this time.

THE DOMESTIC MANUFACTURING TAX

Now, I want to ask you a question. How would repealing the domestic manufacturing tax deduction—you’re familiar with that and

this is the thrust on that—affect your R&D into both conventional

and alternative sources of energy like biofuels?

Mr. HOFMEISTER. Again, this is a case of a zigzag in which it now

seems to have passed in Congress this past week.

Chairman LAMPSON. Only in the House.

Mr. HOFMEISTER. In the House. Sorry. Thank you. It again presents a dilemma as we look at our business-planning process. Now,

having said that, it’s not for Shell, as a company, to set government

policy. That’s not our job; that’s your job. We elect you to do that,

but we do try to make business plans based upon what we see and

how we see it predicted.

One of the ironies of the bill that was passed in the House this

week is, because it targeted only five companies by name, some of

31

our competitors such as PDVSA and Citgo are not excluded from

the deduction. So our competitors in this country are still able to

make the deduction, while the five named companies would be unable to make the deduction.

In addition, there’s another little quirk, as we would call it, in

the bill, which allows Hollywood producers the ability to take a

manufacturing deduction in the making of movies but yet a company like Shell, which is making millions of gallons of gasoline a

day, cannot take the deduction as a manufacturer. So it’s an irony

that we don’t understand.

I think over the longer-term, Congress has to decide what they’ll

do, and we will comply, but we scratch our heads seriously, Congressmen, when we see this kind of policy that emanates only two

years or three years after the deduction was actually created.

Mr. HALL. We thank you for your input. You know, we write

those laws based on what those of you who make it happen testify;

and I thank you for the testimony you’ve given to our committee

back through the years.

Mr. Chairman, I yield back.

Chairman LAMPSON. Thank you, Mr. Hall. I think that you’re

somewhat a hybrid because you really created or helped create the

RPSEA program when you were on the Minority side and you liked

the Minority so much that you moved over and you continued to

fight it.

Mr. HALL. I may move back.

Chairman LAMPSON. Well, we appreciate your effort because I,

too, think it’s a critically important thing.

Mr. HALL. That’s what Bill White would tell us to do—and a man

I admire and respect. I knew him when he was young and have

seen him grow and watched him operate under a great man, Mr.

Dingell. He gave us a lot of advice and guidance when you were

in D.C., but we’re glad to have you back in Texas.

Chairman LAMPSON. He’s given us good advice and direction here

as well.

Dr. Bartlett, you’re recognized for five minutes.

BALANCED ON THE RAZOR’S EDGE: STRATEGIES FOR THE

FUTURE

Mr. BARTLETT. Thank you. You know, in a very real sense an argument can be made that gas is too good to burn. It’s a feedstock

for an incredibly important petrochemical industry; and probably

not one person in 50, other than our farmers, know that essentially

all of our nitrogen fertilizer comes from natural gas. When natural

gas is gone, nitrogen fertilizer is gone. How will we feed the world?

I want to thank Shell Oil Company for your heroic efforts in trying to exploit the oil shales. Thank you, sir, for making a good try

at getting oil from this. You said a trillion barrels. It’s a good deal

more than that. I generally say it’s probably a trillion and a half

barrels there. Potentially a lot of energy, but there’s a huge amount

of potential energy in the tides, too. Just because it’s there doesn’t

mean it’s in your gas tank.

I’m very pleased, sir, that you have joined the chorus of voices

who are warning that we’re facing a supply-demand crisis. Your

32

words were ‘‘balanced on a razor’s edge of growing demand and

tightening supply.’’ Meaning what?

Mr. HOFMEISTER. Meaning that any disruption in the supply

chain is immediately felt by the consumer. The best example is the

supply shortfall after Hurricanes Katrina and Rita, where 25 percent of the Nation’s production capacity, both crude and natural

gas and also refined product, were out of commission not just for

days or weeks, but for months. During that period is when we saw

such a huge spike in gasoline prices at the pump that I, for one,

received letters from 48 Attorneys General suggesting that we

should be investigated for price gouging, when in fact, this was a

market reaction to what was a real shortage.

There was an incident, a week after Rita, where I personally

called Secretary Bodman to say that our Motiva refinery in Port

Arthur had the last 300,000 barrels of finished product to put into

the Plantation and Colonial pipelines to feed all the way up to

Washington, D.C. And that if we didn’t get our generators up and

running over the weekend, we couldn’t pump that inventory and

we would actually, for the first time in the history of the Plantation

and Colonial pipelines, be literally out of gas, which would have led

to panic-buying, literally from the Texas border all the way up to

Washington, D.C. Across the Southeast, involving states that would

have been perhaps possibly fueling panic-buying in other parts of

the country. That’s what I call a razor’s edge. We do not have an

abundance of inventory. We do not have near-term solutions for

any kind of a disruption to the normal supply chain.

Mr. BARTLETT. Sir, I think your company has also said that by

2015, and perhaps before, that there will be a meaningful risk that

production will not be able to meet the world’s demand. That, sir,

means peak oil, I think, in the terms that most people understand

it; and I want to thank you very much for your voice of reason and

coming out and saying that.

When you talk about the short-term, the medium-term, and the

long-term, for each of those, you say that our major reliance will

be on gas and oil. That, sir, is sadly true; and it’s true because of

the statement you made that we cannot attain the commercial

scale and infrastructure needed to meet energy needs through alternative sources. That’s because we’ve waited too darn long to

start and we can’t start yesterday but I sure as heck would like to

start today.

I’m sure you’re familiar with the Cantarell Oil Field, which was

the world’s second largest oil field. It has had, what, a 20 percent

decline in the last two years. About three fourths of all the oil-producing countries in the world have already peaked, and it is very

probable that the world has now peaked. I want to thank Shell Oil

Company for being a leader in being honest with the American people and the world.

Mr. Mayor, your emphasis on conservation is exactly right.

That’s where it’s got to begin. I led a group of nine to China over

the last, not this holiday but the year before. Spent New Year’s Eve

in Shanghai, and the Chinese begin their discussion of energy by

talking about post-oil.

We tend to think in terms of the next quarterly report here, and

we in the Congress have a lot of trouble seeing beyond the next

33

election, but in that part of the world they tend to think in terms

of generations and centuries. There will be a post-oil world. It will

not last forever. There will be an age—we’re about halfway through

it, by the way. We’re about 150 years into the age of oil. Another

150 years, ever less and less, more and more expensive, and we’ll

be through with the age of oil and gas and coal.

I bought the first Prius in the Congress. I bought the first Prius

in Maryland. I retired from the building business a number of

years ago, but I’m still the largest builder of solar homes in Frederick County. So I anticipated a long while ago that we were going

to—maybe it’s the scientist in me, but 40 years ago I started asking

myself the question: Gee, you know, the Moon isn’t made out of

green cheese and the Earth isn’t made out of oil and oil is not

going to last forever. When do I need to start being concerned

about it? Next year? Ten years? A hundred years? Maybe it’s a

thousand years? I had no idea, when I first started asking myself

these questions, when I needed to be concerned about it. You know,

it was about 30 years ago that we really needed to start being concerned about this as a world.

You know, what we have done is just so incredible. This wealth

that we found under the ground, one barrel of which provides the

work equivalent of 12 people working all year, each of us today

enjoy a lifestyle that, if it weren’t for fossil fuel energy, we’d need

300 people out there turning the cranks and waving the fan so that

we could enjoy the quality of life that we have today. When we

found that wealth under the ground, we should have asked ourselves the question: What can we do with this to provide the most

good for the most people for the long of time?

That’s sure as heck not what we did. With no more responsibility

than the kids who found the cookie jar or the hog who found the

feed door open, we’ve just been pigging out. Incredibly, that’s what

we want to continue to do, go out and drill as quickly as you can

to get the last oil. What about my 10 kids, my 16 grandkids and

my two great-grandkids?

You know, the next Congress, if age brings wisdom, you have two

of the wisest people in Congress here because Mr. Hall and I are

the oldest and the second-oldest people in the Congress next year.

Mr. Standish, you very correctly point to the major problem of

electricity is the grid. The future for electricity is very much brighter than it is for liquid fuels. We need to be clear on that. I’m very

bullish on our future for electricity. Wind and solar and more nuclear and we should do more—I see very bright friends in the Congress who are devout opponents of nuclear. Very bright young men.

I can mention one of them, Mark Udall, because he told me I could

mention his name. He’s a very bright young man, and he understands that a reasonable alternative to nuclear might be shivering

in the dark. Nuclear is not looking all that bad when shivering in

the dark is an alternative to nuclear. Solar and wind and nuclear

and micro hydro. We might get as much from micro hydro as we

can from macro hydro, but your focus on the grid is exactly where

the focus with electricity ought to be.

Thank you all very much for your testimony. I yield back, Mr.

Chairman.

34

Mr. HALL. You know, we had a young man in the legislature that

makes speeches all over about energy and he made the statement—purportedly, Mr. Waxman and Mr. Markey accused him of

making a statement, ‘‘Let the Yankees freeze and starve in the

dark.’’ Wasn’t that the way they came before our committee?

He came up to testify and asked me, he said, ‘‘When they finish

beating me around up there on that stage, you ask me what I really said.’’ Mr. Waxman and Mr. Markey and even Mr. Dingell

worked him over. They had his statement made. He made in a

speech on the West Coast. That’s exactly what they were asking

him about. He gave me the chance to ask him the question, ‘‘Well,

what did you really say there?’’

He said, ‘‘I did not say ‘Let the Yankees freeze and starve in the

dark.’ I said, ‘Let the damn, thieving Yankees freeze and starve in

the dark.’ ’’ That’s in the record up there. Bill, you might have been

there when that happened.

Chairman LAMPSON. With that, we’ll recognize Congressman

Green.

THE LOW INCOME HOUSING ENERGY ASSISTANCE PROGRAM

Mr. GREEN. I guess the audiences know that Congressman Bartlett represents the district just south of the Mason-Dixon Line.

I want to again thank my colleague for allowing me to sit in, as

not a Member of the Science Committee but spending a lot of time

on energy because of the Energy Committee and our district. Congressman Bartlett, we’ve had hearings in our committee with you

and the cousin of Mark Udall—Tom Udall—on peak oil, last year,

and the concern. I think we all share that concern.

I have a list of questions, but I really want to comment and not

take up all the time of the Full Committee Members. One of the

issues the mayor brought up was the Low Income Housing Energy

Assistance Program (LIHEAP). The formula has been flawed. I

don’t know if you or your staff looked back on that, but it was

drafted—and it’s so out of date in today’s world. We’ve tried to

change that, and someday we tried it in the energy bill of ’05 and

couldn’t get it done. So now we try and get above $2 billion so

areas that have heat problems actually could get some equity to it.

That’s the frustration. So we’ll continue to fight that LIHEAP battle.

I’ve told our northern Members that I think we need one more

pre-districting, that after 2011 we’ll finally have enough Members

below the Mason-Dixon Line. The science is with us; more people

die of heat-related than ever they do of cold-related. That’s frustrating but, again, it’s a political situation. Chairman Dingell is a

good friend of mine, and he wrote that legislation. If I was from

Michigan—I’d write the same thing—but there’s going to be different Members now in the next few years.

I agree with the need for a balanced approach, and that’s our

biggest question and battle in Washington. The bill was passed last

week, not only the 17 billion, but you know some of us agreed earlier last year for a smaller tax increase on energy that would actually do some of the things that the mayor talked about, smart

building and everything else, but we’re not really to that point. We

don’t talk about increasing production of what we’re going to need

35

for the next 10 to 15 to 25 years. At the same time we’re trying

to pay for the research that we want to do for alternatives that are

both cleaner. Until the House of Representatives does that balanced approach, you’re going to end up with Members like Nick

Lampson and I voting no on something that we’d really like to vote

for, but just don’t give us the number, just be part of the process

because we produce energy in our area. We just don’t consume it,

although we do consume a lot; but that has to be the balanced approach.

Let me talk about the issue about the transmission grid that

both Mr. Hofmeister and CenterPoint mentioned. The energy bill

of ’05 actually created the transmission corridors around the country to help with getting that power from the West that’s wind

power, and just last year on the House Floor we had three different

attacks on trying to eliminate those transmission corridors. They

were defeated in the House of Representatives, but that’s one of the

things in the energy bill of ’05 that was really good because we

have to have a national management of energy, although typically

the opposition comes out of the Northeast, the area that needs

those transmission corridors the most. So we’ll keep fighting that,

and so far we’ve been able to win on the House side.

The other issue—and I’m glad you mentioned about the request

for funds for the technical standards. I think technical standards

is actually the jurisdiction of the Science Committee and can deal

with that, and on the other side the request for the R&D that was

authorized in the energy bill from last year, the ’07, and to see if

we can get that funding in there for what we need to do. I’m glad

you mentioned it. It hadn’t hit my radar screen, but we’ll see if we

can put together some support through the appropriations process

for that, to make sure we do.

SHELL’S EMISSIONS CLARIFIED

You know, like I said, Mr. Chairman, I have lots of questions. We

live, some of us live every day with this issue. My last thing is I

want our Shell CEO to say it again so we’ll hear it, that the Motiva

facility in the Beaumont/Port Arthur area, actually you’re almost

doubling the barrels of production and you’re cutting the existing—

say you’re at 230,000 barrels now and you’re going up to whatever,

400,000, 600,000—you’re actually cutting, though, the current

emissions from producing the half that you’re producing now.

Mr. HOFMEISTER. I should say that more clearly, I think, Congressman. The net unit emission per barrel in total will come

down; but because it’s more barrels, there will be more emissions.

Mr. GREEN. There are more emissions, but the net unit per barrel. Again, there’s effort being made—and again the mayor has

been a leader on this, in representing a district that both has the

energy industry but also has a lot of constituents who work and

live around it. I want to make sure we do much better on the clear

air side and still we can do the production that our country needs.

We learned, as you said, in Rita and Katrina, that if we shut down

the Houston Ship Channel, which it was, you know, 45 percent of

our refined product comes out of this area of the Gulf of Mexico.

So that’s why the whole country needs it. They may not know they

need it until that price will go from 3.10 or 3.50 or whatever it is

36

in other parts of the country to much more, because otherwise we’ll

let people in Pedavesa import it, which they don’t have the refined

product to even import.

Anyway, thank you for having the hearing here and, again, I

thank the Science Committee for doing this.

Chairman LAMPSON. Thank you, Congressman Green.

That brings this panel to a close, and I want to thank the panelists for taking their time and for their good thoughts. We’ll do our

best to follow through with the information that you have given us.

We’ll take a very short recess as we switch groups for this table

and we will lose Congressman Hall.

(To Congressman Hall) We thank you very much for joining us.

Thanks so much for coming.

We’re in recess for just a couple of minutes.

[Recess.]

Chairman LAMPSON. I will call the meeting back into order, and

I want to welcome our second panel of witnesses to provide their

unique perspectives on energy from the academic and research sectors. We’ll have Dr. Walter Chapman, who is the Director of the

Energy and Environment Systems Institute, here at Rice University.

Mr. Michael Ming, who is President of the Research Partnership

to Secure Energy for America, otherwise known as RPSEA. Dr.

Robert Hirsch is the senior energy adviser for Management Information Services, Incorporated; and Dr. Robert Harriss is President

and CEO of the Houston Advanced Research Center, HARC, which

has done some great things around here as well.

We welcome all of you. As we said for the panel before, we ask

that each of you have five minutes for your spoken testimony. Your

written testimony will be included in the record for the hearing.

When you all complete your testimony, we’ll begin with questions.

Each Member will have five minutes to question the panel.

Dr. Chapman, would you please begin.

Panel II:

STATEMENT OF DR. WALTER G. CHAPMAN, W.W. AKERS PROFESSOR; DIRECTOR, ENERGY AND ENVIRONMENT SYSTEMS

INSTITUTE, RICE UNIVERSITY

Dr. CHAPMAN. Mr. Chairman and Members of the Energy and

Environment Subcommittee, welcome to Rice University, a beautiful setting and one of the Nation’s premier research universities.

It’s a great honor to address this committee on an issue of such

crucial importance to the United States and the world.

Before I start, I would like to acknowledge numerous colleagues,

including Amy Jaffe, Kenneth Cox, and Emil Pen ̃ a, for providing

input to this testimony; but the opinions I express here today are

my own.

Mr. Chairman, it is fitting that you have come to Rice today because Rice takes on big challenges. Almost 50 years ago, President

Kennedy came to this campus, not far from where we are seated,

to challenge our Country to land a man on the Moon. The resulting

investment led to one of the United States’ greatest technological

achievements and to unprecedented economic growth and unparalVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00040 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
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leled standing in the international community. We have an even

larger, equally important challenge today. Energy is, as the late

Richard Smalley, Nobel Prize winner and Rice University professor, told the U.S. Senate in 2004, ‘‘the single most important

challenge facing humanity today.’’ Confronting and surmounting

the energy challenge is not optional; it is necessary for survival.

Compared with the space race, this challenge will involve even

more advanced scientific and engineering feats, social change, and

government investment. Rice University’s Energy and Environmental Systems Institute envisions the challenge as being one of

building the bridge to a sustainable, affordable, and secure energy

future. The image of the bridge symbolizes the imperative to span

the technological, economic, and political divide between the

present and a sustainable future; but there is more to the symbolism. To me, this bridge is not constructed solely from technology. In fact, perhaps the most important component of the

bridge is the investment in human capital.

The United States must recommit itself to science and engineering education and to funding scientists and engineers engaged in

fundamental research, research that can produce innovations that

will drive the economy and provide solutions to producing sustainable energy. As the U.S. Government recommits itself to the energy

challenge, it’s important to recognize, as I believe this committee

does recognize, that you cannot legislate an energy solution. Solutions many times come from fundamental research in seemingly

unrelated areas. I recommend adopting the initiatives on education

and research funding in the National Academy’s report, ‘‘Rising

Above the Gathering Storm, Energizing and Employing America for

a Brighter Economic Future,’’ that was presented to this committee

in October of 2005. Among other guidelines, the report recommended significant increases in funding of basic research to secure our future.

Beyond supporting fundamental research, what else should we

do? Let me approach that question by exploring a series of other

questions. What do we know? What we are learning? How can we

learn faster? How long will it take?

First, what do we know? We know that a transition to greater

use of renewable energy sources is essential to sustainability. At

the same time, as the Department of Energy points out, even with

aggressive adoption of alternative energy, the U.S. demand for hydrocarbon energy sources will increase over the next two decades.

Thus, the U.S. should invest more to increase the supply of fossil

fuels, while simultaneously investing to replace them.

Mr. Chairman, I am very pleased that this energy portfolio approach is embodied in your bill, H.R. 5146. At Rice we have learned

many things. With respect to oil and gas, familiar energy sources

that have propelled the global economy for 100 years, we have

learned that there is still much to learn. We still do not know all

we need to know about extracting these energy sources. Roughly 70

percent of the oil discovered in the world cannot be produced by

conventional technologies. Faculty members at Rice University

have developed self-assembling smart fluids to better extract oil

from the pores inside rocks and to expand the areas swept in an

oilfield. Based on experiments and modeling studies, these techVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00041 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
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nologies could double the amount of oil produced from reservoirs.

Further applications of nanotechnology to existing exploration and

production will enhance supplies. The newly-established Advanced

Energy Consortium a privately-funded consortium of companies led

by the Bureau of Economic Geology at the University of Texas, in

collaboration with Rice University, is working on that possibility.

Now, beyond traditional oil and gas, we’re discovering new energy opportunities and new ways to improve existing technologies.

For example, we are learning how nanotechnology can inhibit corrosion, increasing safety and lower maintenance costs in energy,

transportation, and other industries. According to the National Association of Corrosion Engineers, corrosion presently costs the

United States, every year, $276 billion. We are learning how to create metabolically engineered bacteria and plants to convert biomass, as well as wastes from biodiesel production, into fine chemicals and fuels. We are learning how to manipulate gold coated

nanoparticles to efficiently harvest energy. This could lead to more

efficient solar cells.

Interestingly, the same technology has shown effectiveness in

treating cancer, using light energy. We are learning how to employ,

in wind turbines, new nanomaterials as blades that morph into the

optimum shape in response to wind conditions and possibly also

heal themselves if damaged.

In other activities, our institute is helping the Wind Energy Systems Technology Group to bring offshore wind to Texas, the first

offshore wind project in the United States. We are learning within

the Rick Smalley Institute at Rice how to produce, on a large scale,

a quantum wire to allow transmission of electricity around the

globe with near zero loss, enabling distributed energy generation

on a worldwide electricity grid. This is promising and exciting research, but I have only highlighted some of the research under

way, and that at Rice.

This brings me to the next question: How can we learn faster?

I think the answer is twofold. First, as I noted above, we need additional research funding to advance fundamental research and to

assimilate the next generation of students into the quest for solutions. Second, I recommend that the Government, presumably the

Department of Energy, make available, on its website, energy-related research findings from as many sources as possible. Information technology has vastly reduced the cost of placing information

in the public domain. That cost, however, has been offset by the

cost of tracking the sheer volume of material available. One way

to learn faster is to provide the research community and public at

large a compendium of energy information. I acknowledge this is

no small task, but it need not be done perfectly to make a difference.

Finally, how long will we need? We acknowledge that the odds

of finding a single quick solution to the energy challenge are infinitesimally small. It will take time to develop a portfolio of solutions.

At the same time, however, we have every reason to be optimistic

because progress towards a secure, affordable, and sustainable energy future is certain. It is happening now. It is not a matter of

whether but when. We are fortunate, as I hope I have made clear,

39

that there is much that this subcommittee can do to accelerate the

pace toward the goal upon which our very survival depends.

Thank you very much.

Chairman LAMPSON. Thank you very much.

[The prepared statement of Dr. Chapman follows:]

PREPARED STATEMENT OF WALTER G. CHAPMAN

Mr. Chairman and Members of the Energy and Environment Subcommittee, welcome to Rice University, a beautiful setting and one of the Nation’s premier research universities. It is a great honor to address this committee on an issue of such

crucial importance to the United States and the world. Before I start, I would like

to acknowledge numerous colleagues (including Amy Jaffe, Kenneth Cox, and Emil

Pen ̃ a) for providing input to this testimony, but the opinions I express here today

are my own.

Mr. Chairman, it is fitting that you have come to Rice today because Rice takes

on big challenges. Almost 50 years ago, President Kennedy came to this campus (not

far from where we are seated) to challenge our Country to land a man on the Moon.

The resulting investment led to one of the United States’ greatest technological

achievements and to unprecedented economic growth and unparalleled standing in

the national community.

We have an even larger, equally important, challenge today. ‘‘Energy is,’’ as the

late Richard Smalley, Nobel Prize winner and Rice University Professor told the

U.S. Senate in 2004, ‘‘the single most important challenge facing humanity today.’’

Confronting and ultimately surmounting the energy challenge is not optional, it is

necessary for survival. Compared with the space race, this challenge will involve

even more advanced scientific and engineering feats, social change, and government

investment.

Rice University’s Energy and Environmental Systems Institute envisions the challenge as being one of Building the Bridge to a Sustainable, Affordable, and Secure

Energy Future. The image of the bridge symbolizes the imperative to span the technological, economic, and political divide between the present and a sustainable future. But there is more to the symbolism. To me this bridge is not constructed solely

from technology. In fact, perhaps the most important component of the bridge is the

investment in human capital. The United States must re-commit itself to science

and engineering education and to funding scientists and engineers engaged in fundamental research, research that can produce innovations that will drive the economy and provide solutions to producing sustainable energy.

As the U.S. Government re-commits itself to the energy challenge, it is important

to recognize, as I believe this committee does recognize, that you cannot ‘‘legislate’’

an energy solution. Solutions many times come from fundamental research in seemingly unrelated areas. I recommend adopting the initiatives on education and research funding in the National Academies report ‘‘Rising Above the Gathering

Storm: Energizing and Employing America for a Brighter Economic Future,’’ presented to this committee in October, 2005. Among other guidelines, the report recommended significant increases in funding of basic research to secure our future.

Beyond supporting fundamental research, what else should we do?

Let me approach that question by exploring a series of other questions. What do

we know? What are we learning? How can we learn faster? How long will it take?

What do we know? We know that a transition to greater use of renewable energy

sources is essential to sustainability. At the same time, as the Department of Energy points out, even with the aggressive adoption of alternative energy, the U.S.

demand for hydrocarbon energy sources will increase over the next two decades.

Thus, the U.S. should invest more to increase the supply of fossil fuels while it simultaneously invests in replacing them. Mr. Chairman, I am very pleased that this

‘‘energy portfolio’’ approach is embodied in your bill H.R. 5146.

At Rice we have learned many things. With respect to oil and gas, familiar energy

sources that have propelled the global economy for a hundred years, we have

learned that there is still much to learn. We still do not know all we need to know

about extracting these energy sources. Roughly 70 percent of the oil discovered in

the world cannot be produced by conventional technologies. Faculty members at Rice

University have developed self-assembling fluids to better extract oil from the pores

inside rocks and to expand the area swept in an oil field. Based on experiments and

modeling studies, these technologies could double the amount of oil produced from

reservoirs.

In addition, I expect that applying nano-technology to existing exploration and

production will enhance supplies. The newly established Advanced Energy ConsorVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
40

tium—a privately funded consortium of companies led by the Bureau of Economic

Geology at the University of Texas working in conjunction with Rice University—

is working on that possibility.

Beyond traditional oil and gas, we are discovering new energy opportunities, and

new ways to improve existing technologies. For example,

We are learning how to create metabolically engineered bacteria and plants to

convert biomass as well as waste from biodiesel production into fine chemicals and

fuels.

We are learning how to manipulate gold coated nanoparticles to efficiently harvest

solar energy. This could lead to more efficient solar cells. Interestingly, this same

technology has shown effectiveness in treating cancer using light energy.

We are learning how to employ in wind turbines new nanomaterials as blades

that morph into the optimum shape in response to wind conditions and possibly also

heal themselves if damaged. In other activities, our institute is helping the W.E.S.T.

group to bring offshore wind to Texas—the first offshore wind project in the United

States.

We are learning within the Rick Smalley Institute at Rice how to produce on a

large scale a quantum wire to allow transmission of electricity around the globe

with near zero loss enabling distributed energy generation on a world wide electricity grid.

This is promising and exciting and research, but I have only highlighted some of

the research underway at Rice. Which brings me to the question: How can we learn

faster?

The answer to that is two-fold.

First, as noted above, we need additional research funding to advance fundamental research and to assimilate the next generation of students into the quest for

solutions.

Second, I would recommend that the government, presumably the DOE, make

available on its web site a moderated wiki of energy related research findings from

as many sources as possible. Information technology has vastly reduced the cost of

placing information in the public domain. That cost, however, has been offset by the

cost of tracking the sheer volume of material available. One way to learn faster is

to provide to the research community, and the public at large, a compendium of energy research. I acknowledge this is no small task. But it need not be done perfectly

to make a difference.

How long will we need? We need to acknowledge that the odds of finding a single,

quick solution to the energy challenge are infinitesimally small.

At the same time, however, we have every reason to be optimistic because

progress toward a secure, affordable and sustainable energy future is a certainty.

It is happening now. It is not a matter of whether, but of when. We are very fortunate, as I hope to have made clear, that there is much that this subcommittee can

do to accelerate the pace toward a goal upon which are very survival depends.

BIOGRAPHY FOR WALTER G. CHAPMAN

Professor Walter G. Chapman is the William W. Akers Professor of Chemical and

Biomolecular Engineering and the Director of the Energy and Environmental Systems Institute at Rice University. Among his recognitions are multiple teaching

awards and an Outstanding Young Alumni Award from Clemson University. Professor Chapman’s research into properties and interfacial structure of complex fluids

has applications in the energy and high performance materials industries.

Chairman LAMPSON. Mr. Ming, you’re recognized for five minutes.

STATEMENT OF MR. C. MICHAEL MING, PRESIDENT, RESEARCH PARTNERSHIP TO SECURE ENERGY FOR AMERICA

(RPSEA)

Mr. MING. Thank you. Good morning, Mr. Chairman. My name

is Mike Ming, and I serve as the President of the Research Partnership to Secure Energy for America, known as RPSEA. While

you have a copy of my written statement, I have some oral remarks

to elaborate on that, somewhat shorter than my written remarks,

41

which in some detail describe the program Mr. Hall described from

the Energy Policy Act of 2005, Section 999.

I appreciate the opportunity to share with you my views on what

I feel is the most important issue of our time, that being energy.

Its impact on productivity, our standard of living, the economy, the

environment, and national and global security are indisputable.

Energy plays a primary role in virtually every major challenge we

face today, and if we fix the energy problem, all other problems become much more manageable.

RPSEA, a public-private research consortium headquartered in

Sugar Land, Texas, focuses on abundant but technically challenging domestic unconventional natural gas in ultra-deep water

resources. I especially want to thank you, Mr. Lampson, and your

colleague, Mr. Hall, for your support of this program.

The U.S. is endowed with substantial natural gas and oil resources which, if developed in an environmentally responsible manner and consumed as efficiently as possible, will provide reliable

and affordable energy to the American public for decades to come.

Our job at RPSEA is to address those technical challenges and develop the intellectual capabilities to exploit those resources. RPSEA

is a consortium comprised of 130 member entities, 25 research universities. If you include Dr. Hirsch’s association with SAIC, it includes everyone on this panel, Rice University, other universities.

We are facing a fundamental shift in resource types from conventional to unconventional resources, which requires technology but

leverages a much larger resource space. Contrary to popular opinion, we are not running out of energy. In fact, if we are short on

anything, it is creativity and innovation on both the supply and demand ends of the pipeline.

With eight straight years of natural gas reserve growth and actually increasing production, all based on aggressive development

and implementation of technology enabled by market forces and effective public policy, domestic natural gas is a bird in the hand and

not two in the bush. To illustrate, 30 years ago, U.S. reserves were

just over 200 trillion cubic feet, or the equivalent of ten years of

remaining supply at then-current consumption rate. Today reserves

are 211 trillion cubic feet and growing, despite the production of

over 500 trillion cubic feet in the 30-year period in between, or two

and a half times what was supposedly left in 1979. We must not

let up now in our efforts to develop the energy technologies and

technologists to continue this impressive progress for this cleanburning and low-carbon fuel.

Effective energy policy must address many issues and consider

many options, and there is no single solution. What must occur is

the development of a diverse yet integrated portfolio of technologies

and policies. What I address today is primarily one component of

that portfolio, technology development for natural gas and oil supply; but I would also like to comment on end-use energy efficiency

because it is a critical component to the supply side of the equation.

Driven by effective public policy and appropriate market incentives, end-use energy efficiency leverages all force of supply; and

this holds true for natural gas and oil more than any other fuels,

if for no other reason than the sheer scale of their 66 percent conVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
42

tribution of our nation’s energy supply, an enormous enterprise by

any measure. These points were eloquently stated by all the witnesses on the previous panel, Mr. Hofmeister and Mayor White, regarding energy efficiency and energy issues, and by Mr. Standish

with regard to distributed generation.

With regard to the development of natural gas and oil supply

technology, I will highlight three critical requirements. The first is

the creation of a vehicle populated with capable participants which

enables the effective creation of technology solutions. This is the

RPSEA public-private partnership concept, utilizing the open innovation model which engages the full spectrum of contributors. This

contrasts with the historical approach of proprietary single-breakthrough type research efforts, by integrating processes and utilizing interdisciplinary skill sets.

The second is the development and utilization of the intellectual

capability necessary to solve the problems at hand. Fully engaging

the academic and research community, providing real problems for

them to solve, and providing incentives for the best minds to enter

the research field is the best method to build this intellectual capability.

The third and final requirement is integrating supply and demand in an optimized system. The unique attributes of natural

gas, for example, lend themselves to extraordinary increases in the

efficiency of power generation, distribution, and end-use consumption. Legislative supplier-demand proposals, which in isolation ignore the opposite end of the pipe, don’t capture this intrinsic value.

In the U.S. we waste more energy than we use. So my message is

that we have plenty of energy, just not plenty to waste.

All of these requirements necessitate investment with adequate

funding in resources. The funding for the program described by Mr.

Hall is $37.5 million per year. To put that in perspective, that’s the

value of less than 45 minutes worth of imported oil coming into the

United States.

I urge you to take this pragmatic approach back to Washington,

and I hope this message and my written testimony will assist you

in developing an integrated and sustainable energy policy and portfolio that will meet the criteria of our ancestors, where effective decisions are measured seven generations out. Quoting the great

Wayne Gretzky, ‘‘You miss 100 percent of the shots you don’t take.’’

Our research consortium is taking this shot and stands ready to

continue our contribution to this important effort that we cannot

afford to fail.

After spending a career as an independent producer from a rig

floor perspective and now as a technology facilitator, I have always

subscribed to the notion that I am more comfortable at proactively

creating my future than reactively just trying to predict it. I hope

you agree with this philosophy and continue to provide the support

to enable those efforts that truly can create the sustainable energy

future we all desire. I thank you for your time and the opportunity

to voice these opinions.

Chairman LAMPSON. Thank you, Mr. Ming.

[The prepared statement of Mr. Ming follows:]

43

PREPARED STATEMENT OF C. MICHAEL MING

Thank you Mr. Chairman for this opportunity to testify before your subcommittee.

The Energy Policy Act of 2005 established a new research program to maximize the

value of our domestic energy supplies through the development of new technologies

titled the ‘‘Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum

Resources Program.’’ This 10-year, $500 million dollar program is a public private

partnership designed to benefit consumers by developing technology to increase

America’s domestic energy resources and is paid for from lease bonuses and production royalties from federal lands. I want to thank you and your colleague Congressman Ralph Hall for the leadership you have demonstrated with your work to see

that this law was enacted and the program implemented.

The Research Partnership to Secure Energy for America (‘‘RPSEA,’’), a 501 (c) 3

not for profit corporation was selected to help manage research and development

projects funded through this new program. RPSEA is an innovative public-private

partnership comprised as a consortium of over 130 organizations, including 25 of the

Nation’s premier research universities, five national laboratories, several private research institutions, and a range of industry players. Participants in the consortium

and many other people have contributed thousands of man hours and expertise to

help develop a robust research plan to produce the Nation’s abundant—but technically challenging—domestic natural gas and oil resources. RPSEA is

headquartered in Sugar Land, Texas.

RPSEA was selected to administer 75 percent of the funds for this program in a

competitive solicitation issued by the Department of Energy in November, 2005. The

Federal Government maintains oversight of the program and Congress reviews our

Annual Research plan. RPSEA, as the research manager, is limited to 10 percent

of the total funds to administer the program. The research dollars managed by

RPSEA will be awarded to research performers across the Nation. DOE’s National

Energy Technology Laboratory will conduct complementary research with the remaining 25 percent of the funds. Founded in 2002, RPSEA uses a collaborative approach with industry, government, non-government organizations, academia, national laboratories, Federally Funded Research Development Centers and independent research groups. Members of this consortium have invested a substantial

amount of intellectual and financial resources in the start up of this new program,

and initial project selections have been made in several program areas with research projects set to begin this spring.

We also appreciate the pressure that Congress faces as it seeks to allocate scarce

federal resources and we appreciate how hard you have worked to resist recommendations to reduce or eliminate funding for this program—an effort that would

diminish its overall effectiveness and de-value the considerable investment already

made to ensure that it meets its potential for serving the American public. This new

program of research and development contains a revolutionary mechanism to

produce innovation and creativity unburdened by traditional constraints. Its effectiveness is based on open and transparent processes with the full engagement and

support of all stakeholders in the research arena. Attempts to hamper its implementation not only diminish the value of the existing public investment but also discourage the participation of industry which is where the true leverage is created to multiply the value of the taxpayer investment.

All reasonable forecasts indicate that natural gas and petroleum will remain essential sources of energy in this country for decades as we transition to a sustainable energy future. The United States has 75 years of natural gas supply, with most

of it on lands that are not subject to access restrictions; they are, however, ‘‘technically’’ restricted. New technologies will enable less expensive, more efficient, and

more environmentally-friendly domestic natural gas and other petroleum production. Natural gas and oil provide two-third’s of our nation’s primary energy, and will

do so for the next several decades as we transition to a new energy future. This

collaborative research program will ensure the continued development of America’s

intellectual capital and skilled workforce to effect this transition, enhance our energy security and provide new technologies to produce affordable domestic energy

supplies in environmentally-sound ways.

Our nation is not short on resources, in fact identified technically recoverable unconventional resources are growing, and it is this fundamental shift from historical

conventional resources to a virtually unlimited unconventional resource base that

makes this investment so beneficial. Developing cutting edge technologies to bring

reliable sources of clean-burning, environmentally friendly, domestic natural gas to

American consumers is exactly the kind of investment that the United States should

be making today, especially in light of sharply rising energy costs. RPSEA funds research projects conducted across the country that are designed to enhance domestic

44

energy production, mitigate its environmental impacts and help develop the next

generation of energy technologies and technologists. We need to re-establish the

United States global leadership role in energy technology and intellectual capital.

This national effort will engage the best minds in the country—from inside and

outside of the industry—to develop the new technologies that will take us to new

levels of energy self-sufficiency. The work of RPSEA benefits the public directly because the technology that is developed through RPSEA funded research is non-proprietary. The purpose of this Department of Energy program is to fund research—

using federal oil and gas royalties and industry matching funds—that will reduce

America’s dependence on foreign energy sources.

Quoting Congressman Ralph Hall to Energy Secretary Samuel Bodman, ‘‘the energy supply and demand situation in this country will not improve without the concerted and expeditious effort of every person that has the capacity to make a contribution. Production in difficult regions such as the ultra-deepwater requires new

technologies, a point that has been recently highlighted by the recent large Chevron

and Devon find in the Gulf of Mexico. Exploration wells have indicated there is significant resource available in that region; however, actual production and delivery

to market could take five to seven years.’’ This program and the technologies and

partnerships envisioned could help accelerate that production and lower its cost.

The technologies that are developed will likely have crosscutting applications for

deep drilling and production for unconventional onshore production as well. Chevron

and Devon are two of the over 130 members of RPSEA.

Further, two natural gas resources—coal bed methane and the Barnett Shale—

have been unlocked in recent years as the result of collaborative research jointly

funded by the Federal Government, the energy industry and private not-for-profit

research organizations. Today, the Barnett Shale and many basins containing coal

bed methane are significant contributors to our nation’s natural gas supply. The Energy Information Administration recently announced that natural gas reserves rose

for the eighth straight year. Texas led the Nation in gas reserve additions in 2005

thanks largely to sharp increases in the Barnett Shale. Coal bed methane reserves

now account for approximately 10 percent of overall domestic gas reserves. Much

new technology remains to be developed to tap the 1,525 trillion cubic feet of technically recoverable natural gas resource estimated by the Potential Gas Committee.

This program will help to ensure that our citizen’s collective knowledge and ingenuity will continue to be used aggressively to unlock many more natural gas and

oil resources through technology advancement.

The members of our consortium are confident that this program will enable the

broad sharing of R&D results, done at sites all across the country, to address the

public’s interest in developing abundant, clean, affordable and secure supplies.

RPSEA will administer a program across four elements of research, development,

demonstration and commercial application of technologies. The actual R&D activity

is conducted by recipients of awards that are selected through a competitive proposal process.

The time for action is now. Investing in the development of domestic energy resources will make us less dependent on supplies from unreliable overseas supplies.

And investments in R&D today will increase the energy supplies of tomorrow. This

means lower prices, increased competitiveness, and greater security. This program

will give the American consumer a seat at the head of the table: directing the Nation’s energy research agenda with public, not corporate, interests serving as its primary guideposts.

BIOGRAPHY FOR C. MICHAEL MING

C. Michael Ming currently serves as the President of the Research Partnership

to Secure Energy for America, RPSEA. Mr. Ming formerly served as an independent

oil & gas producer as a Managing Member of K. Stewart Energy Group, LLC and

as a principal, Director, and VP of Engineering at K. Stewart Petroleum Corp. He

holds a BS degree with distinction in Petroleum Engineering and an MS degree in

Engineering Management, both from Stanford University, and is a Registered Professional Engineer in Oklahoma. Mr. Ming is an emeritus member of the Petroleum

Investments Committee at Stanford University and is a past Chairman. He is actively involved in the University’s energy programs, co-sponsored the MAP/Ming

Visiting Professorship on Energy and the Environment, and currently serves on the

School of Earth Sciences Dean’s Advisory Board. He has served as an adjunct professor in Energy Management at the University of Oklahoma and as an oil & gas

strategic planning advisor to the Department of Energy.

45

Chairman LAMPSON. Dr. Hirsch, you’re recognized for five minutes.

STATEMENT OF DR. ROBERT L. HIRSCH, SENIOR ENERGY

ADVISOR, MANAGEMENT INFORMATION SERVICES, INC.

Dr. HIRSCH. Mr. Chairman, Dr. Bartlett, and staff, if it hasn’t already, world oil production is about to reach a maximum, after

which it will go into decline. When decline begins, world oil prices

will leap upwards and oil shortages will worsen year after year.

The oil interruptions of 1973 and 1979 sparked recession, inflation, growing unemployment, and high interest rates. The peaking

of world oil production will be much more damaging and could well

last much longer than a decade, in spite of the very best of human

efforts. Oil prices have risen by more than a factor of five since the

1990s, as you know. For the last three and a half years, world liquid fuel production has stagnated, which means that production

has fluctuated within a relatively narrow volatility band. Such a

long plateau in world oil production hasn’t happened in the last 50

years.

A growing chorus of influential individuals and organizations has

warned of impending world oil shortages. Included are the International Energy Agency, Chevron, Shell, Total Oil, Statoil, Hess

Oil, the Chinese Petroleum Institute, the Corps of Engineers, Volvo

Trucks, and a number of retired senior oil company geologists, and

such American notables as James Schlesinger, Boone Pickens, Matt

Simmons, and Charlie Maxwell. Some sugar-coat their warnings

with phrases like ‘‘supply will no longer be able to meet demand,’’

while others warn specifically of growing world oil shortages.

Consider statements by executives of the International Energy

Agency when they released their 2006 world energy outlook: ‘‘This

energy future is not only unsustainable, it is doomed to failure. We

are on a course for an energy system that will evolve from crisis

to crisis.’’ The IEA chief economist opined that he expects the oil

industry’s production capacity to slightly outstrip demand through

the end of this decade—not far from now—if all oil projects worldwide see the light of day, which he said is not likely.

Charlie Maxwell is often called ‘‘the dean of world oil analysts.’’

He tells us to expect gasoline at twelve to fifteen dollars per gallon

within a few years. Twelve to fifteen dollars within a few years.

Others specifically speak of oil shortages that will increase year

after year. Think of what oil shortages will mean to our economy

with our everyday mobility requirements, extensive world trade,

oil-based agriculture, just-in-time manufacturing, and long commutes to work.

In 2005, the Department of Energy released a study that colleagues and I prepared, on mitigating the impacts of peak oil. We

analyzed a worldwide crash program because that represents the

best that would be humanly possible. We found that a crash program started 20 years before world oil peaking could avoid economic disaster. On the other hand, waiting for peaking to become

obvious—the course we are presently following—means much more

than a decade of dire economic consequences. During the time of

our study, we took no position on when peaking might occur because it was much less clear then than it is now. Our primary conVerDate 11-MAY-2000 14:38 Aug 08, 2008 Jkt 040819 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 C:\WORKD\E&E08\022908\40819 SCIENCE1 PsN: SCIENCE1
46

clusion was that growing world oil shortages will almost certainly

outrun the best human efforts, assuming that we wait until the

problem is obvious.

The fact is that there will be no quick fixes, absolutely no quick

fixes, because of the enormity of the lost oil production. That enormity means that rapid activity, the best that we can possibly do,

will not be sufficient. Today credible forecasts indicate that oil declines will occur either right after the current production stagnation or after a few more years of production fluctuations, but a few

more years either way is not significant when viewed from the

point of view of what will have to be a worldwide, multi-decade

crash program.

Peak oil could, indeed, be another perfect storm. This is because

the world, as you well know, is increasingly focused—some might

say fixated—on manmade contributions to global climate change.

While some energy efficiency options may be similar for the two

problems, other peak oil mitigation methods are not. So some

wrenching value readjustments are going to be necessary. Which

problem is more urgent is a matter for debate. To me, the worst

kind of disaster is hordes of people out of work, out of their homes,

and desperate, which is what world oil shortages will deliver.

Peak oil could burst into active public consciousness at any time.

There’s a lot in the literature now, in television and newspapers

and so forth; but in reality hasn’t crashed past the threshold into

open public consciousness. When it does, reactions are likely to resemble those of 1973 and 1979 oil shocks—namely, public panic,

early hoarding, induced shortages, and major negative reactions on

Wall Street.

Those problems arose in the past, and they are almost certain to

happen again.

Difficult compromises and decisive action will be needed. There

will be no single solution. Multiple mitigation options will be required. Large-scale deployment—and let me repeat the word

‘‘deployment′′—of appropriate technologies will be essential, and

government-facilitated industrial crash programs will be a must.

Research and development will be required—and I’m a research

and development person and feel very strongly about such things—

but make no mistake: R&D alone will have little impact in the

near-term. R&D in big problems like this takes times to implement

under the best of conditions. Large-scale deployment is the only

thing that can make a difference.

Thank you for the opportunity to be heard. I have compressed

my comments here, quite obviously. This is a horrendous problem.

The task ahead will be unprecedented.

Chairman LAMPSON. That’s a lot to think of, but I think you’re

right and that’s why we’re here. Thank you, Dr. Hirsch.

[The prepared statement of Dr. Hirsch follows:]

PREPARED STATEMENT OF ROBERT L. HIRSCH

If it hasn’t already, world oil production is about to reach a maximum, after which

it will go into decline. When decline begins, world oil prices will leap much higher,

and oil shortages will worsen year-after-year. The brief oil interruptions of 1973 and

1979 sparked recession, inflation, growing unemployment, and high interest rates.

The peaking of world oil production will be much more damaging and could well

last much longer than a decade in spite of our best efforts.

47

Oil prices have risen by more than a factor of five since the late 1990s. For the

last three and a half years, world liquid fuel production has stagnated, which means

that production has fluctuated within a relatively narrow volatility band. Such a

long plateau in world oil production hasn’t happened in the last 50 years.

A growing chorus of influential individuals and organizations has warned of impending oil shortages. Included are the International Energy Agency (IEA), Chevron, Shell, Total Oil, Statoil, Hess Oil, The Chinese Petroleum Institute, The Corps

of Engineers, Volvo Trucks, a number of retired senior oil company geologists, and

such American notables as James Schlesinger, Boone Pickens, Matt Simmons, and

Charlie Maxwell. Some sugarcoat their warnings with phrases like ‘‘supply will no

longer be able to meet demand,’’ while others warn specifically of growing oil shortages.

Consider statements by the Executive Director and Chief Economist of the International Energy Agency (IEA) associated with the release of their 2006 World Energy Outlook: ‘‘This energy future is not only unsustainable, it is doomed to failure. . .’’ ‘‘. . .we are on course for an energy system that will evolve from crisis to

crisis.’’ The IEA chief economist opined that he expects the oil industry’s production

capacity to ‘‘slightly outstrip demand’’ through the end of this decade, if all oil

projects worldwide see the light of day, which he said was not likely.

Charlie Maxwell is often called the dean of world oil analysts. He tells us to ex- pect gasoline at $12–$15 per gallon within a few years. Others warn of world oil

shortages that increase each year. Think about what oil shortages will mean to our

economy with our everyday mobility requirements, extensive world trade, oil-based

agriculture, just-in-time manufacturing, and long commutes to work.

Some deny that the problem is imminent and tell us not to worry. Included are

OPEC, DOE EIA, CERA, ExxonMobil, and fewer and fewer others. OPEC asks us

to trust that it can and will act in our best interests. The OPEC countries tell us

to believe their secret, unaudited oil reserves claims, in spite of disturbing evidence

they have been less-than-truthful in the past.

CERA has been consistently optimistic, but they have been wrong on many resource and price forecasts in the past. They too ask us to trust them.

In early 2005 the Department of Energy released a study that colleagues and I

prepared on mitigating the impacts of peak oil. We analyzed a worldwide crash program, because it represents the best that would be humanly possible. We found that

a crash program started 20 years before world oil peaking could avoid economic disaster. On the other hand, waiting for peaking to become obvious—the course we are

presently following—means much more than a decade of dire economic circumstances. At the time of our study, we took no position on when peaking might

occur, because it was much less clear than it is now. Our primary conclusion was

that growing world oil shortages will almost certainly outrun our very best human

efforts, assuming that we wait until the problem is obvious. The fact is that there

will be no quick fixes, because the enormity of lost oil production means that rapid

mitigation is impossible.

Today, credible forecasts indicate that oil declines will occur either immediately

after the current production stagnation or after a few more years of production fluctuations. But a matter of a few years is not significant when viewed in the context

of a multi-decade crash program.

Peak oil could indeed be another ‘‘Perfect Storm.’’ This is because the world is increasingly focused, some say fixated, on man-made contributions to global climate

change. While some energy efficiency options may be similar for the two problems,

other peak oil mitigation methods are not, so some wrenching value adjustments

will be called for. Which problem is more urgent is a matter for debate. To me, the

worst kind of disaster is hoards of people out of work, out of their homes, and desperate, which is what world oil shortages will deliver.

Energy experts know that it will take something like half a century for the world

to meaningfully transition toward a more sustainable energy future. In the meantime, world oil supply shortages will require other sources of liquid fuels to power

the huge worldwide fleets of automobiles, trucks, airplanes, ships, and farm equipment.

Most renewables won’t help because they produce electricity, which will be of no

value in existing liquid fuel-consuming machinery. Corn-based ethanol produces a

fuel that can replace oil, but its energy efficiency is near zero; its climate impact

is now believed to be negative; and it has already lead to higher food prices. Oil

peaking will force us to be much more pragmatic about our energy choices and to

stop betting on seemingly wonderful technologies that cannot significantly contribute to the toughest energy challenge we’ve ever faced.

Thinking about peak oil is extremely uncomfortable because it quickly conjures

a cascade of events that lead to a major recession that deepens with time.

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How could peak oil happen? It’s because oil is a finite resource, which the world

is consuming at an ever-increasing rate. Oil production peaking has occurred in

countries all over the world. The Royal Swedish Academy tells us that 54 of the 65

most important oil-producing countries are already past their peak oil production.

In the U.S. lower 48 states, our production peaked in 1970 and has been declining

ever since. This happened in spite of dramatically improved technology and increased oil prices.

The Royal Swedish Academy also tells us that the rate of discoveries of new oil

reserves is less than a third of the present rate of oil consumption. Some believe

the number to be higher. It’s not hard to comprehend that we’ve got a problem.

Keep in mind that seemingly small numbers have very large impacts when it

comes to oil. For example, the five percent decrease in U.S. oil supplies associated

with the 1973 Arab oil embargo was accompanied by a damaging economic recession. A one percent change in current world oil production equates to over 800,000

barrels per day (bpd), which represents a huge volume. To save that level of consumption through improvements in the efficiency of the world’s light duty vehicle

fleet would require more than a decade, assuming crash program implementation.

The production of 800,000 bpd of substitute liquid fuels would require coal-to-liquids

(CTL) plants costing $50–100 billion and more than a decade under the best of conditions, which don’t now exist. The bottom line is that small decreases in world oil

supply can have large economic impacts and necessitate unprecedented levels of

mitigation hardware and investment.

An exercise called Oil Shockwave a couple of years ago concluded ‘‘It only requires

a relatively small amount of oil to be taken out of the system to have huge economic

and security implications.’’ Robert Gates made that statement prior to his current

job as Secretary of Defense. Among other Oil Shockwave conclusions was that a four

percent global shortfall in daily oil supply would result in an oil price increase of

nearly a factor of three and a severe recession in the U.S.

And our whipping boys must change. We can no longer blame the major oil companies, including the public’s favorite villain, ExxonMobil. That’s because the majors

now control only a small fraction of world oil. Expropriations over recent years mean

that National Oil Companies dominate world oil, and many of them are much more

interested in near-term revenues than servicing the world’s thirst for oil. Indeed, it

can be argued that it is in their best interests to hold back production.

The peak oil issue is percolating up the public awareness ladder. There are growing numbers of related articles in the media. The Administration gives indications

that it recognizes the problem but isn’t speaking out directly. More and more people

on Wall Street are talking about the problem. Last time I Googled ‘‘peak oil,’’ there

were over four million items, including serious studies, newspaper stories, documentaries and blogs.

Peak oil could burst into active public consciousness at any time. When it does,

reactions are likely to resemble those of the 1973 and 1979 oil shocks: Public panic,

early hoarding-induced shortages, and major negative reactions on Wall Street.

These problems occurred before, and they are almost certain to happen again.

Difficult compromises and decisive action will be needed. There will be no single

solution; multiple mitigation options will be required. Large-scale deployment of appropriate technologies will be essential, and government-facilitated industrial crash

programs will be a must. Research and development will be required at much higher levels, but make no mistake, R&D alone will have little impact in the near-term.

Large-scale technology deployment is the only thing that can make a difference.

Thank you for the opportunity to be heard. I hope that these compressed thoughts

will help to motivate greater attention to this horrendous problem. The task ahead

will be unprecedented.

BIOGRAPHY FOR ROBERT L. HIRSCH

Dr. Hirsch is a Senior Energy Advisor at MISI and has been involved in virtually

all aspects of energy technology in industry and government for over 40 years. He

is a past Chairman of the Board on Energy and Environmental Systems at the National Academies.

Chairman LAMPSON. Dr. Harriss, you’re recognized for five minutes.

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STATEMENT OF DR. ROBERT C. HARRISS, PRESIDENT AND

CEO, HOUSTON ADVANCED RESEARCH CENTER

Dr. HARRISS. Thank you, Mr. Chairman, and thank you for inviting me to testify. This is an honor to be here with such a distinguished panel, and I want to first say that I’m used to be at the

end of the line because I grew up down in South Texas, in Cameron

County, and one of the most transforming things in my life was to

get off the ranch and come to Houston, Texas, to go to Rice University. I was lucky to be here at a time when there was an amazing

and inspiring speech in this football stadium by John F. Kennedy,

and it was one of the things that changed my life and has inspired

me for the last 43 years, and I hope for many more, to work for

a more sustainable future for our nation. NASA and the space program have resulted in radical innovation in so many ways, from robots on Mars to better products on our markets today, that it’s a

model that I would like to talk about today for other things that

we do in the energy area.

I’m also pleased to represent the Houston Advanced Research

Center, a nonprofit organization founded by the visionaries George

and Cynthia Mitchell. We are dedicated to city and regional sustainability. George Mitchell was a pioneer in natural gas, continues

to worry every day about issues of sustainability and the need for

more visionary thinking. He often calls me up and says, ‘‘Bob, well,

if we’re not doing well at sustaining Houston with six million people, what are we going to do when three more million people get

here? You’ve got to get to work.’’ So he’s relentless in trying to say,

‘‘How do we come up with solutions? There’s plenty of people talking about problems. I’d like to see some solutions.’’

I agree with him. I get weary when I turn on my computer in

the morning to look at the news and see ongoing discussion about

climate change and oil wars and the spread of nuclear weapons, because they’re all looking at the problems and I say it’s time for us

to choose none of those topics but to look for solutions and look forward with a vision that will inspire young people to go out and engage in the science, the engineering, and the policy that’s necessary

to move us forward.

Now, I do totally agree with the previous statements that in the

near-term, the next 20 to 50 years, we’re going to require a very

efficient and effective use of fossil fuel. However, I think we need

to look beyond that. We need to do everything we can to make that

bridge, to look beyond that and, in doing so, to focus on thinking

about how we live in a different world today. It’s an urban age.

We’re really transitioning out of the industrial age into the urban

age. Cities are essential sources of opportunities for social advancement and the creation of wealth, globalization, and creativity; but

they are also large consumers of resources, they’re reservoirs of

poverty, and concentrated sources of solution. We’ve talked about

severe air pollution. We’ve talked about the vulnerability of our

urban areas to hurricanes. Those are just two examples of the

metrics which suggest that we have a big challenge ahead.

Now, I do think the Houston metro area reflects the complexity,

opportunities, and challenges that we face in the urban age on a

worldwide scale. It is the face of the future.

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I’d like to comment on what I think is a very exciting opportunity

in urban sustainability, which is actually a new and emerging field

that considers primarily use-inspired research. We do a lot of good,

basic, fundamental research in our university community and in

our federal laboratories, but we need to also focus on what I will

talk about as use-inspired work. That’s meeting the needs of the

consumers in this nation with the products that will be fitting to

the solutions they expect for their culture, for their local setting,

for their environment. One size simply doesn’t fit all. It’s urgent

that we think seriously through a vision, a design, and a deployment of a whole array of regional and local solutions to our problem with supplying energy for the future.

I’m going to comment very briefly on something that builds on

Mr. Standish’s testimony, and that is the opportunity that Texas

has to lead the world in terms of displaying the first smart supergrid based entirely on renewable energy. Before I do that, I would

like to emphasize that all of these systems that we are talking

about in terms of energy supply and demand, are what we call

sociotechnical systems—that is, the social dimension is every bit as

important as the technological dimension. We can produce a lot of

gadgets, but if there’s not a consumer demand for those and a desire for the consumer to buy those, we’re not going to make a bit

of difference, and yet often we ignore the social sciences as an incredibly important part of the future.

Now, one of the things I think we could do to start to make important headway is to think about setting up a network of urban

sustainability centers. In one sense, I think of the fact that Congress has taken action before that did a very similar thing when

they set up the land grant college system. We were an agricultural

nation. We needed to get out and work with the farmers on a regional basis and to figure out how to innovate in a way that was

suitable for the local culture and the local conditions, including the

environmental conditions. Now, regional sustainability centers

would catalyze, facilitate, and support the integration process necessary to creating use-inspired solutions to the grand challenges

facing American cities.

They are: Shaping the transition to a renewable energy future,

adapting to climate change, sustaining biodiversity in ecosystems,

and reducing vulnerabilities, especially vulnerabilities that many of

our citizens in Houston face to pollution and natural disasters.

These centers would be, I think, a major contribution to going from

a one-size-fits-all model to the customized model that will meet the

needs of citizens across the Nation, in our metros, where they live

and under the conditions and cultural settings in which they live.

As America’s energy capital, Houston would be the ideal setting to

assemble the necessary expertise to do a demonstration or at least

to think through a design of what these regional sustainability centers might look like.

Finally, I want to come back to this notion that Mr. Standish

talked about, of a super-grid or of a Smart Grid; and I want to say

that because Texas is fortunate to have a relatively independent

electrical grid—there are small interconnections, but for the most

part, being a big state with six climate zones, we have our own

grid—and it offers a model for the Nation and the world because

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of the variety of local and regional environments we have. Now, we

can, I am convinced, produce the most affordable electricity our nation has ever experienced, with renewable energy that will only require a backup of natural gas as a reserve for surprises that may

come as a result of global warming or some other factor; but I

think it will be easy for us over the next 20 years to demonstrate

that we can jump-start the world in moving towards a Smart Grid

and a super-grid here in Texas and using available technologies. I

want to emphasize that not only do we not have the funding, we

don’t have the institutions to make that happen now. There are too

many variables.

Finally, I would point out that in terms of energy R&D in our

nation, the energy area and related environmental science have

been flat for several decades now and it’s time for us to, I think,

invest in a way that’s far beyond $100 million in terms of this grid

technology, probably more like $100 billion, and really inspire our

young people to see that as the most exciting challenge they can

take on in their future careers.

Thank you very much, sir.

Chairman LAMPSON. Thank you very much.

[The prepared statement of Dr. Harriss follows:]

PREPARED STATEMENT OF ROBERT C. HARRISS

Mr. Chairman, Thank you for inviting me to testify. My name is Robert Harriss

and I am President of the Houston Advanced Research Center (HARC), a nonprofit

organization dedicated to moving knowledge to action to improve human well-being

and the environment at the regional scale. As an institution, HARC does not take

positions nor engage in advocacy, so the opinions expressed here are my own.

For the record, I have been involved with energy, environment, and related sustainability issues as researcher, educator, and science administrator serving universities, NSF, NASA, the National Center for Atmospheric Research, and the Houston

Advanced Research Center for the past 43 years of my professional career.

My testimony today draws heavily on the work of the Board on Sustainability and

Sustainability Roundtable at the National Academy of Sciences/National Research

Council. The National Academy Press publication titled ‘‘Our Common Journey: A

Transition Toward Sustainability,’’ published in 1999, provided a new foundation for

thinking about pathways to more sustainable futures. The continuing leadership of

Robert W. Kates, recipient of the National Medal of Science, William C. Clarke of

Harvard University, William Merrell at Texas A&M–Galveston, and many others,

continues to reveal and refine new insights and pathways for advancing the wellbeing of both our nation and the global environment.

THE URBAN AGE

The Greater Houston and Upper Texas Coast region, our nation, and Planet Earth

are nearing critical tipping points that will result in declining economic prosperity,

dramatic environmental degradation, and other serious threats to human wellbeing. Prospects for today’s children, and especially our region’s vulnerable populations, hinge upon more aggressive and effective leadership in advancing the

science, engineering, and policies necessary to achieving more sustainable futures.

The United States has demonstrated an extraordinarily successful capacity for

discovery and innovation in developing new technologies, innovation processes, and

public policies that serve commercial and national security purposes. In little more

than a century our nation has moved from an agricultural, to an industrial, to an

urban age. Remarkably, today our top 100 metropolitan areas take up only 12 percent of the land in the United States, but account for 68 percent of our population

and 75 percent of the U.S. Gross Domestic Product. The urbanization of America

and other advanced nations, combined with the increasing role of cyberspace as the

primary infrastructure stimulating economic globalization, positions cities as the

primary platforms for addressing the major challenges facing the world today.

Cities are essential sources of opportunities for social advancement and the creation of wealth, globalization, and creativity. But many cities are also dysfunctional

both environmentally and socially. They are large consumers of resources, reservoirs

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of poverty, and concentrated sources of pollution. The Houston metro area reflects

the complexity, opportunities, and challenges that we face in the urban age.

URBAN SUSTAINABILITY: AN EMERGING FIELD OF ‘‘USE-INSPIRED’’

RESEARCH, EDUCATION, AND INNOVATION

Sustainability science is a new paradigm that aspires to integrate research and

knowledge from the natural, social, medical, engineering, and policy sciences and to

inform decision-making and stimulate innovation. It is defined by the practical problems it addresses, specifically the problems of sustainable development. It is focused

on scientific understanding of strongly interacting human and environmental systems. Sustainability science is generally place-based; at metropolitan and regional

scales where complexity is comprehensible and integration is possible, innovation

and management happen, and local culture is understood.

Present systems for governing and implementing R&D encourage good research

that is anchored in single (or closely related) disciplines and is either fundamental

(e.g., university R&D) or specific to commercial products (e.g., industrial R&D). The

essence of sustainability science, engineering, and policy is synthesis and integration of knowledge and treating policies and projects as opportunities to learn. Relative to conventional science less emphasis is needed on elite researchers making

discoveries and more on connecting diverse stakeholders in a sustained collaborative

dialogue on an important shared problem. The outcome of a sustainability process

and project is to increase stakeholder options and make choices among them. HARC

is committed to the goal of being an effective, trusted bridging organization dedicated to solving sustainability issues in the Greater Houston and Upper Texas Coast

region.

THE NEED FOR A NATIONAL NETWORK OF URBAN SUSTAINABILITY

CENTERS

America has several times solved complex issues through the implementation of

a distributed network of centers that could facilitate a knowledge dialogue aimed

at use-inspired research and education. The development of industrial age agriculture benefited from the Land Grant College program. NASA’s network of regional

research and engineering centers has been successful at integrating university and

private sector researchers into national space technology R&D programs. There is

an urgent need to provide an institutional framework appropriate to solving the

many sustainability issues facing the major metropolitan regions of this nation. Regional urban sustainability centers would catalyze, facilitate, and support the integration process necessary to creating use-inspired solutions to the grand challenges

facing American cities—shaping the transition to a renewable energy future, adaptation to climate change, sustaining biodiversity and ecosystems services, reducing

vulnerabilities to pollution and natural disasters, etc.

A TRANSITION TOWARDS SUSTAINABLE ENERGY SERVICES

Long-term sustainable development must be based on clean, affordable, and renewable energy services. Today’s most critical sustainability issues like global climate change, energy security, and urban air quality can be directly connected to energy systems. Current efforts to design a transition towards future sustainable energy services will fail because many of the objectives related to public goods (e.g.,

national security) and externalities (e.g., air pollution) that are not currently priced

in markets. A fundamental transition in energy systems would also be subject to

‘‘market failures’’ derived from abuse of monopoly power, lack of information, perverse incentives, short-term planning horizons, and other factors.

A transition beyond business-as-usual toward energy systems that support socially, environmentally, and economically sustainable energy is possible. Many technologies and scenarios are available that could meet the requirements of lower costs

of delivering energy services, lower energy intensity of economic activity, lower

emissions intensity of economic activity, and enhanced resilience to climate surprise.

Conventional R&D is necessary but not sufficient to achieve the goal of sustainable

energy services. Creating usable knowledge that informs the design of sustainable

energy services requires solution-driven research and innovation and must consider

the place and scale of operation. Regional urban sustainability centers would catalyze, facilitate, and integrate the dialogue between stakeholders in civil society,

business, and government through which scientists and engineers learn what users

need and users learn what scientists and engineers can offer. As America’s energy

capital, Houston would be the ideal setting to assemble the expertise necessary to

develop the goals and institutional framework for a national network of regional

urban sustainability centers focused initially on the transition towards sustainable

energy services.

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THE NEED TO MOVE QUICKLY TO SCALE

Energy will be our most important technological and social challenge in the 21st

century. America’s metropolitan regions are likely to grow by a further 100 million

people in this century. By 2030, fully half of the American built infrastructure in

place will have been constructed since 2000. Our current federal technology and environment R&D programs will not drive a transformational change in the design

process or implementation of a transition to sustainable energy services. There is

an urgent need to move quickly to scale and to maintain a long-term commitment

to funding sustainable energy programs by both public and private sectors. This

commitment is essential, given the long lead times required for transformational

changes in both technology and human capital.

In summary, I suggest that urban centers are the focus of our sustainability problem and they should be the source of innovative solutions. We should employ models

of innovation based on collaboration and facilitated by organizations capable of

bridging from basic research to application. The first challenge to be addressed by

this network of urban sustainability centers should be development of systems for

sustainable energy services.

BIOGRAPHY FOR ROBERT C. HARRISS

Robert Harriss is President and CEO of the Houston Advanced Research Center.

He was formerly Senior Scientist and Director of the Institute for the Study of Society and the Environment of the National Center for Atmospheric Research, Boulder,

CO. Current adjunct appointments include Professor, Department of Marine

Sciences, Texas A&M University at Galveston; and Principal Scientist, The Institute

for Oceans and Coasts.

Previous appointments include a Harvard University postdoctoral fellowship and

faculty appointments at McMaster University (Canada), Florida State University,

the University of New Hampshire, and Texas A&M University. He also served as

a Senior Scientist at the NASA Langley Research Center and as Science Director

of the Mission to Planet Earth Program at NASA Headquarters. Dr. Harriss obtained a B.S. in Geology from Florida State University and a Ph.D. in Geochemistry

from Rice University and has primary professional interests in sustainability

science, engineering, and policy.

DISCUSSION

Chairman LAMPSON. I think that all of our panelists are to be

commended for the words that you’ve given us, and you’ve given us

a lot of food for thought. I will now move into our question-and-answer period, and I will yield myself the first five minutes of our discussion.

I want to tell everyone that when we finish this particular section of our hearing this morning, we’ll adjourn the formal hearing.

We will step into a room on the other side of this wall, and we’ll

ask you to come in and we’ll have a period of questions and answers, statements that might be made by the public. So I just encourage you to stick around when we are finished here.

TECHNOLOGY COMMERCIALIZATION CHALLENGES

Let me begin, Dr. Chapman, with you. The real prize, I guess,

in research and development is the commercialization and the

adoption of technologies. Obviously, it’s a long road from the laboratory shelf of the marketplace.

How is Rice University providing an environment to connect innovative technologies with entrepreneurs?

Dr. CHAPMAN. Rice has an organization called the Rice Alliance

that’s built up in the Jones School of Management here at Rice.

The Rice Alliance is a, I have here ‘‘the mission is to support the

creation of technology-based companies and commercialization of

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new technologies in the Houston community and the Southwest.’’

And what’s really fascinating about this is since its inception, it’s

assisted in launching 205 new technology companies. What they do

is they bring together the entrepreneurs with the companies, the

startup companies that develop new technology, along with the researchers, in addition bring in the companies that will apply the

technology. By bringing these organizations together, it’s provided

the infrastructure, at least in the Houston area, to develop new innovations, new companies, and get the technologies to the marketplace. It’s really become, I believe, a model for technology commercialization that can be used in other parts of the country.

Chairman LAMPSON. I think the comments of both you and Dr.

Harriss made about how challenges of this country—I guess maybe

all of you alluded to it—the challenges of this country pull along

education and change the activities that we do here. It’s that inspiration and follow-up with the inspiration that has to be done—not

just offer a challenge, put something in place, and then don’t talk

about it anymore or not fund it. It’s going to take the active effort;

and when we do, I think that we have the ability in this nation

to rise to the challenge and to make our dreams become realties.

It’s just providing the wherewithal to make it happen; and it can’t

help but grow our economy, grow our position of technology leadership in the world.

H.R. 5146, INVEST IN ENERGY SECURITY ACT

Mr. Ming, I think that you know that Congressman Chet Edwards and I have introduced a resolution, a bill in the House, HR

5146. We call it the Invest in Energy Security Act. Our legislation

is intended to increase funding this year for important energy research-and-development programs that have already been authorized by Congress but are not fully funded. One of the things that the bill would do is to increase, by $50

million, funding for the program that RPSEA manages.

If we’re successful in getting that bill enacted, how would you expect to apply those funds to research projects?

Mr. MING. Well, first of all, I’d like to applaud you for that proposed legislation, not only for that component but the rest of the

integrated component as I described in my remarks because I think

it’s the integrated approach that really extracts the true value.

What we have done at RPSEA now over the last years is embark

on the solicitation of research proposals from the entire research

community, and just the initial rounds of those proposals have produced over 90 quality research proposals. Right now, with the

available funding of the basic $50 million, we estimate we’ll be able

to fund about one in three of those proposals. The legislation that

you proposed would allow us to fund more of the proposals. It

would allow us to get back to a more historical norm in terms of

research-and-development funding levels from the Federal Government that produce the results that, for example, are technologies

now being deployed that have enabled the Barnett Shale play in

the Dallas-Fort Worth area and coal bed methane production which

now comprises almost 10 percent of the Nation’s production.

So the increase in funding would really just bring us back to the

level that we need to be in order to continue the impressive

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progress to exploit this transition from the conventional to the unconventional fuels. If you take the 1525 trillion cubic feet of technically recoverable reserve resources estimated by the Potential

Gas Committee, that resource base has a value well in excess of

$10 trillion. If you take royalties and severance taxes that are derived from the production of that resource base, it amounts to billions of dollars per year that go to states, individuals, and the Federal Government. That money can be used to develop the next generation of energy technologies and energy technologists.

Chairman LAMPSON. Thank you very much.

BENEFIT OF R&D IN PEAK OIL SCENARIO

Dr. Hirsch, I don’t understand why a crash program of mitigation

won’t keep us out of serious economic trouble. So why is that, and

why won’t more research and development be beneficial?

Dr. HIRSCH. More research and development, of course, will be

beneficial; it just won’t pay off quickly. That’s all. Because you have

to deploy technologies in order to make up for the loss of oil, the

loss that will increase year after year.

The numbers are relatively small, seemingly small. Two to five

percent per year is what people believe the decline in world oil production will be; but when you translate that to times 85 million

barrels a day, you come up with enormous numbers. One percent

is 800,000 barrels a day. It would take much more than a decade

of crash program change in fuel-efficient vehicles in order to begin

to make a dent, come close to that 800,000 barrels a day of savings.

The reason is that there are something like 240 million vehicles in

this country and they have a long lifetime, which we’re happy with

because they last a long time and we don’t have to buy new ones

every few years. That same lifetime means that it takes a long

time for things to change.

Eight hundred thousand barrels a day—if, for instance, you

wanted to produce it by making liquid fuels out of coal, would require over $100 billion of investment and require over a decade of

effort in order to bring enough plants on to save that much liquids.

It’s the scale of things. The scale is absolutely unbelievable, and

that’s why the word ‘‘deployment’’ is key in this whole thing.

PEAK OIL AND CLIMATE CHANGE

Chairman LAMPSON. Let me ask about reconciling our concerns

for manmade global climate change with peak oil mitigation. How

do we go about that reconciliation?

Dr. HIRSCH. Well, I think it’s going to be very difficult because

the focus in the public for quite some time has been on manmade

contributions to global climate change.

So people are fixated on that and I think the mule is going to

have to get hit by the two-by-four of significant growing recession

and people really being hurt. I know they’re being hurt now with

what’s going on, but it’s nothing compared to what’s almost certain

to happen when peak oil hits and shortages begin. That’s when

people will recognize that they have to change their thinking,

they’ve got to alter their priorities and have to make some compromises. When in life didn’t we have to make some compromises?

56

Compromises are going to be necessary here; and the thing, the

squeaky wheel that gets the most attention are people in pain.

Chairman LAMPSON. Thank you.

THE CHANGING ROLE OF GOVERNMENT RESEARCH

Dr. Harriss, energy research and development is extremely expensive, and getting more so every day. I also know that we have

cut, for example, the research money in the Department of Energy

over the last 25 or so years by more than 85 percent; but federal

research and development program budgets are just continuing to

get squeezed down, as that one certainly has. We can’t expect just

the Department of Energy to tackle all the world’s energy problems, particularly with the smaller and smaller amount of money

that we’re giving them. So how do we see the role of government

research and development changing in the future and what can we

in Congress do to enhance that role, with increasingly limited

funds?

Dr. HARRISS. I think there are several lines of hope that we could

explore in addressing that. One is certainly to try to create opportunities to stimulate more radical innovation. When funding is

tight in the science sector, our wonderful peer-review system,

which I have great respect for and have worked on at NASA and

NSF, gets more and more conservative. It’s just human nature.

You’ve got less money; you give it to things you’re most confident

will work. So we do need new institutional ways of thinking about,

in times where we’re limited in funding, how we can continue to

really push the frontiers of creativity and innovation. I think the

notion of this ARPA–E, modeled after DARPA, which was focused

on defense, radical innovation for defense, is a very interesting notion and one that needs to be considered further. I applaud the

Congress for taking this forward and putting it on the table. I

think it is crucial that it not be buried under DOE bureaucracy and

have as much autonomy as possible and have adequate funding to

really go out and do some exciting things.

The second line that I’m particularly interested in is that we do

a much better job of forming partnerships. We need a continuing

sustained dialogue between business, government, independent scientists, and civil society. This dialogue really has to be one in

which scientists and engineers learn what users need, and users

learn what scientists and engineers have to offer. That has to be

a continuing dialogue; and out of that, hopefully, we will be able

to narrow down the domain in terms of our focus and be more efficient in the use of our R&D dollars.

Chairman LAMPSON. Where and how does that take place?

Dr. HARRISS. I think that dialogue takes place at particularly the

metropolitan regional scale because our metro areas have very different needs in terms of the types of technologies that will best

supply them. That’s why I was calling for these regional urban sustainability centers.

Those would be basically neutral, non-advocacy organizations

that could facilitate, in hopefully a trusted and absolutely superb

way, this partnership.

Again, if I can relate back to my youth in Houston, Texas, one

of the reasons I came to school here was not only because Rice was

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a wonderful institution but because at that time the Shell Development Center was a world-famous center for basic research and applications in geology and geophysics. I could go walk into that organization anytime I wanted to, talk to the scientists about the research. It was sort of an open environment, that simply doesn’t

exist anymore. I’m not expert at talking about all the institutional

and other reasons for that, but we need to stimulate more of that

again, to get that dialogue between all that wonderful brainpower

that is in our energy industry, all of the exciting new developments

at places like Rice and other universities, and people out there who

are the consumers, because we should not produce things that we

don’t first sort of understand whether they’re going to meet consumer needs. So I think that’s a really important discussion for us

to have, but it does have to be an ongoing process.

Chairman LAMPSON. Thank you very much.

Dr. Bartlett, I recognize you for the time that you may consume.

STRATEGIES: WILL CONSERVATION WORK?

Mr. BARTLETT. Thank you very much.

Dr. Chapman, I would like to thank you for your observation

that solutions many times come from fundamental research into

seemingly unrelated areas. When I came to Congress 15 years ago,

Congress was going to really do the right thing with our taxpayers’

money. We were going to fund only basic research that was going

to have a societal payoff. I said, ‘‘Pray tell me how you’re going to

know which basic research is going to have a societal payoff.’’ I

can’t imagine that Madame Curie had any notion of the implication

of her early discoveries of radiation.

So thank you for recognizing what we really need to do is to put

enough money in basic research and in the education of the people

to do that basic research, and we will get benefits from that. I can’t

tell you ahead of time where those benefits will come; but I can assure you that the more money we put into basic research, the more

the benefits will be.

I have a lot of farmers in my district and not one of them is

dumb enough to eat their seed corn, but that’s exactly what we do

in the Government. Every year we cut basic research. That’s the

equivalent of eating your seed corn. (Applause) Nobody said Congress was very bright, did they?

Near the end of your presentation, sir, you made some really

great comments: ‘‘We need to acknowledge that the odds of finding

a single quick solution to the energy challenge are infinitesimally

small.’’ If you believe, sir, that there is a silver bullet out there, you

probably also believe you’re going to solve your personal economic

problems by winning the lottery. I think the odds are about the

same.

You also say that we need to accelerate the pace toward a goal

upon which our very survival depends. I think that Dr. Hirsch

would agree with you. Then earlier in your text, you quote from the

Department of Energy, the Energy Information Administration. I

would caution that if you’re quoting from their assessment of the

amount of oil that we have used, you can be pretty sanguine that

you can have some confidence in that. If you’re quoting from their

assessment of how much oil will be there in the future, I think you

58

ought to be very cautious. They’re economists and they come to my

office and they say that’s USGS. The USGS has the strangest way

of providing their prognostications of future oil. They do a lot of

computer simulations and they take the mean of those computer

simulations and they say that’s how much oil is going to be there.

That’s a 50 percent of probability, is what the Energy Information

Administration said. So be very careful.

You quoted their comments that just don’t square with reality:

‘‘The hydrocarbon energy sources will increase over the next two

decades.’’ Sir, there isn’t even a prayer that that’s going to happen.

That just isn’t going to happen.

Then they say the thing we ought to be doing is increasing the

supply of fossil fuels. That’s exactly the thing we ought not be

doing. We need to be husbanding the small, readily available reserves of fossil fuels we have for really, really critical needs; but

going out there now and harvesting those things as quickly as we

can is exactly the wrong thing to do.

So thank you for your words of wisdom at the end of the article,

and be very careful in noting our Energy Information Administration and what they say. They’re very nice people. They’ve been in

my office and they say we just use USGS data. And maybe Dr.

Hirsch will tell us more about the USGS data.

Mr. Ming, we need to be very careful in what we say, that we

aren’t lolling our people. People just love to hear nice, soothing

words. My wife tells me I ought not to be talking about these

things. She said, ‘‘Don’t you remember in ancient Greece they

killed the messenger that brought bad news,’’ and I have to stand

for election every two years. On the average, every year I have a

primary and then a general. You know, I tell her, ‘‘Gee, this is a

good news story because the good news is, if we start today, the

ride will be less bumpy than if we start tomorrow.’’

It’s good news in another respect. You know, we spend far too

much effort, many of us in our country, you know, seeing dirty

movies and smoking marijuana; and we need other things to challenge us. We’re the most creative, innovative society in the world;

and, properly challenged, we’re up to this task of seeing us through

this really, really critical time. There’s no exhilaration like the exhilaration of meeting and overcoming a big challenge; and, boy, this

is a big, big challenge.

We ought to be careful, sir, in saying things like we’re going to

have all the gas and all we need for the foreseeable future and

we’re not running out of energy. That’s right. We’re not running

out of oil. There’s as much more oil to be pumped as all the oil we

have ever pumped. What we are running out of is our ability to

produce that oil as fast as we would like to use it. Our world comes

unglued if we cannot grow. In the United States, two percent

growth is considered too small and the stock market goes into

panic.

By the way, a session for another day, we’re going to have to

change the way we look at these things. Ultimately, sir, for the finite world, there’s no such thing as sustainable growth unless that

growth is coming from increased efficiency, which we really need

to be focusing on. Thank you very much.

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Dr. Hirsch, you mentioned scale; and when you mentioned that,

I was thinking of our corn ethanol debacle. The National Academy

of Sciences says that if we converted all of our corn to ethanol,

every bit of it to ethanol, and just discounted it for fossil fueling,

but which is big—some people think it’s bigger than what you get

out of it, but it’s big—it would displace 2.4 percent of our gasoline.

They wisely mention—now, this isn’t Roscoe Bartlett saying this or

Bob Hirsch; this is the National Academy of Sciences saying this—

if you tuned up your car and put air in the tires, you would save

as much gas as using all of our corn for ethanol. They further say

if we turned all of our soybeans into soy diesel, it would displace

2.9 percent of our diesel requirement.

What we have done with corn ethanol—and I voted against the

last energy bill because it doubled this silly mandate—this ethanol

corn mandate doubled the price of corn. So our farmers diverted

land from soybeans and wheat to corn. So then the price of soybeans and wheat went up—so did the world demand go up. So now

there are people all over the world—three of the basic four food necessities, we drastically increased the price of them and did essentially nothing to displace our need for foreign oil.

One of the officials in the U.N. said what we have done is a

crime against humanity, and now we’re doubling that thing in this

new bill? I wanted to vote for that bill because there’s some very

good things in there about renewables; but with that, I couldn’t

vote for it.

Dr. Hirsch, the one thing that we might do is a really aggressive

program on conservation, which, by the way, was the No. 1 point

in the Chinese five-point program. Matt Simmons says that we

might buy a couple of decades and free up some energy to invest

in alternatives. Now we have run out of time because we totally ignored the warnings of M. King Hubbert and the reality that we

peaked in 1970, and there’s no surplus oil. If there’s any surplus

oil to invest in alternatives, it will take a huge investment in these

alternatives, of time—we won’t worry about money. We just borrow

that from our kids and our grandkids—not with my vote—but borrow from our kids and our grandkids, without their permission.

You can’t borrow time from them, and you can’t borrow energy

from them. Do you agree with him that with a really aggressive

conservation program that we might buy a couple of decades and

free up some energy to invest in alternatives?

Dr. HIRSCH. As you know, one of the things that we’ve talked

about—and it’s part of my testimony and part of our reports in the

past—is that there is no single answer to any of these things.

We’ve got to do a number of things simultaneously. If we make the

mistake of picking one thing and relying on that, we have made a

fundamental error. Conservation clearly is something that is important and will be important, no matter how you see the world.

Indeed, there are significant opportunities out there to be more efficient and to conserve.

I see the term ‘‘energy efficiency’’ different than conservation. I

see conservation as something that is voluntary. As a number of us

have talked about, if people understand that, by God, they need to

do some things differently, they will voluntarily do those things differently, at least for a while; but then the history also is that after

60

a while of doing things and things being all right, people tend to

lapse back into where they were and do what they’ve been doing

previously.

So conservation is a wonderful idea. I think people will respond,

but I think there also needs to be teeth in that. How you do that,

how you do that in such a way as to, on the one hand, inspire but,

on the other hand, be sure that there are negative consequences for

people that don’t fall in line and don’t do what they could be doing?

That’s very important and that’s going to be up to you folks to figure out. That is not going to be easy.

The scale is enormous. There are opportunities here in light-duty

vehicles, particularly in the United States.

We’re all well aware of the SUVs, and I don’t want to be negative

about soccer moms because we had soccer kids when I was a kid

also and I was a younger person. People want what they can have;

and if they can have it easily, they take it, particularly when they

can afford it. Driving around huge pieces of metal in order for a

150- or 200-pound person to get from Point A to Point B just simply does not make sense. To get people to change is going to be

very, very difficult. That’s where the two-by-four is going to have

to come in, because my standing up and saying that this is a waste

is not going to influence a lot of people. How we do these things,

very important.

We also have got these huge fleets of airplanes that I flew in on

and you flew in on. The cars that are out on the street here, an

enormous amount of them, they’re not going to go away overnight.

We can’t replace them overnight. We can’t afford to replace them

overnight. We will make them more efficient over time. We do that,

hopefully, on a crash-program basis. It will not happen quickly.

That has to happen, though. Airplanes already have incentive to be

more fuel-efficient. I don’t know how much more capability there

is to make them much more fuel-efficient. I think probably what

will happen is much less airplane travel. Railroads are a very efficient way of doing things, and doing much more with railroads

rather than trucks and airplanes makes sense.

The point here, I’m going on and on because, in fact, you can go

on and on and there are many different dimensions to this whole

thing. They’ve got to be looked at in a hard way, they’ve got to be

looked at in a creative way, and they’ve got to be looked at in a

practical way. Part of what we’re doing today is looking to the sustainable future and we want to go from where we are now to this

beautiful future. I can conceive of a beautiful future, everybody up

here can consider a more beautiful future, but we’ve got to get from

here to there and that is an enormous task.

Mr. BARTLETT. It is, indeed. The fifth point of the Chinese fivepoint program is international cooperation; and what I would hope

that we might have is an international cooperation and competition. Rather than competing to see how much of the oil we can use,

I’d like to have a challenge to sustainability. Ultimately, we will

have sustainability; it is inescapable. We will go from fossil fuels

to renewables. In 150 years, the age of oil will be over and we will

be making it on renewables. What will that world look like?

Sir, the soccer moms are right and if they know that more of

their kids die in SUVs because they turn over and kill—and that

61

is the statistic—then they’ll drive something smaller. Conservation

is two people getting into a car; efficiency is getting into a Prius.

Dr. HIRSCH. I drive a Prius, sir.

Mr. BARTLETT. Okay. Well, we’re on our second. I bought the

first one, as I mentioned, in Congress and the first one in Maryland.

I want to thank you, sir, very much for the contribution that you

have made. You and I first started talking about this how many

years ago? When I first started talking about this, by the way, we

spent, in my office, quite some time trying to decide whether we

were going to talk about the great roll over Hubbert’s peak or were

we going to call it peak oil. Finally decided to call it peak oil. That’s

how little discussion there was about this at that time. So thank

you very much.

Dr. Harriss, you make a statement which I couldn’t agree more

with. Planet Earth, you started with Houston, and upper Texas

coast region, our nation and planet Earth, we’re all in the same

boat, aren’t we? On our way to the Moon, we looked back and we

saw, boy, that’s just a little spaceship, isn’t it? And we’re going to

have to make do with what’s on that spaceship.

When I thought about that, I thought Apollo 13, your statement

here that nearing critical tipping points that will result in declining

economic prosperity, dramatic environmental degradation, and

other serious threats to human well-being. I thought of Apollo 13.

They were on a little spaceship, and they only had so much. Don’t

you think that’s a pretty reasonable model for where we are today,

to take another look at what we’ve got and what we have to do if

we’re going to make it? I think there’s a fairly narrow window of

opportunity which is closing, if we’re going to make it through.

By the way, one of the greatest authorities in this area, Kenneth

Deffeyes, says that the least bad outcome of this is a deep worldwide recession that may make the Thirties look like good times.

Then he says if you don’t like that, try the four horsemen of the

Apocalypse—war, famine, pestilence, and death. If you have a

chance to invite him to a hearing, he’s really a very bright and very

entertaining guy. Someone asked him what the odds were that we

were going to have a happy outcome in this challenge, and so what

he showed them was a little picture his granddaughter had colored.

It was a snowball in hell.

I want to thank you, Mr. Chairman, very much. I want to thank

the witnesses. I take every opportunity I can. I’ll go halfway

around the Earth to talk about energy because I agree—which one

of you said it—it is the transcending, overarching issue of the 21st

century. That it will be.

Thank you. Thank you very much.

You know, we talk about a lot of things now that it won’t even

matter if we don’t have this energy. One of the first casualties of

an energy-deficient world are going to be all these social programs

that we spend most of our time talking about. This really is a huge,

huge problem we face.

Let me just close by saying that your government, sir, has paid

for four studies, all of them saying essentially the same thing in

different words. Peaking is near or present, with potentially devastating consequences. Why are we totally ignoring that?

62

We’re not. You’re here. So thank you very much for not ignoring.

Thank you for having this hearing, and I want to thank our witnesses. I yield back.

Chairman LAMPSON. Thank you very, very much. (Applause).

Dr. Bartlett, in my opinion, is one of the most thoughtful and,

in my opinion, one of the brightest guys in the House of Representatives. He’s a real scientist that’s come to serve in this body, and

it’s an honor to be able to serve with you.

We do have work to do. It seems like that all of these things, it’s

easier for us to come up with more of the problems than we do the

solutions. It’s easier to talk about the problems and we’ve got to

find ways to change the commitment and get down to the level of

where we can make the changes. That’s going to be in our schools

and inspiring our kids to grow up knowing different things than

what we know and react differently than what we react to.

None of this is going to be very easy to achieve, and we don’t

seem to be making the right kind of commitment. We don’t seem

to have had the right kind of leadership for an awfully long time

to bring these issues to a head, where we can actually get them

adequately addressed. That is why we are here, and I thank all of

you for taking the time to come and to share your concern. Hopefully, more than the folks that are here in this room today who are

here at this meeting. Hopefully there will be many, many more

meetings.

Recently I had something that we called an economic development summit. We got folks from across the community to come and

talk to us about what kind of smart growth and what kind of planning we’re going to be doing. We seem to concentrate too much on

looking at what’s going to be happening to us in the next 10 to 20

years rather than looking at what’s going to be happening to us

generationally. Every decision that we make today is having a

greater and greater impact and making it harder for those future

generations to be able to make the kinds of decisions that we are

making. I think that through our shortsightedness, we are just taking so much away from our children and our grandchildren that we

should be ashamed of ourselves. Hopefully, that will begin to

change; and obviously, as you heard from our panels today, we

don’t have much time within which to change it.

I hope that all of you will do everything that you probably can

to continue to talk about these issues, continue to push Members

of Congress. There’s not a lot of pushing you can do on us or the

others that you have here this morning, but there are plenty of

Members of Congress that need to understand that we have to

change what we have been doing.

I want to also mention to you that all of the materials that have

been generated today will be on the website, which is

www.science.house.gov, for those of you who want access to it. I

would encourage you to go there and use that as well to keep in

touch with our Science Committee and other Members of Congress

through that website.

At this time, I want to thank all of you for appearing before the

Subcommittee today. I think it’s been a very interesting discussion.

There’s been suggestions that hopefully will indeed turn into legislation that will help change some of these things. I must say that

63

under the rules of this committee, the record will be held open for

two weeks for Members to submit additional statements and any

additional questions that they might have for the witnesses. At this

time I will adjourn this hearing, and I thank all of you for participating.

[Whereupon, at 1:17 p.m., the Subcommittee was adjourned.]

(65)

Appendix:

ANSWERS TO POST-HEARING QUESTIONS

66

ANSWERS TO POST-HEARING QUESTIONS

Responses by John Hofmeister, President, Shell Oil Company

Questions submitted by Representative Adrian Smith

Q1. What technological advances are needed to develop the domestic oil and gas resources of the United States?

A1. An assortment of technologies will be needed to responsibly and sustainably recover the vast resources of the United States. Which technologies will prove to be

best is yet to become clear. The following highlights some of what will be required:

1. Access to all potential hydrocarbon basins in the U.S. onshore and offshore

so energy companies can apply and finish development of our new technologies and learn about new settings, reservoirs and hydrocarbon opportunities.

2. All reservoirs are getting small, low pressure, viscous, corrosive or all combinations of the aforementioned. Even giant income cannot pay the technology and development cost to do these economically.

3. The cost of doing business has outstripped the oil price. Only technology

breakthroughs can make many projects feasible.

4. Much of the U.S. infrastructure has aged. The cost to sustain this infrastructure is often prohibitive without technology breakthroughs.

5. Despite overall top performance, we do not have a social and government environment encouraging domestic energy and fuel development from oil and

gas. New technologies must be developed to allow economically possible environmental performance in these more challenging projects. This must be coupled with support by and confidence in the technology and our ability to

sustainably do our job.

6. Tight rock, deep formations, deepwater, low hydrocarbon saturations, small

compartmentalized accumulations, new hydrocarbon and rock types are all

conspiring to dramatically increase risk and uncertainty in exploration. Only

big technology breakthroughs will deliver most of the reservoirs of the future.

7. Complexity in the business is growing rapidly at the same time we are having difficulty getting information from our existing tools. This is made worse

because, in many places, we are limited by cost or legislation on the number

of wells (information points) we can drill. Ability to gather, analyze and take

action on the analysis results must greatly increase in information volume

and speed while accommodating the increasingly limited pool of skilled and

experienced workers.

8. We must both improve recovery and have new recovery mechanisms and

techniques since the remaining U.S. capacity is oil left in old fields or new,

more difficult crude in new areas. These have to be sustainable and economical under much more difficult conditions than in the past.

9. Related to the above is the need for technologies that will speed up development, allow phased and reusable/movable production systems, faster and

lower cost drilling, and also reduce our carbon footprint.

Q2. What impact will the loss of tax credits have on the U.S. oil and gas industry?

A2. At a time when we need energy companies to continue the record level of investment in developing our energy resources, it is unfortunate that some in Congress are pursuing tax policies that will discourage this needed investment. These

policies include proposals such as the repeal of the domestic manufacturing deduction for select U.S. oil and gas companies, which would reduce domestic oil and gas

production and negatively affect our nation’s energy security. Energy companies invest significant amounts in new technologies, new production, refining and product

distribution infrastructure and environmental improvements, and make such investments considering long-term commitments. Continued and sustained capital expenditures are required each year to find and develop energy resources, despite the cyclical nature of the business and risks involved. Given the industry’s long-term capital

allocation models in a global and free marketplace, it is important to have stable

and consistent tax policy in order to meet all of the challenges ahead.

67

Q3. In what way could federal policies level the playing field for all energy solutions,

thereby promoting research and development in a broad range of energy solutions which will survive in the marketplace?

A3. Federal policies should not pick winners and losers among possible technology

solutions. Fair and equal opportunities promoting research and development for a

broad array of innovative solutions to our energy needs should include a wide range

of applications, since we cannot currently predict which ones will survive in the

marketplace. Government policies can and do play a role. Policies currently limit access to domestic resources, which is not reasonable. Research and development can

be incentivized through federal funding, tax policy and other innovative programs.

68

ANSWERS TO POST-HEARING QUESTIONS

Responses by Thomas R. Standish, Group President of Regulated Operations,

CenterPoint Energy

Questions submitted by Representative Adrian Smith

Q1. What technological advances are needed to develop the domestic oil and gas resources of the United States?

A1. In the power sector it’s becoming obvious that gas-fueled generation will be the

short-term bridge in transitioning from fossil-fired generation to renewable technology such as wind and solar as well as nuclear and cleaner coal technology.

Hence, with respect to gas resources, existing exploration efforts need to continue

to evolve through the development of more efficient tools while alternative or unconventional discovery efforts need to also be encouraged. These alternative efforts

would include the enhanced exploration of ‘‘tight sand’’ gas, shale, coal bed methane,

and methane hydrates.

Q2. What impact will the loss of tax credits have on the U.S. oil and gas industry?

A2. Tax credits were granted to help encourage research and development of new

technologies and offset the cost of exploration in areas that otherwise would not be

economical to explore when energy prices were low (e.g., shale, tight sands, and coal

seam formations). In today’s market of high oil and gas costs, one might expect that

energy companies would be able to cover the cost of exploration and production in

those formerly uneconomic areas. For example, once natural gas prices rose above

$5 per MMBtu the U.S. experienced a proliferation of drilling in the various shale

formations throughout the mid-continent area. Without tax credits, one could expect

the energy companies might reduce exploration in areas where their cost are highest.

Q3. In what way could federal policies level the playing field for all energy solutions,

thereby promoting research and development in a broad range of energy solutions which will survive the marketplace?

A3. With respect to the power industry federal policies should promote research and

development of historically uneconomical and underutilized energy sources such as

renewable energy sources (e.g., solar, wind, biofuels made or recovered from waste,

etc.) and also encourage the development of demand response to time of use and

real-time prices. This might call for research grants or new tax credits to companies

that would develop renewable energy technologies and demand-side sources so that

they can quickly be brought to market while also maintaining current tax credits

for existing gas and oil exploration.

Policies and incentives for cleaner coal, nuclear generation as well as the development of technologies that would create more efficient use of oil and gas should also

be sought.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Walter G. Chapman, W.W. Akers Professor; Director, Energy and Environment Systems Institute, Rice University

Questions submitted by Representative Adrian Smith

Q1. What technological advances are needed to develop the domestic oil and gas resources of the United States?

A1. Many technological advances are needed to maximize recovery of domestic oil

and gas. One example where advances are needed is in more efficient oil recovery.

Conventional oil recovery technologies produce only about one third of the oil originally in place—leaving behind approximately two thirds of the oil in a reservoir. Advances in enhanced oil recovery can potentially recover two thirds or more of the

oil originally in place. Although enhanced oil recovery shows great promise, DOE

funding of university research for enhanced oil recovery essentially ended in the

1990’s. The lack of funding results in a lack of new knowledge, but it also results

in a lack of new scientists and engineers available to more the technology forward.

In the area of natural gas, the organization, Research Partnership to Secure Energy for America (www.RPSEA.org <http://www.rpsea.org/> ) has received funding

through the Department of Energy based on the Energy Act of 2005 to determine

the technology gaps and to fund research and development in this area. Still,

RPSEA is limited by law and funding in its scope.

But technological advances alone are only part of the answer. The oil and gas industry, as well as other high technology industries, need a steady supply of educated workers. To maintain economic leadership in all high technology industries,

the United States must commit itself to encouraging students to study science and

engineering and invest in improved science and engineering education programs.

One of the most beneficial ways to invest is to increase funding for basic and applied

research. The United States needs the equivalent of Apollo level funding in research

to regain our technological leadership in the world.

Q2. What impact will the loss of tax credits have on the U.S. oil and gas industry?

A2. Since this question is outside of my area of expertise, I cannot answer.

Q3. In what way could federal policies level the playing field for all energy solutions,

thereby promoting research and development in a broad range of energy solutions which will survive in the marketplace?

A3. In my testimony, I stated that a portfolio of energy solutions will be needed.

The next breakthrough in energy cannot be ‘‘legislated.’’ Research funding must be

increased across the range of energy technologies as well as by significantly increasing funding for basic research. I suggest at least doubling the U.S. investment in

fundamental research and increasing investment in science and engineering education. I support the guidelines listed in the National Academies report ‘‘Rising

Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future.’’

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Robert L. Hirsch, Senior Energy Advisor, Management Information

Services, Inc.

Questions submitted by Representative Adrian Smith

Q1. What technological advances are needed to develop the domestic oil and gas resources of the United States?

A1. None would make a large difference. The issues are almost all human—primarily restricted access to potentially attractive areas for exploration and production.

Q2. What impact will the loss of tax credits have on the U.S. oil and gas industry?

A2. I’m not qualified to provide a meaningful answer.

Q3. In what way could federal policies level the playing field for all energy solutions,

thereby promoting research and development in a broad range of energy solutions which will survive in the marketplace?

A3. The Federal Government needs to stop picking winners and losers and let the

marketplace do it. The corn-ethanol mandates are a disaster because of marginal

energy benefits and serious negative environmental impacts. Mandates for renewables such as wind and photovoltaics are unfortunate because those technologies

cannot provide large-scale electric power because of their inherent intermittence.

The public demands electric power-on-demand, not when the wind blows or the sun

shines. Helping new technologies with temporary tax subsidies or benefits can be

both legitimate and beneficial, but ‘‘temporary’’ too often becomes permanent, which

distorts the marketplace and hinders attempts to build more practical, more reliable

power systems.

All energy sources have strengths and weaknesses, and too often people are mesmerized by ‘‘the new thing’’ that promises to be better than what is currently satisfying our power needs. Too often ‘‘the new thing’’ turns out to have ‘‘warts’’ that can

be worse than what currently serves us. Since it is not politically correct to criticize

renewables, politicians are not being told the inherent practical limits of these ‘‘wonder technologies’’ and are thus not getting the kind of straight talk that is needed

to implement optimal energy policies.

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