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74–055PDF 2012

TAPPING AMERICA’S UNCONVENTIONAL 

OIL RESOURCES FOR JOB CREATION AND 

AFFORDABLE DOMESTIC ENERGY: 

TECHNOLOGY AND POLICY PATHWAYS 

HEARING 

BEFORE THE

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

WEDNESDAY, APRIL 17, 2012 

Serial No. 112–75 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUZANNE BONAMICI, Oregon 

VACANCY 

VACANCY 

VACANCY 
(III) 

C O N T E N T S 

Wednesday, April 17, 2012 

Page 

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

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

Opening Statements 

Statement by Representative Ralph M. Hall, Chairman, Committee on 

Science, Space, and Technology, U.S. House of Representatives ..................... 17 

Written Statement ............................................................................................ 18 

Statement by Representative Eddie Bernice Johnson, Ranking Minority Member, Committee on Science, Space, and Technology, U.S. House of Representatives ........................................................................................................... 19 

Written Statement ............................................................................................ 20 

Witnesses: 

Mr. Andrew Slaughter, Chair, Resource and Supply Task Group, National 

Petroleum Council Report, ‘‘Prudent Development’’ 

Oral Statement ................................................................................................. 22 

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

Ms. Karen Harbert, President and Chief Executive Officer, Institute for 21st 

Century Energy, U.S. Chamber of Commerce 

Oral Statement ................................................................................................. 32 

Written Statement ............................................................................................ 34 

Dr. Michelle Michot Foss, Chief Energy Economist, Center for Energy Economics, Bureau of Economic Geology, University of Texas-Austin 

Oral Statement ................................................................................................. 42 

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

Mr. James Brown, President and Chief Operating Officer, Whiting Petroleum 

Corporation 

Oral Statement ................................................................................................. 60 

Written Statement ............................................................................................ 63 

Mr. Daniel Weiss, Senior Fellow and Director of Climate Strategy, Center 

for American Progress 

Oral Statement ................................................................................................. 74 

Written Statement ............................................................................................ 76 

Discussion ................................................................................................................. 94 

Appendix I: Answers to Post-Hearing Questions 

Mr. Andrew Slaughter, Chair, Resource and Supply Task Group, National 

Petroleum Council Report, ‘‘Prudent Development’’ ......................................... 118 

Ms. Karen Harbert, President and Chief Executive Officer, Institute for 21st 

Century Energy, U.S. Chamber of Commerce ................................................... 120 

Dr. Michelle Michot Foss, Chief Energy Economist, Center for Energy Economics, Bureau of Economic Geology, University of Texas-Austin .................. 123 

Mr. James Brown, President and Chief Operating Officer, Whiting Petroleum 

Corporation ........................................................................................................... 132 

Mr. Daniel Weiss, Senior Fellow and Director of Climate Strategy, Center 

for American Progress ......................................................................................... 136 
Page

IV 

Appendix II: Additional Material for the Record 

Executive Summary of the National Petroleum Council report submitted by 

Chairman Ralph Hall .......................................................................................... 148 

Article submitted by Chairman Ralph Hall, ‘‘Scarce oil? U.S. Has 60 Times 

More Than Obama Claims’’ ................................................................................. 149 

Article submitted by Chairman Ralph Hall, ‘‘New regs could create ’nightmare scenario’ for industry—Texas regulator’’ .................................................. 152 
(1) 

TAPPING AMERICA’S UNCONVENTIONAL 

OIL RESOURCES FOR JOB CREATION 

AND AFFORDABLE DOMESTIC ENERGY: 

TECHNOLOGY AND POLICY PATHWAYS 

TUESDAY, APRIL 17, 2012 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, 

Washington, D.C. 

The Committee met, pursuant to call, at 10:17 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Ralph Hall 

[Chairman of the Committee] presiding. 
2 

RALPH M. HALL, TEXAS 

CHAIRMAN 

U.S. HOUSE OF REPRESENTATIVES 

EDDIE BERNICE JOHNSON, TEXAS 

RANKING MEMBER 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

2321 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6301 

(202) 225-6371 

WWW.scleoce.hOllse.g(lv 

Tapping America's Unconventional Oil Resourcesfor Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April I?, 2012 

10:00 a.m. -12:00 p.m. 

2318 Rayburn House Office Building 

Mr. Andrew Slaughter, Chair - Resource & Supply Task Group, National Petroleum 

Council Report "Prudent Development" 

Ms. Karen Harbert, President and Chief Executive Officer, Institute for 21 Sl Century 

Energy, U.S. Chamber of Commerce 

Dr. Michelle Michot Foss, Chief Energy Economist, Center for Energy Economics, 

Bureau of Economic Geology, University of Texas-Austin 

Mr. James Brown, President and Chief Operating Officer, Whiting Petroleum 

Corporation 

Mr. Daniel Weiss, Senior Fellow and Director of Climate Strategy, Center for American 

Progress Action Fund. 
3 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HEARING CHARTER 

Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

PURPOSE 

Tuesday, April 17, 2012 

10:00 a.m. -12:00 p.m. 

2318 Raybum House Office Building 

On Tuesday, April 17,2012, the Committee on Science, Space, and Technology will hold a 

hearing entitled, "Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways. " The purpose of this hearing is 

to examine unconventional oil resources and identify technology and policy pathways to develop 

domestic energy resources. 

WITNESS LIST 

• Mr. Andrew Slaughter, Chair - Resource & Supply Task Group, National Petroleum 

Council Report "Prudent Development; " 

• Ms. Karen Harbert, President and Chief Executive Officer, Institute for 21 st Century 

Energy, U.S. Chamber of Commerce; 

• Dr. Michelle Michot Foss, Chief Energy Economist, Center for Energy Economics, 

Bureau of Economic Geology, University of Texas-Austin; 

• Mr. James Brown, President and Chief Operating Officer, Whiting Petroleum 

Corporation; 

• Mr. Daniel Weiss, Senior Fellow and Director of Climate Strategy, Center for American 

Progress Action Fund. 

1 
4 

BACKGROUND 

Gasoline Prices 

The national average price of a gallon of regular gasoline is currently $3.91,1 an increase of 

about 60 cents per gallon since the beginning of the year. The Department of Energy's Energy 

Information Administration (EIA) estimates prices will remain close to four dollars per gallon 

throughout the summer of 20 12 (Figure I). The primary factor driving gasoline prices is the 

price of crude oil, representing 72 percent of the total cost of a gallon of gas (Figure 2). 

However, taxes, refining costs, and distribution and marketing also contribute to the price of a 

gallon of gasoline. 

Figure 1. U.S. Gasoline and Crude Oil Prices. 

U.S. Gasoline and Crude Oil Prices 

J As of Thursday April 12, 2012. hltp:llfuclgaugereport.aaa.comi 

2 
5 

Figure 2. What we pay for in a gallon of gas.' 

Regular Gasoline (February 2012) 

Retail Price: S3.56/gallon 

Distribution 8.. Marketing 

erudeOil 

Crude Oil Market Conditions 

Demand 

Crude oil is a commodity traded in a global 

market, thus the price of a barrel of oil is set 

by a number of factors; namely global supply 

and demand conditions, geopolitical factors, 

and additional costs imposed by supply chain 

and infrastructure factors. 

The United States currently consumes 

approximately 19 million barrels of petroleum 

per day (MMbd) (Figure 3), with global daily 

oil consumption at 89.1 MMbd. Global oil 

consumption is expected to increase about 

one percent, or 800,000 bpd, in 2012.3 The 

United States demand for crude oil has been 

decreasing over the previous decade and over 

the next two decades domestic demand for 

Diesel (February 2012) 

Retail Price: 53.95':galloo 

Distribution 8.. Marketing 

Crude Oil 

Figure 3. Petroleum Consumption, Production, 

and Import Trends. 

Petroleum Consumption, 

Production, and Import Trends 

(1949-2010) 

million barrels per day 

25'1 , 

Note Pfooucl'on mdudes crude 0.1 and flatural gas plant hqUlds only 

Source' U S. Energy Information AdminIstration, Monthly 

Energy Review (May 2011), prelimmary data, and Annual 

Energy RevIew 2009, Table 5.1 (August 2010) 

2 U.S. Energy Information Administration, "Gasoline and Diesel Fuel Update," April 9, 2012. Accessible at: 

http://www.eia,gov/pctroleum/gasdiesel/ 

3 International Energy Agency, "Oil Market Report," March 14,2012. Accessible at: 

http://omrpublic.iea.org/currentissues/full.pdf 

3 
6 

crude oil is expected to decline by I percent per year; 4 however, global demand is projected to 

increase, primarily driven by economic growth from non-OEeD countries (Figure 4). 

Figure 4: World Liquid Fuels Consumption' 

World Liquid Fuels Consumption 

Supply and Production 

The United States currently produces 9.7 MMbd of 

refined petroleum per day (Figure 6). Global supply 

currently is 90 MMbd6 (Figure 5) and is projected to 

grow to 112 MMbd by 2035.7 The majority of 

current proven oil reserves are held by national oil 

companies, (Figure 7) though shifting resource 

outlooks are fundamentally altering resource 

ownership. 

Figure 5: World liquid fuels production (EIA) 

Figure 28. Wond liquid fuels production, 1990·2035 ~mdh{'ln barrels per day) 

60 History 2008 Projections 

4 National Petroleum Council, Working Document of the NPC North American Resource Development Study, 

"Paper #1-6: Unconventional Oil," September 15,2011, p, 14. Accessible at: 

http://www.npc.orgiPmdent Development-Topic Papcrsll-6 Unconventional Oil Paper.pdf 

5 Energy Information Administration, "Short-Term Energy and Summer Fuels Outlook," April 10, 2012. Accessible 

at: http://www.cia.gov/forecasts/steo/report/global oiLcfm 

6 U.S. Energy Information Administration, "The Availability and Price of Petroleum and Petroleum Products 

Produced in Countries Other Than Iran." February 29. 2012. Accessible at: 

http://www.eia.gov/analvsisirequcstsindaafpdf/ndaa.pdf 

7 U.S. Energy Information Administration, "International Energy Outlook 20 11 ," September 2011. Accessible at: 

http://www.eia.gov/forccasts/ieo/pdf!0484%2820II%29.pdf 

4 
7 

Estimated Proven Oil and Gas Reserves, 2010 

Billion barrels of oil equivaleut 

NIOe(l",n) ~~~~~~==l===i Saudi Aramoo 

Gazprom (Russia) 

NOC, SOC, MOC" 

ADNOC(UAE) 

Turkmengaz 

UbyaNOC 

Exxon Mobil 

Petrochina 

o 100 200 300 400 

Summer Fuels Outlook." 

!II Global Private 

Companies 

III National or State 

Owned Companies 

J>c.,nom"'l, "Big Oil's bigger brothers," October 29,2011. Accessible at: 

illm:1Ll~!l!l!lQ!ll~~l2lli112:!. 

5 
8 

Petroleum Imports 

In 20 10, the U.S. was a net petroleum importer of 9.4 MMbd, representing just under half of total 

U.S. demand (Figure 8). Approximately half of U.S. crude oil and petroleum imports are from 

the Western Hemisphere, with Canada as the top trading partner, providing 25 percent of U.S. 

imports. Due largely to the increased production associated with oil sands, Canada's oil 

production has increased 75 percent since 2000, and the U.S. import of Canadian petroleum 

increased 50 percent over that time period (Figure 9). 

Figure 8: Net Imports and Domestic Petroleum ProductionlO 

Net Imports and Domestic Sources of U.S. Net Petroleum 

Petroleum as Shares of U.S. 2010 

Demand, 2010 

Source: us, Energy Information Administration, Monthly 

Energy Review. Table 3 3a (April 2011), preliminary data. Source: U.S. Energy Information Administration, Petroleum 

Supply Monthly (February 2011), preliminary data. 

Figure 9: U.S. Imports from Canada of Crude Oil and Petroleum Products II 

u.s. kI>por!a "-C .. _a "'Crude 011 __ ~ 

\0 U.S. Energy Information Administration, "Energy in Brief," June 24. 2011. Accessible at: 

http://www.eia.gov/energv in brief/foreign oil dependence.cfm 

II U.S. Energy Infonnation Administration, "Petroleum & Other Liquids," March 19,2012. Accessible at: 

http://www.eia.gov/ dnav/pet/histiLeafHandler.ashx?n~ PET &s~MTTIMUSCA 1 & F= A 

6 
9 

Global Oil Production Environment 

Key Conclusions of National Petroleum Council's "Prudent Development" Report 

The National Petroleum Council (NPC) is a federally chartered advisory committee the purpose 

of which is to advise the Secretary of Energy on matters relating to oil and natural gas. As an 

advisory committee, the NPC provides advice at the request of the Secretary of Energy. In 

response to a request from Secretary of Energy Steven Chu, the NPC issued a report in 

September 2011 titled "Prudent Development: Realizing the Potenlial o{Norlh America 's 

Abundant Natural Gas and Oil Resources.,,12 The report is a "comprehensive study to reassess 

the character and potential of North American natural gas and oil resources ... ,,13 The study 

reached four primary conclusions: 

1.) "The potential supply of North American natural gas is far bigger than previously 

thought; 

2.) North America's oil resources are also much larger than previously thought; 

3.) Natural gas and oil resources will be needed even as energy efficiency reduces demand 

and lower-carbon alternatives become more economically available on a large scale; and, 

4.) Realizing the benefits of natural gas and oil depends on environmentally responsible 

development.,,]4 

The first chapter of the report identifies crude oil and natural gas resources and supplies and 

considers the prospects for North American oil development with various challenges associated 

with different resource bases, including offshore, Arctic, onshore oil, unconventional oil, and 

pipeline infrastructure issues. (Figure 10) Within the various resource basis, the NPC estimates: 15 

• Currently technically recoverable in the Continental U.S. at nearly 60 billion barrels of 

oil; 

• Arctic contains an estimated 100 billion barrels of recoverable oil; 

• Alberta oil sands with a recoverable oil potential of more than 300 billion barrels; 

• Onshore conventional oil estimated at 80 billion barrels, 

• "Tight oil,,16 could produce an additional 34 billion barrels; 

• Oil shale could yield resources estimated at 800 billion barrels. 

12 National Petroleum Council, "Prudent Development: Realizing the Potential a/North America's Abundant 

Natural Gas and Oil Resources." September 15, 2011. Executive Summary accessible at: 

http://www.npc.org/reportslNARD-ExccSummVql.pdf 

13 NPC Executive Summary, p. I 

"Ibid. 

" NPC "Prudent Development, p. 46. 

{. "Tight oil" is oil contained in traditional deposits, but could not flow through the tight formation rock, thus was 

traditionally inaccessible. 

7 
10 

Figure 10: National Petroleum Council Resource Estimated Potential Production. 

:;: 

0 

"" W 

Q. 

~ 

~ z 

§ 

~ 

20 

10 

0 

Figure ES-6. More Resource Access and Technology Innovation 

Could Substantially Increase North American Oil Production 

Notes; The oil supply bars. for 2035 represent the range of potential supply from each of the individual supply sources. and types 

considered in this study. The specific factors that may constrain or enable development and production can be different for 

each supply type, but include such factors as whether access is enabled, infrastructure is developed, appropriate 

technology research and development is sustained, an appropriate regulatory framework is in place, and environmental 

performance is maintained. 

Note that in 2010. oil demand for the US and Canada combined was 22.45 million barrels per day. Thus, even in 

the high potential scenariO, 2035 supply Is lower than 2010 demand, implying a continued need for oil imports 

and participation in global trade. 

Source: Historical data from Energy Information Administration and National Energy Board of Canada. 

Resource Characterization and Potential Supply 

Conventional resources are generally defined as those resources which are recovered from a 

reservoir in which oil, natural gas, and water accumulate in a layered arrangement. Conventional 

deposits have historically provided the majority of oil and natural gas production. 17 

Unconventional resources are then defined as what is not considered "conventional"' - resources 

that cannot be produced, transported, or refined using traditional techniques. An unconventional 

deposit is one in which the distribution of oil and gas is throughout a geologic fonnation over a 

wide area, rather than within a discrete deposit. The NPC considers heavy oil, tight oil, oil shale, 

and oil sands as unconventional resources. 

The NPC provides three categories of potential oil supply: 

• "Oil in place" is an estimate of both the discovered and undiscovered oil, thus it is simply 

an approximation of how much oil is in the ground. 

17 Whitney, Gene; Behrens, Carl E.; Glover, Carol. Congressional Research Service. "Us Fossil Fuel Resources: 

Terminology, Reporting, and Summary." December 28,2011. Accessible at: 

http://www.crs.gov/Products/R/PDFIR40872.pdf 

8 
11 

• "Resources" refer to the oil volumes that are economically recoverable, as well as 

volumes that could be recovered in the future, but are not considered commercial at the 

time of estimation. Those unconventional resources that are not in commercial production 

at the time of estimation are not counted as "resources" because no oil can be 

economically produced with existing deployed technology. 

• "Reserves," a sub-set of "resources," is the oil that can be produced economically with 

current technology at the time of estimation. This is also referred to as "proven reserves" 

or "economically recoverable reserves." Conversely, "ultimate potential" is an estimation 

of the amount of oil that could become recoverable with significant improvements in 

economic conditions and advancements in recovery technology. 

Types of Unconventional Resources 

Heavy Oil 

Heavy oil, also known as bitumen, and has a higher viscosity and specific gravity than light 

crude oil. In North America, this resource is most prevalent in Canada, from a region termed the 

"heavy oil belt," and is similar to the production of Canadian oil sands. Oil in place in this region 

is estimated at over 35 billion barrels, and produced 382,000 barrels per day in 2009. '8 Current 

production techniques have facilitated development of the most easily accessible heavy oil 

resources, however further technology advancements can facilitate the ultimate potential of the 

resource. 

Tight Oil 

Tight oil is produced using a combination of horizontal wells and fracturing to unlock 

hydrocarbons locked in low permeability and porosity siltstones, sandstones, and carbonates, or 

shale plays. Notable tight oil plays include the Bakken in North Dakota, Montana, and 

Saskatchewan; the Eagle Ford in southern Texas; the Cardium in Alberta; and the Miocene in 

California (Figure 11). Recent technological advancements have turned tight oil resources into 

one of the "most actively explored and produced targets in North America.,,'9 

Estimations oftight oil potential are siguificant (Figure 12). The Bakken Formation in North 

Dakota alone contains estimated recoverable resources ranging from 3.65 billion barrels to 4.3 

billion barrels; the USGS identified the Bakken as the largest continuous oil accumulation ever 

assessed by the agency.20 Additionally, continued advancement of extraction technology and 

resource characterization may greatly expand this estimate. 

18 NPC Unconventional Oil White Paper, p. II. 

19 NPC Unconventional Oil White Paper, p. 84. 

20 The group based !bese estimates on published literature, reports from state and gederaJ govermnent agencies, and 

industry information. References also include USGS reports, and a NETLIDOE report. 

9 
12 

Figure II: Producing and Prospective Tight Oil Plays in the US and Canada2

! 

Producing and Prospective "Tight Oil Plays in The US and Canada 

N 

Estimated Recoverable Resource (MMbo) o Mlr,O 320 4BO WO ~:.:.:-.::~M,le., 

Figure 12: Estimates of Recoverable Resources for Producing Tight Oil Plays CBB - billion barrels) 22 

Table T01 - Estimates of Recoverable Resources for Producing Tight Oil Plays 

Formation States/Provinces Resources (BB) 

---" Bakken ND, MT,SK 3.650 to 4.300 

Cardium AB 0.660 to 1.890 

Monterey (Antelope play) CA ! 0.718 to 3.500 

Niobrara CO,WY 0.240 

Atoka-Cherokeo CO 0.146 

Mancos NM 0.075 

Barnett TX 0.056 

Exshaw AB, MT 0.030 

Eagle Ford TX 0.013 

Total 5.588 to 10.25 (could be 

as high as 34 BB from 

NPC private industry data 

survey) 

21 NPC, "Prudent Development," p. 121. 

22 NPC, Unconventional Oil White Paper, p, 87, 

10 
13 

Oil Shale 

Oil shale refers to deposits in which the petroleum component, kerogen, has not fully 

transfonned into oil or gas; thus, the kerogen must be heatcd to transfonn it into an upgraded 

hydrocarbon. This physical state presents challenges to recover the resource which does not 

pennit it being pumped directly from the ground. Oil shale must either be processed above 

ground (ex situ) or in place (in situ). Potential oil shale production in the US is estimated to be 6 

trillion barrels of oil in place, mostly concentrated in the Green River Fonnation in Colorado, 

Utah, and Wyoming. However, due to the com~lexity of recovering the resource, only a fraction 

of the oil in place will be suitable for recovery. 3 Oil shale has a limited production history in the 

US, and currently thcre is no commercially-viable oil shale production in the US. 

Oil Sands 

Oil sands are a mixture of sand and other rock materials containing crudc bitumen, thick viscous 

crude that can be in a near solid state at reservoir temperature. Production technologies vary as to 

the location and characteristics of various deposits, including mining and extraction 

technologies. Additionally in situ processes, such as steam assisted gravity drainage, cyclic 

steam stimulation, and solvent injection, are used for extraction and production. 

In North America, 

significant oil sands 

deposits have been 

identified in both Canada 

and the United States. In 

Canada, oil-in-place 

estimates for oil sands have 

been estimated at 1.8 

trillion barrels, vaulting 

Canada into second place 

behind Saudi Arabia for 

total oil reserves. (Figure 

13 )24 Ofthis total, 7% or 

131 billion barrels are 

estimated to be contained in 

shallow deposits, 

recoverable by surface 

mining or bitumen 

extraction. The remaining 

93% are contained in 

deeper deposits which will 

require in situ recovery 

techniques. Estimates of 

US oil sands in place are 

- Figyre 13: Oil Sands Resources 

Discovered 

State (BB) 

California 1.9 

Utah 11.9 

Texas 3.9 

Oklahoma ND 

Alabama 1.8 

Kentucky 1.7 

Alaska ND 

New Mexico 0.1 

Tri-State 0.2 

Wyoming 0.1 

Total 21.6 

Undiscovered 

Bitumen-inPlace OBIP 

(BB) (BB) 

3.0 4.9 

8.2 20.1 

0.9 4.8 

0.8 0.8 

4.7 6.5 

1.7 3.4 

19.0 19.0 

0.2 0.3 

2.7 2.9 

0.1 0.2 

41.3 62.9 

23 The RAND Corporation has estimated that between 500-1100 billion barrels may be recoverable. Accessible at: 

http://www.rand.org/pubsimonoo raphs/2005/RAND M G414. pdf 

24 NPC, Unconventional Oil White Paper, p. 72. 

11 
14 

approximately 54 to 62.9 billion barrels spread across ten states.25 

According to an analysis by Citi, the growth of unconventional oil resources, including the 

Canadian oil sands, tight oil and oil from shale, North American oil and gas liquids production 

could double by 2020 and overtake both Russia and Saudi Arabia in oil production (Figure 14).26 

Figure 14: U.S. Unconventional Oil and Gas Production 

Figure 8. US production could overtake Saudi Arabia and Russia's this 

decade 

-us 

141 

12 c 

mbld 

10 

4 i 

Russian Federabon -Saudi Arabia --Canada -Mexico 

Saudi Arabia 

, 

, 

, 

us : 

, 

, 

Canada, .' ' 

, 

. 

I ~~ 

2 '1 

o 1-. -, ,-, -, ~-T-"-' TT,-,rT'TT",~',,-,-,-,-rrTTTn-'-'~~~T'.-rrrrro 

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 

Source BP Cltllnvestl11ent Research and AnalYSIS 

Key Technology Advances 

A number of advances in key technologies have facilitated increased energy production in 

unconventional oil plays. For example, the use of "enhanced oil recovery," or injecting steam or 

a gas (typically carbon dioxide) into the ground to extract additional liquids from a previously 

drilled well, accounts for 19% of total onshore oil production in the lower 48 states.27 

Additionally, Canada's investment in in-situ technology facilitated the expansion of oil sands 

production. 

25 NPC Unconventional Oil Resources White Paper 

26 Citigroup, "Energy 2020: North America, the New Middle East?" March, 20, 2012. Accessible at: 

https:ilir.citi.comIXrlJppnooam%2FCDzHLslfFJI%2B2Xlik7UrYkldeekRQLtTrCHYY%2Fkg2g%3D%3D 

27 NPC Prudent Development p. 106. 

12 
15 

Oil Shale 

The potential for the development of key production technologies may enable the production of 

oil shale, one of the world's largest unconventional hydrocarbon deposits. The NPC estimates oil 

shale sits at 8 trillion barrels of oil in place, approximately 6 trillion barrels of which is located in 

the United States and 80% of which lies under U.S. federallands. 28 Historical efforts have been 

made to develop oil shale but tapered off as crude oil dropped in price throughout the 1990's. 

However, interest in the huge potential of oil shale returned in the last decade, and pursuant to 

the Energy Policy Act of 2005, the Bureau of Land Management began development of a leasing 

program on federal lands that contain oil shale. The first round of research, development, and 

demonstration leases were awarded in 2006, and another round ofleases were offered in 2009 

but are yet to be awarded. On February 3, 2012, the Bureau of Land Management's proposed 

new regulations that would reportedly "reduce available lands for oil shale development in 

Colorado, Wyoming and Utah by more than 75 percent. In addition, it would only allow research 

on the leases until industry demonstrates that commercial development is technically viable and 

environmentally safe.,,29 

Tight Oil: The Bakken Play 

The development of the Bakken formation provides an illustrative example of how technology 

can greatly expand energy production. The advent of horizontal drilling, coupled with hydraulic 

fracturing stimulation, made the development of the Bakken fields, located in North Dakota 

economical. 

The Bakken formation occupies about 200,000 square miles of the subsurface of the Williston 

Basin, underlying parts of Montana, North Dakota, and Saskatchewan. First discovered in 1951, 

the rock formation consists oflower shale, middle dolomite, and upper shale. An April 2008 

USGS report estimated the amount of technically recoverable oil, using readily available 

technology, within the Bakken Formation at 3.0 to 4.3 billion barrels, 25 times more than a 1995 

estimate. The Bakken Formation estimate is larger than all other current USGS oil assessments 

of the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the 

USGS.30 The presence of vertical to sub-vertical natural fractures in the shale formation makes 

the Bakken an excellent candidate for horizontal drilling. 

Energy production in the Bakken Formation has reshaped North Dakota's economy. North 

Dakota is now the third largest oil producing state, producing 558,254 MMbd.3

! (Figure IS) The 

unemployment rate is the lowest in thc country at 3.1 percene

2 and the average wage in the oil 

28 NPC Prudent Development, p. 122. 

29 Taylor, Phil, E&E Greenwire, "Obama proposes rollback of shale plans for Rocky Mountain West," February 3, 

2012. http://w\.M.eenews.net/public/Greenwirc/2012/02/031J 

30"Continuous" oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than 

existing as discrete, localized occurrences httn:llwww.usgs.gov/newsroom/artkle.asp'?lD=1911 

31 North Dakota Oil & Gas Industry "Facts and Figures," Updated April 12, 2012Accessible at: 

http://www.ndoil.org!image/cache/Facts and Figures 2012 4.12.pdf 

32 U.S. Department of Labor, Bureau of Labor Statistics, "Unemployment Rates for States," March 30, 2012. 

Accessible at http://www.bls.gov/webilaus/lnumstrk.htm 

13 
16 

and gas extraction industry was $89,020 in 2011. 33 In 2010, the oil and gas production industry 

contributed $749.5 million in taxes.34 

Figure 15: North Dakota Crude Oil Production 

CRUDE OIL PRODUCTION 

• In hbruary 2012, an averagc' 

of 558,25,! barrels of oil pc'r dar 

(bopei) was produced . 

• Th(' statc>s avt'rage production in 

2011 was ,118,356 (bopd), 

lolalinA 153 million barrl'ls for 

the year. This is a 35il[) 

increase oYer 2010 ,IntI 

<l 233(}() increase 

O\W 2007. 

1::;3 

2001 n:)2 70:)3 20:)4 2005 ]006 n:)7 2(135 203') 2010 7011 

33 ND Oil & Gas "Facts and Figures." 

34 Ibid. 

14 
17 

Chairman HALL. Good morning, and thank all of you. The Committee on Science, Space, and Technology will come to order. I 

want to welcome you to today’s hearing entitled ‘‘Tapping America’s Unconventional Oil Resources for Job Creation and Affordable 

Domestic Energy: Technology and Policy Pathways.’’ In front of you 

are packets containing the written testimony of everybody. 

Where is everybody? I guess they are still out watching the shuttle. But this is a very busy day with a lot of committee work going. 

I think they will be in and out of here. You didn’t come all this way 

just to talk to two people; I know that. But it will go into the Congressional Record. Everybody is going to have to read your testimony whether they want to or not. So we welcome you here, and 

I might as well take the next five minutes and give time for the 

shuttle to land. They are going to Disneyland or wherever they are 

going. 

I welcome you to this morning’s hearing, and as I have said, it 

is entitled ‘‘Tapping America’s Unconventional Oil Resources and 

Job Creation and Affordable Domestic Energy: Technology and Policy Pathways.’’ Currently, gas prices average just under $4 per gallon nationwide, and are expected to remain at that level through the spring 

and the summer, maybe go higher. These prices are hurting consumers and the economy, and have sparked yet another national 

debate on energy policy, and to address high energy prices, Republicans have long supported an ‘‘all of the above’’ approach, which 

includes expanding supply and production of our vast domestic energy resources and development of market-based solutions to reduce demand and increase energy efficiency. 

In recent years, President Obama also adopted the Republican 

‘‘all of the above’’ slogan to describe his own approach to energy 

policy. His Energy Secretary, Steven Chu, has changed his tune as 

well, taking back his remark that we need to ‘‘somehow boost the 

price of gasoline to the levels in Europe’’ only after standing by 

that statement for over three years and refusing to retract it before 

this Committee just in March and went across the Hill to the Senate and told them how he really felt. 

When it comes to oil and gas drilling, however, the Administration’s actions simply don’t match the President’s rhetoric. Pro-drilling actions at the federal level have been few and far between, and 

while the President works hard to claim credit for recent domestic 

energy production increases, it is important to note that these come 

primarily from state and private lands beyond the reach of his Administration or he would probably preclude them too. 

Faced with a direct and urgent opportunity to address U.S. oil 

supply and infrastructure concerns, the President opposes drilling 

in ANWR, restricts development in the Gulf of Mexico and Outer 

Continental Shelf, rejects the Keystone XL pipeline, and blocks 

over a million acres of public land from oil shale development. But 

for these actions, America could be a seller of energy, not a buyer 

of energy. It is extremely difficult to consider this Administration’s 

actions and conclude that the President’s strategy can be objectively characterized as ‘‘all of the above.’’ 

Despite this backdrop, technology moves forward as is evidenced 

by the ability of recent advancements in horizontal drilling to safe-
18 

ly and economically unlock vast amounts of oil. For example, in 

1995, North Dakota was estimated to hold 150 million barrels of 

oil. Today, thanks to technology, it is estimated to hold 8 billion 

barrels. The economic benefits of this newly enabled production are 

very dramatic. North Dakota has the Nation’s lowest unemployment rate, just 3.3 percent. Jobs are so plentiful in Williston, North 

Dakota, that the average salary is $90,000 per year and McDonald’s is reportedly hiring new workers at $18 an hour with a signing bonus. 

A true all-of-the-above policy would be aggressively looking to 

replicate the North Dakota economic success story. But instead of 

unleashing technological innovation and energy production, the 

President continues to ask multiple agencies to regulate, delay, and 

raise the costs of American energy production. Just this week, EPA 

is expected to issue new rules restricting emissions from oil and 

gas operations. 

As the Committee, we feel responsible for overseeing the commercial application of energy technologies. We hope to learn more 

today about the status of and outlook for efficiently and economically increasing domestic oil production in the United States. We 

will explore challenges and opportunities resulting from new technologies such as horizontal drilling that are enabling expanded production, and we will discuss how continued technological development could position the United States as a top global energy producer for decades to come. 

[The prepared statement of Mr. Hall follows:] 

PREPARED STATEMENT OF CHAIRMAN RALPH HALL

Good morning, and welcome to this morning’s hearing, entitled Tapping America’s 

Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

Technology and Policy Pathways. 

Currently, gas prices average just under $4.00 per gallon nationwide, and are expected to remain at that level through the spring and summer. These prices are 

hurting consumers and the economy, and have sparked yet another national debate 

on energy policy. 

To address high energy prices, Republicans have long supported an ‘‘all of the 

above’’ approach which includes expanding supply and production of our vast domestic energy resources and development of market-based solutions to reduce demand 

and increase energy efficiency. 

In recent weeks, President Obama also adopted the Republican ‘‘all of the above’’ 

slogan to describe his own approach to energy policy. His Energy Secretary, Steven 

Chu, has changed his tune as well, taking back his remark that we need to ‘‘somehow boost the price of gasoline to the levels in Europe’’—only after standing by that 

statement for over three years and refusing to retract it before this Committee in 

March. 

When it comes to oil and gas drilling, however, the Administration’s actions simply do not match the President’s rhetoric. Pro-drilling actions at the Federal level 

have been few and far between, and while the President works hard to claim credit 

for recent domestic energy production increases, it is important to note these come 

primarily from State and private lands beyond the reach of his administration or 

he would probably preclude those too. 

Faced with a direct and urgent opportunity to address U.S. oil supply and infrastructure concerns, the President opposes drilling in ANWR, restricts development 

in the Gulf of Mexico and Outer Continental Shelf, rejects the Keystone XL pipeline, 

and blocks over a million acres of public land from oil shale development. 

It is extremely difficult to consider this Administration’s actions and conclude the 

President’s strategy can be objectively characterized as all-of-the above. 

Despite this backdrop, technology moves forward as is evidenced by the ability of 

recent advancements in horizontal drilling to safely and economically unlock vast 

amounts of oil. For example, in 1995, North Dakota was estimated to hold 150 mil-
19 

lion barrels of oil; today, thanks to technology, it is estimated to hold eight billion 

barrels. 

The economic benefits of this newly enabled production are dramatic. North Dakota has the nation’s lowest unemployment rate—just 3.3 percent. Jobs are so plentiful in Williston that the average salary is $90,000 per year and McDonald’s is reportedly hiring new workers at $18 an hour with a signing bonus. 

A true all-of-the-above policy would be aggressively looking to replicate the North 

Dakota economic success story. But instead of unleashing technological innovation 

and energy production, the President continues to ask multiple agencies to regulate, 

delay, and raise the costs of American energy production. Just this week, EPA is 

expected to issue new rules restricting emissions from oil and gas operations. 

As the Committee responsible for overseeing the commercial application of energy 

technologies, we hope to learn more today about the status of and outlook for efficiently and economically increasing domestic oil production in the United States. We 

will explore challenges and opportunities resulting from new technologies such as 

horizontal drilling that are enabling expanded production, and we will discuss how 

continued technological development could position the U.S. as a top global energy 

producer for decades to come. 

I now recognize Ranking Member Johnson for a five minute opening statement. 

Chairman HALL. I now recognize Ranking Member Mrs. Johnson 

for a five minute opening statement. 

Ms. JOHNSON. Thank you very much, Mr. Chairman, and welcome to all of the panelists. 

This is an interesting topic for this Committee to examine today, 

and certainly, the oil and gas sector is one area in which we see 

how advances in science and engineering can translate into largescale economic value, and our agencies have played a historic role 

in unconventional fossil research and development. But, being an 

election year and with gas price on their way to new heights, I 

have little confidence that the discussion will stay within the 

bounds of the jurisdiction of this Committee today. 

Even as late as decades ago, we had little idea of the fossil resources that would be available today. But high energy prices and 

a healthy dose of geologic luck aligned with some critical research 

investments made by the Department of Energy over 30 years ago 

to bring new natural gas online, and with it, oil. 

The Department of Energy program wrapped up in the early 

1990s with a private company—when a private company took the 

research performed by DOE and ran with it to ignite the oil and 

gas boom we see today. I think my colleagues would agree that 

that is the model for applied research programs we all hope to see: 

federal investments shepherding transformational technologies to 

the marketplace, even when the path is not clear. 

But that also begs the question: Being the Science, Space, and 

Technology Committee, what are we really here to discuss today? 

After all, it does not get much more commercial, much more profitable, than oil and gas. At a time of severe fiscal restraint, is it appropriate to talk about expanding the federal role in technology development for the oil and gas industry? What about the fear of government picking winners and losers, crowding out private investment, or otherwise engaging in market-supported activities that 

my Republican colleagues are usually so quick to malign clean tech 

research programs for supposedly perpetrating? How many decades 

and how many billions of taxpayer dollars can we spend picking 

the same winners? 

If sustained high oil prices are not enough to drive further innovation in unconventional oil, is it really the job of the taxpayer to 
20 

buy-down the oil industry’s risk? Are billions of taxpayer dollars in 

subsidies not enough of a handout for the most profitable industry 

in the world? 

Maybe we are here to talk about the importance of oil to the 

economy. If so, don’t worry; we get that. 

I am from Dallas, Texas, and Democrats drive cars too. Oil and 

gas will play an important role in our Nation’s economy for decades. 

The real reason we are here today is that it is an election year, 

and this hearing is another installment in the losing campaign to 

pin the Nation’s escalating gasoline prices on President Obama. To 

that, I add my voice to the bipartisan chorus of industry and policy 

experts that consider that as ridiculous as the notion that we can 

somehow drill our way into low gas prices and energy independence. 

The Republicans’ multi-million dollar effort to create an alternate 

reality in which a President controls gas prices is backfiring. The 

American people are smarter than that, and are coming to appreciate the real cost of our addiction to oil. Even if the oil comes from 

our own backyard, and I have relatives who had gas pumps in our 

backyards—I lived to see that—you pay the global price. The only 

guaranteed relief from the pain at the pump is to visit the pump 

less often. We need more transportation options, with cars and 

trucks that are dramatically more efficient, more alternative fuels, 

and more vehicle electrification. The cheapest gas is the gas you 

don’t have to buy. 

In closing, I would like to dispel the myth that President Obama 

and the Democrats are mounting a war on fossil fuels. We simply 

want future generations to have a choice. Where Democrats differ 

from our Republican counterparts is that we recognize that our Nation will be strengthened by diversifying our energy supply and 

protecting public health, and that is more important than shortterm profits of industry. The oil will be there. It is up to the markets to make the price right, and the industry to make sure it can 

be produced sustainably. 

Thank you, and I yield back, and I look forward to the testimony. 

[The prepared statement of Ms. Johnson follows:] 

PREPARED STATEMENT OF RANKING MEMBER EDDIE BERNICE JOHNSON

Thank you, Mr. Chairman. 

This is an interesting topic for this Committee to examine today. Certainly, the 

oil and gas sector is one area in which we see how advances in science and engineering can translate into large-scale economic value, and our agencies have played a 

historic role in unconventional fossil R&D. 

But, being an election year and with gas price on their way to new highs, I have 

little confidence that the discussion will stay within the bounds of our jurisdiction 

here. 

Even as late as a decade ago, we had little idea of the fossil resources that would 

be available today. But, high energy prices and a healthy dose of geologic luck 

aligned with some critical research investments made by the Department of Energy 

over 30 years ago to bring new natural gas online, and with it, oil. 

That DOE program wrapped up in the early 90’s when a private company took 

the research performed by DOE and ran with it to ignite the oil and gas boom we 

see today. I think my colleagues would agree that that is the model for applied research programs we all hope to see—federal investments shepherding transformational technologies to the marketplace, even when the path is not clear. 
21 

But that also begs the question: Being the Science, Space, and Technology Committee, what are we really here to discuss today? After all, it does not get much 

more commercial, much more profitable, than oil and gas. 

At a time of severe fiscal restraint, is it appropriate to talk about expanding the 

federal role in technology development for the oil and gas industry? What about the 

fear of government ‘‘picking winners and losers,’’ ‘‘crowding out private investment,’’ 

or otherwise engaging in market-supported activities that my Republican colleagues 

are usually so quick to malign cleantech research programs for supposedly perpetrating? How many decades and how many billions of tax payer dollars can we 

spend picking the same winners? 

If sustained high oil prices are not enough to drive further innovation in unconventional oil, is it really the job of the taxpayer to buy-down the oil industry’s risk? 

Are billions of taxpayer dollars in subsidies not enough of a handout for the most 

profitable industry in the world? 

Maybe we are here to talk about the importance of oil to the economy. If so, don’t 

worry, we get that. I am from Dallas, and Democrats drive cars too. Oil and gas 

will play an important role in our nation’s economy for decades. 

The real reason we are here is that it is an election year, and this hearing is another installment in the losing campaign to pin the nation’s escalating gasoline 

prices on President Obama. To that, I add my voice to the bipartisan chorus of industry and policy experts that consider that as ridiculous as the notion that we can 

somehow drill our way into low gas prices and energy independence. 

The Republicans multi-million dollar effort to create an alternate reality in which 

a President controls gas prices is backfiring. The American people are smarter than 

that, and are coming to appreciate the real cost of our addiction to oil. 

Even if the oil comes from your own backyard, you pay the global price. The only 

guaranteed relief from the pain at the pump is to visit the pump less often. We need 

more transportation options, with cars and trucks that are dramatically more efficient, more alternative fuels, and more vehicle electrification. The cheapest gas is 

the gas you don’t have to buy. 

In closing I would like to dispel the myth that President Obama and the Democrats are mounting a war on fossil fuels. We simply want future generations to have 

a choice. Where Democrats differ from our Republican counterparts is that we recognize that our nation will be strengthened by diversifying our energy supply and protecting public health, and that is more important than short-term profits of industry. The oil will be there. It is up to the markets to make the price right, and the 

industry to make sure it can be produced sustainably. 

Thank you, and I yield back. 

Chairman HALL. I thank Ms. Johnson. We are neighbors and we 

are good friends, but we don’t always agree. So the gentlelady 

yields back. 

If there are Members who wish to submit additional opening 

statements, your statements will be added to the record at this 

point, or when they do arrive here. 

Our first witness is Mr. Andrew Slaughter, Chair of the Resources and Supply Task Force of the National Petroleum Council’s 

report entitled ‘‘Prudent Development: Realizing the Potential of 

North America’s Abundant Natural Gas and Oil Resources.’’ He is 

currently the Business Environmental Manager for Shell’s upstream America’s exploration and production business. In this capacity, he is responsible for strategic counseling and analysis relative to North American crude oil and natural gas markets covering short- and long-term supply, demand, price and other regional market issues in support of investment, planning and business strategy. 

Our second witness is Karen Harbert, President and Chief Executive Officer of the Institute for 21st Century Energy. Mrs. Harbert 

is the former Assistant Secretary for Policy and International Affairs at the U.S. Department of Energy and served as the Deputy 

Assistant Administrator for Latin America at the Caribbean and 

the U.S. Agency on International development. Mrs. Harbert re-
22 

ceived her degree in international policy studies and political 

science from Rice University in Houston. 

Our third witness today will be Dr. Michelle Michot Foss, the 

Chief Energy Economist of the Center for Energy Economics at the 

Bureau of Economic Geology at the University of Texas-Austin. 

Hook ’em, Horns. Dr. Foss has over 30 years of experience in energy and environmental. I couldn’t help but put that in there. Dr. 

Foss’s expertise is in applied energy economics and business development, enterprise strategy and commercial operations and business-government relations across the energy value chain. She received her Ph.D. in political science from the University of Houston, a master of science from the Colorado School of Mines and her 

bachelor of science from the University of Louisiana-Lafayette. 

And then our next witness will be James Brown, President and 

Chief Operating Officer of Whiting Petroleum Corporation. Mr. 

Brown has served in his current capacity since January 2011. He 

previously served as Senior Vice President of Operations. Mr. 

Brown began his career with Shell Oil Company in Houston, Texas, 

in 1975 and he has held engineering and supervisory positions at 

American Petroleum, BP and Whiting Petroleum Corporation. Mr. 

Brown received his bachelor’s degree in civil engineering from the 

University of Wyoming and a master’s of business administration 

from the University of Denver. 

Our final witness, or our last witness, will be Daniel Weiss, Senior Fellow and Director of Climate Strategy, center for American 

Progress. Before coming to American Progress, he spent 25 years 

working with environmental advocacy organizations and political 

campaigns. Mr. Weiss is an expert in energy and environmental 

policy, legislative strategy and tactics, and advocacy communications. Mr. Weiss received his master’s of public policy and a bachelor of arts degree from the University of Michigan. 

As our witnesses should know, spoken testimony is limited to 

five minutes, but you won’t be held absolutely to that. You have 

come a long way and you have prepared many years, and you are 

kind enough to give us your time today. So we won’t just hold you 

to that, but do your best to stay as close to it as you can. After 

which the Members of the Committee will have five minutes each 

to ask questions. 

I now recognize our first witness, Mr. Slaughter, for your five 

minutes more or less. 

STATEMENT OF MR. ANDREW SLAUGHTER, 

BUSINESS ENVIRONMENT ADVISOR, SHELL EXPLORATION 

AND PRODUCTION COMPANY, AND CHAIR, 

RESOURCES AND SUPPLY TASK FORCE OF 

THE NATIONAL PETROLEUM COUNCIL 

Mr. SLAUGHTER. Good morning, and thank you, Mr. Chairman, 

Ranking Member, distinguished Committee. Thanks for the opportunity to be here and talk about unconventional oil resources in 

America and their future development. 

As Mr. Chairman said, my name is Andrew Slaughter. I work on 

supply and market fundamentals for Shell. But today I am here in 

my capacity as Chairman of the Resources and Supply Task Group 

of the ‘‘Prudent Development’’ report, which was recently published 
23 

by the National Petroleum Council, an advisory body to the Secretary of Energy. 

This report was a comprehensive assessment of North American 

oil and natural gas with a special focus on the environmental 

issues associated with development and of course the future productive capacity of that resource. The study was commissioned in 

September 2009. The final report was delivered in September 2011. 

And you can access and look at the report and all the backup materials on the National Petroleum Council website. 

I did submit a written statement for the record with further 

background on the NPC, the Prudent Development study and its 

parameters. But today I will focus my shorter comments on the 

study’s conclusions and recommendations, mainly addressing the 

size of unconventional resources and factors that could increase or 

decrease their productive potential. 

Let me first clarify what we mean by unconventional. Unconventional resources are those oil and natural gas resources produced 

by other means than by producing from a defined reservoir through 

a vertical well bore using natural or induced pressure. So basically 

it is using some different technology or different production techniques to produce the resource. These include heavy oil, bitumen 

or kerogen produced through in situ thermal recovery. It includes 

tight oil produced from source rock using horizontal drilling and 

multistage hydraulic fracturing. And on the gas side, it includes 

such resources as shale gas, tight gas and coal bed methane. 

So with regard to the scope of these resources, we analyzed virtually every non-proprietary resource assessment conducted by government agencies, the private sector and many organizations from 

the United States and Canada, and the conclusion was, the ultimate potential of the North American unconventional oil resource 

is huge. It is composed of several distinct resources, each at a different stage of development. The unconventional oil in place in the 

United States and Canada was estimated to be about 3–1/2 trillion 

barrels of oil with technical recoverable resources today of about 

180 billion barrels. By comparison, the total conventional oil resource in the United States is about 185 billion barrels. In terms 

of natural gas, we have about 2,000 to 5,000 TCF of technically recoverable resource. About half to two-third could be considered unconventional. 

So this leads to a potential for production. It is important to say 

that not all the oil in place will be produced. We concluded that 

about 1.1 trillion barrels could be ultimately recoverable. And of 

that, approximately just under 180 billion barrels are recoverable 

using technology in place today. With new technology and technology development, an additional 1 trillion barrels is probably ultimately recoverable with technology and other advances over the 

next years and decades. 

So in 2010, the United States and Canada produced 10 million 

barrels a day together. Approximately 2 million barrels a day came 

from unconventional plays, mainly the oil sands, and 3 million barrels a day came from natural gas liquids, much of which comes 

with unconventional gas production. 

So there are potential development pathways for these resources 

that depend on choices that are made from policy and the invest-
24 

ment and technology. In a limited production case, total 2035 production was estimated at 10 million barrels a day, but with a growing contribution from unconventional oil up to 3–1/2 million barrels 

a day. But in a high potential case, if we get supportive policy, access and fiscal support, total North American production can grow 

to over 20 million barrels a day by 2035 with further potential 

thereafter, and unconventional oil comes to about 10 million barrels a day in that total. The oil shale resource is not included in 

those totals but could be of huge development potential thereafter. 

For each of these sources of unconventional supply, the path to 

production is unique. Oil and gas technology could lead to surprisingly rapid production growth for tight oil but other unconventional 

resources will be developed over a much longer time period. 

I will finish up here by just saying there are some three principal 

recommendation areas to support prudent development of these resources. First, establish an independent forum to research the facts 

and potential of all the unconventional hydrocarbon space to inform 

policy. Second, put policies in place to support innovation and production growth, particularly stable leasing access and fiscal regimes and technology support regimes. And finally, work very 

closely with Canada, who have a very successful track history in 

developing unconventional oil resources, particularly in the Alberta 

oil sands. 

And with that, I will conclude my remarks. My apologies for running over time. 

[The prepared statement of Mr. Slaughter follows:] 
25 

Testimony of Andrew Slaughter 

Business Environment Advisor, Shell Exploration and Production Company 

and 

Chair, Resources and Supply Task Group of the National Petroleum Council 

Before the House Committee on Science, Space and Technology 

April 17, 2012 

Mr. Chairman, Mr. Ranking Member, distinguished committee members; thank you for the opportunity 

to be here today to talk about America's unconventional oil resources and the potential for their 

development. I am here today in my capacity as a contributor to the recent National Petroleum Council 

Study, "Prudent Development - Realizing the Potential of North America's Abundant Natural Gas and Oil 

Resources". For this study I was the chairman of the Resources and Supply Task Group which focused on 

hydrocarbon resources and development potential in the U.S. and Canada. I also work for Shell where I 

focus on analyzing North American natural gas and crude oil markets. 

The National Petroleum Council (NPC) Study was undertaken in response to a request from Secretary of 

Energy Dr. Chu to assess North American resources of natural gas and oil; describe their development 

potential; describe the key technologies which will be used in this development; set out how 

development can be achieved while ensuring high standards of environmental performance and 

management of community impacts; and analyze the contribution which greater use of natural gas can 

make in reducing C02 and other air emissions, while achieving objectives of environmental protection, 

economic growth, and energy security. The study was commissioned in September 2009 and the final 

report was delivered in September 2011. The study report, 55 supporting topic papers, and other study 

materials are publically available on the NPC's webSite (www.npc.org). 

The NPC is a Federally chartered, self-funded AdviSOry Committee with the sole purpose of providing 

advice to the Secretary of Energy and Executive Branch by conducting studies at their request. It is not 

an advocacy group and does not lobby. NPC study participants represent diverse interests and expertise 

relating to the topic being addressed. There were over 400 participants involved in the study that 

produced the NPC's "Prudent Development" Report, the majority of which were from organizations 

outside of the oil and gas industry. 

The Task Group which I chaired was composed of almost 100 experienced industry professionals, 

academics and experts from government agencies, and set out to describe the natural gas and oil 

resources available for development in the U.S. and Canada; potential pathways for development and 

production over the next two to four decades, laying out the enabling conditions which could favour a 

pathway to higher production and the challenges or barriers which could constrain production growth; 

and the key technologies, current and future, which will need to be developed and deployed. 

1 
26 

The Task Group undertook a comprehensive review of the following hydrocarbon resource types: 

offshore oil and natural gas; Arctic oil and natural gas; onshore conventional oil and enhanced oil 

recovery; unconventional oil; and onshore natural gas. We also studied crude oil and natural gas 

infrastructure needs; hydrocarbon resource assessments; and we reviewed and analyzed a wide range 

of publicly available studies on these topics as well as undertaking a survey of proprietary outlooks from 

oil and gas companies and consulting firms. 

Since the focus of this hearing is on unconventional oil, I propose to concentrate my remarks in this 

area, although I would also be pleased and willing to answer questions about other segments of North 

American hydrocarbon supply potential. 

We define unconventional oil as oil resources which require non-traditional production techniques and 

technologies to be developed and produced; in contrast to conventional oil which is usually produced 

from a defined reservoir through a vertical wellbore using natural or induced pressure. In the case of 

unconventional oil, nonconventional production techniques 

include mining or in-situ thermal 

recovery of heavy oil, bitumens and 

kerogen. We include heavy oil, very 

heavy, oil shale and oil sands in this 

category of unconventional oil. 

Unconventional oil can also include 

such resources as tight oil, which is 

usually light and sweet, but which is 

extracted from source rock using 

horizontal drilling and mUlti-stage 

hydraulic fracturing techniques 

similar to those deployed in shale 

gas plays. 

Figure 1·~. :\lore Reljource Access and Technology InnoY:ltion Could Sub.,:tantially 

Incrfll\e ~ol'lh American Oil Production 

The study team found that the ultimate potential of North American unconventional oil is huge. Oil in 

place is estimated at over 3.5 trillion barrels, with recoverable resources using known technology 

standing at over 177 billion barrels. This compares with about 185 billion barrels of technically 

recoverable conventional oil resources in the U.S. And with future technological developments, we may 

ultimately be able to recover over 1 trillion barrels of all these resources with sustained advances in 

appropriate technologies and operating practices. Moving towards ultimate potential will take decades, 

not years, but requires sustained activity in developing appraisal, drilling and recovery technologies and 

operating practices; and recognition from policy-makers and regulators that regulatory, fiscal and 

leasing frameworks need to take into account the specific complexities of these resources. 

The NPC study took an in-depth look at how the resources identified could be developed into production 

over the next couple of decades (as well as the conventional oil resources in North America). Figure 1.5 

2 
27 

from the Executive Summary 

of the report shows the range 

of potential production and 

highlights how unconventional 

crude oil might be developed 

compared to conventional oil. 

It included production from 

both the U.s. and Canada, as 

we considered the two 

countries to represent 

essentially one large market 

for oil supply. The chart shows 

that, out of 2010 total 

Millionb!d 

7 NA Unconventional Oil Supply Potential in 

NPCStudy 

CanadianOIiSands CanadianHeavyOil TlghtOil US Oil Shale 

1!12010 5!2035 limited Potential 82035 MostLikely n' 2036 High Potential 

production of just under 10 million bId, approximately 2 million barrels per day came from what we 

would consider unconventional plays, predominantly the Alberta oil sands; and a further 3 million 

barrels per day or so came from natural gas liquids, much of which was associated with unconventional 

natural gas production. 

The two other bars on the chart represent the potential range of North American oil production by 

2035. 

The limited outlook assumes that development of new plays and expansion of existing plays proceed 

quite slowly, inhibited by restrictions on access, restrictive leasing frameworks, a lower capacity to 

develop appropriate technologies and a lower pace of infrastructure development. Even in this more 

limited outlook, however, there could be an expanded role for unconventional oil, growing to over 3.5 

million bId, with growth from the Alberta oil sands and from U.S. tight oil. Indeed, in this more restricted 

oil development scenario, unconventional oil would represent a growing share of the total as the more 

conventional sources decline as a result of the lack of new development, combined with continuing 

depletion of existing mature reservoirs. 

In the High Potential scenario, shown on the right of this chart, the study team assessed that total North 

American oil production could rise to over 22 million bId by 2035, if more favorable development 

conditions are assured by governments, regulators and oil and companies alike. Of this 22 million bId, 

the study team estimated that about 7 million bId could come from unconventional sources with a 

further 5-6 million bId coming from natural gas liquids, again much of which should be expected to be 

associated with unconventional natural gas production. 

The following chart breaks out the individual components of unconventional oil included in the overall 

ranges of production. We can see that the highest scope for increases is still expected to come from the 

Alberta oil sands, with their vast resources of identified hydrocarbons. But US tight oil could also 

become a significant contributor over this time period, reaching at least 3 million bId by 2035. In fact, 

over the course of the NPC study and in the time since it has been completed our understanding of tight 

3 
28 

oil resources and their potential to grow production increased substantially. And it is quite conceivable 

that even the high potential case shown here understates the scope of production which may be 

achievable. 

The following map shows the principal areas of current and potential development of tight oil, as known 

today. It is, of course, quite possible, that, as with shale gas, more prospective areas are identified as 

more knowledge and experience is acquired. (The map makes an estimate of recoverable resources for 

some tight oil plays using published literature, reports from states and government agencies, and 

industry press releases. These estimates could be low - many of the tight oil plays are in early stages of 

development and resources may be significantly greater than currently reported). 

It is worth clarifying at this point that US oil shale, although it represents a massive hydrocarbon 

resource, even in the most favourable scenario for development, should not be expected to have as 

much impact as oil sands and tight oil in this time frame. However, in order to be available for ramp-up 

to significant volumes in subsequent decades, a sustained effort in leasing, research and technology 

development will be needed in the near-term. Since unconventional resources will mostly require 

unique new techniques to extract the oil, learning from the Canadian oil sands example, the yardstick 

4 
29 

for measuring the successful development and deployment of new technologies is decades - not years. 

Other factors to support growth include -- fiscal measures to spur growth and reduce risk, and long term 

land access agreements so that operators have time to develop and deploy new extraction ideas. 

Now let me turn to the key technologies which can influence these potential outcomes and which will 

be needed if the higher potential production profiles are to be achieved. For unconventional oil, new 

technologies include both methods to extract the oil economically, and, since unconventional oil 

generally has a higher environmental footprint than conventional oil, ways to reduce environmental 

impacts from production. 

First let me address tight oil. In this case, the successes over the past five years in unconventional and 

shale natural gas development really opened the path for the subsequent take-off of tight oil 

development. The impact of new technology application has been to revitalize areas which have in the 

past seen significant oil and natural gas development, but which had mostly been perceived as largely 

"played out" such as in the Williston Basin of North Dakota and Montana, home of the Bakken play. 

The key to opening up the new tight oil resources has been the application of new extraction methodshorizontal drilling, combined with multi-stage hydraulic fracturing. At this level, the technology is similar 

to that used to open up shale gas plays. However, specific use of technology is conditioned by the 

specific geologic conditions encountered in each location. Rock permeability and porosity conditions 

vary as do depth and pressure. The design of drilling and completion strategies in each basin needs to be 

tailored to local conditions. Technology improvements as these developments go forward will be around 

better identification of oil location within the formations, optimum placement of fractures and flow 

monitoring systems which can track the performance of individual fractures. And, on the 

environmental technologies and operating practices side, operators need to develop new techniques 

that both reduce overall water use and manage the water flows as an integrated cycle from water 

acquisition to water disposal. Recycling of water will be increasingly necessary as the volume of activity 

increases. In addition to the above technologies, a multitude of other technological advances have 

continued to improve the identification of resources, reduce costs, and/or increase recoveries of tight 

oil and other resources. 

In the North American context, the development of the Alberta oil sands is also a key component of 

expanded oil supply. For the first 20 years, the oil sands industry has been focused on developing 

technology that could extract the oil economically. Over the next 20 years, the focuses will be on the 

environmental technologies. a clearer understanding of the technologies used and how environmental 

impacts are managed for the region as whole is an important for consideration for Canadian policy 

makers and regulators. As supply grows, methods to reduce the environmental footprint of extraction, 

and to ensure that the growth stays within the regional environmental limits is a key focus .. There are 

two broad categories of oil sands extraction -1) surface mining, in which shallow deposits of bitumen 

are removed using truck and shovel techniques and then treated to remove bitumen from the other 

mined materials; and 2) in-situ extraction, used in deeper depOSits, hot steam injection is used to 

increase bitumen viscosity so it can flow to the surface. There are various in-situ technologies available 

5 
30 

and operators are continuously testing new approaches to increase efficiency, environmental impacts, 

and recovery rates and/or to lower operating costs. These approaches are discussed in more detail in 

the "Unconventional Oil" topic paper of the recent NPC study, and it is worth stressing here that, with 

the opportunity to develop these resources, the industry has been extremely proactive in developing 

improvements in technology, operating practices and environmental performance in all its aspects, to 

enable continued expansion of the production. For example, the industry has lowered its GHG 

emissions intensity per barrel by 39 percent from 1990 to 2008'. 

In fact, the Alberta oil sands development could, in many respects, serve as a template for 

unconventional oil development in many other areas of the U.S. and Canada. Industry, provincial and 

federal governments and regulatory agencies have consistently worked together to develop appropriate 

access, leasing frameworks, regulations and environmental standards which have together enabled 

steady expansion of capacity over many years, allowing the economic and energy security benefits of 

these resources to be achieved, whilst also driving continued improvement in environmental 

management. A constructive learning from the Canadian oil sands, which could be applied to other 

unconventional resources, is to undertake a full assessment of the environmental and social impacts 

early to allow for long term planning, and integration of mitigation strategies early in the resources 

development. 

The Alberta oil sands has reached its current position as a world-class oil province, both in terms of 

current production and future growth, after decades of patient, sustained effort by all involved to 

assemble an operating and regulatory framework which works well for all participants, allowing 

substantial benefits to be realized. In the u.s. we can see a possible parallel in the development of oil 

shale in the Rocky Mountain states. Again, here various attempts have been made over the past 40 

years or so to build large-scale production, commensurate with the immense size of the available 

resource. However, as yet, cost-effective and environmentally appropriate development and producing 

technologies have not yet emerged to move into sustainable high-volume production, and this process 

might take several more decades and enormous capital commitments from the oil and gas companies. 

To enable these development pathways to proceed with confidence, broad and consistent government 

engagement is required to provide some degree of long-term regulatory certainty. On the technology 

front, a broad partnership of industry, academia and government research facilities would be desirable 

to allow a range of concepts to be developed and tested. If these regulatory frameworks and technology 

development efforts are not put in place and sustained, then we may not be ready to tap into these 

vast resources when there is a clear need in the market, later this century. We should not let our 

current and near-term successes in such resources as tight oil distract us from preparing for the 

long-term when new sources of oil will surely be required. 

1 National Inventory Report 1990---2008: Greenhouse Gas Sources and Sinks in Canada" Environment Canada (2010) 

Available athttp://www.ec.gc.ca/Publications/deiault.asp?lang=En&xml=492D914C---2EAB47AB---A045--

-c62B2CDACC29 Part I, Page 69 

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31 

There are other types of unconventional oil which we have identified, such as heavy and extra-heavy oil, 

and US oil sands. Others may emerge in the coming years and decades. Together with the vast, worldclass producing and prospective basins in North America for conventional oil, such in the offshore, 

around all the coastlines of the lower-48 states (not just the Gulf of Mexico); in the Arctic regions of the 

u.s. and Canada; and in the application of new drilling techniques and enhanced oil recovery methods 

to fields which may have previously been considered as mature, North America has the prospect of 

maintaining and building on its position as one of the major oil producers of the world for many years to 

come. Although there are significant uncertainties about the future size of the North American oil 

market (and these will be addressed in the forthcoming NPC study on the future of Transportation 

Fuels), the opportunity to produce a much larger share of domestic consumption from North American 

sources is real and demonstrated. Unconventional oil has added a new dimension to what was already a 

rich portfolio of oil development options. In considering current and future energy policy, we urge policy 

makers to take all necessary steps to keep these options on the table, allowing capital to be deployed, 

technology to be developed and significant energy security and economic benefits to be achieved. There 

are challenges to many of these prospects. But industry can overcome these challenges by being 

allowed to proceed with development and technological advances. The continuous history of this 

industry has been one of ever-increasing productivity and technological intensity, allied with everimproving environmental performance and engagement with the communities where we operate. 

Government and policy-makers have an important role to play in setting out a framework for activity 

which recognizes the contribution of the resource potential, while addressing the needs of wider groups 

of stakeholders. 

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32 

Chairman HALL. We thank you for your own time. Thank you, 

sir. 

Now I recognize Mrs. Harbert. 

STATEMENT OF MS. KAREN HARBERT, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, 

INSTITUTE FOR 21ST CENTURY ENERGY, 

U.S. CHAMBER OF COMMERCE 

Ms. HARBERT. Thank you, Chairman Hall and Ranking Member 

Johnson, Members of the Committee. I represent the Institute for 

21st Century Energy, which is an affiliate of the U.S. Chamber of 

Commerce. 

I really appreciate the opportunity to discuss an issue area that 

gets very little coverage in the public policy debate. That is the potential benefits and the existing obstacles to greater development 

of our vast unconventional oil and natural gas resources. Rarely 

does public debate include the fact that America has hundreds of 

years of supply stored in unconventional formations in the United 

States. In fact, Colorado, Wyoming and Utah alone contain more oil 

from oil shale than all of the conventional oil contained in the Middle East. These resources are so vast that when made commercial, 

they have the real potential to completely alter the global oil market and secure America’s energy future. Yet today we have a policy 

in this government to ignore the value of these resources, sacrifice 

the revenue, the jobs and security dividends that we could realize 

from developing them. 

After the Arab oil embargo, the price of oil increased tenfold by 

1980, and as a response, the United States began a very big development program for domestic oil including oil sands and oil shale 

as a hedge against future supply disruptions. Canada took a similar tack. However, in the mid-1980s we saw the price of oil decline 

precipitously and the United States stopped that program. Canada, 

notably, did not, and Canada saw its oil production double between 

1982 and 2008, and the United States saw its production decrease 

by 43 percent. 

The International Energy Agency says that global energy demand is going to go up by 50 percent by 2035, and in that time 

frame, fossil fuels will still dominate 80 percent of our energy landscape. Countries around the world are increasing their production 

and looking to acquire assets abroad but the United States is on 

a different course. Under this Administration, more than 86 percent of federal offshore lands and 83 percent of federal interior 

lands are off limits for exploration. The Interior’s Bureau of Land 

Management reduced the acreage for oil shale activities in Colorado, Utah and Wyoming by over three-quarters and it reduced 

available acreage in eastern Utah as it relates to oil sands by nearly 80 percent. 

Recent claims that U.S. oil production is up are accurate but the 

reason is much more telling. Production of oil from federal lands 

is down 11 percent comparing 2011 to 2010 but is increased by 14 

percent on private and state lands. And of course, we also have to 

remember, we are paying more for what we import. In fact, we are 

accounting—our imports account for 60 percent of our total trade 

deficit, and fuel prices are dominating the political and legislative 
33 

debate for good reason. Every 1-cent increase in the price of gasoline costs Americans roughly $1 billion a year. The average American household spent about 8.5 percent of its household income on 

gasoline, which is the highest since 1981. And let us not forget that 

every $10 increase in oil prices can knock a few tenths of a percent 

off any increase in GDP. 

Yes, it is true, there are a few mechanisms that the Federal Government has its disposal to immediately lower fuel prices but it is 

not accurate to say that the government can do nothing to affect 

prices in the future. A signal to the global energy market that the 

U.S. is committed and serious about accelerating the development 

of its vast conventional and unconventional oil resources would not 

go unnoticed. Introduction of new supply from the North Slope of 

Alaska or the North Sea in the early 1980s helped cause the global 

price to collapse in 1986. And new commercial production in Alberta also impacted global prices. So similarly, our unconventional 

resources have the potential to be the game changer our U.S. economy needs and upon which our future competitiveness can depend. 

According to the U.S. government, the country has an estimated 

2.7 trillion barrels of oil in place of oil shale and oil sands but 80 

percent of it is located on federal lands. These resources would supply ourselves for at least 380 years. These resources are twice the 

size of the entire world’s proven conventional oil reserves of 1.3 

trillion barrels. 

A paper by Anton Dammer, who is the U.S. government’s former 

head of oil shale reserves, said if we were to develop our oil shale 

and oil sands resources as Congress instructed in 2005 in the Energy Policy Act, over the next 25 years we could realize a gain in 

oil production of 1.1 billion barrels. We could increase economic 

growth by $153 billion, government revenue by $31 billion, and not 

send $129 billion overseas to finance our demand for energy. Congress was clear in 2005 when it created an interagency task force 

to look at this and make recommendations, and the Administration 

complied with that in 2008 and made those recommendations. This 

Administration is now walking those backwards. We are taking 

lands off the table. We are picking energy favorites and we are 

trumping the Nation’s strategic interests. Lack of access has prevented oil shale development technologies from aggressing as far as 

the oil sands in Canada. But we need access to federal lands, not 

just private lands. 

As such, the policy pathway to realizing even a portion of this 

huge asset is to allow access to our unconventional resources which 

are in control of the Federal Government. This Administration has 

ignored Congress’s mandate, and unless this approach changes, our 

largest strategic asset will remain untapped until this or a subsequent Administration decides to allow access to these strategic assets and to secure our energy future. America’s business depends 

on that decision. Thank you. 

[The prepared statement of Ms. Harbert follows:] 
34 

Committee on Science, Space, & Technology 

United States House of Representatives 

"Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology & Policy Pathways" 

Testimony of Karen A. Harbert 

President & Chief Executive Officer 

Institute for 21st Century Energy 

U.S. Chamber of Commerce 

Tuesday, April 17t

\ 2012 

Thank you, Chairman Hall, Ranking Member Johnson, and members of the Committee. I am 

Karen Harbert, President and CEO of the Institute for 21st Century Energy (Institute), an affiliate 

of the U.S. Chamber of Commerce. The U.S. Chamber of Commerce is the world's largest 

business federation, representing the interests of more than three million businesses and 

organizations of every size, sector and region. 

The mission of the Institute is to unify policymakers, regulators, business leaders, and the 

American public behind common sense energy strategy to help keep America secure, prosperous, 

and clean. In that regard we hope to be of service to this Committee, this Congress as a whole, 

and the administration. 

I appreciate this opportunity to discuss an issue area that gets very little coverage in the public 

policy debate, the potential benefits and the existing obstacles to greater development of the 

nation's vast unconventional oil and natural gas resources. There has been much discussion 

about America's oil reserves recently, but rarely does it accurately capture the full extent of our 

resources. The country's unconventional oil resources are some of, if not the largest the world 

and one of the single greatest assets we as Americans possess. 

We have hundreds of years of oil supply stored in unconventional formations in the United 

States. In fact, the three states of Colorado, Wyoming and Utah alone contain more oil from oil 

shale than all of the conventional oil contained in the Middle East. This resource is so vast that 

when made commercial, it has the real potential to completely alter the global oil markets and 

secure America's energy future at the same time. Yet it is the current policy of our government 

to ignore the value of these resources, sacrificing the revenue, jobs and huge security dividends 

Americans would realize from developing them. 
35 

Historical Context 

After the Arab oil embargo, the price of a barrel of oil almost doubled between 1973 and 1974. 

By 1980, the price of oil had increased more than tenfold since 1972. In response, the United 

States, along with most of the Western world, reshuffled its energy policy with a focus on 

weaning itself off imported oil to insulate it from another supply disruption. Efforts were made 

by the Department of Energy and private industry to begin a Research and Development (R&D) 

program to foster technology that could economically produce our unconventional oil resources, 

primarily focused on our vast oil shale deposits. Canada began similar programs to develop its 

huge supply of oil sands in Alberta. 

However, between 1980 and 1986 oil prices declined by more than 60%, falling by nearly half 

between 1985 and 1986 alone. In the United States, this decline served as justification to stop 

virtually all federal R&D focused on unconventional oil. Canada however, maintained its 

commitment to developing unconventional resources and has seen oil production more than 

double between 1982 and 2008. Over that same period U.S. domestic oil production declined by 

43%. 

Yet in 2009, the United States began to see an increase in domestic oil production, the first yearto-year increase since 1985. Innovation in the private sector has generated this nascent 

renaissance. The combination of hydraulic fracturing and horizontal drilling has catalyzed an 

energy revolution in America, enabling the economic production of trillions of cubic feet of 

natural gas from shale formations around the country. More recently industry has evolved these 

technologies further to produce millions of barrels of oil, putting us on a path that could quite 

possibly make the United States the largest oil producer in the world once again. If the federal 

government were to allow access to the country's tremendous unconventional resources, our 

production levels could completely reshape the current geopolitical paradigm that has existed for 

more than 40 years. 

These innovations originated in the oil fields of north Texas in the late 1970s, when an 

experienced and single-minded oilman named George Phydias Mitchell defied the conventional 

wisdom in the industry, the advice of his employees, and sometimes even the will of his 

shareholders and invested millions of dollars attempting to produce gas from the Barnett shale 

formation. Under his direction, Mitchell Energy pioneered the use hydraulic fracturing to 

unleash methane from this thin, but dense shale formation. Ultimately Devon Energy purchased 

Mitchell Energy in 2001 and married Mitchell's experience fracking shale formations with its 

experience using horizontal drilling technology to make it the pioneer of shale exploration and 

production. 

While it was risk-taking entrepreneurs in the private sector like George Mitchell who created 

these innovations, the federal government has also played a role in making the technology more 

efficient and safer, as well as accelerating its development. In 1991, the National Energy 

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36 

Technology Lab collaborated with Mitchell Energy's first horizontal well in the Barnett and 

brought a significant body of technological knowledge and experience to Mitchell's operation, 

informed by its own work in the Eastern Gas Shales Project started in 1976. The federal 

government lacks the mission or technical capability to develop these commercial technologies. 

First movers in industry tend to lack broader data and comparative experience that can be applied 

to use of their technology to improve efficiencies. Together though, cooperative work between 

the National Laboratories and the private sector has helped accelerate technological innovation. 

This is the same type of cooperation that Americans expect when it comes to the development of 

our nnconventional oil assets, but are no longer receiving. 

Federal Energy Policy Impact on Competitiveness 

Current federal policies that hamper production not only threaten our energy security, but also 

severely undermine our competitiveness. The International Energy Agency (lEA) projects that 

global energy demand could increase by nearly 50% by 2035. It also projects that fossil fuels 

will account for 80% of the world's energy supply, only slightly down from today's 86%. Fossil 

fuels, and oil specifically, will continue to fuel the world's economies, and countries that are 

realizing the most economic growth are thinking and acting strategically to ensure future 

supplies will be available to maintain economic growth and competitiveness. 

International competitors are not only increasing their own production, but they are exploiting 

the tie between their governments and their oil companies to invest in new oil reserves in other 

countries. It is very difficult for a private corporation, no matter how large it may be, to compete 

against central governments. These other countries are taking positive steps to ensure they have 

the energy resources to fuel economic growth well into the future. 

However, the United States is set on an opposite course. Under this administration, more than 

86% of federal OCS lands and 83% of federal interior lands are completely off limits to energy 

exploration. In 2008, the Department of Interior's Bureau of Land Management (BLM) 

proposed making up to 2 million acres of public lands available for commercial oil shale leasing 

in Utah, Colorado, and Wyoming and 431,000 acres available for oil sands leasing in Utah. In 

February 2012, the BLM retreated from that proposal and significantly reduced the acreage 

available for industry to undertake research and development activities. Specifically, BLM 

reduced the acreages for oil shale activities in Colorado, Utah and Wyoming by over threequarters, from 2 million to 461,965 acres. In addition, BLM reduced available acreage in eastern 

Utah for activities related to oil sands development by nearly 80%, from 431,000 to 91,045 

acres. 

Not only has the federal government been reducing access to the country's energy resources, but 

it has also been making it more difficult and expensive to produce on the areas that remain 

available. New and proposed regulations will add to the cost of production, making it even less 

attractive for industry to invest and produce oil in the U.S. The largest publicly traded oil 

3 
37 

companies are increasingly looking overseas to the remaining areas that have not already been 

locked up by other countries' national oil companies. 

Demand for oil will continue to increase as the global economy recovers and the developing 

world's thirst for energy only grows. The claim that U.S. oil production is rising is accurate but 

the reason is even more telling. Production of oil from federal lands is down 11 % from 20 II 

compared to 2010 but has increased by 14% on private and state lands. The picture is equally as 

lopsided for production of natural gas, which is down 6% on federal lands but is up 12% on 

private lands. The most significant reserves are located on public lands so this trend is not 

sustainable over the long term. Without increased access to federal resources, we will see a 

return to more of our demand being met by imports. 

And, of course, we are paying more for what we do import. Our net imports of petroleum and 

related products rose to $331 billion in 2011, accounting for 60% of our total trade deficit and 

about two-thirds of the trade deficits increase from 2010. 

In short, America's access to oil, our predominant source of energy, is declining at home and 

abroad. The same cannot be said for our global competitors, and our ability to compete, generate 

investment and revenue and foster economic growth is tremendously diminished as a result. 

Market Influence on Innovation and Production 

The recent significant increase in domestic oil production has not occurred in a vacuum. It is 

important to note that geologists have been aware of the shale resources that have spurred 

increased domestic production for decades. However, it was not until sustained increases in 

global demand put oil prices on a relatively predictable upwards trajectory did it become 

economical to commercially deploy the new technology to produce shale oil resources at the 

levels we are now seeing. 

After oil prices climbed to a record-high $143 per barrel in July 2008, the U.S. and the world 

entered an economic recession that significantly curbed demand, causing oil prices to plummet 

60% over the next seven months. Since then, much of the world began positive economic 

growth again, led by developing economies like China and India, resulting in a gradual increase 

in oil prices until last year. Over the past three years, we have seen oil prices triple. However, 

because demand was down in the U.S. and the increase was gradual, most Americans did not 

really notice it until recently. The recent political turmoil in North Africa and the Persian Gulf 

created fears of further instability and supply disruptions, and prices climbed precipitously. It is 

important to understand that even if the political unrest subsides and global supplies are 

unaffected, increased global demand has essentially recalibrated the oil market. Given today's 

market fundamentals, it is difficult to see prices returning to the low prices seen in 2009. 

This presumption has created a level of certainty necessary for the private sector to invest 

billions of dollars over the past three years in oil-bearing shale formations. It also creates the 

4 
38 

necessary certainty for the private sector to invest in our other unconventional resources like oil 

shale and oil sands if it were allowed access to those resources. 

Impacts of Fuel Prices on Business & the Economy 

Fuel prices have taken an increasingly central role in the political and legislative debate over the 

last few months, and for good reason-it is a drag on economic growth and acts as an effective 

tax on American families and business. The cost of transporting goods, getting to work and even 

driving to the grocery store has increased 140% since January, 2009. 

Everyone cent increase in the price of gasoline costs Americans roughly an additional $1 billion 

per annum. The average American household spent $4,155 on gasoline in 2011, consuming 

8.4% of median household income, the highest since 1981. Additionally, each $10 increase in 

oil prices can knock a few tenths of a percent off any increase in GDP. The quicker the increase, 

the more pronounced the impact on economic growth. Because of the recent global recession, 

the cumulative amount of money spent on oil has become a larger share of global GDP since 

most other areas of economic output have remained constant or declined. In 2011 oil accounted 

for more than 5% of global GDP, a level not seen since 2008 when oil was selling at $150. 

Based on 2012 projections from lEA, oil's share ofGDP could approach 6% in 2012, the highest 

mark since the tumultuous 1970s. 

Higher energy prices erode expendable income for America's families and marginal profits for 

America's businesses. At a time where we are just beginning to realize positive economic growth 

again, these price increases can have a profoundly negative impact. U.S. policy alone cannot 

recalibrate global oil markets on its own. However, U.S. policy can absolutely have a positive 

impact on U.S. prices just as it has had a negative impact. 

As energy costs increase, businesses have less money to pay employees, new or existing. If 

prices remain elevated long enough, the unemployment rate can be expected to rise. This, of 

course, would be on top of the current prolonged high unemployment rate. As the administration 

and some in Congress have made calls to raise taxes on the oil and gas industry, it is also 

important to remember the consumer and job impacts such policies would have. 

While it is factually accurate to say that there are very few mechanisms at the federal 

government's disposal to lower fuel prices immediately, it is not accurate that the government 

can do nothing to affect prices in the future. A signal to the global energy market that the U.S. is 

committed to accelerating the development of its vast conventional and unconventional oil 

resources would not go unnoticed. It is also not true that increased U.S. production could never 

be large enough to impact global prices and any claim to the contrary demonstrates either 

unawareness of the country's massive unconventional oil resources or a willful attempt to hide 

our potential. One need only look back to the first half 1980s to see the impact the addition of oil 

production from Alaska's North Slope and other areas such as the North Sea had on putting 

downward pressure on the world price of oil, contributing to the collapse in global price in 1986. 

5 
39 

The acceleration of oil sands production in Alberta in the early 2000s is another, more recent 

example. Similarly, our unconventional resources have the potential to be the gamechanger the 

U.S. economy needs and upon which our future competitiveness can depend. 

Potential Benefits of Increased Unconventional Production 

According to a recent Inventory of U.S. Energy Resources produced by the Institute for Energy 

Research from official U.S. government data, the country has an estimated 2.7 trillion barrels of 

in-place oil shale and oil sands resources, more than 80% of which is located on federal lands. 

At current levels of consumption, these resources would meet our demand for more than 380 

years. These resources are twice the size of the entire world's proven conventional oil reserves 

of 1.3 trillion barrels. However, current technology would only allow for production of a 

fraction of the total resources. The Energy Information Administration estimates that the Green 

River Formation in Colorado, Utah, and Wyoming contains 800 billion barrels of recoverable oil. 

A white paper released last monthl by Anton Dammer and James Bunger updates previous 

government estimates and finds that by developing our oil shale and oil sands resources as 

Congress instructed in 2005, over the next 25 years we could realize a gain in oil production of 

1.1 billion barrels, increase economic growth by $153 billion, increase government revenue by 

$31 billion, and avoid sending overseas $129 billion for imported oil. 

The paper noted that original government estimates that were delivered to Congress in 2007 were 

much higher but the current administration has been adversarial to development of these 

resources, eroding any progress that had been made in the previous administration. The paper 

recounts that a Task Force consisting of the Departments of Interior, Energy, and Defense had 

worked to fulfill Congress' mandate through 2008. The Task Force inventoried unconventional 

resources, current R&D work being conducted, and the state of current technology and 

recommended a strategic plan for accelerating the development of these resources. Additionally, 

the Department of Interior finalized a Programmatic Environmental Impact Statement (PElS), 

produced a Resource Management Plan, promulgated new leasing regulations, and awarded six 

Research, Development, and Demonstration leases to industry. Implementation of Congress' 

mandate was on underway and on schedule at the end of2008. 

Since then, the current administration has essentially killed this effort against the will of 

Congress. The Department of Interior has withdrawn the leasing program, publicly suggested 

that terms of existing leases and the Resource Management Plan are under review, and chose not 

to defend itself in a lawsuit that has killed the leasing program. Moreover, the Unconventional 

Fuels Program at the Department of Energy has been de-funded and abandoned. The 

Department ofinterior's new PElS severely limits new acreage. These actions have spoken loud 

I A. Dammer & J. Bunger, Economic Impacts of Failure to Implement Legislative Mandates of Section 369 of the 

Energy Policy Act 0(2005. March 2012. 

6 
40 

and clear to the private sector. .. do not invest your capital in the development of unconventional 

oil production 

Similar to what has happened in the production of oil and natural gas from shale formations, 

industry has been forced to focus on development on state and private lands. While the current 

hydrocarbon boom demonstrates that industry's innovation and perseverance can sometimes 

trump governmental obstinace, it should not have to do so. Our energy future is being 

compromised by the administration picking energy favorites and trumping the nation's strategic 

interests. 

Technology & Policy Pathways to Expand Production 

Industry has developed many different potential methods to develop both oil sands and oil shale 

resources. In both cases hydrocarbons are trapped in no viscous elements. While oil sands 

contain producible hydrocarbons, oil shale must be chemically converted to produce 

hydrocarbons. Because Canada had the foresight to maintain a commitment to unconventional 

R&D and production, there is a tremendous body of commercial technology that supports oil 

sands production. As the technology has evolved, it has become more efficient and has 

considerably lessened its environmental impact. In fact, Albertan oil sands development has 

become so common-place that it no longer even merits the designation of "unconventional". 

In the initial stages of oil sands production, soil was mined from the surface and then 

manufactured into crude oil. Recently however, there has been a major shift towards in situ, or 

"in place" production, whereby heat either through steam or other mediums is applied to the oil 

sands bitumen to increase its viscosity to the point that it is produced via traditional oil drilling 

techniques. In situ production has significantly reduced land disturbance and environmental 

footprint. While U.S. oil sands are chemically divergent from those in Canada, the innovation 

and experience in Alberta provides a tremendous starting point for production here ... if and when 

the government was to allow access to our oil sands resources. 

Lack of access and economic conditions have prevented oil shale development technology from 

progressing as far as that for oil sands. However, like oil sands, crude oil can be produced from 

oil shale through surface mining or via in situ methods. Because shale is solid rock, oil shale 

kerogen must be exposed to higher temperatures to render its hydrocarbons. Industry does 

believe that knowledge gained in the Albertan oil sands will directly benefit development ofU.S. 

oil shale .. .if and when the government was to allow access to our oil shale resources. Unlike 

production of oil and natural gas from shale formations, there is relatively little oil shale to 

develop on state and private lands. Without access to federal oil shale resources, industry has 

very little incentive to invest capital into technology when it has no reason to expect that it will 

ever be able commercially produce oil shale deposits and recoup its R&D investment. 

As such, the policy pathway to realizing even a portion of this huge asset is to allow access to 

our unconventional resources for production. Congress made its will known through its 

7 
41 

overwhelmingly bipartisan support for the Energy Policy Act of 2005. This administration has 

ignored its mandate and refuses to move forward with production of unconventional oil on 

federal lands. Unless this near-sighted approach changes, our largest strategic assets will remain 

subterranean potential assets until this, or subsequent administrations decide to allow access to 

these strategic assets and secure our energy future. 

8 
42 

Chairman HALL. Thank you, and well said, Ms. Harbert. Thank 

you. 

I now recognize Dr. Michot Foss for five minutes, and I must 

warn you that when I said hook ’em Horns, the lady in red here 

sent me a note, also put in the record, gig ’em, Aggies, so they are 

equal, and since I have a granddaughter down at A&M, I am forced 

to say that. We recognize you now for five minutes. 

STATEMENT OF DR. MICHELLE MICHOT FOSS, 

CHIEF ENERGY ECONOMIST, 

CENTER FOR ENERGY ECONOMICS, 

BUREAU OF ECONOMIC GEOLOGY, 

UNIVERSITY OF TEXAS–AUSTINBUREAU 

OF ECONOMIC GEOLOGY, 

UNIVERSITY OF TEXAS–AUSTIN 

Dr. FOSS. Thank you, Mr. Chairman, Ranking Member Johnson 

and Members of the Committee. Thank you so much for inviting 

me to join you today, and Chairman Hall, it is nice to see you again 

and see you looking well. And let me say I am agnostic. I have degrees from lots of different universities and support them all. 

I will add some comments to the record to supplement what my 

colleagues have said already and to make a few key points that I 

think are important for us to consider as you debate all of these 

issues. 

First of all, in my view, our major concerns should be about replenishment and deliverability. I include some information in my 

testimony to demonstrate long-term efficiency of the industry, the 

U.S. industry. It is remarkable, really, how well the industry has 

performed over time to sustain the ability to deliver hydrocarbons 

when we need them and where we need them. That is really the 

key thing is keeping that cycle going. It is a long process to develop 

ideas, to develop prospectively, to make the investments, to yield 

the supply, to serve the market, and it can’t be interrupted. Any 

interruption is what creates distortions and disruptions that impact customers. 

The essential industry capability to maintain a long-term reasonably steady balance between reserves and production is one of the 

most important ingredients to U.S. energy security and long-term 

prosperity. We really have to keep that in mind. 

I want to make a point. A robust resource base, we have known 

for a longtime that we have a robust resource base. This alone does 

not fully protect producers and consumers from short swings in 

price but it is key to restoring market balances at times when we 

have very fast economic growth and we have constraints in the system. 

Now, the Committee asked me to take on four very large questions, and I have attempted to do my best to address those. The 

first one had to do with primary economic factors that shape energy markets and prices with a focus on gasoline. First and foremost, global oil markets are a complex daily dance, and I put in 

a wonderful and very complex and detailed chart that we came up 

for the U.S. Department of Energy’s Energy Information Administration to try to illustrate all of the interactions that occur between 

buyers and sellers, producers and customers, intermediaries, coun-
43 

tries, governments, independent and international companies, traders, brokers, shippers, transporters and so on to try to deliver what 

we really demand, which are the products from crude oil, not the 

raw material itself. Price level is most immediately impacted by 

cost of incremental supply to serve incremental demand at any one 

time, and we look at lot at surplus capacity worldwide. We measure it. We try to monitor it as best we can. One of the most important things that U.S. government agencies can do is keep the 

transparency between us and producing countries open and vital 

and vibrant so that we can get the data that we need to understand where at any one point in time deliverability worldwide exists, and I showed an illustration of that using the OPEC data and 

some points that you can ponder. Whenever world demand grows 

as quickly as it has during the 2000s when we have supply capacity constraints, you can expect an increase in price, and that is 

what happened. 

Variation also in price comes from incremental demand in the 

United States, regionally, interregionally and intraregionally, differences been domestic and international crude prices, which is 

very strong right now, the cost of inputs like steel and raw materials that are essential for drilling, production and processing, and 

let me say also that when it comes to the cost of inputs, these are 

critical not just for oil and gas operations but all energy technologies. So we have to think about preserving our ability to supply 

inputs not just oil and gas production but also for alternative energy technologies, renewable technologies and everything else that 

use the same raw material inputs and require a hefty industrial 

base to be able to supply those. 

With regard to the potential impacts of supply and production on 

energy prices in the national economy, we all know that there are 

huge benefits that are delivered by the oil and gas industries every 

day in terms of jobs and related benefits for households and local 

economies and assortment of other things, but we have to keep in 

mind that these fuels and materials are important for the overall 

national economy and really focus on that. What do these products 

and the supply of these products on a competitive basis do for the 

overall U.S. economy, not just local job creation in any one place 

where the industry is active? 

Hydrocarbons provide a greater measure of energy density than 

other forms of energy. This is a key point that way too often gets 

missed in the debate about what we should do and how we should 

do it. This means that on a unit energy basis, hydrocarbons actually yield environmental benefits over other energy technologies 

that have lower energy densities and are therefore harder and 

more expensive to build up, to scale up and to manage when it 

comes to intermittent use. 

Natural gas and gas-fired electricity have provided relief from 

more expensive oil and gas products so we have savings today. We 

have been having savings to consumers for the past year or so because of lower natural gas prices and commensurately lower electricity prices. 

Finally, on the point of economic benefits, I want to make an addition to Andrew’s statements on the NPC study. I was on the industrial subcommittee for that report. There was a lot of discussion 
44 

about what supports manufacturing in the United States, and some 

very strong views about the role of not just energy but all aspects 

of macroeconomic and monetary policy in the United States. Industrial growth is more strongly linked to gross domestic product than 

any other factor. Energy is important but it is a relatively small 

part of the cost of the manufacturing base in the United States. So 

many things affect the health of the manufacturing sector. So much 

has to be done if we want to actually build that sector back up. It 

goes well beyond energy. But in terms of understanding what we 

can do with our energy supplies, I included an example from the 

trucking industry. This is new information that was presented to 

me just recently on the status of the trucking industry itself. We 

are looking at using incremental natural gas supply as a clean fuel 

for trucking operations in a liquefied form in particular but trucking companies are having a hard time recruiting drivers. They have 

to deal also with a great deal of federal and state regulatory compliance. They face high cost structures, poor infrastructure and all 

of the other things that affect the ability to move goods when and 

where we need them in the United States, and so I think that is 

a very good example to look to for the full picture of things that 

affect our energy space. 

When it comes to regulatory and supply chain hurdles, we have 

a great deal of investment that needs to take place in the midstream businesses, pipelines, gas processing, raw material processing for the crude oil side. We have existing fairways that have 

been very efficient in moving product, mainly to the Gulf Coast. 

Those fairways need to be expanded and we actually need to do 

some replumbing of our midstream network in the United States 

to be able to move oil and natural gas and natural gas liquids to 

different locations in the mid-continent, the Northeast and other 

places where new capacity is needed. 

Unconventional plays are helping to insulate us against Gulf of 

Mexico issues but I want to put into the record that we have to 

sustain production from the Gulf of Mexico. There is no choice. 

That is just too vital a province for the United States. 

Finally, on the role of technology, I appreciate all of the comments about the role of federally supported technology and the importance of all of that. I included an example for everyone in order 

to understand the lead times. I think it is worth thinking about the 

30 years that it took before horizontal drilling, just horizontal drilling by itself, finally topped 50 percent of the overall market for 

drilling services in the United States. I have intermittent experience with that. I worked for Matt Simmons at Simmons and Company International when the first horizontal drilling transaction 

was done in the late 1980s. It is a long haul to get this stuff working and to have it function the way that it needs to so that the industry can benefit from all of those examples, all of those technologies. 

To close, when it comes to regulatory and policy bottlenecks and 

the things you all can do, the Ranking Member mentioned taxes. 

Yes, the oil and gas industry is profitable. It is also one of the largest, if not the largest, taxpaying industries in the country at all jurisdictions, federal, state and local. Last time I checked, Apple was 

actually more valuable than any one I believe of the energy compa-
45 

nies, at least on a cash basis, pays relatively little in taxes, I might 

add, along with General Electric and a few others. So I think we 

have to put some perspective on all of that. These companies pay 

a great deal into the federal treasury, state and local treasuries, 

into households and taxpayers’ pocketbooks, and I think it is important to recognize that and understand that benefit that gets created. Thank you very much. 

[The prepared statement of Dr.. Foss follows:] 
46 

Dr. Michelle Michot Foss 

Bureau of Economic Geology/Center for Energy Economics 

Jackson School of Geosciences, The University of Texas 

Testimony on 

"TAPPING AMERICA'S UNCONVENTIONAL OIL RESOURCES FOR JOB CREATION AND 

AFFORDABLE DOMESTIC ENERGY: TECHNOLOGY AND POLICY PATHWAYS" 

April 17, 2012 

SUMMARY 

Our major concerns should be about replenishment and deliverability. 

The essential industry capability to maintain a long term, reasonably steady balance 

between reserves and production is one of the most important ingredients for U.S. 

energy security and long term prosperity. 

A robust resource base does not fully protect producers and customers from sharp 

swings in price but sustaining a robust resource base is essential to restoring market 

balance. 

On primary economic factors that shape energy markets and prices, with a focus on oil and 

gasoline: 

Global oil markets are a complex daily dance 

Price level is most immediately impacted by cost of incremental supply to serve 

incremental demand. Unconventional resource plays sit firmly at the expensive end of 

the marginal cost curve for oil supply. 

Variation between domestic and international crude price and regional demand within 

the U.S. explains much of gasoline price differences. 

Increasing global incremental demand for oil relative to incremental supply and supply 

capacity create upward price pressure. 

On potential impacts of supply and production on energy prices and the national economy: 

While a significant effort has been made to demonstrate economic benefits and impact 

from oil and gas industry operations, it is the much larger set of benefits and multipliers 

from overall provision and use of competitively supplied and delivered fuels and 

materials that underlies economic value. 

Hydrocarbons provide a greater measure of energy denSity, yielding environmental 

benefits that are usually not measured. 

Competitively supplied and priced energy can provide enormous economic benefits. 

Natural gas and gas-fired electricity have provided relief from more expensive oil and oil 

products. Industrial growth is more strongly linked to gross domestic product (GDP) 

than any other factor; the trucking industry provides a good example of constraints. 

On impacts on energy markets of regulatory and supply chain hurdles faced by energy 

exploration and production firms: 

"Debottlenecking" the oil and gas transportation and storage system requires 

transparent, senSible, and timely certification of facilities. 

Unconventional plays are helping to insulate against GOM issues, but GOM production 

must continue. 

Sustaining socioeconomic benefits will require a competitive tax and business 

environment and thoughtful and flexible environmental regulatory oversight. Reducing 

cycle time is a key consideration. 

On the role of and potential for technology advances in driving current and future energy 

production and impacting prices: 

Technology development and deployment is crucial to ensuring competitive supply and 

pricing but entails long lead times. 

Dr. Michot Foss, CEE/BEG-UT, 1 
47 

Dr. Michelle Michot Foss 

Chief Energy Economist and Head 

Center for Energy Economics 

Bureau of Economic Geology, Jackson School of Geosciences, 

The University of Texas 

Testimony on 

"TAPPING AMERICA'S UNCONVENTIONAL OIL RESOURCES FOR JOB 

CREATION AND AFFORDABLE DOMESTIC ENERGY: TECHNOLOGY AND 

POLICY PATHWAYS" 

April 17, 2012 

Mr. Chairman and members of the Committee on SCience, Space, and Technology, I 

am Michelle Michot Foss, Chief Energy Economist, and Head of the Bureau of 

Economic Geology's Center for Energy Economics, based in the Jackson School of 

Geosciences at The University of Texas. I am pleased and honored to be selected 

as a witness for the Committee. 

My testimony today follows on similar testimony presented almost exactly one year 

ago, on March 17,2011, before the Committee on Natural Resources (CNR). In 

that previous testimony, I laid out a "high altitude" case for the economic and 

environmental benefits of hydrocarbons, touching on markets, technology, policy, 

and regulation, and offering specific ideas on what can be done to harvest domestic 

energy resources for the betterment of our society. 

During the intervening year, nothing has happened to alter my views regarding the 

underlying, fundamental forces impacting prices of the major energy commodities. 

Indeed, all of the work I and my colleagues have simply reinforces our opinions 

regarding the intrinsic and extrinsic forces that impact commodity markets and 

prices. 1 However, since spring a year ago, there are added complexities and 

nuances, new challenges, new ideas, and new consequences, unintended or 

otherwise, to consider. 

One of the key "known knowns" is the richness of our domestic natural resource 

base. To make that pOint, I've repeated a chart from the 2011 testimony. This 

chart illustrates data on proved reserves of oil and natural gas (in barrel of oil 

equivalent terms). As before, I've added the estimated total U.S. natural gas 

supply (proved reserves plus total natural gas resources, deemed technically 

recoverable) from the Potential Gas Committee's 2010 report. I've also added an 

estimate of Canadian oil sands reserves. When we consider technically recoverable 

resources estimated by PGC, our hydrocarbons endowment tops the known and 

understood worldwide distribution of hydrocarbon wealth. In fairness, if other 

1 Dr. Michot Foss and CEE researchers were selected by U.S. Energy Information 

Administration (USEIA) to provide an independent expert memo on oil market dynamics and 

pricing. Our final report was submitted in April 2011. 

Dr. Michot Foss, CEE/BEG-UT, 2 
48 

countries in this list provided the same kind of transparent scrutiny of their 

resource endowments, some could easily top the U.S. It also is not possible to say 

whether all of the total future natural gas supply of some 2,100 trillion cubic feet 

(TCF) will ever be produced. To a large extent, how much of that future supply 

could be realized in annual production is the subject of this hearing. Of importance 

is that we are learning, once again, the same lesson we've learned many times 

but can't seem to accept: we have a rich resource endowment, and a nimble, 

inventive, and deep industry bench. Whenever supply-demand conditions yield 

an attractive price signal that suggests imbalance, companies and investors 

respond quickly. Private land and minerals holdings enable fast response for 

leasing and testing new play concepts. Technology and service providers 

combine with operating savvy to push the envelope yet again in a way that 

challenges preconceived notions about U.S. productivity and longevity. As 

the cycle progresses, research and development are mobilized to tackle the next 

tranche of resource recovery challenges. The outcome is downward pressure on 

both of our major commodity price indexes (Henry Hub for natural gas, West Texas 

Intermediate for crude oil). Spreads have widened between our domestic prices 

and international indexes. This reality, along with the large price premium of oil 

against natural gas, is unleashing disruptive forces that could lead to long term 

shifts in how we develop and use these resources and in international trade 

patterns. 

Top Reserve Holders (Billion Barrels of Oil Equivalent) 

U.s. with PGC Ii w 

Russian Federation 

Iran 

Saudi Arabia 

Venezuela 

Qatar 

Canada with oil sands 

United Arab Emirates 

Iraq ill 

Kuwait 

U.S • Iiiiiiiiiiiilii 

Nigeria ........ libya 

Turkmenistan -........ Kazakhstan ...... Canada -.ill 

Algeria -.ill 

China ....... Rest of World 

0.0 100.0 200.0 300.0 400.0 500.0 600.0 

CEE-UT analysis based on BP Annual Statistical Review, Potential Gas Agency 

and industry reports. 

Dr. Michot Foss, CEE/BEG-UT, 3 
49 

I've also updated and included charts from May 2010 testimony before the CNR on 

oil and natural gas reserves replacement in the u.s. (see top charts, next page). 

Our major concerns should be about replenishment and deliverability. 

Replenishment is the vital activity of finding new resources and proving up new 

reserves that enables sustained production going forward. Deliverability is the 

amount of supply that can enter the market at any time to meet demand. The 

questions posed regarding potential regulatory and supply chain hurdles hit home 

most squarely on our ability to sustain a base of hydrocarbon reserves and deliver 

production from those reserve on an ongoing basis. The long view I've provided on 

reserves to production (RIP), using a three-year moving average, demonstrates 

industry responsiveness (see bottom charts, next page). RIP provides a rough 

measure of performance. Wartime needs and post-war economic growth 

diminished RIPs for both crude oil and natural gas (as did increased industry 

efficiency and improved inventory management). Our vibrant industry and markets 

have allowed operators to stabilize and, when robust business conditions exist, 

increase RIP ratios. This essential capacity - industry capability to maintain 

a long term, reasonably steady balance between reserves and production -

is one of the most important ingredients for U.S. energy security and long 

term prosperity. 

Importantly, a robust resource base does not fully protect producers and 

customers from sharp swings in price. Short and mid-term deliverability can 

be impacted by any number of factors, ranging from natural disasters to 

operational events to pronounced business cycles. Oil and natural gas are 

commodities for which we are all price takers. However, sustaining a robust 

resource base is essential to restoring market balance. Coupled with 

operational and market flexibility, ever advancing technology, and a more elastic 

policy and regulatory environment, a robust resource base can help mitigate swings 

in price. We are entering a phase in which continued deliverability of natural gas 

from dry (nonassociated) producing locations, which constitute the bulk of natural 

gas supply capacity, will be challenged by the low price environment. In testimony 

last year, I emphasized the shift in drilling already taking place as higher oil prices 

lure capital investment away from pure natural gas plays and into locations that are 

"liquids rich". We continue to receive pipeline imports of natural gas from Canada, 

and as liquefied natural gas (LNG) from other locations. But at some pOint, natural 

gas prices will rise; increased demand for low priced natural gas and stronger 

economic recovery will hasten that adjustment. The expectation is that the robust 

shale gas resource base that has been proved up along with conventional play 

opportunities will facilitate responsiveness. Constraints to responsiveness, such as 

midstream bottlenecks or policy and regulatory hurdles, would exacerbate 

imbalances. In the history of our natural gas industry, the U.S. has had 

plenty of experience with policy and regulatory induced imbalances. On the 

oil Side, going forward, the Gulf of Mexico remains a critical component of our 

replenishment and deliverability system. Midstream bottlenecks are preventing 

cheaper crude oil and liquids from entering the market. These bottlenecks could 

impact dry gas deliverability since, in the low natural gas price environment, 

associated gas production would become more important for deliverability. Refining 

remains a challenging business segment. 

Dr. Michot Foss, CEE/8EG-UT, 4 
U.S. Crude Oil and Natural Gas Replenishment, U.S. Production Rankings, and RIP Ratios 

U.S. Crude Oil Reserves/Production (R/P), 3 VR MA U.S. Natural Gas Reserves/Production (R/P), 3·YR MA 

o 

>$<:;'''' .f' -$'>'<> "0,,,,,,> ,:;:>"i' .:;,,,,'\ ./}.J> 0<>"- ...,0,"''1> {l"''> $'''' ,,0/'" .:;>'1>'0 ... '}# .... # 

CEE analysis using USEIA and industry data. 

Dr. Michot Foss, CEE/BEG-UT, 5 
51 

With this background, I turn to the four key questions posed by the Chairman and 

Committee. 

1. Primary economic factors that shape energy markets and prices, with a 

focus on oil and gasoline. 

In our expert opinion to USEIA on oil markets, we provided the chart shown below. 

Conceptual Organization of the Global Oil Marketplace 

In tum, price Imp..Kts market players, eS~ClaUy financial IIwestors (high ST ela<;tlclty); demand; slippher decisions 

regarding E&r Investment; and refinery Investment and opeu,tlollS (all with tow ':,T el,15tlclty), The gap in dastlcltles 

enhances ST volatility. Both IT and ST pncf' change and volatility occur. The cyete rep€.'ats Itself continuously. 

Price Change and Volatility 

CEE,2011. 

Dr. Michot Foss, rC,,,;j''''''''''_1 6 
52 

Global oil markets are a complex daily dance between supply and demand, 

involving large infrastructure systems (producing fields, storage facilities, shipping, 

pipelines, refineries). Numerous commercial (entities engaged in oil operations) 

and noncommercial participants engage in a huge financial market in which "paper" 

barrels facilitate the exchange of "physical" barrels and provide a means of price 

risk management. We feel that the most important drivers of oil and gasoline 

prices are the following. 

• Cost of incremental supply 

Price level is most immediately impacted by cost of incremental supply to 

serve incremental demand. As demand grows, oil supplies are delivered from 

ever more expensive supply sources. When demand falls, with commensurate 

drops in oil prices, the most expensive supply sources are abandoned first. In our 

work for EIA, we showed that oil price and full, breakeven finding and 

development (F&D) cost are highly correlated; price can be predicted from 

F&D cost in systematic ways. On average, depending upon other conditions, price 

needs to be 3-4 times greater than F&D cost to cover all expenses and provide a 

sufficient return on investment to spur drilling. 

A coincident indicator of F&D cost is steel, a major input for oil and gas 

operations. The chart below illustrates, the strong, roughly 74 percent correlation 

between oil price and a common steel products price index. Higher demand for 

steel, and thus higher prices, impact oil and gas extraction cost. Higher oil and gas 

prices impact the cost of making steel. 

Steel Price Index and Oil Prices - A Coincident Link 

$350 $160 

Management & Engineering Production Services (International) 

ht!e:llwYJJ!L mgQli.~.yklim.t~ b1m 

$300 $140 

All Carbon Steel Producu Composite Price and !ndeK. U.S, $/tonne, Jan 1997=100 

$120 

$250 

$100 

" " $200 ." 

.5 

.~ $80 

lr. 

Q; $150 

~ $60 

$100 

- All Carbon Steel Products Composite $40 

Index Global, U.5.$/tonne 

$50 -Brent, U.S. S/Bbl $20 

-WTl, U.S. S/Bbl 

Dr. Michot Foss, CEE/BEG-UT, 7 
53 

Unconventional resource plays sit firmly at the expensive end of the 

marginal cost curve for oil supply. Subsurface conditions are more rigorous; 

specialized technology and manpower are expensive. To guarantee success, and to 

be able to operate through price cycles, operators must continually strive to reduce 

cost on a unit (barrel) basis. They can do this by scaling up production volumes, so 

long as business conditions and other constraints (like policy and regulation) 

permit. Technology adaptations can help to eventually improve recovery rates, a 

target for sustainability and future pathways in unconventional plays, thus lowering 

costs and supporting profitability. 

• Variation between domestic and international crude prices and regional 

demand within the U.S. 

The preceding chart also serves to capture the increasing differential between 

Brent oil price, an international index, and WTI, our domestic index. Normally very 

closely linked, WTI has been heavily influenced by domestic exploration and 

production success and midstream, midcontinent bottlenecks that have created a 

persistent surplus at the Cushing, Oklahoma price pOint and within PADD 2 

(Petroleum Administration Defense District). Refineries in our heaVily populated 

coastal areas typically import crude feedstock priced on Brent. The disparity 

between WTI and Brent contributes to variation in gasoline prices (other major 

contributors being environmental regulations and various state rules for 

reformulated gasolines and differences in regional consumption patterns across the 

U.S.). Prices are much higher in large coastal markets that rely on 

imported crude feedstock, and much lower in the less dense U.S. midcontinent. 

The differential extents to natural gas liquids (NGLs) that tend to be higher valued; 

NGLs (propane, butane, ethane and so on) are cheaper in midcontinent locations 

and more expensive on the Gulf Coast where the bulk of ethane fractionation and 

petrochemical capacity is located. 

• Global incremental demand for oil relative to incremental supply and 

supply capacity. 

Also in our expert report for EIA, we adapted and modified a chart EIA typically 

uses to track elasticity in global oil markets. For the time being, and the 

foreseeable future, members of the Organization of Petroleum Exporting Countries 

(OPEC) have the best ability to maintain surplus production capacity, Saudi Arabia 

in particular. When global demand kicks to higher gear, or when particular 

geopolitical events, natural disasters or other occurrences create real or perceived 

disruptions, information about OPEC spare capacity can help to both dampen price 

movements but also send an important signal that additional increments of supply 

are necessary. As shown in the chart below, when OPEC spare capacity is tight 

relative to demand (the OPEC surplus/demand ratio), oil price tends to be 

higher. This was clearly the case at the peak of the past oil price cycle in 2008. 

When spare capacity is ample relative to demand, price tends to be lower. 

This was the case during the drop in oil prices from May 2009 to September 2010, 

largely a function of broad economic recession in the U.S. and Europe. With time 

and continued domestic production gains and given our status as a major oil 

consumer, our resource base can help to reduce fears about chronic oil 

Dr. Michot Foss, CEE/BEG-UT, 8 
54 

shortages. Consequently, replenishment and deliverability in the U.S. oil sector 

can contribute to greater international energy security. 

$140 

$120 

$100 

S $80 ~ 

;:: 

! 

8 $60 

~ 

(5 

$40 

$20 

$0 

0% 

Oil Price and OPEC Spare Capacity 

, 

!. 

, 

. 

•• • • + 

. -( 

't 

1% 

, 

,I ... 

" . .' . • +. •• + • 

.+ cJ)j!WJW . .. . . . . 

<t . . . , . 

2% 3% 4% 5% 6% 

OPEC Surplus I Demand 

CEE analysis using EIA data. 

7% 

y=5.9584x-<l531 

Rl;;;: 0.2239 

8% 9% 

2. Potential impacts of supply and production on energy prices and the 

national economy. 

Energy is essential for economic development and well-being. Hydrocarbons offer a 

multitude of benefits, ranging from the value associated with discreet molecules for 

materials and feedstocks to the energy products and services derived from them. 

While a significant effort has been made to demonstrate economic benefits 

and impact from oil and gas industry operations, it is the much larger set 

of benefits and multipliers from overall provision and use of competitively 

supplied and delivered fuels and materials that underlies economic value. 

These returns swamp those of other energy technologies, for several reasons. 

Hydrocarbon fuels provide a greater measure of energy density than other 

resources and technologies (more work per unit measure of energy value). They 

are more easily stored. These attributes mean that hydrocarbons offer 

environmental benefits that are not usually accorded to these fuels and related 

technologies. To replace a unit of energy provided by oil and natural gas, 

alternative energy technologies (currently available) must be scaled orders of 

magnitude above the hydrocarbons base. While renewables do not deplete, there 

is no commercial storage option that facilitates large scale deployment, and options 

for offsetting intermittency of renewable and other alternative energy forms are 

costly and inadequate. This does not mean that investment in alternative energy 

Dr. Michot Foss, CEE/BEG-UT, 9 
55 

R&D should be stopped. However, it should be reconsidered, and targeted and 

focused on basic materials science that can solve these problems before 

alternative energy systems are scaled up with myriad unintended consequences. 

Total industry employment growth averaged six percent per year from early 

2000s until recently with recession and soft natural gas prices. In many states 

with established oil and gas production businesses, economic conditions 

have been somewhat better than for the nation as a whole. Employment 

and other economic benefits are derived not just from direct oil and gas industry 

activity but many indirect and ancillary activities as well. After many years of slack 

spending, R&D investments by industry (which provides nearly all R&D investment 

in oil and gas) surged, a reflection of the deep technology and human resource 

needs in the shale oil and gas plays, deepwater GOM, and other frontiers. R&D 

spending is a vital component of competitiveness and generates a wealth 

of connected economic benefits. 

Competitively supplied and priced energy can provide enormous economic 

benefits. Natural gas and gas-fired electriCity have provided relief from more 

expensive oil and oil products. From a household perspective, higher prices can 

suppress spending and investment but the degree to which this happens is 

contingent on overall economic activity and household wealth. Households are 

more sensitive to higher energy prices during slack economic periods, thus 

the concern about rising gasoline costs today. For the industrial sector, energy 

cost, on average, is a small part of the U.S. manufacturing base (a bigger 

component for feedstock industries). During the effort to produce the 2011 NPC 

study, Prudent Development, it was clear from industrial subcommittee 

deliberations that many other factors drive manufacturing activity. The 

subcommittee concluded that industrial growth is more strongly linked to 

gross domestic product (GDP) than any other factor. Other factors include 

energy cost, legislation and regulation (in particular, carbon policy which adds to 

operational cost and risk), technology, and other considerations such as 

international trade competitiveness and labor and health cost and policy. Informal 

conclusions reached by the subcommittee were the followlng. 2 

• Energy intensive basic industries are important to long term economic growth 

because they are the base materials used to produce all other products 

consumed in the U.S. 

• Industry has proven itself an efficient user of natural gas, responding to high 

prices by investing in efficiency and shutting down assets which no longer 

compete. 

• A robust supply of natural gas that is affordable and reliable would give the 

industrial sector, especially energy intensive industries, a global advantage 

creating investment and jobs in the United States. 

• Action by federal and state policymakers will have a defining impact on whether 

the U.S. industrial sector continues to lose jobs or whether it will thrive over the 

next century. 

2 From draft documents prepared by the subcommittee, of which Dr. Michot Foss was a 

member. 

Dr. Michot Foss, CEE/BEG-UT, 10 
56 

• The industrial sector use of energy creates significant value for the country. 

An industrial renaissance fueled by U.S. domestic resources is as 

contingent on larger macroeconomic and policy conditions as on isolated 

influences like energy prices. 

An example lies in the trucking industry. 3 The disparity between oil and 

natural gas prices is spurring considerable effort to explore and invest in timely 

options for increasing utilization of natural gas as a transportation fuel. Regional 

and interstate trucking operations are a target because truck fuel distribution 

infrastructure can move more quickly than retail distribution for the overall U.S. 

light duty vehicle fleet. And yet the trucking industry is struggling with a sharp 

decline in employment, a recession effect but, more importantly, also a function of 

a longer term trend as potential drivers exit or avoid the trucking industry. 

Road infrastructure, regulatory compliance (ranging from safety to environment), 

cost of operation - an assortment of variables is affecting one of the most vital 

arteries for U.S. economic activity, and one that could benefit hugely from 

advances in domestic production. 

3. Impacts on energy markets of regulatory and supply chain hurdles 

faced by energy exploration and production firms. 

Regulatory and supply chain hurdles can emanate from many causes. Any can 

impact replenishment and deliverability by creating delays, increasing costs, 

blocking access. I highlight a few specific concerns below. 

• A specific challenge for midstream/downstream supply chain 

infrastructure is posed by unconventional plays because these challenge 

existing fairways and processing locations. 

As oil, natural gas, and NGLs production is established in new unconventional 

basins, the U.S. pipeline, storage, and processing network will need to adapt. Lags 

in offtake of NGLs could present a drag on liquids rich production areas. Indeed, 

NGLs prices have been falling the past several weeks as surplus conditions emerge, 

a result of inadequate "offtake". Natural gas, oil, and oil product pipelines need 

debottlenecking and new additions. Certifying and constructing new pipelines is 

increasingly difficult. A lesson on future tests emanated from the Keystone pipeline 

slated to carry Canadian oil sands, Bakken, and other crude oil to the Gulf Coast. 

Midstream developers respond most assertively to "spreads" - price differences 

across regions and seasons. The strong WTlfBrent spread is triggering activity to 

debottleneck the midcontinent region. Unusually for natural gas, spreads are 

absent, exacerbated by soft demand from recession and a warm winter. This is not 

3 Information from Groendyke Transport as presented to the Natural Gas and Energy 

Association of Oklahoma, September 2011, and provided by EnerFin, a Houston-based 

midstream company. 

Dr. Michot Foss, CEE/BEG-UT, 11 
57 

likely to be a permanent condition. Significant investments in natural gas pipeline 

and storage capacity already had been made, but some of this capacity may be 

"stranded" by shifts in production and collapsed spreads that previously had 

supported projects (Rockies Express to the northeast being a prime example). 

Downstream refining and petrochemical investment is under review. Some $80 

billion in new downstream spending is anticipated for the Gulf Coast alone. 

Other regions and states are targeted to host additional capacity, especially in the 

swath of production areas from Marcellus west to the Bakken. Timing, location, 

and ultimate extent of capital expenditure will hinge on many variables. 

The refining industry currently is plagued by low profit margins, as high cost crude 

feedstock in some locations (northeast) accelerated beyond retail pricing. Soft 

demand, from both recession and a long term decline in gasoline consumption, 

undermine refining profitability, in general. Environmental risk and uncertainty 

complicate the picture. Expectations are that refiners and petrochemical operators 

will increase exports of their products if prevailing conditions continue into the 

future. Not much of these export volumes will reach other U.S. customers. 

Review and reform of the Jones Act should be considered to foster new, cost 

effective transportation routes in U.S. waters so that more Americans can benefit 

from our own competitively produced energy supplies. 

In sum, "debottlenecking" the oil and gas transportation and storage 

system requires transparent, sensible, and timely certification of facilities. 

"Access" to right-of-way to build infrastructure is just as critical as access to oil and 

gas resources in order to sustain domestic industry and production 

competitiveness. 

• With regard to replenishment and deliverability, unconventional plays 

are helping to insulate against GOM issues, but GOM production must 

continue. 

Soft demand for oil products, a consequence of our deep recession, has helped to 

protect customers and consumers against potentially higher prices and disruptions 

related to Gulf of Mexico production decline. This decline has two major drivers. 

One - maturity in older, shallow water fields on the GOM shelf. Maturing and 

natural decline is affecting GOM natural gas deliverability much more heavily than 

oil. Oil production has benefitted from exploration success in oil-prone deepwater 

blocks. But, second uncertainty about policy and regulatory oversight of 

the GOM Outer Continental Shelf (OCS) province is hindering investment, affecting 

replenishment and is, therefore, a potential factor in domestic oil reserve 

replenishment and supply deliverability going forward. 

Dr. Michot Foss, CEE/BEG-UT, 12 
58 

The U.S. Crude Oil Production Renaissance and Some Components 250,000 .. U.S. Field Production of Crude 011 (Thousand Barrels) 

200,000 

~ 150,000 

! 

." 

i f3. 100,000 

··.:t .... ·.,. ...... ~ 

• Midwest (PADD 2) Fjeld Production of Crude Oil (Thousand 

Barrels) 

PACD 3 Excluding Federal oes (Thousand Barrels) .+. ..,.-.~ 

.. ~: ;,.~"'-.....",..''t A FederaIOffshore·-Gulf of Mexico Field Production of Crude au .. .. .." .,.-~......,.. (Thousand Barrels) .. 

+ + ~..-...~;. ! .. + •• ""~.~ ~.. ~ .." .... # •• \..... .,) .. .,. •••• :. ~...!' ...... :. .. .... + 

+ 

Gulf of Mexico Offshore Peak ~ 

UnconvenliOnal: Barnett (TX), Bakken Eagle Ford'~+ (NO) 

SO'ooo ... ~:::::~ A 

~/ 

CEE-UT analysis based on U,S. EIA survey data. 

• Sustaining socioeconomic benefits will require a competitive tax and 

business environment. 

The debate on oil and gas industry taxation continues to unfold. For many, tax 

treatment of exploration cost and producing fields as they deplete seems unfair. 

However, replenishment is not simply critical, it is a matter of survivability. The oil 

and gas industry is one of the most, if not t!:u: most, heavily taxed industries 

in the U.S. when all jurisdictions - federal, state, local - are considered. In order 

to successfully operate through business and price cycles, navigate higher costs, 

continue funding and deployment of R&D and advanced technology, deal with 

workforce retention and recruitment, and, not least, guarantee safe and 

environmentally responsible operations, the industry needs a transparent and 

flexible fiscal regime that is consistent with fiscal policy across the economy. 

• Sustaining socioeconomic benefits will require thoughtful and flexible 

environmental regulatory oversight. 

It is not easy to design and implement rules and regulations to ensure safe 

operations while also being cognizant of industry requirements and "cycle time" 

(time from origination of project concept to execution). Reducing cycle time 

helps with cost management. Public safety can be assured while also avoiding 

undue pressure on cycle time. 

Dr. Michot Foss, CEE/BEG-UT, 13 
59 

4. Role of and potential for technology advances in driving current and 

future energy production and impacting prices. 

The biggest cost component in oil and gas supply is drilling. Consequently, drilling 

technology adaptation, especially in frontier applications, is crucial to ensuring 

competitive supply and pricing. For comparison, it has taken roughly 30 years 

for horizontal drilling to comprise more than 50 percent of the drilling market (see 

chart below). The oil and gas industry has one of the longest lead times for 

technology prove-up. Work is underway for solutions to specific problems in 

unconventional plays, most of which are geared toward improving recovery factors. 

New tools for predicting microfractures, new proppants for micro ("nano") 

enVironments, new approaches for water handling and disposal and even, perhaps, 

replacements for water as a drilling medium - all of these are in exciting stages of 

R&D. Continued investment in technology is best fostered through reasonable, 

coherent business and government frameworks. 

Commercial Pathway for Horizontal Drilling in the U.S. 

100% 

-%Horizontal 

90% -% Vertical 

80% 

70% 

60% 

50% 

40% 

30% 

Chevron Barnett test, 

1997 

¢lFirstBarnett Shale well,1g8! 

20% -~;;;;;.;;tio~s fo;horizontal 

technology, late 1980s (1989) 

10% 

0% 

Horizontal drilling applied 

In Barnett, 2003 

Based on Baker Hughes rig activity data. 

Dr. Michot Foss, CEE/BEG-UT, 14 
60 

Chairman HALL. Thank you very much. I must stay, you really 

answered all the questions, but I need a little more time with you 

on your chart sometime. Thank you, Dr. Foss. 

I recognize Mr. James Brown now for your five minutes, or more. 

STATEMENT OF MR. JAMES BROWN, 

PRESIDENT AND CHIEF OPERATING OFFICER, 

WHITING PETROLEUM CORPORATION 

Mr. BROWN. Mr. Chairman, Ranking Member and Committee 

Members, thank you. It is a great honor and pleasure for me to be 

here this morning. 

I am going to step out on a limb and just think that maybe many 

in the room haven’t heard of Whiting Petroleum Company, so 

Whiting is a Denver-based E&P company. The company was founded in 1980. We have kind of endured the ups and downs of the 

E&P business during that time. Whiting became a publicly traded 

company in 2003, and through acquisitions doubled the size of the 

firm in 2004 and again in 2005. Those acquisitions provided three 

assets that today comprise approximately 70 percent of our 345 

million barrels of oil equivalent proved reserves that we have in 

the company. Those assets are the Postle Field located in Texas 

County, Oklahoma, out in the panhandle near Guymon, the North 

Ward Estes Field located in the Permian Basin out near the big 

town of Monahans, and also several assets up in North Dakota that 

provided us the springboard to become the number three oil producer in that state. What has enabled Whiting to grow production 

from 33,000 BOE per day in 2005 to over 76,000 BOE per day in 

2012 is new technology. Today in the Bakken, and I am going to 

say Bakken, and what I am referring to is the total Bakken hydrocarbon system which includes the Upper Bakken shale, all the 

Members of the Middle Bakken, the Lower Bakken shale and the 

Three Forks, and for those that are interested I brought samples 

of all those for you to look at today if you have any interest in 

doing that. 

Whiting drills down 10,000 feet vertically, about 2 miles, turns 

and drills another 2 miles horizontally. We run 4–1/2-inch pipe in 

the well with up to 40 sliding sleeves and swell packers. The drilling rig is moved off. Production facilities are constructed. Frack 

ranks are moved in, filled with water. A pressure pumping company moves in and the wells are fracture stimulated with sand in 

30 to 40 stages, depending on how many sliding sleeves we run. 

This entire fracture stimulation treatment is completed in around 

24 hours. The pressure pumping company moves off location and 

the well is placed on production. Our goal is zero gas emissions 

from the well during flowback. 

The gas produced with the Bakken oil must be processed before 

it can be sold. Whiting has constructed two gas plants in North Dakota with a combined processing capability of 120 million cubic feet 

per day. We process as much gas from other operators’ wells as we 

do from Whiting wells. We have built two oil-gathering systems 

and we transport as much produced oil as we can from the basin 

via pipeline. 

I am going to switch gears and move over to our two enhanced 

oil recovery projects. In Texas down in North Ward Estes, we are 
61 

utilizing CO2 to recover an additional 15 to 20 percent of the oil 

in that mature reservoir. At North Ward, we are injecting 325 million cubic feet of CO2 a day, managing 790 patterns containing over 

2,000 wells. The CO2 that comes back out of the producing wells 

is recycled, separated using a membrane technology, and reinjected. Approximately one-half of the CO2 that we inject stays in 

the reservoir and will be permanently sequestered once that process ends. 

Whiting recently executed a contract with the Texas Clean Energy Project to use CO2 from their coal gasification plant in our 

North Ward Estes field. 

Much of what I just discussed would not have been possible even 

five years ago. Unconventional resource plays and technology have 

impacted every facet of our business from consummating the lease 

to drilling the well to reporting production. We routinely drill a 

20,000-foot horizontal well in 15 to 20 days. We use technology to 

send information being recorded at the drill bit to the surface in 

real time that our engineers and geologists in Denver can access 

at their desktop. 

Sliding sleeve technology continues to improve. Whiting was the 

first company to pump a 24- and 40-stage sliding sleeve frack job. 

We have constructed a rock lab in Denver where we have two 

scanning electron microscopes to help us understand how oil is produced from these unconventional reservoirs. Our goal is to transfer 

this knowledge from the Williston Basin to other basins across the 

lower 48. We are actively working in the DJ Basin in Colorado and 

the Delaware Basin in West Texas where recent results have been 

very encouraging. We believe there is potential to utilize what we 

have learned in several other prospects. 

How does this translate into jobs? When Whiting went public in 

2003, we had 110 employees. As of April 1, 2012, Whiting employed 

746 individuals. We currently have 271 open positions in the company. Currently, we have 19 drilling rigs in operation in North Dakota. If you take the number of people directly employed by the 

drilling company, add up all the individuals that provide service 

and the vendors required to drill a well, that amounts to 600 indirect jobs that we have created in North Dakota. These people need 

homes, food, schools, and other services. The economic impact of 

what we are doing is far reaching. 

As we have already heard this morning, the price of gasoline at 

the pump is getting a lot of attention. It seems that all oil companies get lumped together and get blamed for this oil price. I just 

want to say in this regard, Whiting is similar to the local farmer. 

We are price takers. Whiting tries to protect our cash flow utilizing 

hedges and commodity markets but we have little influence over 

the overall oil price. To impose legislation that would make it more 

expensive to produce oil makes no sense. 

Along those lines, the Keystone XL pipeline was scheduled to 

transport around 200,000 barrels of oil per day out of North Dakota 

to markets. This would be very beneficial and help alleviate the 

price differentials that we experience in North Dakota. It would 

improve the net backs and increase royalties paid to the Federal 

Government, the State of North Dakota and the individual mineral 

interest owners. 
62 

I thank you for the opportunity to present to you today. 

[The prepared statement of Mr. Brown follows:] 
63 

Testimony of 

JAMES T. BROWN 

PRESIDENT AND CHIEF OPERATING OFFICER 

WHITING PETROLEUM CORPORATION 

before the 

COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY 

UNITED STATES HOUSE OF REPRESENTATIVES 

April 17, 2012 
64 

Whiting Petroleum Corporation is a Denver based, New York Stock Exchange traded exploration 

and production (E&P) company. Whiting was founded in 1980 and has endured the ups and 

downs of the E&P business since that time. Whiting became a publicly traded company in 2003 

and through acquisitions doubled the size of the firm in 2004 and again in 2005. Those 

acquisitions provided three assets that today comprise over 70% of our 345 million barrels of oil 

equivalent (BOE) reserves. Those assets are the Postle Field, located in Texas County, 

Oklahoma; the North Ward Estes Field located in Ward and Winkler Counties, Texas; and 

several properties in the Williston Basin of North Dakota that provided Whiting with the 

toehold that has allowed us to become the number three oil producer in that state. 

What sets Whiting apart from many of our peers is we are an oil company. Based on either 

production or reserves we are approximately 83% oil. In January of 2012 our net production 

was just over 76,000 BOE per day. What has enabled Whiting to grow production from 33,100 

BOE per day in 2005 to over 76,000 BOE per day in 2012 is technology. Drilling horizontal 

Bakken wells in North Dakota is not a new concept. In the late 1980's and early 90's several 

operators were drilling horizontal wells in the Bakken shale. However, they were relying totally 

on Mother Nature to provide the fracturing. Sometimes she provided it, sometimes she did 

not. 

That activity was followed by a round of drilling in 2000 through 2005 in the Elm Coulee Field in 

Richland County, Montana. In this round of drilling, horizontal wells were drilled not in the 

Bakken Shale, but in a dolomitic section in what was identified as the Middle Bakken. These 

4,000 to 7,000 foot laterals were fracture stimulated with one big frac job. This effort was very 

successful and was responsible for the big production increase that occurred in Montana during 

the early part of this century. 

Whiting did not have a very material lease position in the Montana Bakken, so we tasked our 

technical staff to look other places in the Williston Basin and in other basins where we might 

repeat what had occurred in the Elm Coulee field. We had learned that we probably did not 

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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65 

want to drill in the shale, we needed a poor grade reservoir rock to provide the conduit for the 

oil to get from the shale to the horizontal wellbore. Staff identified an area on the Eastern side 

of the Williston Basin in a very lightly drilled area in Mountrail County, North Dakota. Whiting 

leased around 100,000 acres and drilled several wells utilizing the same technology that had 

been employed in Montana and the results were not very encouraging. Other operators were 

also attempting to get the Bakken to produce in North Dakota and they were also having mixed 

results. 

In August of 2007 Whiting drilled a well named the Locken 11-22H. This well was drilled across 

two sections, two square miles, with a lateral length of approximately 10,000 feet. A new Frac 

Point® technology being developed by Baker Hughes was utilized where we ran 10 swell 

packers on the outside of the 4-1/2" diameter pipe that was installed in the horizontal portion 

of the well. When swell packers come in contact with hydrocarbons, they adsorb the 

hydrocarbon, swell, and create a seal between the pipe and the rock walls ofthe borehole. This 

segregates the horizontal well bore into 10 separate sections. In between each set of swell 

packers is a sliding sleeve that is opened by dropping successively larger ceramic balls to 

activate the sleeves. This allows the horizontal wellbore to be hydraulically fracture stimulated 

10 times, rather than just a single time as earlier technology allowed. This technology was a 

game changer. The Locken had an initial production rate over 1600 BOE per day. 

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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66 

Today, in the Bakken, Whiting drills down 10,000' vertically, close to two miles, turns and drills 

a 6-1/4" diameter hole horizontally for another two miles. We run 4-1/2" pipe in the well. 

Sliding sleeve technology has advanced and now allows us to run up to 40 sliding sleeves and 

swell packers. The drilling rig is moved off, production facilities are constructed, frac tanks are 

moved on location and filled with up to 50,000 barrels (2.1 million gallons) of water. A pressure 

pumping company is moved on location and the wells are frac'd with up to 2 million pounds of 

sand in 40+/- individual frac stages. This entire fracture stimulation treatment is completed in 

around 24 hours. The pressure pumping company is moved off location and the well is placed 

on production. 

Our goal is to have zero gas emissions from the well during flowback. The associated gas 

produced with the Bakken oil must be processed before it can be sold. The gas has a high BTU 

Tapping AmericQ1s Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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67 

content in its native state. Whiting has constructed two gas plants in North Dakota; one in 

Mountrail County and a second in Stark County to process this gas. Liquids are removed from 

the gas and we sell the residue into the local market. We are processing as much gas from 

other operator's wells as we are from the wells Whiting has drilled. We have built two oil 

gathering systems and we are transporting as much of the produced oil as possible from the 

basin via pipeline. 

Figure #1 Initial producing rates for Bakken and Three Forks wells based on the average of the first 30 days of production 

Development of the Bakken is proceeding at a rapid rate with 216 drilling rigs and over 4000 

wells drilled to date. Current production is 680 MBOPD which represents approximately 4% of 

the current U.S. demand. To date, the Bakken has produced .73 billion barrels with publically 

disclosed estimates of ultimate production ranging between 8 to 24 billion barrels. We 

currently believe that the Bakken in North Dakota and Montana is ultimately capable of yielding 

a total of 9 billion barrels within current product pricing, regulatory constraints and existing 

technology. 

If the frac job is performed in Sanish Field, a micro-seismic survey of the frac is recorded to 

determine what portion of the reservoir was frac'd. In March of 2010 Whiting completed the 

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68 

installation of 298 permanent seismic monitors across the Sanish field. This installation allows 

us to record data and map the fracture stimulations to determine the rock volume contacted 

with the frac job. 

The above is an example of the data that is generated from a micro-seismic survey. This is a 

map view of the fracture stimulation treatment. The red line represents the horizontal 

wellbore. The heel, or the portion of the horizontal closest to the vertical well is on the right 

and the toe, or end of the horizontal is on the left. The different color dots represent the 

different stages of the frac job. This particular example was a 24 stage fracture treatment. The 

fracture extends about 750 feet either side of the horizontal well bore, and it appears we did a 

pretty effective job contacting the reservoir. 

Moving on to our Enhanced Oil Recovery projects at the North Ward Estes field in Texas and the 

Postle field in Oklahoma. We are utilizing C02 to recover an additional 15-20% of the oil in 

these reservoirs. At North Ward Estes we are injecting 325 million cubic feet per day of C02 

managing 790 patterns containing over 2,000 wells. In total, these projects produce over 

18,000 barrels of oil per day, which is approximately 24% of Whiting's total daily production. As 

a result of CO2-EOR, production has increased significantly at both fields. The following chart 

illustrates the production increase at North Ward Estes. 

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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69 

North Ward Estes Oil Production 

11,000 

10,000 

i;' 8,000 c 

if 6,000 Ja 

~ ~ 4,000 

'" 2,000 

E0P 

1-90 J-95 J-OO J-05 J-10 J·15 

The increasing production will extend the life of these fields which will provide high quality jobs 

for many years to come; a significant benefit to the local communities and beyond. 

Since the inception of CO2-EOR in the early 70's, the technology for implementation and 

management of these projects has evolved dramatically, Specialized procedures utilizing CO2 

resistant cements are used to seal and complete wells ready for production, Specialized 

metallurgies are utilized to prevent corrosion as a result of the acids created by mixing water 

and CO2, Advanced reservoir characterization techniques are used to visualize the rock strata 

and design flood patterns. Sophisticated computer monitoring is used to manage the 

movement of C02 within the reservoir, Operations are controlled via state-of-the-art 

Supervisory Control and Data Acquisition systems (SCADA). 

Implementing COrEOR projects requires significant volumes of CO2, The C02 is injected into 

the reservoir containing the oil. The injected CO2 is absorbed into the oil, which reduces the 

viscosity and allows the oil trapped in tiny pore throats of the rock to flow. Alternating slugs of 

water are used to push the mobile oil to adjacent wells where it is produced and recovered. 

The majority of C02 used for Enhanced Oil Recovery operations originates from five naturally 

occurring sources of C02 located in Colorado, New Mexico and Wyoming. Other sources of CO2 

include anthropogenic or manmade sources which are typically plants such as ethanol or coal 

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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70 

gasification facilities. The C02 produced from these sources is transported to various COrEOR 

projects via a network of pipelines. 

Currently the supply of CO2 for EaR is tight with the majority of sources producing at record 

levels. The lack of supply is an impediment for widespread implementation of COrEOR. Efforts 

to expand naturally occurring sources of C02 are ongoing. A number of manmade sources or 

plants are also under development. Plants or manmade sources can be an important source of 

C02 for the future. 

The Texas Clean Energy Project is an anthropogenic source currently planned for West Texas. 

The project will gasify coal from Wyoming and generate electric power. Whiting is committed 

to take a significant portion of the CO2 output from the plant. The CO2 will be injected into 

Whiting's North Ward Estes field for EaR operations and permanently sequestered once EaR 

operations cease. Not only will the project enable expanded use of EaR, it will also lead to 

increased use of abundant, affordable U.S. coal. In addition to electric power, projects like 

these can generate high value transportation fuels, such as diesel and gasoline which can 

ultimately reduce U.S. dependence on foreign sources for these fuels. 

An important aspect of C02-EaR is the permanent sequestration of large volumes of C02. The 

technology for measuring and monitoring the injection of C02 into the subsurface has improved 

significantly. Today, seismic is used to create 3D images of the subsurface. Down hole logging 

technology is used to monitor fluid flow within the reservoir. Computers control alternating 

cycles of water and CO2 injection which are used to control how the oil is swept from injector to 

producer. Continuous monitoring of down hole pressure ensures optimal conditions for flood 

performance throughout the process. While C02 is recycled several times from injector to 

producer, once CO2-EaR operations cease, all C02 remains permanently sequestered. 

There is significant potential for expanded use of Enhanced Oil Recovery using C02 within the 

United States. The DOE estimates that as much as 89 billion barrels of additional oil could be 

Tapping America's Unconventional Oil Resources jor Job Creation and Affordable Domestic Energy: 

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71 

recovered with widespread implementation of the technology. Realizing this potential, 

however, will be challenging. In addition to securing further supplies of CO2, new pipelines will 

need to be built and numerous aging oil fields will need to be rehabilitated. 

Much of what I have discussed would not have been possible even five years ago. 

Unconventional resource plays and technology have impacted every facet of our business from 

consummating the lease to reporting production. Because of the size of the resource plays we 

have gone from leasing portions of townships to leasing counties. To assist with this effort we 

have digitized lease records for entire counties. We routinely drill a 20,000' horizontal well in 

15 to 20 days. We utilize technology to send information being recorded at the bit to the 

surface in real time. The engineers and geologists in Denver can access this information at their 

desk. Sliding sleeve technology has continued to advance. Whiting was the first company to 

pump a 24 and 40 stage frac utilizing sliding sleeves. 

If asked to identify the one part of our business has made the most dramatic change it would be 

in the equipment used to drill the well. The drilling rig of today bears little resemblance to the 

drilling rigs of 15 years ago. There are top drives, iron roughnecks, and automated catwalks. 

The Driller, the person who operates the rig, now sits at a "Star Wars" looking console all of the 

controls are electronic. He gathers information needed to run the rig from a number of 

strategically located flat panel screens. There is no roar of diesel engines just the quiet whine 

of electric motors. There is now an electrician / instrument technician as part of the crew to 

help keep all of these electronics functioning in what can become a hostile weather 

environment. Today's rigs have mud pumps with increased horsepower over what was on 

older rigs to power the new high torque mud motors. That, in combination with new bit 

technology, has allowed us to drill an entire 10,000' horizontal well with a single bit run. The 

end result is drilling the well much faster in a safer environment for the employees. 

We have a rock lab located in our Denver office where we have two scanning electron 

microscopes (SEM) to help us understand how oil is produced from these unconventional 

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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72 

reservoirs. The resolution with these microscopes is about a nanometer, about the size of a 

methane molecule. The Helios Nanolab 650 SEM allows us to create a 3D visualization of a 

cube of the reservoir rock. With this 3D visualization we can examine the size and shape ofthe 

pore throats in the rock. What we have learned is although natural gas will flow through shale, 

i.e. the Barnett, oil molecules are too large to fit through the pore throats. We need to find a 

pseudo reservoir located in proximity to the shale to allow oil to be produced. Our goal is to 

transfer what we have learned in North Dakota to other basins. We are actively working in the 

DJ Basin in Colorado and the Delaware Basin in West Texas. In each of these areas our results 

are encouraging. We believe there is potential to utilize what we know in several other 

prospects located in other lower 48 basins. 

How does this translate into jobs? When Whiting went public in 2003 we had 110 employees. 

As of April 1, 2012 Whiting employed 746 individuals. Across Whiting's operations we have 

over 250 open positions. Currently we have 19 drilling rigs in operation in North Dakota. A 

drilling rig employees approximately 25 individuals. A frac crew employees approximately 65 

individuals and we have two full time frac crews employed. There are approximately 40 

vendors involved in the drilling of a well. If each vendor had only one employee that would be 

another 40 jobs. Add all of this up and it approaches 600 indirect jobs created by our activity. 

These people need a place to live, they need food, and schools and hospitals and other services. 

The impact of our efforts on the economy is far reaching. 

We are fortunate that the Bakken exists in North Dakota. Much of the surface and mineral 

ownership in North Dakota is by individuals with a minor Federal and State ownership. 

Obtaining permits in North Dakota is a reasonable process. The one area we are having 

difficulty is in Stark County, North Dakota near Theodore Roosevelt National Park where there 

is Federal ownership (the park is off limits) and Federal drilling permits are required. The 

average time to receive an approved Federal drilling permit is currently 298 days. 

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

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73 

One of the topics getting its fair share of attention these days is the price of gasoline at the 

pump. Oil companies get lumped together and get blamed for the price of gas. In this regard, 

Whiting is similar to the farmer, we are price takers. We try to protect our cash flow utilizing 

hedges and the commodity markets but we have little influence on the overall oil price. To 

impose legislation that would make it more expensive to produce oil would make no sense. 

Along those lines, the Keystone Xl pipeline was (or is) scheduled to transport around 200,000 

barrels per day of North Dakota production to the refining markets. This would be very 

beneficial and help alleviate the high price differentials that have been experienced in North 

Dakota. This would improve the net backs and increase the royalties paid to the Federal 

Government, the State of North Dakota and the mineral interest owner. 

The three dominant factors in determining economic viability of any product are capital 

investment in drilling, well productivity and product price. While we have minimal control over 

product pricing, we believe that a combination of stable regulatory environment and continued 

increase in technologies that help us to increase well productivity and reduce our costs will 

allow energy companies to increase the ultimate recovery from the Bakken by as much as 60% 

(9 Billion barrels to 15 billion barrels). 

Whiting strives to be a good steward of our assets for our shareholders, for the state and 

governmental areas where we operate, and for the mineral interest owners who have allowed 

us to develop their resource. We strive to be good stewards of the environment to preserve 

the environmental resource for future generations. 

Tapping Americals Unconventional Oil Resources lor Job Creation and Affordable Domestic Energy: 

Techn%gy and Po/icy Pathways Page 11 
74 

Chairman HALL. I thank you. Mr. Brown. 

Now the Chair recognizes our last witness, Dr. Daniel Weiss, for 

five minutes, and thank you, sir. 

STATEMENT OF MR. DANIEL WEISS 

SENIOR FELLOW AND DIRECTOR OF CLIMATE STRATEGY, 

CENTER FOR AMERICAN PROGRESS ACTION FUND 

Mr. WEISS. Thank you, Mr. Chairman. Chairman Hall, Ranking 

Member Johnson and Members of the Committee, thank you very 

much for the opportunity to testify today. I am Daniel J. Weiss, a 

Senior Fellow at the Center for American Progress Action. 

High oil prices are responsible for high gasoline prices. The Energy Information Administration estimates that 72 percent of the 

cost of a gallon of gas was due to the cost of crude oil. As Mr. 

Brown just noted, oil prices are set on the global market, which is 

controlled by the Organization of Petroleum Exporting Countries, 

a cartel. The Federal Trade Commission found that ‘‘OPEC attempts to maintain the price of oil by limiting output and assigning 

quotas.’’ 

Canada, which produces most of its own oil, also has high gasoline prices right now. On March 30th, the Edmonton Journal reported that ‘‘Canadians are paying some of the highest prices they 

ever have for gasoline.’’ 

The President has little control over oil prices, as recently noted 

by the Wall Street Journal, the Cato Institute and a survey of 

economists by the University of Chicago. Gasoline prices are up 84 

cents per gallon since Representative Boehner became Speaker in 

January 2011, yet is he to blame for the recent high gasoline 

prices? 

The increase in shale oil production in places such as the Bakken 

shale in North Dakota and Eagle Ford in Texas is due to advances 

in horizontal drilling and hydraulic fracking developed with the assistance of federal research, as Mr. Slaughter noted. 

As you can see on this slide [oil production v. gas prices], more 

oil production cannot lower gasoline prices. The Associated Press 

study of oil production and gasoline price data from three decades 

determined that there was ‘‘no statistical correlation between how 

much oil comes out of U.S. wells and the price at the pump.’’ The 

red line is gasoline prices. The blue line is U.S. oil production. And 

as you can see, even as oil production has increased on the righthand side of the slide, gasoline prices have increased even more 

dramatically. 

Fortunately, we are using less oil due to modern vehicle fuel 

economy standards adopted by President Obama in 2009. By 2025, 

the average car will go twice as far on a gallon of gas compared 

to 2010. This will save 2 million barrels of oil per day and save 

$8,000 in gasoline costs compared to a 2010 vehicle. 

We are also producing more of our own oil. The Energy Information Administration determined that in 2011, the United States 

generated 3.7 quadrillion BTUs of energy from crude oil produced 

from federal lands and waters compared to 3.3 quadrillion BTUs in 

2008, a 12 percent increase in production from federal lands and 

waters compared to 2008. 
75 

Continued dependence on a product where we consume 20 percent of the annual supply but have only two percent of its resources 

will leave us vulnerable to oil and gasoline price spikes. As Ms. 

Johnson noted in her opening statement, the most effective way to 

reduce pain at the pump is to reduce our oil use so we pump less. 

We must invest in alternatives to oil. Plug-in hybrids and all-electric vehicles consume little or no gasoline. During their first year, 

the combined sales of the plug-in hybrid Chevrolet Volt and allelectric Nissan Leaf were twice as large as the now-familiar Toyota 

Prius and Honda Insight hybrids during their first year. In March, 

Chevrolet sold more Volts than in any previous month. 

Investments in buses, subways and trains can also reduce our 

dependence on oil and create jobs. Public transportation saves 4.2 

billion gallons of gasoline annually. Every $1 billion invested in 

public transportation supports 36,000 jobs. 

The House-passed fiscal year 2013 budget resolution authored by 

Representative Paul Ryan would worsen pain at the pump by 

slashing billions of dollars of investments in transit, alternative 

fuels and clean energy technologies that will reduce oil consumption. Instead, the budget would retain $40 billion in tax breaks for 

big oil companies. 

We must also reduce Wall Street speculators’ ability to drive up 

prices. Many experts believe that these speculators are driving up 

oil prices to make a quick profit preying on the fears of a supply 

disruption. The reports of President Obama’s new plan to be announced today to fight Wall Street speculators would reduce their 

ability to drive up prices and would put more cops on the beat policing oil trades. 

One so-called solution won’t reduce gasoline prices. The State Department determined that, and I quote—this is from their analysis 

of the Keystone pipeline—‘‘Building Keystone XL would not of itself 

have any significant impact on U.S. total crude runs, total crude 

and product import levels, or costs.’’ 

Mr. Slaughter in his work with the National Petroleum Council 

has put together essential recommendations that would help protect public health as we develop our shale oil and natural gas resources. This means avoiding, and I quote from the NPC study ‘‘air 

and water pollution that directly affects public health as well as 

these and other impacts affecting habitat, fisheries and the global 

climate.’’ 

Lastly, I would also note that the NPC also strongly advocates 

‘‘a mechanism for putting a price on greenhouse gas emissions that 

is economy-wide.’’ 

Thanks very much for the opportunity to testify and I would be 

happy to answer any questions. 

[The prepared statement of Mr. Weiss follows:] 
76 

Center for AlTIerican I .... ~r..nr..,.""·""s Action Fund 

Daniel J. Weiss 

Senior Fellow 

Center for American Progress Action Fund 

Testimony on 

"Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways" 

House Committee on Science, Space, and Technology 

2321 Rayburn House Office Building 

April 17, 2012 

1 
77 

Chainnan Hall, Ranking Member Johnson, and members of the committee, thank you very much 

for the opportunity to testify today on 'Tapping America's Unconventional Oil Resources for 

Job Creation and Affordable Domestic Energy: Technology and Policy Pathways." 

My name is Daniel J. Weiss. I am a Senior Fellow at the Center for American Progress Action 

Fund, a tax-exempt organization dedicated to improving the lives of Americans by transfonning 

progressive values and ideas into policy. 

In my testimony, I will address the impacts that new technologies and the expansion of domestic 

oil supply may have on oil and gas markets in the near-tenn; some of the factors that detennine 

the price of gasoline at the pump; policy and technology pathways that may lessen the impact of 

high energy prices on consumers; and the ways environmental and workforce safeguards have 

impacted domestic oil production and prices in recent years. 

I will also address some valuable recommendations by the National Petroleum Council in its 

report, "Prudent Development: Realizing the Potential of North America's Abundant Natural 

Gas and Oil Resources." 

The impact of new technologies on oil supply and prices 

Oil price set on a global mm'ket 

The most important contributor to high gasoline priees is high oil prices. The Energy Infornlation 

Administration estimates that the cost of crude oil was 72 percent of the cost of a gallon of gas in 

February 2012. The price for a barrel of West Texas Intenl1ediate crude oil was 3 percent higher 

in March 2012 compared to March 2011. Brent crude oil-a lighter, sweeter oil sold in Europe 

but often used to produce gasoline on the East Coast-was 9 percent higher compared to a year 

ago. 

Oil prices are set on the global market, which is controlled by the Organization of Petroleum 

Exporting Countries, a cartel. The Federal Trade Commission found that: 

"Over 70% of the world's proven oil reserves are in Organization of Petroleum Exporting 

Countries (OPEC) member countries. OPEC attempts to maintain the price of oil by 

limiting output and assigning quotas. These actions by OPEC would be a criminal price 

fixing violation ofthe U.S. antitrust laws if done by private finns." 

This leaves us extremely vulnerable to volatile prices or international events beyond our control. 

AI' study determined that expanded domestic production would haw JlO impact on 

gasoline prices 

Whenever oil and gasoline price spikes occur, Big Oil and its political allies revive their demand 

for "drill, baby, drill." But because oil prices are set by this world market, more domestic drilling 

cannot alter the world price. 

2 
78 

Gas prices, in 

2012 dollars 

Oil production vs. gas prices u.s. 

Produc.tion, 

in MiIIlonsof 

--Gas prices (unleaded regular) -u.S. oil production Barrels of Oil 

$5.00 500 

$4.00 400 

$3.00 300 

$2.00 200 

$1.00 100 

$0.00 ... .... N N '" Nl ... .". '" '" '" '" .... .... 00 00 en en ~ 0 ~ ~ N 

9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 9 '";' '";' c: ~ c: ~ c: ~ c: ~ c: ~ c: ~ c: ~ c: ~ C ~ C ~ C ~ c: ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 

Date 

To test whether more U.S. drilling would lower gasoline prices, the Associated Press completed 

an exhaustive analysis of 36 years of monthly U.S. oil production and gasoline price data. AP 

found that there is: 

"No statistical correlation between how much oil comcs out of U.S. wells and the price at 

the pump. Ifmore domestic oil drilling worked as politicians say, you'd now be paying 

about $2 a gallon for gasoline. Instead, you're paying the highest prices ever for March." 

The United States is saving and producing more oil yet gasoline prices are high. 

High oil and gasoline prices exact a real economic toll on American families and businesses. In 

2011 Americans paid an average of $3.53 for a gallon of gas, and the high prices continue this 

year. Gasoline averaged $3.94 per gallon through the week of April 9. This is a 63-cent 

increase--a 19 percent bump--since January 2. Average weekly gasoline purchases this year are 

4 percent lower than they were a year ago, yet families still spent $5.5 million more on gasoline 

the week ending April 9 than they did the week ending January 2. 

The recent spike in oil and gasoline prices is not a first-time event. Fortunately, we are now 

better prepared to withstand its impact because we are using less oil. Gasoline demand is the 

second-lowest since 1997, due to modem vehicle fuel economy standards adopted by President 

Barack Obama in 2009-the first increase in more than 20 years. By 2016 the average car will 

use one-third less gasoline per mile compared to cars in 2010. The second round of standards 

will double fuel economy to 54.5 miles per gallon in 2025 compared to 2010. This will reduce 

3 
79 

oil consumption by 2 million barrels per day. The typical owner of a 2025 model car will spend 

$8,000 less on gasoline compared to an owner of a 2010 vehicle. 

We are also producing more of our own oiL For the first time since President Clinton, the United 

States is producing a majority of the oil we rely on to power our vehicles and economy. We are 

less reliant on other nations for oil and send less of our treasure abroad. The Nell' York Times 

reported in March that, "In 2011, the country imported just 45 percent of the liquid fuels it used, 

down from a record high of 60 percent in 2005." 

The Encrgy Infonnation Administration detennined that in 2011 the United States generated 3.7 

quadrillion Btus of energy from crude oil produced from federal lands and waters compared to 

3.3 quadrillion Btus in 2008-a 12 percent increase in production. And 2011 production from 

federal areas was higher than it was from 2006 through 2008 during the George W. Bush 

administration. What's more, the oil rigs in federal waters met significantly more protective 

worker and environmental-safety standards than before the BP oil disaster in 2010. 

A March 20,2012, Congressional Research Service report reiterated the in<-Tease in oil 

production on federal lands under President Obama: 

"On federal lands, there was also an increase in production from 2008-2009 and another 

increase in 2010 (258,000 bid [barrels per day]), then a decline in 201 L Overall, oil 

production on federal lands is up slightly in 2011 when compared to 2007." 

Similarly, the Columbia Journalism Review on March 22 reported that, 

"The average productivity on federal land and waters during the four Bush years, 2003-

2008, was 634 million barrels per year. During the three Obama years, 2009-2011, it was 

676 million barrels." 

In other words, average annual oil production from federal lands and waters was 5 percent higher 

under President Obama than it was under President Bush. 

The increase in oil production--due horizontal drilling and hydraulic fracking in places such as 

the Bakken Shale in North Dakota and Eagle Ford in Texas-benefit our security and economy. 

Producing more and using less oil reduces foreign oil imports and our trade deficit, creates jobs, 

saves families money on gasoline bills, and boosts economic growth by spending more oil 

dollars at horne. But the Associated Prcss study of 36 years of oil production and gasoline price 

data detennined that there is "No statistical correlation between how much oil comes out of u.s. 

wells and the price at the pump." 

More domestic production from these new shale oil plays will not lower oil prices because prices 

are set on the world market. As long as oil prices remain high, so will gasoline prices. 

4 
80 

The cause of high oil and gas prices 

Presidents have little impact on gasoline prices 

Because of this global, cartel-controlled market, the president of the United States has little 

control over oil prices. A March 10 Wall Street Journal article noted that, 

"u.S. gasoline prices, like prices throughout the advanced economies, are determined by global market 

forces. It is hard to see how Mr. Obama's policies can be blamed." The NPC noted that an essential 

element of protecting public health and the environment is ensuring that federal and state 

agencies overseeing shale oil and gas fracking have the resources necessary to enforce the law. 

Regulators at the federal and state level should have sufficient funding to ensure 

adequate personnel, training, technical expertise, and effective enforcement. 

The Cato Institute, a free-market think tank, came to a similar conclusion in early March: 

"Is President Obama responsible for the spiraling price of gasoline? Republicans say yes, 

but the facts say no .... Why have gasoline prices increased since the start of the year? 

The simplest explanation is that the price of crude oil has increased." 

Worldwide trends don't suggest high oil prices 

Domestic oil production is high, and demand is low. Yet oil and gasoline prices are high. We 

know that oil markets don't follow normal supply-and-demand rules partly because there are few 

substitutes for oil, and also because its price is set by the OPEC cartel. We also know that there 

are other factors that contribute to oil prices in a world market such as concerns about potential 

supply disruptions due to natural disasters or political turmoil in the Persian Gulf. But even when 

we take all the normal factors into account, it doesn't add up. 

Worldwide trends don't offer much of a clue, either. The Energy Infonllation Administration 

reports that worldwide consumption in the first quarter of 20 12 is essentially unchanged from the 

fourth quarter of2011, though it is about I percent higher than a year ago. Yet the April 10 price 

of West Texas Intermediate crude oil-sold in the United States-was $101 per barrel. Brent oil 

on the European market was $120 per barrel--or 5 percent higher than last year. 

There have been some relatively minor supply disntptions in Syria South Sudan and Yemen, 

according to a February 2012 report by the Energy Information Administration. Libyan 

production is also at 81 percent of its pre-civil war capacity. And Saudi Arabia-the world's 

largest oil producer-has raised its output by about 600 000 more batTels per day than in 2011. 

Despite great tensions with Iran over its nuclear weapons program, there has not yet been a 

supply disntption in the Persian au1 £ 

Canada is seeing inexplicably high gasoline prices too. The Edmontoll Journal on March 30 

reported that, 

5 
81 

"Canadians are paying some of the highest prices they ever have for gasoline, even though 

the amount that fuel makers pay for the crude oil that goes into making it has been in 

decline for months .... Data from Statistics Canada on Thursday showed the price 

processors pay for crude oil fell 2.4 per cent in February from January, but the cost of 

gasoline from refiners rose 3.9 per cent. It was third straight month crude oil prices have 

declined and second straight month gasoline prices have increased." 

Wall Street speculators are driving up world oil prices 

On February 14 Bloomberg Businessweek noted that "rising gas prices: not demand driven." It 

cited Tom Kloza, chief oil analyst for the Oil Price Information Service, who says that 

speculators are helping to increase oil prices, and, in tum, gas prices: 

"Much of the increase [in oil prices] is due to speculative money that's flowed into 

gasoline futures contracts since the beginning of the year, mostly from hedge funds and 

large money managers. 'We've seen about $11 billion of speculative money come in on 

the long side of gas futures,' [Kloza] says. 'Each of the last three weeks we've seen a 

record net-long position being taken.'" 

Further, a February 21 analysis of oil trades by McClatchy Newspapers concluded that 

Wall Street speculators are "behind sharply rising oil and gas prices." It determined that, 

"While tension over Iran has ratcheted up over the last few months, the price of oil and 

gasoline has leaped far beyond conventional supply and demand variables. Financial 

speculators are piling into the market, torqueing the Iranian fear factor into ever-higher 

prices. 

"Historically, financial speculators accounted for about 30 percent of oil trading in 

commodity markets, while producers and end users made up about 70 percent. Today it's 

almost the reverse. 

"A McClatchy review of the latest Commitment of Traders report from the Commodity 

Futures Trading Commission, which regulates oil trading, shows that producers and 

merchants made up just 36 percent of all contracts traded in the week ending Feb. 14. 

That same week, open interest, or the total outstanding oil contracts for next-month 

delivery of 1,000 barrels of oil (about 42,000 gallons), stood near an all-time high above 

1.486 million. Speculators who'll never take delivery of oil made up 64 percent of the 

market." 

Wall Street speculators' role in driving up prices in 2012 is consistent with evaluations of 

previous price spikes. Commodity Futures Trading Commissioner Bart Chilton recently 

cited numerous independent studies that indicate excessive Wall Street speculations 

played a significant role in earlier events. Hc also noted that nearly all of these speculators' 

trades are betting on higher, not lower, oil prices. Chilton recently said that, "CFTC data says 

that massive passive long speculators have shorts outnumbered 12 to one." 

6 
82 

On March 5 The Washington Post reached a similar conclusion about speculation in current 

and previous oil price shocks: 

"Many analysts agree that trading activity is pushing up oil prices over and above what 

supply and demand would normally dictate - and much of this has been driven by 

fear over a possible conflict with Iran. 

"'Speculation has inflated oil prices by more than 30%,' says Fadel Gheit, an oil analyst 

at Oppenheimer & Co. That's in line with other estimates: A recent paper (pdf) by the 

Federal Reserve Bank ofSI. Louis found that 'financial speculative demand shocks' were 

responsible for at least 15 percent of the huge run-up in oil prices between 2004 and 

2008." 

Even oil executives understand that Wall Street speculation drives up oil prices. At a 

hearing before the Senate Finance Committee on May 12,2011, Sen. Maria Cantwell 

(0-W A) asked ExxonMobil CEO Rex Tillerson, "What do you think the price would be 

today, ifit was based on fundamentals of just supply and demand?" He responded: "It's 

going to be somewhere in the $60 to $70 range." 

In fact, at the time of the hearing WTI crude oil was selling for $98 per barrel--40 percent 

to 63 percent more than Tillerson's predicted range. 

To decrease the impact of Wall Street speculators on oil and gasoline prices, the Commodity 

Futures Trading Commission must use the tools at its disposal to crack down on them. It must 

use its authority to set "position limits" to restrict the amount of oil Wall Street speculators can 

control in the market. In addition, Congress must ensure that the commission has the money 

needed to put enough cops on the beat to enforce the law. Those who would cut commission 

funding are in effect helping Wall Street speculators drive up oil and gasoline prices. 

Are oil companies rigging gasoline prices'? 

How can this discrepancy be explained? Even some leading oil experts express bewilderment 

about high oil prices. Reuters just reported that oil specialists found that high oil prices are 

inconsistent with current levels of supply and demand: 

'''The reality today is that the market is well oversupplied. OPEC production has been 

rising consistently since September and will probably continue rising further,' said Colin 

Smith, energy strategist at VTB Capital." 

Similarly, on April 2 The Wall Street Journal determined that, 

"There is no shortage of crude oil in the global markets and current prices aren't justified 

by demand-supply fundamentals, Qatar's energy and industry minister said Monday, 

easing concerns over supply constraints. 

7 
83 

"'Oil producers are committed to supplying. When you look at demand-supply, there is no 

evidence of a shortage of oil anywhere in the world,' Mohammed Bin Saleh AI Sada told 

reporters. 'When it comes to price ... there are so many elements-not necessarily part of 

fundamentals of supply and demand-but other factors.'" 

Many Americans believe Big Oil companies are responsible for these "other factors" and suspect 

these giant corporations have rigged gasoline prices in their favor. Could they be on to 

something? 

Certainly oil companies have an incentive to support high gasoline prices. A March 1, 2012, 

report by the Congressional Research Service determined that higher gasoline costs "yield a 

windfall for crude oil producers because the rise in gasoline prices is driven primarily by higher 

crude oil prices." 

Further, a Center for American Progress analysis compared five years of gasoline price data with 

quarterly Big Oil profits and found that a I-cent increase in gasoline prices led to $200 million in 

profits for the largest oil companies (on a quarterly basis). 

Oil profits increase when gas prices go up 

Quarterly big five oil company 

profits, In billions of doliars 

560 

$50 • AverageU.s.gasoUneprlce 

$40 

• Big five profits 

$30 

$20 

$10 

Quarterly average 

gasolme price, in dollars 

$4.50 

$4.00 

53.50 

$3.00 

52.50 

52.00 

51.50 

50 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 51.00 

-;10 

2008 2009 2010 2011 

-;20 

Source: Enerqylnfonnation Administrati~ BP, Chevron, EnooMobt fklyalDutch Shell, andCOI'IocoPhdlips 

Quarterly profit: REportS 

50.50 

$0.00 

To be sure, there is no smoking barrel that demonstrates Big Oil is rigging the game to raise 

gasoline prices. But many of the actions they've taken have the suspicious effect of boosting 

prices, The following factors suggest that Big Oil companies, with help from Wall Street 

8 
84 

speculators, are taking steps that tilt the gasoline-price playing field in their favor, which in tum 

increases costs for middle-class families: 

The five biggest oil companies made record profits in 2011, as average annual nationwide 

gasolinc prices hit a 36-year high. Yet these companies also produced less oil. 

Every I-cent increase in gasoline price yields $200 million in profit (on a quarterly basis) 

for the largest oil companies. 

U.S. exports of refined petroleum products doubled in the past five years. 

Oil companies are holding thousands of unexplored or undeveloped leases in federal 

lands and waters. 

Oil companies are also closing refineries, threatening to slash fuel supplies. 

Big Oil companies will receive $40 billion in unnecessary tax breaks over the next 

decade. 

Wall Street speculators are trading twice as many oil futures as commercial end users. 

For more information about each of these factors, see our report, "Arc Oil Companies Rigging 

Gasoline Prices?" 

Americans have a right to be suspicious that the gasoline game is fixed. Right now we have more 

domestic production, less demand, and no major supply disruptions, which should ease gasoline 

price pressure. Yet Big Oil companies are making higher profits, lowering production, sitting on 

thousands of unused leases, exporting more refined products, and shuttering refineries, which, 

combined with excessive Wall Street speculation, are all energy industry actions that tend to 

boost gasoline prices. Clearly the $40 billion of Big Oil tax breaks are wasted revenues that 

could be invested in technologies that reduce oil use, which would lower families' spending on 

gasoline. 

Policies that could reduce gas prices 

Support investments that reduce oil use 

Even as we produce more and use less oil at home, oil prices remain subject to thc global markct. 

The 2011 disruption in Libya's oil production sent prices climbing. This year, Iran's saberrattling to use oil as a weapon to defend its nuclear program is roiling markets. This destructive 

pricc volatility will continue to harm our economy and Americans if we continue to depend on a 

product with few substitutes where we consume 20 percent of the annual supply but only 2 

percent of its resources. The ultimate path to long-term relief is to dramatically reduce our 

reliance on oil. The most effective way to reduce pain at the pump is to reduce our oil use so 

we pump less. 

The United States must develop modem fuel economy standards to make cars go much farther 

on a gallon of gas. As noted above, the administration will soon finalize fuel economy standards 

for passenger vehicles manufactured from 2017-2025. If the standards are kept strong, they will 

save more than 2 million barrels of oil per day. Congress must resist pleadings of special 

9 
85 

interests to reduce or delay these standards since they will only increase gasoline consumption 

and prices. 

In addition to much-improved vehicle fuel economy standards, we must begin the investment in 

cars and trucks powered by other fuels. Passenger vehicles could use readily available, 

increasingly clean electricity. Plug-in hybrids and all electric vehicles consume little or no 

gasoline. The Chevrolet Volt and Nissan Leaf are two early electricity powered vehicles. The 

Volt was even named "2011 Motor Trend Car of the Year." During their first year of production, 

their combined sales were twice as large as the now familiar Toyota Prius hybrid during its first 

year. 

As with cell phones, desktop computers, and other innovative new technologies, there will be 

bumps along the road to widespread commercialization. For instance, bad publicity for the Volt 

due to overstated concerns about the potential for fires has inhibited sales. Nonetheless, February 

2012 sales were significantly higher than January sales. In March, Chevrolet sold morc Volts 

than in any previous month. Despite GM's temporary halt in production to sell some existing 

inventory, it still plans to sell 45,000 Volts in 2012 - six times more than last year. 

Despite the Volt's recognition as an innovative, impressive vehicle, it has suffered attacks from 

conservatives. These conservatives sound like they are rooting for General Motors to fail, even 

though this plug-in hybrid technology could dramatically reduce oil use and pain at the pump. 

These condemnations are equivalent to assaulting the first cell phones, desk top computers, or 

iPads for being too big, too expensive, or too limited - common concerns with brand new game 

changing technologies. Those who criticize the Volt in their attempt to score political points 

should be ashamed of their attacks on American ingenuity and innovation. 

The Volt and other innovative American oil savings technologies require enhanced infrastructure 

to speed their adoption. There is a long history of government support for the infrastructure 

essential to grow pioneering technologies, from FM radio to telephones. Electric vehicles, too, 

would benefit from such assistance with recharging infrastructure. The Electric Drive Vehicle 

Deployment Act of2011, H.R.1685, sponsored by Reps. Judy Biggert (R-IL) and Ed Markey (DMA) would provide financial assistance to states for the deployment of electric vehicles. 

Investments in buses, subways, and trains can also reduce our dependence on oil and create jobs. 

Public transportation saves the U.S. 900,000 automobile fill-ups per day, which equal 4.2 billion 

gallons of gasolinc per year. Every $1 billion of investment in public transportation 

infrastructure supports 36,000 jobs in a varicty of industries - construction, finance, insurance, 

real estate, retail and more. 

Despite these overwhelming benefits, our public transportation infrastructure is woefully 

underfunded. A recent CAP report "Meeting the Inrrastructure Imperative: An Affordable Plan 

to Put Americans Back to Work Rebuilding Our Nation's Infrastructure." by Donna Cooper 

found that an additional investment of $15.7 billion annually is needed to meet our most urgent 

public transportation infrastructure needs. This would increase oil savings and create jobs. 

10 
86 

Unfortunately, the pending House transportation bill would undermine our existing 

transportation infrastnlcture. It would end the 30-year practice of allocating a small portion of 

the federal gas tax for transit funding. It would replace this predictable funding source with 

reliance on lower speculative revenue from future oil drilling. The American Public Transit 

Association predicts that the House bill will 

"Lead to additional deferred maintenance, leading to less reliable service, fewer transit 

extensions, higher fares and potentially fewer riders." 

This significant cut in transit ridership would force more people to drive, using more gasoline to 

travel. This additional demand would likely increase gasoline prices. 

Ryan budget keeps Big Oil tax lweaks, Cllts investments that reduce oil dcpendcnce 

The HOllse passed FY 2013 budget resolution, authored by Rep. Paul Ryan (R-WI), would 

worsen pain at the pump by slashing billions of dollars of investments in transit, alternative fuels 

and clean energy technologies that would reduce oil consumption. Such investments help protect 

middle-class families from volatile energy prices as well as create jobs. Instead, the budget 

would retain $40 billion in tax breaks for big oil. 

The Office of Management and Budget warned that the Ryan budget could devastate clean 

energy investments: 

"Clean energy programs would be cut by 19 percent over the next decade, derailing 

efforts to put a million electric vehicles on the road by 2015, retrofit residential homes to 

save energy and consumers money, and make the commercial building sector 20 percent 

more efficient by 2022." 

In addition, the Ryan budget would cut transportation funding by more than one-third in 2013, 

with public transit-buses, subways, and trains-likely to be a major target. Such a steep 

revenue decrease would reduce accessibility and affordability of public transportation, which 

would increase demand for gasoline and drive up its price. The American Public Transportation 

Association reported that "transit reduces annual fuel use by the equivalent of 4.2 billion gallons 

of gasoline." 

In short, the Ryan budget compounds the cost of high oil and gasoline prices by slashing 

investments in alternatives that lessen oil demand and reduce costs for the middle class. 

Selling some reserve oil could provide tl'mporm}' relief 

The Wall Street Journal, Cato Institute, and a survey of economists by the University of Chicago 

Booth School of Business, noted that President Obama cannot affect gasoline priccs. There is a 

proven tool, however, that can provide some temporary relief from high prices in the short term. 

Selling a small amount of oil from the Strategic Petroleum Reserve in coordination with sales 

from International Energy Agency reserves could suddenly expand the world oil supplies by 

millions of barrels over a month or two. 

11 
87 

The Strate(,>ic Petroleum Reserve is 96 percent full. Selling a small amount of reserve oil in 

conjunction with our allies-say 45 million barrels each-would still leave the reserve 90 

percent full. It's important to note that the 104th Congress under then-Speaker Newt Gingrich 

sold 28 million barrels of rcserve oil in 1996 to reduce the budget deficit when the reserve was 

less than 80 percent full. 

Selling SPR oil can temporarily lower oil and gasoline prices by bursting the "bubble" caused by 

Wall Street speculators betting that oil prices will continue to rise due to fears of supply 

disruption in the Persian Gulf. Such a sale has occurred under the past four presidents and has 

lowered oil and gasoline prices every time. This can cut prices and burst the bubble-even recent 

rumors of a reserve oil sale reduced prices. On March IS Bloomberg reported: 

"Oil [prices] fell ... on reports that President Barack Obama discussed a release from the 

U.S. Strategic Petroleum Reserve with UK Prime Minister David Cameron." 

Crack down on \Vall Stl'cet speculators 

Another measure that would lower oil and gasoline prices would be to lessen Wall Street 

speculators' ability to drive up prices. Many experts believe that these speculators-who never 

intend to take position of the oil that they buy-are driving up oil prices to make a quick profit, 

preying on the fears of commercial end users who attempt to lock in a favorable future price. 

The impact of public health and work safety standards on price 

After BP tragedy, ncw safcty measures adoptcd whilc drilling I'ctllrns to normal 

The BP Deepwater Horizon disaster was the worst offshore oil spill in the nation's history. It 

tragically took the lives of II men. 210 million gallons of oil bled into the Gulf of Mcxico, with 

a long-term economic and biological impact that is still unknown. Gulf Coast residents and 

businesses have or will receive a total of at least $22 billion in compensation for economic harm 

from this disaster. 

In the wake of this unprecedented calamity, the U.S. Department of the Interior called a time-out 

on offshore drilling to make sure that there were no other tragedies waiting to happen. The 

bipartisan National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling 

conducted a thorough investigation of this disaster and essentially concluded that this was a 

prudent step: 

"The immediate causes of the Macondo well blowout can be traced to a series of 

identifiable mistakes made by BP, Halliburton, and Transocean that reveal such 

systematic failures in risk management that they place in doubt the safety culture of the 

entire industry. 

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88 

"Deepwater energy exploration and production, particularly at the frontiers of experience, 

involve risks for which neither industry nor government has been adequately prepared, 

but for which they can and must be prepared in the future. 

"To assure human safety and environmental protection, regulatory oversight of leasing, 

energy exploration, and production require reforms even beyond those significant 

reforms already initiated since the Deepwater Horizon disaster." 

The Department of the Interior has adopted a number of reforms to enhance worker and drilling 

safety, as well as "continu[ing] to process permits to drill as efficiently as is safely possible." 

Since October 12,2010, the Bureau of Safety and Environmental Enforcement has approved 84 

percent ofthe new and revised deep-water well permits. 

Even with the new safety measures, offshore oil rigs are returning to their pre-BP disaster 

numbers. On April 10 Reuters reported that, 

"Gulf of Mexico oil drillers will be busier this year than at any point since the BP (BP.L) 

oil spill in 20 10 that upended their industry and soiled their reputation along with parts of 

the marshy Louisiana coast. 

"Eight more deepwater rigs are expected in the Gulfthis year, based on what oil 

companies tell contractors ... Such an influx would bring the active deepwater count to 

29, just short of the level before the well blowout two years ago this month that killed II 

people." 

While the Obama administration has taken strides to improve the safety of offshore drilling, 

Congress has not. It is irresponsible that the liability limits for economic damages from offshore 

oil spills remains an embarrassingly low $75 million. This is less than 0.5 percent of the $13.8 

billion BP has already paid in claims for damages from the Deepwater debacle. 

Put another way, in 2011 the big five oil companies earned $137 billion in profits. -the $75 

million appropriated by Congress represents about five hours of profits for these corporations. A 

higher liability limit would further encourage companies to follow safe operating 

procedures. This unconscionably low limit is completely insufficient to change behavior. 

As previously noted, it is important to remember that there was more oil produced from federal 

lands and waters in 2011 than in any of the last three years ofthe Bush administration-and 

these rigs are safer now, too. It is fairly clear that these safety measures have had no impact on 

high oil and gasoline prices. 

Allowing more pollution from gasoline won't lower gasoline prices 

Another regular proposal to lower gasoline prices is to waive the summer pollution reduction 

requirements for gasoline in metropolitan areas with severe smog problems. These standards 

reduce contaminants produced by gasoline combustion, such as nitrogen oxides and volatile 

organic compounds that form ground level ozone (smog) in the presence of sunlight. The 

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89 

American Lung Association warns that ozone causes "increased risk of premature death," 

"asthma attacks," and "increased susceptibility" to heart- and lung-related problems. Children, 

seniors, and those with respiratory ailments are most vulnerable to harm from smog. 

According to an EPA analysis, abandoning these cleaner gasoline rules might reduce gasoline 

costs by only a few cents per gallon but would increase smog that harms children, seniors, and 

others. In addition to human suffering, such a step would have real economic costs due to 

additional health care expenditures and lost productivity. 

The Congressional Research Service recently concurred that relaxing these clean fuels standard 

would require other polluters to make steeper, more expensive pollution reductions. 

"Relaxing these standards long-term may require states that use special blends as part of 

their plan to meet NAAQS [National Ambient Air Quality Standards that protect public 

health] to come up with alternative--potentially more commercially costly--means to 

meet air quality targets." 

State Department: Kl'ystolle pipeline won't increase production or lown prices 

Other oil industry advocates claim that completing the Keystone XL pipeline from Alberta, 

Canada, to the Gulf of Mexico would both increase oil supplies and reduce prices. The State 

Department's analysis of the project found that neither assertion is accurate. 

The State Department's final "Keystone XL Assessment" concluded that it would not increase 

oil supply or lower prices: 

"WORLD and ETP studies indicate that building versus not building Keystone XL would 

not of itself have any significant impact on: U.S. total crude runs, total crude and product 

import levels or costs." (emphasis original) 

The State Department analysis determined that the pipeline would only have a tiny impact on the 

priee of crude and other products: 

"Under the KXL scenario, delivered prices for [oil sands] ... into PADD3 Gulf Coast are 

lower than under the No KXL case and those for P ADD2 [Midwest], higher. The effect is 

limited, no more than around $O.70Ibbl [per barrel]." 

The analysis acknowledges that the pipeline would actually raise gasoline prices in the Midwest 

since it would eliminate the current oil glut there that has kept prices lower. Bloomberg cautions 

that, "TransCanada Corp.'s Keystone XL oil pipeline ... risks raising prices as much as 20 cents 

a gallon in the Midwest, Great Plains and Rocky Mountains." At the same time, there may be a 

decrease in gasoline prices in the Gulf region because of the increase in oil supply there. 

Time magazine's analysis concurred that Keystone would have almost no impact on gasoline 

prices. "Keystone would have little immediate [price 1 effect, especially since there's already 

sufficient pipeline infrastructure in place for the next few years." 

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90 

Additionally, there are indications that a portion of the oil sands piped through Keystone to Gulf 

Coast refineries will be refined into products for export rather than kept here for American 

drivers. At a December 2,2011, hearing before a subcommittee, Rep. Ed Markey (D-MA) asked 

the CEO of pipeline-owner TransCanada whether he would agree to keep all refined products 

from oil sands in the United States. He declined. 

One way to ensure that Keystone adds a marginal amount of oil to U.S. supplies is to require that 

the oil and its refined products be sold here--not exported. On February 15 Rep. Markey offered 

an amendment to H.R. 3408 to "ensure that if the Keystone XL pipeline is built, the oil that it 

transports to the Gulf of Mexico and the fuels made from that oil remain in this country to 

benefit Americans." The amendment failed 173-254, which means that some of the oil sands 

will be exported. 

Some advocates of building this pipeline claim that it would also help lower gasoline prices 

because this project is "shovel ready." This is also false. The Keystone pipeline isn't even map 

ready yet since its route through Nebraska has yet to be publicly announced. And there has been 

no assessment of the potential harm to adjacent air, water, and land from its construction and 

operation once it is sited. 

In fact, there is a growing controversy over building the pipeline in places where the route is 

already mapped. The Los Angeles Times reported on the conflict between landowners and 

TransCanada: 

"Canadian company that wants to build the 1 ,660-mile structure [is] going to court to 

force the cooperation oflandowners who don't want it crossing their land. 

"The issue has brought conservative tea party groups out rallying alongside 

environmentalists opposed to tar sands oil production, united behind [Julia Trigg] 

Crawford's attempt to keep the pipeline from crossing her 600-acre farm in the town of 

Direct, near Paris, where she fears it could contaminate the creek that irrigates her fields." 

This controversy suggests that construction is not "shovel ready" outside of Nebraska either. 

The bottom line is that the State Department and other independent analyses determined that the 

Keystone XL pipeline won't increase U.S. oil supplies, reduce gasoline prices, or even transport 

any oil anytime soon. 

Lifting protection for special places won't reduce oil 01' gasoline prices 

Some people are calling for more oil drilling in protected places to reduce gasoline prices, 

though they disingenuously neglect to mention that it takes seven years for new offshore oil 

drilling to producc any oiL And ErA found that opening up the currently protected Atlantic and 

Pacific Coasts won't havc an impact on price. ErA also predicts that it will take 10 years to 

produce oil from the Arctic National Wildlife Refuge in Alaska. 

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91 

Don't get me wrong. More American oil production benefits us in several ways. First, producing 

more and importing less would help our balance of trade. In 2010 it was estimated that oil 

imports were nearly half of our trade deficit. The nearly $1 billion sent overseas daily to 

purchase oil is money that will not recirculate here or create more economic growth. 

Purchasing less foreign oil also enhances our national security. Canada and Mexico are our two 

largest importers. But a CAP analysis found one in five barrels of oil consumed in the United 

States in 2008 came from nations classified as "dangerous or unstable." 

These are real economic and security benefits to our nation, and higher oil production should 

continue. At the same time, more U.S. production will not lower prices because oil prices are set 

on a worldwide market price, with the active participation of the Organization of Petroleum 

Exporting Countries, or OPEC, cartel. A significant production increase by one country could be 

offset by a reduction by another nation so that the price remains the same. 

In fact, some oil-producing nations believe that some oil producers want to stabilize prices 

around $100 per barrel. In an interview with CNN, Saudi Arabian Oil Minister Ali al-Naimi said 

that, "Our wish and hope is we can stabilize this oil price and keep it at a level around $100" for 

the average barrel of crude oil. Saudi Arabia and other OPEC countries have the ability to raise 

or lower their production to accomplish this goal. 

Ken Green, resident scholar with the conservative American Enterprise Institute, explained that 

crude oil is a global commodity whose price will be unaffected by new U.S. production. Last 

year Greenwire reported that Green said: 

'''The world price is the world price. Even if we were producing 100 percent of our oil,' 

Green said, if prices increase because of a shortage in China or India, 'our price would go 

up to the same thing ... We probably couldn't produce enough to affect the world price of 

oil,' he added. 'People don't understand that.'" 

Green also astutely predicted that some politicians would exploit higher oil prices to boost Big 

Oil's desire to drill on fragile lands and in coastal waters. "We're likely to see a replay of the 

McCain-Palin 'drill, baby, drill,' 'drill here, drill now.' It will probably be a cause celebre for the 

party." His warning was prescient-those same cries arc occurring this year as well. 

Green is correct. Allowing production into protected, fragile places will not lower oil and 

gasoline prices today, tomorrow, next year, or the year after that. 

The National Petroleum Council safety recommendations would 

The National Petroleum Council report "Prudent Development" has critical recommendations 

that would increase the ability of big oil and gas companies to produce resources without 

harming public health, hunting and fishing, and other environmental values. It noted in its letter 

to Secretary of Energy Steven Chu that 

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92 

"Positive outcomes of increased North American natural gas and oil resources can only 

be realized if developed prudently. 

"Realizing the benefits of natural gas and oil depends on environmentally responsible 

development. .. in all circumstances." 

The report describes "environmentally sustainable" in broad terms to include well construction 

and operation, wastewater disposal, truck traffic and emissions, and land use. It notes that 

"Environmental sustainability encompasses impacts such as air and water pollution that 

directly affect public health, as well as these and other impacts affecting ecosystem 

vitality, biodiversity, habitat, forestry, and fisheries' health, agriculture and the global 

climate." 

.The pollution from surface activities could have serious impact in areas far beyond the well pad. 

For instance, a peer reviewed study in the Proceedings ofthe National Academv o{Seienees 

released on April 9 determined that methane pollution from natural gas production and use could 

be greater than originally understood. Dr. Joseph Romm wrote in Climate Progress that 

"Methane [is] a very potent !,rreenhouse gas, though with a much shorter lifetime in the 

atmosphere than C02, which is emitted by burning fossil fuels like natural gas. Recent 

studies suggest a very high global warming potential (GWP) for CH4 vs C02, 

particularly over a 20-year time frame." 

The PNAS study that "it appears that current [methane] leakage rates are higher than previously 

thought" and "reductions in ch4 leakage are needed to maximize the climate benefits of natural 

gas." This is the type of problem that the NPC believes that government must help address 

through more research, establishment of science based pollution reduction standards, and 

vigorous enforcement of them. 

The NPC also strongly advocates a greenhouse gas pollution reduction regime. The United 

States needs a 

"Mechanism for putting a price on greenhouse gas emissions that is economy-wide, 

market-based, predictable, transparent." 

Finally, the NPC noted that an essential element of protecting public health and the environment 

is ensuring that federal and state agencies overseeing shale oil and gas fracking have the 

resources necessary to enforce the law. 

"Regulators at the federal and state level should have sufficient funding to ensure 

adequate personnel, training, technical expertise, and effective enforcement." 

Sustainable production is an essential element in efforts to dramatically expand the production of 

shale oil and gas. As you know, a major blow-out or spill on land could quickly sour public 

support for production of thcse newly available resources. In addition to threatening public 

health and local economies, such an event could taint other companies conducting similar 

operations even if they comply with safety rules and employ best practices. 

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93 

Unfortunately, the hired advocates for these companies frequently argue for the opposite - the 

weakest, narrowest possible protection standards, claiming that its multi-billion dollar member 

companies cannot afford to fully protect public health and safety. This argument lacks 

credibility when the big five oil and gas companies made $1 trillion in profits from 2001-2011. 

When oil costs an average of $15 per barrel to produce sells for $100, a small increase in 

production costs to protect people from toxic chemicals in their air and water, deadly diesel 

particles, and an increase in climate change pollutions is a cost-effective investment. 

18 
94 

Chairman HALL. Dr. Weiss, thank you very much, and I thank 

all the witness. This Committee was dubbed the Committee of the 

Day, and I see why. All five of you have certainly given us a good 

basis for our questions, and I thank you for your testimony. I will 

remind our Members that the Committee rules limit questioning to 

five minutes. We will try to stay close to that. The Chair at this 

time will open the round of questions, and I recognize myself for 

five minutes. 

I will start off. Mr. Slaughter, your testimony described the National Petroleum Council’s ‘‘Prudent Development’’ report in detail. 

The report’s findings on the amount of economically recoverable oil 

and gas resources are very striking. Could you describe just how 

much oil and gas we now think is recoverable and what that means 

in the context of global energy resources over the coming decades? 

How has the development of new energy exploration and production technology increased the estimated resource base? Those are 

three questions in one but you can handle them any way you want 

to. 

Mr. SLAUGHTER. Sure, and just a clarification to start off with, 

resource is a wider term than the reserves estimate, which Mr. 

Weiss just mentioned. Reserves is a very narrow definition based 

on current technology and current economics. 

When we are looking at future development over several decades, 

we look at technically recoverable resources and ultimately recoverable resources. Today’s technology, we define the total unconventional resources at about 180 billion barrels, which is additive to 

the conventional resources of approximately 185 billion barrels. But 

as we move into technology development in some of these longerterm plays, we could be recovering over 1 trillion barrels of oil in 

several decades if you include resources like the oil shale of Colorado, which can be developed in several decades’ time if we keep 

working on the technologies to develop that. So these are huge 

amounts of oil. 

Chairman HALL. Yes, and I thank you. 

Dr. Foss, given the potential amount of domestic energy we now 

realize that we can access, it is really appropriate to suggest that 

we only have two percent, as the President says, of the world’s oil 

resources, as President Obama suggests? How correct is that? 

Dr. FOSS. Well, again, like Andrew, the use of the word ‘‘resource’’ and other words are often confused. I have a chart that I 

submitted in testimony, and it is a big of an exaggeration, admittedly, because I did the same thing but to make a point. In our 

country, because we have transparent government data, we have 

transparent industry data and lots of processes for looking at that 

information, we feel comfortable that we can look at our resource 

potential the way we do, and it puts us at the top of the world in 

terms of overall resource wealth. Now, what you do to deliver the 

ultimately recoverable resource into the market at any one time, 

that is a different question. We have much more than two percent 

of the world’s known resources. In fact, we have the majority of the 

world’s known resources if every country went out and did the 

same things that we did to evaluate the resource base and maybe 

that percentage would change. But for the time being, we are extremely large. 
95 

Chairman HALL. I thank you for that. I have a minute and 42 

seconds left. Let me ask one more question. 

President Obama’s position is that because the price of oil is set 

on a global market, there is little or nothing that the United States 

policymakers can do to impact gas prices. Ms. Harbert and Dr. 

Foss, you both touched on this in your testimony. If the President 

increased oil production or even signaled that he intended to increase oil production in such areas as Alaska where little ANWR 

is just 19 million acres, or the Outer Continental Shelf, would 

prices be impacted? 

Ms. HARBERT. When you look at the statistics from the International Energy Agency, the global demand for energy is going to 

go up by 50 percent. If we do not increase supply, we will be certain of one thing: prices will go up. So what are we doing here at 

home to inoculate ourselves against that inevitable price increase 

if we don’t increase supply? We have an opportunity to be part of 

our own solution which we are depriving ourselves of. So if you 

look at the longer-term market fundamentals that are basically 

supply and demand, without more supply, and we have a lot of it, 

prices will go up. 

Chairman HALL. Dr. Foss? 

Dr. FOSS. Yes. Thank you. Studies of the type that have been 

mentioned today looking at domestic gas production and gasoline 

prices are inevitably flawed because they do not take into account 

the impact of not having domestic production on gasoline prices, 

which—— 

Chairman HALL. I just have about 10 more seconds, so go ahead. 

Dr. FOSS. And I also think that one thing that we haven’t put 

on the table today is the cost of other things that impact gasoline 

prices to customers: the ethanol mandate, taxes on gasoline and 

other things that actually make gasoline purchases expense for 

households. 

Chairman HALL. I thank you, and I now recognize Mrs. Johnson 

for her five minutes. 

Ms. JOHNSON. Thank you very much. I noticed that some of the 

testimony indicates support for a continued role for the federal research into oil and gas drilling-related technologies, and I realize 

that in many of your responses you have already indicated that it 

would take decades to produce from these sources that you are 

speaking of. In what way do you think that the Federal Government should continue to invest in research right now during this 

very scarce taxpayer dollars for research? 

Mr. SLAUGHTER. If I can have a go at that, what we are looking 

at here is some parts of the resource base which are pre-commercial by quite a long time and so the private sector by itself does 

not put a lot of investment focus on pre-commercial resources, for 

example, the oil shale or the oil sands or methane hydrates in natural gas. So in these circumstances, to keep the necessary research 

and development effort going, we in the NPC study recommended 

partnerships of industry, academia and government to keep the 

momentum going on those essential technology development programs. 
96 

Ms. JOHNSON. It really sounds great to talk about all the drilling 

that we can do and all of the resources we have and we talk about 

the oil shale and all. It would take decades to produce, wouldn’t it? 

Mr. SLAUGHTER. The development pathway for oil shale particularly is long but if we want to have it available when we need it, 

then we need to keep working on it. It won’t be available if we stop 

working on those questions now. 

Ms. JOHNSON. How much do you think that the private industry 

is willing to fill in while we don’t have the dollars for the research? 

Chairman HALL. Ms. Harbert, you were trying to ask a question 

or answer a question? 

Ms. HARBERT. I was just going to say, the Department of Energy 

answered that question. They issued a report in 2007. They were 

asked to look at all the private-sector activities underway to develop the technology and they issued a report of every—whether it 

is Exxon or Shell or Red leaf or Whiting, all the multitude of companies that have been investing in developing this technology on 

their own dime without asking for any subsidies from the Federal 

Government. What the industry is asking for is some certainty, 

that knowing that I can have access to this resource base so I can 

develop the technology, make it commercially viable and bring this 

resource to market in a reasonable time frame, and adhering to all 

the environmental regulations that are in place. 

So we have a very good idea of the multitude of technologies that 

are under development but if the opportunities being closed down 

to access the resource base, they are not going to develop the technology. I don’t think you will find anybody in the industry that is 

saying we need more money from the Federal Government. They 

are saying we just need the opportunity. The economic conditions 

have changed dramatically for this resource and now they want to 

be able to have the opportunity to develop it. 

Ms. JOHNSON. Thank you. 

Mr. Brown, you mentioned some of the oil shale availability. 

What is your company doing at this time to access that resource? 

Mr. BROWN. Can I ask for a clarification? When you are saying 

the oil shale, you are talking about like western Colorado, the 

very—one of the companies that I mentioned the acquisition that 

Whiting made early in their—well, after they went public in 2003, 

one of those companies owned a very large oil shale position in 

western Colorado, and we—and they owned it outright. It was actually granted to them by the government back in the 1930s to develop, and they own it in fees, so they own the minerals, they own 

the—or we own the minerals, we own the surface. 

Currently, we are not doing anything out there. I mean, it is not 

a lease that is going to go away on us. We are producing hydrocarbons from other zones on that lease out there because it is productive in the deeper zone for natural gas. But right now we can’t 

see a path forward that makes that an economic project in any reasonable time. 

Ms. JOHNSON. What do you mean, you can’t see a path forward? 

Mr. BROWN. You know, you have to somehow be able to generate 

a lot of heat down in the reservoir to make this project—to turn 

the kerogen into a liquid hydrocarbon product, which Shell is actively pursuing out there right now. Right now, we don’t—to be 
97 

able to do that, we can’t see that it is an economic venture for us 

to undertake at this time. 

Ms. JOHNSON. I have less than 10 seconds, so I am going to do 

Ms. Adams’ technique. Just answer yes or no for all of you. Is 

President Obama the cause for the high gas prices right now? Just 

yes or no down the line. 

Mr. SLAUGHTER. No. 

Ms. HARBERT. Yes and no. 

Ms. JOHNSON. I just need one of those. 

Ms. HARBERT. Yes and no. It is too complex to go to a yes or no 

question—answer, quite honestly. 

Ms. JOHNSON. Next? 

Dr. FOSS. Same for me. 

Mr. BROWN. No. 

Mr. WEISS. No. 

Ms. JOHNSON. Thank you for the truth. Thank you. 

Chairman HALL. The gentlelady’s time is up, and I recognize the 

gentleman from Alabama, Mr. Brooks. And thank you for staying 

within the time, Ms. Johnson. 

Mr. BROOKS. Thank you. 

I would like to hear Ms. Harbert and Dr. Foss expound on why 

they believe that the White House policies are partially responsible 

for our American soaring gasoline prices. 

Ms. HARBERT. Well, if we were to have access to federal offshore 

and onshore lands, and then you take a much more aggressive 

stance on unconventional oil shale, and then you add to that the 

Keystone pipeline, which would bring more resources to the—you 

combine all those together, there is a lot of government revenue, 

a lot of new supply, and America then stands on a very different 

energy footing, and those are just three things to start, and that 

is jobs, it is revenue, it is energy security, and that would dramatically alter our standing in terms of our power within the global energy market. 

Mr. BROOKS. Dr. Foss? 

Dr. FOSS. I don’t think the question is about gasoline prices. I 

think that is the wrong way of looking at things. I think the point 

is to look at household—the transportation portion of household energy cost, and I think the problem is that a lot of the alternatives 

that you are spending both taxpayer dollars on and private money 

on are more expensive than actually the things that can be done 

to encourage more efficient use of the existing petroleum product 

base that we have. 

Mr. BROOKS. Now, I presume each of you is aware that in September of 2008, Dr. Steven Chu, the current Secretary of Energy 

for Barack Obama, said ‘‘Somehow we have to figure out how to 

boost the price of gasoline to the levels in Europe.’’ Currently, gasoline prices in Europe range from $6 to $8 per gallon, and quite 

frankly, when I got gasoline a couple of days ago coming into 

Washington, over $4 per gallon. That was a first for me, and I 

searched for 30 minutes trying to find something less expensive but 

finally gave up. Now, Secretary Chu had the opportunity in this 

very room to backtrack on his position; he did not. However, later 

in a Senate hearing, he did backtrack. I personally believe that his 

original statement that he wanted to essentially double gasoline 
98 

prices on American citizens reflects his true beliefs inasmuch as he 

backtracked in the Senate after having had the opportunity to do 

so here and did not but in the Senate. We all understand this is 

an election year, and I would suspect that in an election year setting, that had something to do with his views. Perhaps we can give 

him the benefit of the doubt. The public can make a final judgment 

on that. 

But having said all that, if Secretary Chu’s preference for doubling American gasoline prices were to occur, what would it mean 

for the United States economy if gasoline were at European levels, 

and I would like to direct that question to Ms. Harbert and Dr. 

Foss. 

Ms. HARBERT. We would look like Europe, which doesn’t look 

very good right now. I was just there a couple of weeks ago, and 

there is a great deal of discussion about how to change this very 

entrenched, very long-term approach towards taxing fuels. I think 

there is proof in the pudding coming up this summer. Given the 

weakness of the European economy, the cost to customers and businesses, I think that we are going to be seeing some pretty interesting eruptions with respect to how fuels are taxed over there. 

Americans are already paying 8.5 percent of their household income on gasoline, and that would go up. That is the highest level 

since 1981. It would impact certainly the economic recovery, our 

GDP, and it would affect business investment. Let us not forget 

that manufacturing is starting to figure out how it can get back on 

its feet based on low natural gas prices. We have the chemical industry that left this country and went to the Middle East because 

there were lower natural gas prices there. They are now coming 

back, and we want to see those types of things happen. And so 

price matters, and that matters in our economy, it matters in business decisions, it matters in investment decisions, and it certainly 

matters at the family dinner table. So it would have a very bad 

knockoff effect on the economy. 

Mr. BROOKS. But again, I personally believe for emphasis that it 

is the White House strategy to drive up energy prices in order to 

make them more competitive with the exotics that this Administration is pouring so many billions of tax dollars into. But having said 

that, President Obama repeatedly claims he supports an all-of-theabove energy strategy. However, the President’s rhetoric rarely 

matches his Administration’s actions, especially when it comes to 

the EPA and its regulatory culture. Can you please describe what 

EPA’s numerous proposed regulations such as the recently proposed New Source Performance Standards for Power Plants and 

Cross State Air Pollution Rule as well as forthcoming rules on 

greenhouse gas emissions at drilling sites and tier three refining 

standards mean for the United States energy use and energy 

prices? And again, Dr. Foss or Ms. Harbert, very quickly. 

Ms. HARBERT. The real answer is that no one knows because the 

modeling of those combined rules and regulations have not been 

done, and so we really don’t know the ultimate cost and what it 

is going to do to energy prices. And that is why in some cases the 

court system has stepped in and stalled the implementation of 

some of these regulations until more review has been done. 
99 

Mr. BROOKS. Well, Mr. Chairman, if I could just add a comment, 

since my time is expired, for Dr. Foss. I sincerely believe that it 

is another effort to jack up prices. 

Chairman HALL. The gentleman’s time is expired. 

Mr. Miller, the gentleman from North Carolina, is recognized for 

five minutes. Is he here? All right. Who is next? Mr. McNerney, 

you are recognized for 5–1/2 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

I want to thank the panel. I think all your testimonies were very 

well thought out and I appreciate what you are bringing to the 

table here. 

Mr. Slaughter, all Americans are clearly struggling with the 

price of gasoline now, and there is no doubt in my mind that there 

is a lot of gas or a lot of oil there from all sources within our borders. But I am worried about the costs both direct and indirect of 

extracting some of these unconventional sources. For example, I 

worry a little bit about the effects of global warming as do a lot 

of people, but let us talk about the economics here. Are the unconventional sources more expensive per barrel to extract than conventional sources? 

Mr. SLAUGHTER. That depends. Not all unconventional sources 

look alike. Many of the tight oil resources that have been ramping 

up production now and over the last couple of years are actually 

not on the margin as the most costly production. Some of the more 

frontier-type resources like, for example, the oil sands tend to be 

the most expensive but they are economic in today’s environment. 

Mr. MCNERNEY. Well, the unconventional sources have unique 

risks regarding the environment. What safeguards do you think 

should be in place to reduce the risk of extracting these hydrocarbons in a safe manner? 

Mr. SLAUGHTER. The NPC study did a tremendous amount of 

work on this question, and the oil and gas companies take this very 

seriously. So there is a lot of recommendations in that study about 

disseminating best practices, developing responsible extraction 

technologies, about promoting councils of excellence to raise the 

game in terms of environmental performance. This is something we 

have to do and we have to take it seriously. 

Mr. MCNERNEY. I agree. If local extraction causes local environment pollution and contamination of groundwater, local communities will turn against that. So we want to make sure that that 

doesn’t happen as part of the outcome. 

Ms. Harbert, thank you for your testimony again. In your written 

testimony, I believe I took that you indicate that while U.S. demand for oil has decreased in recent years, an increasing international demand has led to increasing prices in gas at home. How 

much impact do you think recent American policy has on domestic 

gasoline prices? 

Ms. HARBERT. Well, you know, the reason we have decreased demand is for a very unfortunate reason, which is the recession that 

we have all been suffering through. So we certainly don’t want to 

substitute that for an energy policy. We know the economy is going 

to recover. We will hope it recovers as fast as it possibly can and 

that is going to command more energy, you know, consumed domestically. So if we look at, you know, what is the effect of the re-
100 

cession on the global energy price, I don’t know that anybody 

knows the answer to that. Maybe my friend here to the left that 

is an economist can quantify that for us. 

But I will say when we look outwards and we look at the increasing demand from China, India, the Middle East—which is the second-fastest growing region for energy consumption—we know we 

are going to need more supply. And so it is incumbent upon us to 

look at all of our tools in our toolbox, whether it is increasing access, whether it is examining taxes, whether it is examining all the 

different things that we have to ensure that we are maximizing our 

competitive advantage here, because we do have a lot of resources 

and we could certainly be using that as the foundation to compete 

more effectively in a very, very globally competitive market. 

Mr. MCNERNEY. Thank you. Mr. Weiss, you have—— 

Mr. WEISS. Mr. McNerney, two things about that: first, studies 

have indicated the reason why demand is down is due to increased 

fuel economy standards that this Congress passed in 2007 and 

Mr.—President Obama implemented in 2009; second, the International Energy Agency reports that estimated demand worldwide 

for oil is only up about one percent this quarter compared to the 

previous quarter. So I don’t believe there is a huge increase in demand that is driving up oil prices, and in fact, research by 

McClatchy and others indicates that it is Wall Street speculators 

that are helping to drive up the price of oil due to preying on fears 

of a supply disruption in the Persian Gulf. 

Mr. MCNERNEY. I think you sort of answered my next question 

to Ms. Harbert. 

We have heard a lot about domestic production; we haven’t heard 

a lot about efficiency of our automobiles. Do you think that that 

has had any impact on the price we are paying for gasoline today? 

Ms. HARBERT. I think everybody recognizes that, as an economy, 

we certainly can become more efficient and that means in our 

transportation sector and in our electricity infrastructure without 

a doubt. Since the fuel standards that were put in place and are 

coming into the marketplace, they—a lot of people haven’t bought 

cars recently. The new cars that have the efficiency standards, just 

based on our economy, will they have an impact on reducing the 

amount of consumption over time? I mean I think that was the— 

ultimately the purpose of that. And I think we have to examine all 

ways we can become more efficient without a doubt. But the real 

answer is that the reason we have had decreased demand is directly tied to the economy, but the fuel standards will certainly 

have some beneficial impact in the out years. 

Mr. WEISS. One point of fact: the auto companies are on record 

to produce more—sell more cars this year than any year since 

2007. 

Mr. MCNERNEY. Okay, thank you. 

Mr. Chairman, I had better yield back or I will get the gavel. 

Chairman HALL. You won’t get the gavel but thank you for yielding back. 

The Chair now recognizes Dr. Harris, the gentleman from Maryland. 

Dr. HARRIS. Thank you very much. And thank you, Mr. Chairman for holding a hearing on a very important subject. As people 
101 

go to that gas pump and see that $4 a gallon at the top and the 

farmers in my district paying $4 a gallon for diesel and the 

watermen, they are interested in this. Here is the yes no question. 

If the President had an epiphany today, got up tomorrow and, you 

know, in the White House, had a press conference, said that we are 

going to increase onshore and offshore drilling in the United 

States, we are going to maximize American energy production, he 

announced that the $4 billion Department of Energy budget was 

going to go to research programs to convert natural gas to liquid 

fuels and—what would the response of the oil market the next day 

be—price on the oil market? Would it go up or down? Mr. Slaughter? The President announces the United States is going to become 

an energy leader in the world. 

Mr. SLAUGHTER. The oil market is very complex. It depends on 

many factors—— 

Dr. HARRIS. Will it go up or down? Because we—it has been done 

before. See, President Bush did it once so we don’t—you know, we 

actually have historical evidence of what happens. 

Mr. SLAUGHTER. Yeah, I have to pass on that one. 

Dr. HARRIS. Okay. Ms. Harbert? 

Ms. HARBERT. You point out an interesting thing. When Presi- dent Bush lifted the moratorium, the price of oil went down $9 

overnight. I don’t know exactly what happened. It is complex. And 

I will be serious because this is—— 

Dr. HARRIS. Yeah. 

Ms. HARBERT. —a serious issue and we have—— 

Dr. HARRIS. Sure. 

Ms. HARBERT. —to take it seriously. There are a lot of different 

complicating things in there, but the long-term price signals of the 

market would be is that America is back open for energy business. 

Dr. HARRIS. Thank you very much. 

Dr. Foss, you are an economist. What happens to the speculators? What do they get worried about the next day? 

Dr. FOSS. Perception is reality and I agree with my friend, Karen 

Harbert, that a signal like that would have a huge impact, especially given everything else that is going on. 

Dr. HARRIS. Sure. 

Mr. Brown? 

Mr. BROWN. You know, I have been in the business trying to predict the oil price for a long time here, but if you have the ability 

to do this, let us talk later because we—it could really work to my 

benefit. 

Dr. HARRIS. That is what I thought. 

Mr. Weiss? 

Mr. WEISS. It would make no difference and would take seven 

years to produce any oil from increased offshore oil drilling. 

Dr. HARRIS. Mr. Weiss, the question was—— 

Mr. WEISS. It would make no difference—— 

Dr. HARRIS. —the next day, the next day—— 

Mr. WEISS. —no difference—— 

Dr. HARRIS. —there is no difference? 

Mr. WEISS. No difference. 

Dr. HARRIS. Let us talk about Mr. Weiss’ testimony because it is 

kind of a tome here. Mr. Slaughter, Mr. Weiss says the Council— 
102 

the National Petroleum Council ‘‘also strongly advocates a greenhouse gas pollution reduction regime.’’ I read that report. I don’t 

see an advocacy for greenhouse gas reduction regime. I see a statement that if you are going to do one, here are the things you ought 

to do. Did the Council strongly advocate a greenhouse gas reduction regime? 

Mr. SLAUGHTER. No, we were all—— 

Dr. HARRIS. Thank you very much. 

Ms. Brown—Mr. Brown, the Secretary of Energy was here and 

admitted that the Department of Energy spends 1/8 of one percent 

of their budget on natural gas research, 1/8 of one percent. Now, 

what can the Federal Government do to help you and your companies develop unconventional oil? Do you think that is an adequate 

amount for the Department of Energy to spend on research into 

this field? 

Mr. BROWN. You know, for what we do, we try to react very 

quickly. The reason we built the rock lab for ourselves in Denver 

is because the commercial labs that are out there will do what we 

want to do; they won’t do it quick enough for us. So if the government is going to invest money in research, it has to be on some of 

the subjects we talked about earlier. It has to be long-term, has to 

be something out there. We operate in a much—we have even had 

these discussions. We support all the universities across Montana, 

North Dakota—we haven’t got to Wyoming yet but we are working 

on that one—Colorado School of Mines. Academia does not work 

fast enough for us. 

Dr. HARRIS. Sure. So we—— 

Mr. BROWN. So that—— 

Dr. HARRIS. I know they need the help. Mr. Brown, the testimony 

from Mr. Weiss says that the price of oil coming out of the ground 

is $15 a barrel and of course you are selling it for $100. Mr. Brown, 

what is your average price of the oil that you produce? 

Mr. BROWN. Oh, wow. 

Dr. HARRIS. I know because $15 is not what American companies 

are paying to produce oil. What do you charge or what your cost 

is? 

Mr. BROWN. That is in our SEC filings. You can see our finding 

cost for oil is around 25 bucks a barrel—— 

Dr. HARRIS. Twenty-five. 

Mr. BROWN. —25, 27, somewhere in there. 

Dr. HARRIS. So they are off by a factor of, oh, 60 percent or so. 

Okay. So it is a second thing and I will look through the rest of 

this and I will submit some questions for the record later. 

Ms. Foss, let me ask you a question. The—what will the effect— 

the President says, you know, there is $4 billion, oh my gosh, we 

have to reduce all these subsidies to oil companies at $4 billion. 

How—if we do that, how in the world are they going to do research 

if we eliminate the advantages that we give to all businesses 

whether it is pharmaceutical industry, whether it is the music industry—Apple gets the same benefits. How are we expecting the— 

because Mr. Brown just suggested that actually you have to be 

nimble. You actually have to be able to produce some of this research for these groundbreaking technologies. How are we going to 
103 

do it if we remove that $4 billion in tax incentives that every manufacturing business in the country gets? 

Dr. FOSS. Thank you for making the point that way because that 

is something that doesn’t get spoken correctly I think to the wider 

audiences. I—we have been through every bit of taxing and forms 

of taxing and subsidies and credits on different industries and 

there is no difference between what is done for oil and gas versus 

anything else. There are very large upfront research and development costs. Exploration is a research and development business. 

And so in that way, pharmaceuticals is a great example. You sink 

a lot of money into the business without knowing what you are 

really going to get for it. 

I think the key thing is transparency and predictability and feeling like there is a fiscal regime in the country that is clear, is not 

going to be handled capriciously, that is consistent. I think all business in the United States appreciates that, not just the oil and gas 

industry. 

Dr. HARRIS. I think you are right. 

Thank you very much, Mr. Chairman. 

Chairman HALL. And thank you. 

The Chair now recognizes Mr. Lujan, gentleman from New Mexico. 

Mr. LUJAN. Mr. Chairman, thank you very much. Appreciate the 

testimony today and you bringing us here today, Mr. Chairman. 

A lot of conversations about who is to blame for high gas prices, 

anyone that truly believes that President Obama or Secretary Chu 

or Speaker Boehner or Congressman Lujan wants higher fuel 

prices for the American people, it is not true. And I think that we 

need to get past this so that way we can start solving the problems. 

People are paying more at the pump. People are paying more for 

eggs. Our farmers as well are paying more for diesel. And there are 

some things that we can do as well. Why is the United States exporting more diesel now in 2011 than ever before? If my farmers 

are paying more for diesel or we are moving signs or this weekend 

I was on the Bobcat cleaning up around our sheet bars moving that 

dirt and it did cost a bundle to be able to fill up that Bobcat. Why 

are we exporting more diesel? 

And therein lies some of the questions that I have is if we 

produce more oil and natural gas in the United States, we are 

going to increase supply, correct? That means lower gas prices at 

the pump for the American people? And I would ask the witnesses 

yes or no. Mr. Slaughter, we will start, just come down the line. 

Mr. SLAUGHTER. All things being equal, more supply in the market of—— 

Mr. LUJAN. All things being equal, if the United States increases 

its supply, will fuel prices at the pump go down for the American 

people? 

Mr. SLAUGHTER. It would reduce the supply of crude oil. Refined 

product prices have more complex dynamics. But all things being 

equal, it reduces the—— 

Mr. LUJAN. Ms. Harbert? 

Ms. HARBERT. Demand is going up, we need more supply. We 

don’t have the supply, the prices go up. So if we have more supply, 
104 

the prices will—that price increase will be somewhat ameliorated, 

if not go down. 

Mr. LUJAN. Okay. Let us stay there for a second. So if the United 

States increases supply, fuel prices will go down is what you are 

saying. All right. So do you support—you support increasing production in the United States? 

Ms. HARBERT. Is that a question? 

Mr. LUJAN. Yes. 

Ms. HARBERT. Yes. 

Mr. LUJAN. Do you support keeping any increased production in 

the United States for American consumption to be refined in the 

United States only? 

Ms. HARBERT. To be refined here and then kept here for use? 

Mr. LUJAN. Yes. 

Ms. HARBERT. So putting up trade barriers to—— 

Mr. LUJAN. Call them whatever you want. 

Ms. HARBERT. —to keep those molecules back in the United 

States? 

Mr. LUJAN. I am saying if we are going to increase production 

in the United States, shouldn’t we keep it in the United States to 

be able to help the American consumer and American businesses, 

the people that you represent? 

Ms. HARBERT. We are not going to be able to put a ring around 

the United States, erect a wall and have the price, you know, be 

dramatically different on the island of the United States versus 

what it is set on the world market. So—but when you look at the 

overall world market—— 

Mr. LUJAN. So then if there is not a little island around the 

United States, then we won’t be able to impact prices. Is that what 

you are saying? 

Ms. HARBERT. No, that is not what I am saying. 

Mr. LUJAN. So then if we are able to create this magic ring 

around the United States and increase production in the United 

States, shouldn’t we keep it here? 

Ms. HARBERT. We are not—— 

Mr. LUJAN. That is what I mean. 

Ms. HARBERT. —able to build a hypothetical wall around the 

United States so this—you started the conversation very—— 

Mr. LUJAN. Well, then how are we going to—— 

Ms. HARBERT. —importantly. You said this is a very important 

subject to maybe get beyond some of this. 

Mr. LUJAN. Ms. Harbert, my time is limited. I apologize. If—— 

Chairman HALL. You have time to let her answer the question. 

Mr. LUJAN. Well, Mr. Chairman, I appreciate that but it is my 

line of questions so we will get through this and I will try to be—— 

Chairman HALL. Well, I am trying to help you. 

Mr. LUJAN. Well, I want to be respectful to our colleagues so I 

appreciate that, sir. We will submit some things in writing as well. 

But these have been conversations we have had in the Natural 

Resources Committee as well. If I remember correctly, back when 

the United States built a pipeline after the oil embargos in the 

early ’80s, there was a requirement that was put in place by this 

Congress by one of our Republican colleagues that authored the 

amendment that said any oil that flows through this pipe is for 
105 

American consumption. They built a little circle around us then 

and it helped the American people, right? So I don’t know why we 

are having this fundamental disagreement today where if we are 

going to increase production, American people are hitting $4 a gallon, some places higher. Diesel, which is a byproduct that we are 

exporting more now is hitting our farmers and ranchers even harder. Why don’t we say—— 

Chairman HALL. All right. The gentleman is using all of his time 

for his question. If we can get to the question and let them give 

a quick answer. 

Mr. LUJAN. Mr. Chairman—one second. Mr. Chairman, if I may 

ask that time be suspended and ask a personal inquiry here, the 

rules allow for a Member to get five minutes to be able to ask questions in any way that they so choose, but when Members of the 

other side of the aisle are interrupting answers that are coming in, 

no one was correcting to be able to ask the witnesses to respond 

in a certain way. 

Chairman HALL. I tried to give everybody five minutes, but if 

some of you go over and some of you go over with your questions. 

Mr. LUJAN. But it is important. 

Chairman HALL. All right. Go ahead and go with it. How much 

time did he have coming? 

Mr. LUJAN. I was about 1 minute 40 if I am not mistaken, Mr. 

Chairman. 

Chairman HALL. All right. 

Mr. LUJAN. So if that is the case, I don’t understand why we are 

not trying to learn what we have done in the past. If there is going 

to be support across the aisle to work together, which was done 

after the oil embargos in the ’70s to say what can we do to increase 

production but make sure that we keep it in the United States for 

American consumption to truly help us here, why that is just not 

even put on the table any longer? And I guess that is something 

I can’t get my hands around. 

Dr. FOSS. Congressman, if I could I think I have some ideas that 

might help you understand the issues. The places in the United 

States where we have the cheapest fuel prices right now are where 

the new sources of production are located. You can look at—— 

Mr. LUJAN. So this—— 

Dr. FOSS. —this—you can look at—— 

Mr. LUJAN. Dr. Foss, if I may—— 

Dr. FOSS. Let me finish, please. 

Mr. LUJAN. No, Dr. Foss, this is my line of questioning here. So 

do you support keeping increased production in the United States 

and not exporting it? 

Dr. FOSS. No, I don’t. 

Mr. LUJAN. Okay—— 

Dr. FOSS. What I was going to distinguish was—— 

Mr. LUJAN. Well, I appreciate that but my line of questioning is 

quick here. So—but I do have an area where I think that there is 

a silver lining for us and we talked about this in the Natural Resources Committee as well. This is something that the Chamber I 

believe supports as well and I think that there may be support 

across the panelists. There is a piece of legislation that was authored in the previous Congress that has been reintroduced in this 
106 

Congress. And we talk about using natural gas. Natural gas in 

New Mexico right now, we know production is down because of 

where the price is. There is a piece of legislation that would actually encourage natural gas use in 18-wheelers. So as we talk about 

moving the largest vehicles across the country, using a domestic resource, keeping the dollars in the United States, there is a piece 

of legislation ready to go and I hope that there is a way that we 

can work together to get our leadership to get this bill moving. 

Lastly, I will say is that, you know, with all this pushback 

against biofuels and making investments in other sources of energy, 80 percent of convoys in Iraq and Afghanistan are for fuel 

and it is estimated that 46 convoys resulted in a casualty. From 

2003 to 2007 we lost 30—we lost 3,000 uniformed and civilian contractors. Something has got to change. 

Thank you, Mr. Chairman. 

Chairman HALL. I interrupted you and cost you about 30 seconds. Would you like to have 30 seconds back to give Dr. Foss a 

chance to answer as you asked? 

Mr. LUJAN. Mr. Chairman, I think what I will do is I will just 

put some questions in writing there and I will get them to the witnesses. 

Chairman HALL. Okay. You have that right. 

The Chair now recognizes Mr. Rohrabacher, gentleman from 

California. 

Mr. ROHRABACHER. And, Mr. Chairman, just for the record, I 

think the—our colleague did have a point that he does have a right 

to control those five minutes any way we sees fit and just would— 

with due respect, I think that that is something that—he did point 

out that quite often I will question a witness and demand an answer and interrupt if they are trying to elongate the answer. So— 

but I do that with respect and I know you are just trying to make 

sure we get all the information out. Sometimes the rules are contradictory to that but sometimes they are meant to keep things 

fair. 

Let me just note here that if the gentleman’s point is that new 

energy—if we keep it here rather than let it go into the world market that that will create lower prices here, why is he stopping with 

oil? What about food? Why don’t we just say any agriculture products that are made in the United States can only be sold in the 

United States? Well, think of how low the price of food would go 

or anything else that we manufacture. The reason we don’t do that 

is because it creates other barriers that will hurt our economy and 

put other people out of work and hurt the overall prosperity of our 

country because it is more than just a one-step process. But we do 

know if you increase the supply of something, usually that means 

that the prices—that the pressure for higher prices go down. 

Let me note—and correct me if I am wrong, Mr. Weiss, how 

many oil refineries have we built in this country in the last 3 decades? 

Mr. WEISS. Oil refinery capacity has increased dramatically in 

the last 3 decades. 

Mr. ROHRABACHER. How many new oil refineries? 

Mr. WEISS. None, but we have expanded—— 
107 

Mr. ROHRABACHER. None. That is a good answer. Thank you. 

And I will follow my colleague’s lead. Yes, we have built none. 

Mr. WEISS. We have expanded capacity. 

Mr. ROHRABACHER. No new refineries have been built. Luckily, 

our—the people who run our refineries now are trying their very 

best to keep up with technology. 

Let me ask, I have heard some really incredible analyses of how 

much oil we—and gas we have in this country but also I hear 

something which seems contradictory to that from Mr. Brown. Ms. 

Harbert, the predictions you said about how much oil and gas we 

have, was that including the predictions from shale oil? And Mr. 

Brown suggested that we don’t really have the technology now to 

get that. 

Ms. HARBERT. The specific figure that I referenced, which is 2.7 

trillion barrels, that is in-place oil shale and oil sands—— 

Mr. ROHRABACHER. Um-hum. 

Ms. HARBERT. —important to note that 80 percent of those resources however, are on federal lands, not private lands. 

Mr. ROHRABACHER. Right. 

Ms. HARBERT. In order to develop those, the Federal Government 

has to allow access. 

Mr. ROHRABACHER. Now, I am just thinking about the technology 

now. Do we have the technology to get that shale oil? 

Mr. SLAUGHTER. We are working on the technology. Shell has 

had a project—a research project going for ten years or so. It is a 

very long process to make that technology work. 

Mr. ROHRABACHER. Does that mean no? 

Mr. SLAUGHTER. It means we need to work on it—— 

Mr. ROHRABACHER. I know but—— 

Mr. SLAUGHTER. —and it is the same basis. 

Mr. ROHRABACHER. —we don’t have it now. 

Mr. SLAUGHTER. We do not produce commercial oil shale today, 

no. 

Mr. ROHRABACHER. Okay. So—— 

Ms. HARBERT. But in order for those investments to continue and 

to grow, there has to be some certainty that ultimately they are 

going to be able to produce this resource in the United States—— 

Mr. ROHRABACHER. Okay, but—— 

Ms. HARBERT. —and right now, that is one of the—— 

Mr. ROHRABACHER. Well, we didn’t know how we would get a lot 

of gas before fracking came up. We didn’t know how we were going 

to get a lot of the oil, so we would hope the technology was there, 

but I am just trying to get right now how much reserves we can 

actually count on. 

Mr. Brown, there is—I read an article somewhere that suggested 

that there was a new method of fracking that was not going to be 

using water, that would be using some sort of explosives, a fuel of 

some kind. Do you know anything about that? Could you enlighten 

me to that? 

Mr. BROWN. There is a technology out there called 

GASFRAC—— 

Mr. ROHRABACHER. Um-hum. 

Mr. BROWN. —and they actually use—they—you can use any propane—or any hydrocarbon product. I think the one they are cur-
108 

rently using is propane. So instead of using water, you use propane 

to move your materials. 

Mr. ROHRABACHER. Okay. And that would make it less likely to 

have water pollution? Why would someone use that? 

Mr. BROWN. Part of the issues we have—like with this Bakken 

shale—not so much in the Bakken shale but some of the other formations that we are looking at you have in the porous space in the 

rock you have some clay particles in there similar to bentonite that 

would swell up when they are contacted with water, which is what 

we currently use for fracking—— 

Mr. ROHRABACHER. Um-hum. 

Mr. BROWN. —so you try to frack them with something other 

than water. 

Mr. ROHRABACHER. So that would make it more efficient. 

Mr. BROWN. Yes. Yeah. 

Mr. ROHRABACHER. So I have no doubt that we are going to have 

technological advances that will increase our ability to obtain this 

type of fuel and energy for our country as long as the—our government has the purpose and it is the purpose of government to increase the amount of energy in our country and I would suggest 

that it is the purpose of this government not to increase oil and gas 

production out of some unfortunate loyalty to this idea that CO2 is 

creating huge changes in our climate which will result in the fact 

that we are not going to develop those energy sources. 

Thank you very much, Mr. Chairman. 

Chairman HALL. The gentleman yields back. Thank you. 

Recognize Mr. Quayle, gentleman from Arizona, for five minutes. 

Mr. QUAYLE. Thank you, Mr. Chairman. 

Mr. Brown, the President routinely has been claiming recently 

that under his Administration America is producing more oil today 

than at any time in the last eight years. This is a few years after 

the fact the President actually said during an editorial board meeting—I believe it was in San Francisco—that under his Administration energy prices would necessarily skyrocket. And Secretary Chu 

I believe has been quoted as saying that he would like to see gas 

prices in the United States to be at European levels. So I think 

that that kind of shows where the Administration is. 

But even though he is trying to say all this, the reality is that 

most of the domestic production has occurred on state and private 

lands, not federal land, which the Administration actually has. And 

I believe Ms. Harbert said that in her testimony that the data 

shows that oil production on federal lands declined by 11 percent 

and natural gas production on federal lands declined by 27 percent 

in 2009 to 2011. 

Now, in Arizona where I am from and in many of the Western 

States, much of our land is federal. It is under federal control. And 

I really—routinely hear from companies with renewable energy and 

also traditional energy that they are extraordinarily frustrated by 

the permitting problems and the administrative roadblocks that 

are put up when people are trying to get projects on federal lands. 

And in your testimony you said that ‘‘it is fortunate that Bakken 

exists in North Dakota because most of the surface and mineral 

ownership is by private individuals with minimal federal ownerships.’’ Could you expand on this because this is the big thing that 
109 

we have been hearing over and over again is that, wow, oil and 

natural gas production is going up and this is because the Administration’s actions when in actuality it is in spite of the Administration’s actions because most of this has been developed on state and 

private land. So could you expand on what you are talking about 

with the Bakken field? 

Mr. BROWN. Sure. One of the projects that we are developing in 

North Dakota is an area or a prospect we call Pronghorn. It is located in Stark County, North Dakota, and that project butts right 

up against the Theodore Roosevelt National Park up there. The 

park is off limits. We can’t drill in the park; we can’t even drill 

under the park so that is totally off limits. There is a halo of federal acreage around the park that is administered by the BLM. We 

are able to get drilling permits in North Dakota from—on state and 

on fee ground in something around 60 days. On the acreage or the 

leases that we have that are federal, the current—and this is their 

number; this isn’t our number—the current number is 298 days to 

get a permit. 

As I mentioned in my testimony, we currently have 19 drilling 

rigs running in North Dakota and trying to make—trying to get 

the logistics to all this to work, when you—you know, you are saying—when you start in they are going—they are saying a permit 

may take 6 months to get. You plan on 6 months. The 6 months 

gets there, you don’t have a permit, but you have got a drilling rig 

you have got to do something with. So it has just been—it adds another level of complexity, another level that we have to take into 

our planning right now. The other—I mean—so that—you know, 

we are waiting almost a year to go drill a well. We are waiting almost a year to start paying royalties that would be going to the 

Federal Government. 

The other issue we have is there are leases within the area that 

we are drilling that we have nominated to come up on the lease 

schedule that just isn’t occurring. And so we are not able to drill 

federal—or fee minerals that surround this particular federal lease 

just because we can’t get access to that federal lease that may exist 

right in the middle of one of our spacing units. 

Mr. QUAYLE. And when you say it was 296 or 298—— 

Mr. BROWN. Two hundred and ninety-eight. 

Mr. QUAYLE. Two hundred and ninety-eight days. Is that on the 

low end? That is a low-end estimate and usually it is longer than 

that or—— 

Mr. BROWN. Well, that is their average over—I think it was the 

last 9 months or something like that. That was—when—Mr. 

Salazar went to North Dakota a couple of weeks ago. That was the 

number that they put out in the print to BLM. 

Mr. QUAYLE. Okay. Dr. Foss, a recent report by Citigroup declared that North America is the new Middle East and that—this 

is a quote—‘‘the only thing that can stop it is politics.’’ And can you 

explain some of the hurdles that politics could pose to the timely, 

safe, and economic recovery of hydrocarbon resources and how our 

current policies are impacting energy development? 

Dr. FOSS. Actually, I was thinking of an example as I was listening to Mr. Brown. We have something like 110 species on the 

watch list in Texas, endangered species. You probably have some-
110 

thing like that in Arizona. And currently, there are attempts to use 

the ESA to try to slow down oil and gas development in West 

Texas. This is of concern to the State because of the impact on oil 

and gas severance tax receipts and other receipts. The point that 

we have made is that these same species that are being discussed 

also impact non-hydrocarbon, nontraditional alternative energy 

projects, as you have well pointed out because they are in the same 

places that people want to use the development of those energy 

technologies. 

So I think that the thing to focus on is the constellation of federal policies, the fact that they often are in conflict with each other, 

there is no one-stop shopping. We created one-stop shopping in the 

State and other States are trying to do the same thing to at least 

be able to streamline the process for developers so that they can 

understand what permits they need to get, what the timeline is 

going to look like, what their responsibilities are, what they have 

to do to mitigate any impacts they are creating, and so on. The 

overall management of the process has to be improved. There is 

just no doubt about that. 

Mr. QUAYLE. Thank you, Mr. Chairman. I yield back. 

Chairman HALL. Thank you for yielding back. 

Mr. Cravaack from Minnesota for five minutes. 

Mr. CRAVAACK. Thank you, Mr. Chairman. I thank the panel for 

being here today. 

A couple questions in regards to—Dr. Foss, can you tell me if— 

we have all heard about you got to pay your fair share and we have 

seen that paying your fair share for some of the oil companies if 

you take a look at, for example, Apple like you said, Johnson & 

Johnson, McDonald’s, for example, they are paying—they get quite 

a bit of tax credits in relation to what the oil companies get. Now, 

if the oil companies lost their tax credit, what happens? What happens to the consumer? 

Dr. FOSS. Not all of the industry is the same. It is a pretty diverse cluster of companies, large, small, some of them are publicly 

traded, some of them are privately financed so the impacts would 

be different. If the standard deductions that businesses get to cover 

the cost of making investments were removed or if the standard investments for aging equipment and assets, whether it is depletion 

allowances for, you know, aging oil and gas fields, new oil and gas 

industry or whether—or its depreciation associated with drilling 

costs and other expenses, then obviously companies are going to 

look at their investments in a different way. It will slow down the 

cycle time. They will move more slowly. They will choose not to 

make certain investments in certain places. And the likelihood is 

that we would actually have a reduction in our potential domestic 

production as a result of that. 

Mr. CRAVAACK. So when I go plug in at the pump, gas is going 

to go up. Are we going to pretty much say that? 

Dr. FOSS. It would have a very big impact. 

Mr. CRAVAACK. Okay. So now let us talk about—that is gas at 

the pump. I am going to plug in, average American, who pays the 

ultimate price for this? The average American is going to pay the 

ultimate price for the tax if President Obama has his way in re-
111 

gards to eliminating the tax credits that are given to the oil companies. 

Okay. Let us take it one step further. When I go into town halls, 

I ask people, how many people have 401(k)’s? How many people 

have IRA’s? You know, how many people have pension plans? A lot 

of people have big oil in their pension plans, would you agree? So 

what is the bottom line going to happen to the pension plans and 

IRA’s and 401(k)’s? Those are probably going to go down as well, 

would you agree with that? 

Dr. FOSS. Well, to the extent that the industry would be perceived to be both more expensive and less valuable, then, yes, it 

would affect market capitalization and affect holdings of those. 

Mr. CRAVAACK. So what the President, then, is proposing is going 

to affect the average American at the pump and also in their longterm retirement plans in the 401(k)’s, IRA’s and their pension 

plans as well. So it is a negative effect overall for these two things 

as well. 

Now, let us talk another thing. Let us say we start ramping up 

oil production in the United States, America. Let me ask you this 

question, Mr. Slaughter. You know, we start ramping up—and also 

Mr. Brown, too—we start increasing our oil production, we start investing into the infrastructure in the United States. What happens 

when you do that? What do you also create in the sidelines? 

Mr. SLAUGHTER. There is a tremendous amount of associated job 

creation potential around the oil industry from the service sector, 

the supply chains, and all the supporting dollars in that. So there 

is a tremendous effect which spreads through the economy. 

Mr. CRAVAACK. Creates jobs, wow, what a concept. I think we are 

in need of that, aren’t we, creating jobs? So—okay. So if we lower— 

get rid of the tax credits we are going to lower IRA’s, 401(k)’s, and 

people are going to have in their pension plans, we are going to increase the price of gas, but if we start investing in our infrastructure, we will start creating jobs which we need badly in the United 

States as well. 

Now, let me ask you this question. We talked, Mr. Weiss—we 

said something about supply if the supply isn’t affected whatsoever. 

The Strait of Hormuz goes down. Ms. Foss, can you tell me Strait 

of Hormuz goes down, Iran becomes potentially a nuclear weapon, 

Strait of Hormuz goes down, 30 percent of the oil goes through the 

Strait of Hormuz, we have harassment from pirates going through 

the Red Sea, lack of supply, what is going to happen to gas? 

Dr. FOSS. It will go up. 

Mr. CRAVAACK. Gas is going to go up. So therefore, the Strait— 

so supply going down, gas is definitely going to go up. Now, let me 

take this one step further. Say we do go into a possible wartime 

scenario where we possibly have actually a two-theater war concept 

where both sides, both coasts are—sea lanes are shut down, supply 

is down. Mr. Brown, can you tell me do we have enough oil in this 

country to keep the United States running in the present? 

Mr. BROWN. We do not. 

Mr. CRAVAACK. So therefore, we could consider oil production 

within the United States of America as a national asset. Would you 

agree with that statement? 
112 

Mr. BROWN. I would, yes. 

Mr. CRAVAACK. Okay. Now, it is not too long ago I think we 

fought a world war, a lot of it initiated because of oil. Would that 

be a correct statement for Japan? 

Mr. BROWN. Yes. Yes. 

Mr. CRAVAACK. So now we are figuring out that oil production 

within the United States is a national asset, will create jobs and 

creating a tax decrease—our tax credit decrease is going to be negative to our economy and possibly negative to job production as 

well. Wow. It seems pretty straightforward to me on where we are 

going here. 

So let me ask—Mr. Weiss, let me ask you a quick question. Do 

you believe that CO2 is the cause of climate change? 

Mr. WEISS. Ninety-eight percent of the scientists who have done 

research on this in this field have concluded that it is humancaused production of carbon dioxide and other global-warming pollutants that are responsible for global warming. 

Mr. CRAVAACK. Let me ask. I only have a couple seconds. Do you 

think we have more CO2 in the air than we did in 1976 versus 

where we are today? Do you think we are more environmentally 

friendly today than we were in 1976? 

Mr. WEISS. Yes, we are more environmentally friendly—— 

Mr. CRAVAACK. Hugely. Okay, let me—— 

Mr. WEISS. —but we have more CO2 in the air than we did in 

1976 in the upper atmosphere, yes. 

Mr. CRAVAACK. Okay, well, I would debate that because of the— 

looking at the arctic ice going down, first off, it says that CO2 follows temperature increase, does not initiate it. Second thing is in 

1976 I was in high school. You look around the same generation 

as I. Do you remember when the big theory was then the polar 

caps were going to expand so dramatically it was going to tilt the 

whole world? 

Mr. WEISS. There had been not as much research then on that 

theory as their as has been now on global warming. 

Mr. CRAVAACK. I would disagree with you, sir, and looking at the 

arctic caps today, it has been proven that temperature follows—or 

CO2 follows temperature. 

And with that, I am over time and I will yield back, sir. 

Chairman HALL. The gentleman yields back. 

And the very patient lady from Florida is recognized for five minutes. 

Mrs. ADAMS. Thank you, Mr. Chairman. A lot of my questions 

have been answered, but I do want to touch back on something. 

Ms. Harbert, I know you answered this earlier but I just want 

to hear it again because some of these rules, you know, the EPA’s 

numerous proposed regulations such as recently proposed New 

Source Performance Standards for power plants and Cross State 

Air Pollutant Rules are very burdensome, especially to States like 

mine in Florida, as well as forthcoming rules on greenhouse gas 

emissions at drilling sites and tier three refining standards. What 

does that mean for our energy use and energy prices? 

Ms. HARBERT. Well, the reality is that industry cannot figure out 

how to navigate this regulatory tsunami. If you look at all of the 

regulations from EPA from 2011 out to 2014, which is what their 
113 

planning horizon is, there are tens—many, many, many, many 

large-scale regulations that are coming forward and nobody has 

taken a look at the complete amalgamation of all of these regulations, what the impact would be on GDP, what the real impact is 

and benefit is to the pollutants they are intended to regulate, and 

what will affect business. And that is really troubling that we have 

all of these regulations coming all in a short period of time and nobody can honestly say that we understand what the complete cumulative impact will be. 

Mrs. ADAMS. Now, would you say they would affect prices? Because I pulled up to the gas pumps just a couple days ago at home 

and the car before me must have had a heart attack because on 

the gas pump it was $81.10. So I can only imagine what my constituent was thinking at the time when they were filling up their 

gas tank. Would those regulations, a combination of such also add 

to the cost? 

Ms. HARBERT. We certainly need to take a look first at electricity 

because we are seeing this play out in real time for us as the implementation of these regulations is already underway, plants are 

shutting down, and the local regulators are trying to figure out how 

to keep the lights on. There is a big reliability issue and I can tell 

you the economic impact of having a reliability problem in our grid 

is significant and very, very frightening for the American economy 

and the American business community. 

On the transportation side of things, I mean these are going to 

be coming in over the next couple of years and we are going to see 

the impact. It certainly is going to do nothing to decrease prices. 

Mrs. ADAMS. And we have seen what happens if we lose a grid 

as seen in the Northeast, correct? So—— 

Ms. HARBERT. Very, very, very big impacts on the economy. 

Mrs. ADAMS. Mr. Slaughter, I understand you also work for Shell 

North America. What is Shell doing to increase energy production 

in the United States? And also, what challenges has Shell faced 

such as acquiring necessary production permits from the Department of Interior or the EPA? And how long did it take Shell to acquire a producing permit for the lease in Alaska’s Outer Continental Shelf? And is that—how does that compare to historical 

timelines? 

Mr. SLAUGHTER. Well, on the first part of the question, we are investing billions of dollars a year, $3 to $5 billion a year in onshore oil and gas exploration, more in the Gulf of Mexico. We are 

also investing in other sources of energy like wind power, very big 

wind power developer. So we have a very robust investment plan 

because we think the resource is there and we think we can develop it for the long-term. 

In terms of the permitting and regulatory experience in Alaska, 

you have to recognize that these are federal offshore leases which 

have a ten-year life. We are almost halfway through that ten-year 

period and we are only now beginning to get the necessary permits 

in place. So we never anticipated the complexities and difficulties 

of navigating that regulatory process, which has caused significant 

risk to that offshore drilling program in Alaska. 

Mrs. ADAMS. And how would that compare to historical permitting timelines? 
114 

Mr. SLAUGHTER. I would have to research that. I think Alaska 

is a bit of a special case because offshore developments in Alaska 

is a new activity. 

Mrs. ADAMS. Well, Mr. Brown, we have heard a great deal about 

the dramatic economic turnaround in North Dakota, you know, 

that is occurring because of—thanks a lot to the oil production. Can 

you describe the current economic outlook for your operations in 

North Dakota and what is the current average salary for your employees? How many people has Whiting hired since the beginning 

of this boom? And what is your company’s short- and medium-term 

growth potential? 

Mr. BROWN. Wow. When we made our first acquisition in North 

Dakota—and this would have been back just before we went public 

in 2003—we had zero employees in North Dakota. We are currently 

at about 270 employees in North Dakota. As I mentioned, we have 

270 openings in the country right now, approximately 100 of those 

are in North Dakota. As you are well aware, you know, there is— 

in order to get employees up there, we have bought housing, we 

have bought apartments, we are doing everything we can to make 

it, you know, hospitable for the folks that we move up there. We 

moved one gentleman from Shreveport, Louisiana, up there. He is 

wondering if we moved him to the end of the world. 

Our outlook for growth, we are currently spending about $800 

million in North Dakota this year. That level will continue to grow 

next year, and so we are—I mean North Dakota is just a very— 

one of the foundation blocks for Whiting right now. 

Mrs. ADAMS. Average salaries? 

Mr. BROWN. Oh, man. I am going to guess. The last time I saw 

the average salary we were paying up there was approaching 

$100,000 a year. 

Mrs. ADAMS. So this process has been economically good for 

North Dakota and the United States? 

Mr. BROWN. Correct. 

Mrs. ADAMS. And it created jobs? 

Mr. BROWN. Both direct and indirect. I mentioned all the—you 

know, we hire—a lot of what we get done up there is through contractors. And so we—it just, you know, dominoes through the economy. 

Mrs. ADAMS. And I realize I went over, Mr. Chair, but I would 

like for Ms.—Dr. Foss, if she would like to finish her response to 

my colleague when she was talking about distinguishing if that 

would be appropriate? 

Chairman HALL. Without objection, you are recognized. 

Dr. FOSS. This is to Congressman Lujan’s point you mean? Here 

is the issue—and this is why the debate around Keystone and 

other infrastructure—siting infrastructure like that is so important. We have low fuel prices in the middle of the country where 

supply is abundant. The bulk of the population is in coastal areas. 

We don’t have good ways right now to move supply from the interior of the country where Whiting and other companies like Shell 

are operating to the points where people are. And without being 

able to address that problem, then we are not going to be able to 

provide everyone with more opportunities to have more competitively priced energy. 
115 

The other thing I would like to suggest the Committee think 

about is our own waterways—our own coastal waterways by law 

we cannot move production in our own waterways that is domestically produced because of restrictions in the Jones Act. I know this 

is controversial but I did put it in my testimony. I want to go on 

the record as suggesting that everyone does need to look at that 

and the constraints that it poses. It is really—it is a shame. I do 

agree it is a shame to think about exporting our production outside 

of the country when we could be our own best customers. But we 

can’t get there and that is something that people could think about. 

Chairman HALL. All right. The gentlelady yields back. And I 

thank you for that. 

And I certainly do thank all of you. I think we are out of questionnaires and questions completed. And I thank you for your very 

valuable testimony and the Members for their questions. And this 

has been a wonderful—I think a wonderful presentation on all five 

of your parts. And I thank you and I know the Committee thanks 

you. And these empty chairs here shouldn’t have any effect on you 

because this is all taken down. They will all be given to their committee staffs and they will either read them to the Congressmen 

or let him read it or her read it themselves. So it is available to 

them and you have made that possible and I sure do thank you. 

The Members might have some additional questions for any of 

you and we will ask you to respond to those in writing if they submit them to you. The record will remain open for a couple of weeks 

for additional comments. 

At this time, I would like to enter into the record three items— 

and this is without objection—the Executive Summary of the National Petroleum Council report that Mr. Slaughter has testified on 

today. That is the first one. Second, an editorial from Investor’s 

Business Daily summarizing the massive amount of U.S. oil resources that we could potentially access. That is number two. Number three, an article from yesterday’s E & E News detailing comments made by the Texas Railroad Commission Chairman that lifting regulatory burdens could allow Texas oil production to quadruple to four million barrels per day. Without objection, it is so ordered. 

[The information appears in Appendix II.] 

Chairman HALL. And at this time, if there are no further inquiries, we are adjourned. And thank you. 

[Whereupon, at 12:13 p.m., the Committee was adjourned.] 

(117) 

Appendix I 

ANSWERS TO POST-HEARING QUESTIONS
118 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Mr. Andrew Slaughter 

Questions for the Record for Andrew Slaughter related to the House Science Committee Hearing: 

"Tapping America's Unconventional Oil Resources for Job Creotion and Affordable Domestic Energv: 

Techno/ogv and Policy Pathways" held on Tuesday. April 17. at 10:00 a.m 

1. Tn recent weeks, county commissions in Mesa, Garfield, and Rio Blanco County 

Colorado have passed resolutions criticizing or opposing a proposal from the Bureau of 

Land Management (BLM) that would reduce the amount of public land available for oil 

shale research and development. Can you briefly explain the impact of the BLM proposal 

on oil shale development, and its potential implications for the United States' long term 

energy outlook? 

The potential contribution of oil shale in the US. to domestic oil production is substantial in the longterm. The oil in place in Colorado, Utah and Wyoming is estimated at 1.5 trillion barrels of which over 

half may be recoverable with appropriate technology development. However, such technologies may 

take decades of sustained research, experimentation and capital commitment for the resource to be 

developed and large-scale, economic and environmentally responsible operation can lead to large-scale 

production. Such a sustained effort will require long-term commitments from companies and a 

supportive fiscal, leaSing, access and research regime from the U.S. government. 

History has shown in many instances that the most effective arena for technology development is in the 

field, with the ultimate prospect of commercial operations. Restrictions on access inevitably result in 

restrictions on technology development as companies have both less opportunity and less incentive to 

work on and improve the technologies which could unlock large-scale production in the long-term. 

Federal leases are clearly a necessary and important part of opening and maintaining access to oil shale 

resources, since federal lands in the Rocky Mountain States where huge resources exist are extensive. 

The Research, Development and Demonstration (R, D&D) leases that were awarded by the BlM in 2006, 

represented a positive signal to industry that this resource is important to long-term national energy 

security and that the government recognizes the importance of sustained long-term applied technology 

development in the field to ultimate success. 

However, the industry is not encouraged by the lack of follow-up leasing programmes since 2006, and 

by proposals to cut back land available for leasing. The imposition of more restrictions on RD&D land 

access can be expected to slow progress on effective and environmentally appropriate technologies and 

potentially put at risk major contributions to new oil supply when it is needed in 20 or 30 years time. 

The approach of the U.S. to this resource can be contrasted with that of Jordan, where the government 

has made available large land areas for oil shale research, in the expectation that the country can 

become an important oil producer when the technologies have been proved. We can also contrast it 

with the U.S. government maintaining a research effort into another large-scale future hydrocarbon 

resource, methane hydrates, for which ultimate success will also depend on long-term, field-based 

technology trials. 
119 

In summary, long-term availability of the huge oil resource and large-scale production potential 

represented by oil shale can be enabled by leasing of federal lands in the resource-rich areas; and will be 

impeded and delayed by restrictions on such leases. 
120 

Responses by Ms. Karen Harbert 

U.S. HOUSE OFREPRESENTATlVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHKOLOGY 

Questions for the-Record 

Tbe Honorable llitlph nail 

Tapping America's Unconvelltional Oil Resources/or Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April 17,2012 

10:00 a.m. "12:00 p.m. 

2318 Rayburn House Office Building 

l\'is. Harbert 

L _/0,. recent article in Oil and Gas .Tournal warned that "transportation hmdles potentlally 

couid slow down light oil development," and further elaborated on ch8Jlenges that 

producers could face in transporting crude to refineries. Is this an assessment you would 

agree with? Can you elaborate on the current state ofinfrastructul'e serving ne,,\, 

unconventional plays, and identii"y any issues now or in the future v..ith adequate 

infrastructure to handle the oil boom? 
121 

-u.s, HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE. SPACE, Al"\D TECHNOLOGY 

Questions for the Record 

The Honorable Randy Neugebauer 

Tapping America's Unconventional Oil Resources/or Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April 17, 2012 

10:00 a.m. -12:00 p.m. 

2318 RaybWll House OlIicc Building 

Ms. Harbert 

\Vhat are the dangers of releasing crude oil fTom the Sb.'8tegic Petroleum Rese!'ve absent a 

real, significant disruption in sunply? _ It is my understanding thai .ve have Stil1110t 

replHced the 30 milliolJ bands of reserves that the Administration released ill 2011; what 

do you believe the total cost to the taxpayer 'will ultimately be when the reserves are 

replaced, presumably at a higher cost of crude than when they were sold last year? 

If you could prioritize the top three items that the tederal goveollnent could do, or stop 

doing, to encourage greater acces.s to affordable, reliabk <:nergy, 'what 'Would it be? 
122 

C.S; HOUSE" OF REPRESENTATIVES 

COMMITTEE 0'[ SCIENCE. SPACE, AND TECH,[OLOGY 

Questions for the. Record 

The Honorable Randy Hultgren 

Tapping America's Unconventional Oil ResourcesJor Job Creation and 

Affordable Domestic Energy: Technology and Polley PathwaJ's 

Tuesday, April 17, 2012 

10:00 a.m. ·12:00 p.m. 

2318 Rayburn House Office TIuilding 

Ms. Ha.rbert 

1. To w11at degree do JOU think that the use of hydraulic fracturing has been r~sponsible for 

the growth injob creation we have ~een in the oil and gas industry in the r..ast few years? 

wbat kind of job grov.ih do you expect io see in the next decade? 

2_ What kind of an impact ",1.11 proposed federal regulations have on this job growth? For 

:lnslaIwe, th~ EPA is working on a rule that would require companies to apply for 8 permit 

for hydraulic fracturing if they plan to use diesel-like substance~ in the fracturing fluid. 

Exactly what constitutes diesel fuel is still being worked out, hut the EPA is hoping to 

expand the definition br;;:yond the traditional scope. V..'hat kind of impact would this 

additional layer of regulation have on development and job creation? 
123 

Responses by Dr. Michelle Michot Foss 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Questions for the Record 

The Honorable Ralph Hall 

Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April 17,2012 

10:00 a.m. -12:00 p.m. 

2318 Rayburn House Office Building 

Dr. Foss 

1. Recently, there have been allegations in the media that oil companies are responsible for 

fixing the price of oil somehow. For example, Mr. Weiss authored articles supporting this 

hypothesis. Do you believe it is possible for the "Big Five" oil companies to fix the price 

of crude oil? 

It is highly unlikely that in our large, global, liquid oil marketplace, overt price fixing could 

occur unnoticed and without reactions. I will not say impossible - it could be that a market 

participant might, for a very short period of time, influence oil price one way or another by virtue 

of trading positions. Market manipulation in traded commodities is very difficult to achieve and, 

more importantly, to sustain long enough for such positioning to be profitable. Note my caveat 

regarding profitability - in all of the documented cases of attempted commodities market 

manipulation that I know of, trading losses were the outcome. "Loss aversion" being a 

widespread hallmark of investor behavior, even among the most sophisticated investors, the 

downside risk of overt market manipulation and price fixing provides a strong disincentive to 

such strategies. 

We believe, based on extensive review ofliterature and analysis and our own depth of 

knowledge about the structure and performance of oil and other commodities markets, that oil 

price movements are largely the consequence of a number of factors that can be identified and 

understood, but difficult to test given lack of data and transparency. One key oil price driver is 

the inherent structure of the global crude oil market, dominated by producing and exporting 

countries that impact prices via production quotas. These countries have target prices that reflect 

the cost of political stabilization. Throughout the "Arab Spring" and as events have unfolded 

since then, producing/exporting countries have used revenues from oil export sales to mollify 

restive populations. A second key driver has been the dominance oflarge consuming emerging 
124 

markets - China and India in particular. India actively subsidizes the cost of petroleum products 

to politically powerful customers, sheltering them from higher prices and thus exacerbating 

global demand at a time when demand should be more price sensitive. Third, the cost of supply 

is a central factor. Both real and subsidized demand and consequent high prices have triggered 

large capital investments in ever more expensive frontier oil plays, such as offshore in deeper 

water and complex unconventional resource projects. Higher oil prices also make the costs of 

inputs to oil exploration and production, such as steel, much more expensive. Fourth, 

commodities are treated as an asset class in investment portfolios. The base of commodities 

market participants has broadened considerably over the years, and we now have a large 

population of investors providing crucial financial liquidity but who also do not have physical 

assets and thus are invested in futures contracts simply for financial gains. This trend is a 

distinct consequence of U.S. fiscal and monetary policy. The performance ofaltemative 

investments such as stocks and bonds has been uneven and lackluster, discouraging many 

investors from holding these assets. A particular problem is that for many years since the late 

1990s - interest rates have held down in order to support economic growth and recovery through 

myriad events, ranging from the 1990s "dotcom" bubble and bust, to 9/11 and housing (first to 

encourage mortgage lending and then to recover from the broad recession in which we have been 

mired since 2009). Oil is traded in dollars; low interest rates impact the value of the dollar; a 

cheaper dollar has contributed to the long upward trajectory of our main, light sweet crude 

benchmark. 

$160 12. 

'14' '00 

$120 

.. j 

li .. ", 

..... t ... 20 

.,. -Cushlng, OK WTI spot !trIce FOB (Dollars per Barret) 

-Tnlde Weighted Exchange Index: Major Currencies 

Finally, other behaviors - unplanned, unexpected, and unpredictable - can "accelerate" price 

movements that may already be underway because of shifting fundamentals. We think "herding" 

can and does occur. That is, market participants will pile into traded contracts in hopes of 

benefitting from price appreciation (non-commercial participants mainly engage when prices are 
125 

rising; most of these investors are not sophisticated enough to engage successfully in "short" 

positions). Behavior of non-commercial market participants at times can be so prominent as to 

cause the traded price to "de-link" from core, supply-demand fundamentals. Indeed, the 

increasing popularity of commodities for investment portfolios and demand for futures (growth 

of the "paper" market) caused us to suggest, in 2009, that the physical and financial markets for 

crude oil and other traded commodities were both separate yet highly linked (see 

http://www.beg.utexas.eduiencrgyeconithinkcorner/Encrgy Trading Foss.pdf). Based on that 

work we were asked to provide an expert review on oil markets for the U.S. Energy Information 

Administration. A summary of our findings, the basis for my response, can be found at 

hltp:llwww.beg.utexas.cdu/energyecon/thinkcorner/Think%2OCorner%20tactors%20impacting 

%200il%20price.pdf. 

2. In your testimony you speak to the importance of sustaining a robust resource base as 

essential to restoring market balance. Can you explain what you mean by market balance, 

and what role a robust resource base can serve in mitigating swings in price? What role 

can unconventional oil resources play in maintain this resource base, and what steps need 

to be taken now to ensure the continual development ofthese resources? 

By market balance I mean the balance between supply of crude oil and liquids relative to demand 

at any point in time. Market imbalances result in price signals that send crucial information to 

participants. Given the persistently high oil prices since 2003, oil companies have been 

motivated to prove up new frontier plays, especially in deep water and tight oil onshore. 

Expanding the known resource base does not alleviate all problems in a high price cyclewitness the ongoing difficulties in building out supporting transportation and other midstream 

infrastructure for new domestic oil supplies. However, establishing new domestic resources that 

can be converted to reserves and ultimately production provides a supply inventory that can be 

brought into the marketplace much more quickly. Market dynamics are heavily influenced by 

expectations about supply-demand balances and price. When expectations are that balances are 

tight and new production not easily forthcoming (2005-2008) then prices tend to be much higher 

and more volatile than they if the opposite were true. I emphasize that while prices trended back 

up in 2008, the general forward curve has flattened out considerably (see chart above). This is 

because sentiment has shifted we expect supply to be more available and more easily delivered 

heading into the future. In addition, it is very clear from OPEC communications, trade press, and 

good market intelligence that the major oil producers and exporters also share these expectations 

and are motivated to dampen prices in order to stem further erosion of oil demand in the U.S. and 

elsewhere. Oil market psychology is everything! 

3. During the hearing, you gave an example of a potential hurdle politics could pose to the 

timely development of our nation's energy resources. Please elaborate on the example 

you gave of endangered species listings in Texas and the impact that might have on 

production, and provide any other pertinent examples of impending or proposed policies 

that could negatively impact production. 
126 

I have many concerns, not least of which is timely build out of transportation and midstream 

infrastructure to efficiently, and cost effectively, transport, treat, store, and deliver oil supplies from new 

geographies in the Lower 48. At the time of the hearing, there was great concern that the Dunes 

Sagebrush Lizard would be listed under ESA for protection. The petition to list DSL was withdrawn; see 

http://www.fws.gov/southwest/es/Documents/R2ESfNR (or DSL Final Determination 13June20 l2.pdf 

. Species that are are on the watch list with are shown on the Texas Comptroller of Public Accounts web 

site at htlp:lltexasahead.org/texasfirst/spccics/watch.php. Counties in the Permian and Delaware basins of 

West Texas and the Eagle Ford trend in south/southwest Texas are affected. However, all counties in 

Texas are affected by ESA watch lists to some extent. 

4. A recent article in Oil and Gas Journal warned that "transportation hurdles potentially 

could slow down tight oil development," and further elaborated on challenges that 

producers could face in transporting crude to refineries. Is this an assessment you would 

agree with? Can you elaborate on the current state of infrastructure serving new 

unconventional plays, and identify any issues now or in the future with adequate 

infrastructure to handle the oil boom? 

Yes. It is a slow process building out infrastructure - time required for permitting new pipelines, 

in particular, creates delays. This is true for oil, gas, and natural gas liquids in the 

unconventional plays. For natural gas, the primary problem is the low price environment and the 

lack of basis differentials (differences in prices across locations along with lack of seasonal 

variation) that normally attract new investment by signaling imbalances. We are in a slack 

market with surplus deliverability. In all likelihood, and as in the past, upward pressure on 

natural gas price may well derive from transportation bottlenecks. For NGLs, investment 

requirements are substantial, including new downstream petrochemicals offtake. These are high 

risk investments and companies are moving slowly to conduct due diligence. Oil is more 

fungible and so alternative transportation options exist - mainly rail, which is enabling shipment 

of oil from North Dakota and providing a bit of relief to railroads plagued by poor business 

conditions as coal production and use have declined. The Keystone XL Pipeline debate 

highlighted the strong conflicts and mixed opinions associated with siting new pipelines. A 

streamlined, state-federal cooperative approach on environmental reviews and siting could help, 

with improved, and more constructive, public engagement. 
127 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Questions for the Record 

The Honorable Randy Neugebauer 

Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April 17, 2012 

10:00 a.m. -12:00 p.m. 

2318 Rayburn House Office Building 

Dr. Foss 

1. What are the dangers of releasing crude oil from the Strategic Petroleum Reserve absent a 

real, significant disruption in supply? It is my understanding that we have still not 

replaced the 30 million barrels of reserves that the Administration released in 2011; what 

do you believe the total cost to the taxpayer will ultimately be when the reserves are 

replaced, presumably at a higher cost of crude than when they were sold last year? 

The problems with government-controlled strategic reserves are many-fold. First, governments 

rarely can get it right when it comes to releases. There have been times over the past 15 years or 

so when releases were raised as a possibility to calm markets (example - Spencer Abraham 

during the first Bush administration and Gulf War) but refiners could not take additional 

supplies. Or, more often, eventual releases happen at the wrong side of the price event. Second, 

as you point out in your question, the problem is paying for replacement. This is a charge to 

taxpayers that is an unnecessary burden. If strategic reserves are felt to be essential (at 

minimum, to meet our lEA commitments if we feel these need to be honored) then they should 

be true national security reserves and part of DOD's budget rather than managed as a loosely 

defined and poorly functioning market implement. Finally, most controversially, prevailing 

perceptions of SPR is that they are too often managed for political rather than market gain. This 

undermines the entire purpose of releasing strategic reserves market psychology becomes 

affected by political factors and the release, or threat of release, triggers adverse reactions. 

I can't even estimate what the total cost to taxpayers of replacement would be. That estimate 

goes well beyond the dollars per barrel of domestic/world market prices. It has to include the 

opportnnity cost of not being able to use those federal funds for other essential needs. 

If you could prioritize the top three items that the federal government could do, or stop 

doing, to encourage greater access to affordable, reliable energy, what would it be? 
128 

One - streamline environmental rules and reviews. Create a "one-stop" process for Federal 

lands and right of way. Strengthen FERC's "team" approach of federal-state coordination and 

use that across agencies. Get the EPA to "get real" - if that Agency is to have involvement in 

how energy development proceeds, then there should he tangihle experience at EPA when it 

comes to energy resources, infrastructure, and operations. EPA "independence" for 

environmental protections absent practical energy sector needs is disadvantageous to energy 

consumers and customers and ultimately a waste of resources - emphasis gets placed on 

environmental protection initiatives that offer, at best, minimal or even diminishing returns in 

tenns of real improvements and/or mitigation. Delays in siting, pennitting, enabling energy 

resource and infrastructure development to proceed translate into higher costs for energy 

customers and consumers and erosion of national energy and economic security. 

Two - put authority where it helongs. Why does State have control over Keystone, for instance? 

Federal authority is fragmented, unwieldy, duplicative, and inefficient. Laws and rules should be 

re-visited and revised to eliminate redundancies, improve reviews, and improve oversight and 

enforcement. This should happen across the board for all dimensions of federal oversight when 

it comes to energy resources and infrastructure - environment, labor, safety, economic (tariffs, 

etc), and so on. 

Three - good, timely, transparent data and infonnation are vital and essential for planning and 

decision making. EIA has done yeoman's work to improve data collection and access. More 

needs to be done. But, more importantly, all federal data should he centralized and consolidated 

to force interactions across data collecting bodies (EIA, BLS, BEA, etc.). This is a strategic 

issue and need beyond energy. More cooperation is needed across the key data collecting 

agencies. EIA has invested in and provides an effective data portal that could be adapted for use 

for other federal, and perhaps even state, economic and energy infonnation streams. Indeed, 

more cooperation is needed between state and federal agencies for data collection and to resolve 

persistent conflicts and inconsistencies in data quality. Decision makers, customers, policy 

makers would all benefit from the ability to compile decent, reasonable, and, most important, 

timely views of industry and market conditions especially during periods of stress, such as 

recessions, national security events, and the like. 

2. Could you briefly touch on the economic benefits that Texas has recently enjoyed by 

enacting energy-friendly policies on the state level, and how that could be applied to 

other states and the federal government? 

To my point above about sensible one-stop shopping for federal data, I personally have spent 

inordinate amounts of time trying to locate and consolidate data that could help address 

cconomic henefits associated with encrgy development and implications of state and federal 

policies. This is an exercise fraught with difficulty and full of frustration, and it shouldn't be the 

case. We know roughly how policy and regulatory regimes in Texas enhance energy production 
129 

and use and the eonsequenees. For instance, streamlined one-stop shop permitting for drilling 

new wells in Texas, initiated by the Texas Railroad Commission some years ago and in 

cooperation with other state agencies such as Texas Commission on Environmental Quality and 

the Texas Water Development Board allows producers to much more quickly test and prove up 

new plays. Our ability to sustain oil and gas production in Texas shows up in the bottom line of 

production taxes collected by the Texas Comptroller of Public Accounts; the state's ability to 

sustain revenue flows as fields mature and new opportunities are pursued provides an indication 

of both attractive investment conditions and the state's ability to be flexible through industry 

cycles. We also know that time horizons for approving, constructing, and initiating operations of 

new electric power plants is shorter in Texas than other large states; that we have been able to 

sustain a large and mobile industry workforce with commensurate economic benefits and a 

healthy capacity to create jobs and absorb slack in our workforce during downturns. 

Translating the Texas experience to other states and the federal domain could be difficult; other 

jurisdictions may be less able or willing to make certain tradeoffs. We have been, at times, fairly 

critiqued for placing less attention than we should to environmental quality and protection. 

However, by creating a business-friendly approach and gaining economic benefits from that 

approach, we have wealthier communities that are better able to invest in their own amenities 

and priorities. 
130 

u.s. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Questions for the Record 

The Honorable Randy Hultgren 

Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April 17,2012 

10:00 a.m. -12:00 p.m. 

2318 Rayburn House Office Building 

Dr. Foss 

I. To what degree do you think that the use of hydraulic fracturing has been responsible 

for the growth in job creation we have seen in the oil and gas industry in the past few 

years? What kind of job growth do you expect to see in the next decade? 

Hydraulic fracturing is merely a means to an end. It happens to be a best available technology, 

based on decades of use, for well construction in certain kinds of "plays" and locations. As such, 

hydraulic fracturing has helped the U.S. oil and gas industry to sustain itself, creating jobs and 

economic benefits, for a very long time. 

Since the mid-I 990s, hydraulic fracturing has been adapted for unconventional resource plays, 

combining multiple stages of fracturing across lateral (horizontal) well bores. This approach has 

made it commercially feasible to capture hydrocarbons from formations that are very rich in 

organic material but that also are deep and very tight (that is, the rock matrix has little porosity 

and little permeability making extraction almost impossible without accommodating 

technology). Pursuit of unconventional resource plays with lateral multi-stage hydraulic 

fracturing as a key enabling technology has opened new opportunities for growth in domestic oil 

and gas production. To be fair, however, these same jobs and associated income, tax, and other 

economic benefits could be derived from investment in conventional oil and gas reservoirs and 

resources, for which hydraulic fracturing also may be needed to some extent (especially to 

recover additional resources from older fields or to improve recoveries from vertical wells). The 

attraction of unconventional resource plays (or resource plays for brevity) is the avoidance of 

exploration risk, i.e., the chance that hydrocarbons are not present, and thus higher costs and 

potential losses associated with unsuccessful wells. Shales are hydrocarbon source rocks for 

conventional reservoirs; indeed, the best place to hunt for natural gas in shales or liquids from 

silt lenses in shales is underneath existing oil and gas fields. All of this does not mean that all 

unconventional oil and gas wells are successful- uncertainty, the amount ofliquids and/or 
131 

natural gas that can be recovered, can be substantial. Distribution of hydrocarbons and recovery 

rates - industry's ability to extract hydrocarbons from these very tight rocks are very uneven 

both across and within basins. 

Because of uncertainty about volumes of oil and gas that can be recovered from challenging 

resource plays into the future, building outlooks for job growth are very difficult. In addition, 

"above ground" factors (public opposition; regulatory requirements and compliance; oil and 

natural gas prices and price signals; development of essential midstream infrastructurepipelines, storage, terminals, processing, and so on; and demand - availability of, or growth in, 

available markets for U.S. production or viable export strategies) will impact heavily on industry 

prospects and performance. If conditions remain favorable, job growth prospects in states and 

locations where production can be established will be favorable (4 to 6 percent or more would 

not be surprising). 
132 

Responses by Mr. James Brown 

Question 1: 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY 

Questions for the Record 

The Honorable Ralph Hall 

Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways 

Tuesday, April 17, 2012 

10:00 a.m. -12:00 p.m. 

2318 Rayburn House Office Building 

Mr. Brown 

In recent weeks, county commissions in Mesa, Garfield, and Rio Blanco County, Colorado have passed 

resolutions criticizing or opposing a proposal from the Bureau of Land Management (BLM) that would 

reduce the amount of public land available for oil shale research and development. Can you briefly 

explain the impact of the BLM proposal on oil shale development, and its potential implications for 

the United States' long term energy Outlook? 

Answer: 

In Wyoming, Colorado and Utah we have a huge resource in oil shale [get some numbers]. The oil shale 

deposits range anywhere from being at the surface to several thousand feet below the surface. In the 

past there have been many attempts at methods to economically recover the liquid locked in these 

rocks. We have had discussions with the operators of a plant in Russia where similar deposits exist and 

they mine it. Because of environmental concerns that is probably not an option. 

There is going to have to be a technology break-through to make the production of hydrocarbons from 

the oil shale economic. Because of the relative shallow depth of the deposit there are environmental 

concerns such as protection of ground water and surface environment. If we limit the number of places 

where individuals I corporations are allowed to explore and apply research to this resource we may 

delay the technology that would eventually make this an economic source. 

Question 2: 

Your testimony highlights how advances in technology have enabled greater exploration and 

production of domestic energy resources. Can you please describe this in further detail? How does 

Whiting Petroleum decide to invest in technology development? 

1 
133 

Answer: 

a. What do you consider the biggest opportunity associated with the advancement of new 

technologies? 

b. What can the Federal Government due (sic) to encourage greater research and 

development in technologies to expand domestic energy supply? 

As an industry we have known there was oil in the Bakken since the 1950's. With the advent of 

horizontal drilling and the staged hydraulic fracturing, first utilized in unconventional natural gas 

production, we were able economically to recover oil from the Bakken in North Dakota. From the 

Bakken, industry has moved on to the Niobrara in Colorado and Wyoming, the Marcellus in Ohio, 

Pennsylvania and New York, the Wolfcamp in the Permian Basin ofTexas and New Mexico. Each ofthese 

plays is different and takes a slight modification to the technology to be successful. As an industry we 

have knowledge of numerous tight hydrocarbon bearing formations in the lower Forty-Eight and around 

the globe and we now have a new tool in the tool box to use to explore for these reserves. 

One could say we invest in technology every day. What is considered routine today, for example a 30 

stage sliding sleeve hydraulic stimulation in a horizontal wellbore, could not have been performed three 

years ago. There are several areas where we are doing "firsts" which are pushing the technology. How 

the decision is made concerning when Whiting makes the decision to invest directly in a technology, say 

our two electron microscopes we have in our rock lab in Denver is a bit more involved. As we continued 

to complete wells in the Bakken and Three Forks in North Dakota and our knowledge of "unconventional 

oil" production increased we encountered things we did not understand. We were doing things that 

conventional thinking would indicate were not possible. So we start looking for explanations and for 

information. When we reach a point where there is no organization providing the information or 

providing the answers we are after we have to determine the value associated with that particular bit of 

information and does knowing it provide us with an advantage over our competitors. 

What can the government do to help with research and development? First of all take a balanced 

approach to the research on potential energy resources. It is no secret the current administration does 

not support any fossil fuel as a resource, and all of the attention is directed towards renewable I 

sustainable energy, solar, wind and bio-mass. As a society we are going to have to utilize all of the 

energy sources we can imagine. However we cannot make this transition overnight it is going to take 

time to develop economic solutions to the energy issue. Energy security is an important issue and the 

Federal Government has the means to assist with the research required to perform some of the longterm background research that is required to develop some of the unconventional resources. 

Question 3: 

In your testimony, you state it is "fortunate the Bakken exists in North Dakota" because most of the 

surface and mineral ownership is by private individuals, with minimal Federal ownership. What are 

the obstacles to drilling on Federal lands? Is there a difference in leasing, permitting and drilling 

timelines? 

2 
134 

Answer: 

Yes, there is a huge difference in leasing, permitting and drilling on fee or for that matter State lands and 

on Federal lands. First, acquiring the lease. With a fee lease, county records are researched to find who 

owns the minerals, the mineral owner is contacted a lease negotiated, executed and that is the process. 

This can happen in a matter of days to several weeks. On Federal acreage the lease has to first be 

nominated by someone who wants to lease the minerals. The responsible regulatory agency reviews 

the lease to determine if there are any factors that would prevent the lease from being offered in a 

Federal lease sale. This agency also determines what lease stipulations, if any, should encumber the 

lease (no surface occupancy, wildlife, etc.). Once this reView is complete the lease is placed on an 

upcoming lease sale. This process can take from months to years. We have nominated leases years ago 

and they have not yet shown up on a Federal lease sale. 

Once the lease makes it through the nomination process it is auctioned to the highest bidder at a 

Federal Lease sale and a winning bidder determined. Prior to the lease being issued, the winning bidder 

pays the lease bonus which could amount to millions of dollars. This is another step in the process 

where delays occur. The BLM went for over two years in Wyoming without issuing leases to the winning 

bidders. This is also the point where the lease can be contested by parties who have no financial stake 

in the process and prevent the lease from being issued. This entire process can take anywhere from 

months to years. 

Once the lease is issued and the operator wants to shoot seismic to help identify where the operator 

wants to drill. For both Federal and fee leases permits are required to shoot seismic. On Fee leases this 

is a process that can be handled in a time frame measured in weeks and the seismic shoot can be 

initiated. We are in the process of shooting two seismic programs on Federal leases in Colorado and we 

have been working on getting all of the permits and clearance for over a year on each project. On the 

Western Colorado shoot we are permitting to utilize helicopters to distribute the geophones to reduce 

the environmental impact. We are now being required to perform archeology surveys on the spots 

where the helicopters are going to land. More boots on the ground is what we were trying to eliminate. 

Common sense does not seem to be too common. 

Drilling permits on fee land are handled by the State agency who have primacy over that particular 

activity. In most states drilling permits are received and approved in 60 days or less. Currently federal 

drilling permits in North Dakota are taking 298 days to be approved. The Federal agencies are saying it 

is because of the operators not providing complete drilling permit applications. Part of the problem is 

because of staff turnover at the agencies and that a clear definition of what constitutes a complete 

permit is constantly changing. Industry is diligently working to provide complete permits. It is not in our 

best interest to provide incomplete permits. 

I could go on with other issues, I believe it is obvious that yes there is a difference in operating on 

Federal acreage. 

3 
135 

Question #4: 

What technology advancements are you aware of that are making the development of 

unconventional resources safer, cleaner and more efficient? 

Answer: 

Drilling Rigs. The rigs we are using in North Dakota are much safer and efficient than the rigs that were 

in service just 10 years ago. Iron roughnecks perform many of the pipe handling chores that were 

always a safety concern. Automated catwalks simplify moving of the pipe from ground level up to the 

rig floor. Many of the manual tasks have been automated to make the rig a safer place to work. 

Although not required, Whiting has installed closed loop mud systems on all of our rigs in the Williston 

Basin. This reduces the environmental impact and eliminates the need for pits. Although this is more 

expensive we feel it is a necessary step. 

Today's drilling rig has mud pumps with greater horsepower ratings. This is required to drive the new 

high torque mud motors that are being used to drill the horizontal wells. It is Whiting's goal that once 

the wellbore is turned horizontal and casing set through the curve to drill the entire 10,000 foot 

horizontal section with a single bit and motor run. That is a huge improvement over what was expected 

just a few years ago. 

Whiting has worked closely with Baker Hughes to utilize technology to improve how we drill Bakken 

wells. As mentioned in the previous paragraph, we drill a vertical hole approximately 10,000 feet to 

near the top of the Bakken turn the well horizontal and set 7" casing. At that point the rig is about two 

miles away from the bit. When we finish the horizontal section the rig is about 4 miles away from the 

bit. What you think is going on downhole may not be what is actually happening. Baker Hughes, 

working with Whiting has developed tools that monitor downhole conditions to help the drilling 

engineers optimize the weight on the bit, rotational speed and downhole tool configuration to drill the 

well in the most efficient method possible. 

One other game changer is information flow. With the advent and universal availability of the internet 

our technical staff has information available at their desks to make them more efficient. We can have a 

drilling engineer in Denver supervising a rig in North Dakota and applying what he has learned in North 

Dakota to a drilling operation in West Texas. Likewise, a geologist in Denver can be monitoring and 

directing the paths of a drill bits on several rigs in North Dakota based on real time data while Sitting at 

their desk in Denver. 

4 
136 

Responses by Mr. Daniel Weiss 

Center for AInerican Progress Action Fund 

~ 

May 18, 2012 

The Honorable Eddie Bernice Johnson 

2468 Rayburn Office Building 

Washington, DC 20515 

Dear Representative Johnson, 

Thank you for the invitation to testify at last month's Science, Space and Technology 

Committee hearing on "Tapping America's Unconventional Oil Resources for Job Creation and 

Affordable Domestic Energy: Technology and Policy Pathways." I am honored to be included 

as a witness on this topic. 

Attached please find my responses to your important questions. Please don't hesitate to contact 

me with any additional questions. 

Sincerely, 

Daniel J. Weiss 

Senior F eHow and Director of Climate Strategy 

Center for American Progress Action Fund 
137 

1. To what extent can domestic oil insulate consumers from fluctuations in the global price 

for oil? 

The most important contributor to high gasoline prices is high oil prices. The Energy Infomlation 

Administration estimates that the cost of crude oil was 72 percent of the cost of a gallon of gas in 

February 2012. The price for a barrel of West Texas Intermediate crude oil was 3 percent higher 

in March 2012 compared to March 2011. Brent crude oil-a lighter, sweeter oil sold in Europe 

but often used to produce gasoline on the East Coast-was 9 percent higher compared to a year 

ago. 

Oil prices are set on the global market, which is controlled by the Organization of Petroleum 

Exporting Countries, a cartel. The Federal Trade Commission found that: 

Over 70% of the world's proven oil reserves are in Organization of Petroleum Exporting 

Countries (OPEC) member countries. OPEC attempts to maintain the price of oil by 

limiting output and assigning quotas. These actions by OPEC would be a criminal price 

fixing violation of the u.s. antitrust laws ifdone by private firms. 

This leaves us extremely vulnerable to volatile prices or intemational events beyond our control. 

Because of this global, cartel-controlled market, the president of the United States has little 

control over oil prices. A March 10 Wall Street Journal article noted that, 

u.s. gasoline prices, like prices throughout the advanced economies, are determined by 

global market forces. It is hard to see how Mr. Obama's policies can be blamed. 

The Cato Institute, a free-market think tank, came to a similar conclusion in early March: 

Is President Obama responsible for the spiraling price of gasoline? Republicans say yes, 

but the facts say no . ... Why have gasoline prices increased since the start of the year? 

The simplest explanation is that the price of crude oil has increased. 

The Wall Street Journal, Cato Institute, and a survey of economists by the University of Chicago 

Booth School ofBusincss, all concluded that President Obama's policies cannot affect gasoline 

prices. 

2. Will increased domestic drilling allow the United States to be energy independent? 

No. We consume 20 percent of global annual supply but we only have 2 percent worldwide 

technically recoverable reserves. The ultimate path to long-term relief is to dramatically 

reduce our reliance on oil. The most effective way to reduce pain at the pump is to reduce our 

oil use so that we pump less. 

2 
138 

3. Will increased domestic drilling bring back the low gasoline prices Americans expect? 

To test whether more U.S. drilling would lower gasoline prices, the Associated Press completed 

an exhaustive analysis of36 years of monthly U.S. oil production and gasoline price data. AP 

found that there is: 

No statistical correlation between how much oil comes out of u.s. wells and the price at 

the pump. Ifmore domestic oil drilling worked as politicians say, you'd now be paying 

about $2 a gallon for gasoline. Instead, you're paying the highest prices ever for March. 

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Ken Green, a resident scholar with the conservative think tank American Enterprise Institute, 

explained that crude oil is a global commodity whose price will be unaffected by new U.S. 

production. In 2011 Greenwire reported that Green said, 

"The world price is the world price. Even if we were producing 100 percent of our oil, " 

Green said, ifprices increase because ofa shortage in China or India, "our price would 

go up to the same thing ... We probably couldn't produce enough to affect the world price 

()f oil, " he added. "People don't understand that. " 

4. What are the most important things we can do as policymakers to reduce the impact of 

high gas prices on consumers? 

Support investments that reduce oil use. Even as we produce more and use less oil at home, oil 

prices remain subject to the global market. The 2011 disruption in Libya's oil production sent 

prices climbing. This year, Iran's saber-rattling to use oil as a weapon to defend its nuclear 

program roiled markets. This destructive price volatility will continue to harm our economy and 

Americans if we continue to depend on a product with few substitutes. We consume 20 percent 

of global annual supply but we only have 2 percent worldwide reserves. The ultimate path to 

3 
139 

long-term relief is to dramatically reduce our reliance on oil. The most effective way to reduce 

pain at the pump is to reduce our oil use so that we pump less. 

The United States must develop modem fuel economy standards to make ears go much farther 

on a gallon of gas. As noted above, the administration will soon finalize fuel economy standards 

for passenger vehicles manufactured from 2017-2025. If the standards are kept efficient, they 

will save more than 2 million barrels of oil per day. Congress must resist pleadings of special 

interests to reduce or delay these standards since these pleas will only increase gasoline 

consumption and prices. 

In addition to much-improved vehicle fuel economy standards, we must begin the investment in 

cars and trucks powered by other fuels. Passenger vehicles could use readily available, 

increasingly clean electricity. Plug-in hybrids and all electric vehicles consume little or no 

gasoline. The Chevrolet Volt and Nissan Leaf are two new electricity-powered vehicles. The 

Volt was named "2011 Motor Trend Car of the Ycar." During its first year of production, its 

combined sales were twice as large as the now-familiar Toyota Prius and Honda Insight hybrids 

in their first years. 

As with cell phones, desktop computers, and other innovative new technologies, there will be 

bumps along the road to widespread commercialization. For instance, bad publicity for the Volt 

due to overstated concerns about the potential for fires has inhibited sales. Nonetheless, February 

2012 sales were significantly higher than January sales. In March Chevrolet sold more Volts than 

in any previous month. Despite GM's temporary halt in production so as to sell some existing 

inventory, it still plans to sell 45 000 Volts in 20l2-six times more than last year. 

Despite the Volt's recognition as an innovative, impressive vehicle, it has suffered attacks from 

conservatives, who sound like they are rooting for General Motors to fail, even though this plugin hybrid technology could dramatically reduce oil use and pain at the pump. These 

condemnations are equivalent to assaulting the first cell phones, desktop computers, or iPads for 

being too big, too expensive, or too limited-common concerns with brand new game-changing 

technologies. Those who criticize the Volt in their attempts to score political points should be 

ashamed oftheir attacks on American ingenuity and innovation. 

The Volt and other innovative American oil savings technologies require enhanced infrastructure 

to speed their adoption. There is a long history of government support for the infrastructure that 

is essential to grow pioneering technologies, from FM radio to telephones. Electric vehicles 

would likewise benefit from such assistance with recharging infrastructure. The Electric Drive 

Vehicle Deployment Act of2011, H.R.1685, sponsored by Reps. Judy Biggert (R-IL) and Ed 

Markey (D-MA) would provide financial assistance to states for the deployment of electric 

vehicles. 

Investments in buses, subways, and trains can also reduce our dependence on oil and create jobs. 

Public transportation saves the United States 900,000 automobile fill-ups per day, which equals 

4.2 billion gallons of gasoline per year. Every $1 billion of investment in public transportation 

4 
140 

infrastructure supports 36,000 jobs in a variety of industries-construction, finance, insurance, 

real estate, retail, and more. 

Despite these overwhelming benefits, our public transportation infrastructure is woefully 

underfunded. A recent CAP report, "Meeting the Infrastructure Imperative: An Affordable Plan 

to Put Americans Back to Work Rebuilding Our Nation's Infrastructure," by Donna Cooper 

found that an additional investment of $15.7 billion annually is needed to meet our most urgent 

public transportation infrastructure needs. This would also increase oil savings and create jobs. 

Additionally, selling some reserve oil could provide temporary relief .. There is a proven tool, 

however, that can provide some temporary relief from high prices in the short term. Selling a 

small amount of oil from the Strategic Petroleum Reserve in coordination with sales from 

International Energy Agency reserves could immediately expand the world oil supplies by 

millions of barrels over a month or two. 

The Strategic Petroleum Reserve is 96 percent full. Selling a small amount of reserve oil in 

conjunction with our allies-say 45 million barrels each-would still leave the reserve 90 

percent full. It's important to note that the 104th Congress under then-Speaker of the House 

Newt Gingrich sold 28 million barrels of reserve oil in 1996 to reduce the budget deficit when 

the reserve was less than 80 percent full. 

Selling SPR oil can temporarily lower oil and gasoline prices by bursting the "bubble" caused by 

Wall Street speculators betting that oil prices will continue to rise due to fears of supply 

disruption in the Persian Gulf Such a sale has occurred under the past four presidents and has 

lowered oil and gasoline prices every time. This can cut prices and burst the bubble-even recent 

rumors of a rcserve oil sale reduced prices. On March 15 Bloomberg reported: 

Oil [prices] fell ... on reports that President Barack Obama discussed a releasefrom the 

u.s. Strategic Petroleum Reserve with UK Prime Minister David Cameron. 

Another measure that would lower oil and gasoline prices would be to lessen Wall Street 

speculators' ability to drive up prices. Many experts believe that these speculators-who never 

intend to take possession of the oil whose contracts they buy-are driving up oil prices to make a 

quick profit, preying on the fears of commercial end users who attempt to lock in a favorable 

future price. 

5. What role does efficiency and conservation play? 

The United States must develop modem fuel economy standards to make cars go much farther 

on a gallon of gas. As noted above, the administration will soon finalize fuel economy standards 

for passenger vehicles manufactured from 2017-2025. Ifthe standards are kept efficient, they 

will save more than 2 million barrels of oil per day. Congress must resist pleadings of special 

5 
141 

interests to reduce or delay these standards since these pleas will only increase gasoline 

consumption and prices. 

6. What are some policy proposals that DO NOT show promise for bringing down gas 

prices or that otherwise have adverse impacts on the economy or the environment? 

Another regular proposal to lower gasoline prices is to waive the summer pollution reduction 

requirements for gasoline in metropolitan areas with severe smog problems. These standards 

reduce contaminants produced by gasoline combustion such as nitrogen oxides and volatile 

organic compounds that form ground level ozone (smog) in the presence of sunlight. 

The American Lung Association warns that ozone causes "increased risk of premature death," 

"asthma attacks," and "increased susceptibility" to heart- and lung-related problems. Children, 

seniors, and those with respiratory ailments are most vulnerable to harm from smog. 

According to an EPA analysis, abandoning these cleaner gasoline rules might reduce gasoline 

costs by only a few cents per gallon but would increase the smog that harms children, seniors, 

and others. In addition to human suffering, such a step would have real economic costs due to 

additional health care expenditures and lost worker productivity. 

The Congressional Research Service recently concurred that relaxing these clean fuel standards 

would require other polluters to make steeper, more expensive pollution reductions: 

Relaxing these standards long-term may require states that use special blends as part of 

their plan to meet NAAQS [National Ambient Air Quality Standards that protect public 

health} to come up with alternative-potentially more commercially costly-means to 

meet air quality targets. 

Some people are calling for more oil drilling in protected places to reduce gasoline prices, but 

this won't reduce gasoline prices. It takes seven years for new offshore oil drilling to produce 

any oil. The Energy Infonnation Administration found that opening up the currently protected 

Atlantic and Pacific coasts won't have an impact on price. The administration also predicts that it 

will take 10 years to produce oil from the Arctic National Wildlife Refuge in Alaska. 

7. What impact would approval ofthe Keystone pipeline system have on the price of 

gasoline? 

Other oil industry advocates claim that completing the Keystone XL pipeline from Alberta, 

Canada, to Steele City, Nebraska, would both increase oil supplies and reduce prices. The State 

Department's analysis of the project found that neither assertion is accurate. 

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The State Department's final "Keystone XL assessment" concluded that it would not increase oil 

supply or lower prices: 

WORLD and ETP studies indicate that building versus not building Keystone XL would 

not of itself have any significant impact on: u.s. total crude runs, total crude and 

product import levels or costs. [emphasis original] 

The State Department analysis determined that the pipeline would only have a tiny impact on the 

price of crude and other products: 

Under the KXL scenario, delivered prices for [oil sands] ... into PADD3 Gulf Coast are 

lower than under the No KXL case and those for PADD2 [Midwest], higher. The effect is 

limited, no more than around $0. 70lbbl [per barrel]. 

This level of reduction translates to roughly a penny and a half per gallon of gasoline. 

In addition, the State Department analysis acknowledges that the pipeline would actually raise 

gasoline prices in the Midwest since it would eliminate the current oil glut there that has kept 

prices lower. Bloomberg cautions that, 

TransCanada Corp. 's Keystone XL oil pipeline .. , risks raising prices as much as 20 

cents a gallon in the Midwest, Great Plains and Rocky Mountains. 

At the same time, there maybe a decrease in gasoline prices in the Gulfregion because of the 

increase in oil supply there. 

Time magazine'S analysis concurred that Keystone would have almost no impact on gasoline 

prices: 

Keystone would have little immediate [price] effect, especially since there's already 

sufficient pipeline infrastructure in place for the nextfew years. 

Additionally, there are indications that a portion of the oil sands piped through Keystone XL to 

Gulf Coast refineries will he made into products for export rather than kept here for American 

drivers. At a December 2, 2011, hearing before a subcommittee, Rep. Markey asked the CEO of 

pipeline-owner TransCanada whether he would agree to keep all refined products from oil sands 

in the United States. He declined. 

One way to ensure that Keystone adds a marginal amount of oil to U.S. supplies is to require that 

the oil and its refined products be sold here--and not exported. On February 15 Rep. Markey 

offered an amendment to H.R. 3408 to "ensure that if the Keystone XL pipeline is built, the oil 

that it transports to the Gulf of Mexico and the fuels made from that oil remain in this country to 

benefit Americans." Thc amendment failed 173-254, which means that all or some ofthe oil 

sands can be exported. 

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143 

Some advocates of building this pipeline e1aim that it would also help lower gasoline prices 

because this project is "shovel ready." This is also false. The Keystone pipeline isn't even map 

ready yet since its precise route through Nebraska has yet to be chosen. There has been no 

assessment of the potential harm to adjacent air, water, and land from its construction and 

operation once it is sited. 

In fact, there is a growing controversy over building the pipeline in places where the route is 

already mapped. The Los Angeles Times reported on the conflict between landowners and 

TransCanada: 

Canadian company that wants to build the J,660-mile structure [is] going to court to 

force the cooperation of landowners who don't want it crossing their land. 

The issue has brought conservative tea party groups out rallying alongside 

environmentalists opposed to tar sands oil production, united behind [Julia Trigg] 

Crawford's attempt to keep the pipeline from crossing her 600-acre farm in the town of 

Direct, near Paris, where she fears it could contaminate the creek that irrigates her 

fields. 

The New York Times reports that TransCanada has begun condemning land to build the southern 

leg of the pipeline. 

The bottom line is that the State Department and other independent analyses determined that the 

Keystone XL pipeline won't increase U.S. oil supplies, reduce gasoline prices, or even transport 

any oil anytime soon. 

8. What does your analysis show to be the likely root of what are apparently artificially 

high prices? 

Domestic oil production is high, and demand is low. Yet oil and gasoline prices are high. We 

know that oil markets don't follow normal supply-and-demand rules partly because there are few 

substitutes for oil, and also because its price is set by the OPEC cartel. We also know that there 

are other factors that contribute to oil prices in a world market such as concerns about potential 

supply disruptions due to natural disasters or political turmoil in the Persian Gulf. But even when 

we take all the normal factors into account, it doesn't add up. 

Worldwide trends don't offer much of a e1ue, either. Thc Energy Information Administration 

reports that worldwide consumption in the first quarter of2012 is essentially unchanged from the 

fourth quarter of 20 II, though it is about 1 percent higher than a year ago. Yet the April 10 price 

of West Texas Intermediate crude oil-sold in the United States-was $101 per barrel. Brent oil 

on the European market was $120 per barrel--or 5 percent higher than last year. 

There havc been some relatively minor supply disruptions in Syria South Sudan. and Yemen. 

according to a February 2012 report by the Energy Information Administration. Libyan 

production is also at 81 percent of its pre-civil war capacity. And Saudi Arabia-the world's 

8 
144 

largest oil producer-has raised its output by about 600,000 more barrels per day than in 2011. 

Despite great tensions with Iran over its nuclear weapons program, there has not yet been a 

supply disruption in the Persian Gulf. 

Even though it produces nearly all of its own oil, Canada is seeing inexplicably high gasoline 

prices too. The Edmonton Journal on March 30 reported that, 

Canadians are paying some of the highest prices they ever have for gasoline, even though 

the amount that foel makers pay for the crude oil that goes into making it has been in 

decline for months . ... Datafrom Statistics Canada on Thursday showed the price 

processors pay for crude oil fell 2.4 per cent in February from January, but the cost of 

gasoline from refiners rose 3.9 per cent. It was third straight month crude oil prices have 

declined and second straight month gasoline prices have increased. 

How can this discrepancy be explained? Even some leading oil experts express bewilderment 

about high oil prices. Reuters just reported that oil specialists found that high oil prices are 

inconsistent with current levels of supply and demand: 

"The reality today is that the market is well oversupplied. OPEC production has been 

rising consistently since September and will probably continue rising further, " said Colin 

Smith, energy strategist at VTB Capital. 

Similarly, on April 2 The Wall Street Journal determined that, 

"There is no shortage of cn/de oil in the global markets and current prices aren't justified 

by demand-supply fundamentals, " Qatar's energy and industry minister said Monday, 

easing concerns over supply constraints. 

"Oil producers are committed to supplying. When you look at demand-supply, there is no 

evidence of a shortage of oil anywhere in the world, " Mohammed Bin Saleh Al Sada told 

reporters. "When it comes to price ... there are so many elements-not necessarily part of 

fundamentals of supply and demand-but other factors . .. 

Many Americans believe Big Oil companies are responsible for these "other factors" and suspect 

these giant corporations have rigged gasoline prices in their favor. Certainly oil companies have 

an incentive to support high gasoline prices. A March I, 2012, report by the Congressional 

Research Service determined that higher gasoline costs 

Yield a windfall for crude oil producers because the rise in gasoline prices is driven 

primarily by higher crude oil prices. 

9. How would you characterize the President's performance in regards to oil and gas 

exploration and production in the U.S.? 

9 
145 

Gasoline demand is the second-lowest since 1997, due to modem vehicle fuel economy 

standards adopted by President Barack Obama in 2009-the first increase in more than 20 years. 

Consumption fell 1.8% from 2010 to 2011. First quarter 2012 consumption is 3.5% lower than 

the same time last year. Oil use falling due higher gasoline prices, displacement by biofuels, 

better fuel economy, slow economy 

By 2016 the average car will use one-third less gasoline per mile compared to cars in 2010. The 

second round of standards will double fuel economy to 54.5 miles per gallon in 2025 compared 

to 2010. This will reduce oil consumption by 2 million barrels per day. The typical owner of a 

2025 model car will spend $8,000 less on gasoline compared to an owner ofa 2010 vehicle. 

10. How has production from Federal lands fared under the Obama Presidency, and why 

does it matter? 

We are also producing more of our own oil. For the first time since President Clinton, the United 

States is producing a majority of the oil we rely on to power our vehicles and economy. We are 

less reliant on other nations for oil and send less of our treasure abroad. The New York Times 

reported in March that, "In 2011, the country imported just 45 percent of the liquid fuels it used, 

down from a record high of 60 percent in 2005." 

The Energy Infonnation Administration determined that in 2011 the United States generated 3.7 

quadrillion Btus of energy from crude oil produced from federal lands and waters compared to 

3.3 quadrillion Btus in 2008-a 12 percent increase in production. And 2011 production from 

federal areas was higher than it was from 2006 through 2008 during the George W. Bush 

administration. What's more, the oil rigs in federal waters met significantly more protective 

worker and environmental-safety standards than before the BP oil tragedy in 2010. 

A March 20, 2012, Congressional Research Service report reiterated the increase in oil 

production on federal lands under President Obama: 

On federal lands, there was also an increase in production from 2008-2009 and another 

increase in 2010 (258,000 bid [barrels per day]), then a decline in 2011. Overall, oil 

production on federal lands is up slightly in 2011 when compared to 2007. 

Similarly, the Columbia Journalism Review on March 22 reported that, 

The average productivity on federal land and waters during the four Bush years, 2003-

2008, was 634 million barrels per year. During the three Obama years, 2009-2011, it 

was 676 million barrels. 

In other words, average annual oil production from federal lands and waters was 5 percent higher 

under President Obama than it was under President Bush. 

The increase in oil production-due horizontal drilling and hydraulic fracking in places such as 

the Bakken Shale in North Dakota and Eagle Ford in Texas. These technologies were developed 

10 
146 

with federal research dollars, and benefit our security and economy. Last December the 

Washington Post reported that 

There's no denying the extraordinary economic return on taxpayer investments. Shale 

gas is likely to allow the United States to go from net gas importer to net gas exported 

over the next decade. 

Producing more and using less oil reduces foreign oil imports and our trade deficit, creates jobs, 

saves families money on gasoline bills, and boosts economic growth by spending more oil 

dollars at home. 

More domestic production from these new shale oil plays will not lower oil prices because prices 

are set on the world market. As long as oil prices remain high, so will gasoline prices. 

11 
(147) 

Appendix II 

ADDITIONAL MATERIAL FOR THE RECORD
148 

EXECUTIVE SUMMARY OF THE NATIONAL PETROLEUM COUNCIL REPORT SUBMITTED BY

CHAIRMAN RALPH HALL

To view PRUDENT DEVELOPMENT: Realizing the Potential of North America’s 

Abundant Natural Gas and Oil Resources, National Petroleum Council Report(2011) 

visit http://www.npc.org/reports/NARD-ExecSummVol.pdf. 
149 

ARTICLE SUBMITTED BY CHAIRMAN RALPH HALL

Scarce Oil? U.S. Has 60 Times More Than Obama Claims 

By JOHN MERLINE, INVESTOR'S BUSINESS DAILY Posted 01:03 PM ET 

o 

The Oil Scarcity Myth The U.S. OIl "reSNves" 

Pr • .,dent Obama talks 

about '5 IU5t the very 

tip of the o,l pyramId 

View Enlarged Image 

• 

When he was running for the Oval Office four years ago amid $4-a-gallon gasoline prices, thenSen, Barack Obama dismissed the idea of expanded oil production as a way to relieve the pain at 

the pump. 

"Even if you opened up every square inch of our land and our coasts to drilling," he said. 

"America still has only 3% of the world's oil reserves." Which meant, he said, that the U.S. 

couldn't affect global oil prices. 

It's the same rhetoric President Obama is using now, as gas prices hit $4 again, except now he 

puts the figure at 2%. 

"With only 2% of the world's oil reserves, we can't just drill our way to lower gas prices," he 

said. "Not when we consume 20% ofthe world's oiL" 

Thc claim makes it appear as though the U.S. is an oil-barren nation, perpetually dependent on 

foreign oil and high prices unless we can cut our own use and develop alternative energy sources 

like algae. 

U.S. Awash In Oil 

But the figure Obama uses - proved oil reserves - vastly undercounts how much oil the U.S. 

actually contains. In fact, far from being oil-poor, the country is awash in vast quantitiesenough to meet all the country's oil needs for hundreds of years. 

The U.S. has 22.3 billion barrels of proved reserves, a little less than 2% of the entire world's 

proved reserves, according to the Energy Information Administration. But as the EIA explains, 
150 

proved reserves "are a small subset of recoverable resources," because they only count oil that 

companies are currently drilling for in existing fields. 

When you look at the whole picture, it turns out that there are vast supplies of oil in the U.S., 

according to various government reports. Among them: 

At least 86 billion barrels of oil in the Outer Continental Shelf yet to be discovered, according to 

the government's Bureau of Ocean Energy Management. 

About 24 billion barrels in shale deposits in the lower 48 states, according to EIA. 

Up to 2 billion barrels of oil in shale deposits in Alaska's North Slope, says the U.S. Geological 

Survey. 

Up to 12 billion barrels in ANWR, according to the USGS. 

As much as 19 billion barrels in the Utah tar sands, according to the Bureau of Land 

Management. 

Then, there's the massive Green River Formation in Wyoming, which according to the USGS 

contains a stunning 1.4 trillion barrels of oil shale - a type of oil released from sedimentary 

rock after it's heated. 

A separate Rand Com. study found that about 800 billion barrels of oil shale in Wyoming and 

neighboring states is "technically recoverable," which means it could be extracted using existing 

technology. That's more than triple the known reserves in Saudi Arabia. 

All told, the U.S. has access to 400 billion barrels of crude that could be recovered using existing 

drilling technologies, according to a 2006 Energy Department report. 

When you include oil shale, the U.S. has 1.4 trillion barrels of technically recoverable oil, 

according to the Institute for Energy Research, enough to meet all U.S. oil needs for about the 

next 200 years, without any imports. 

And even this number could be low, since such estimates tend to go up over time. 

Back in 1995, for example, the USGS figured there were 151 million barrels of oil in North 

Dakota's Bakken formation. In 2008, it upped that estimate to 3 billion barrels to 4.3 billion 

barrels - a 25-fold increase. Now, some oil analysts say there could be as much as 20 billion 

barrels there. 

And USGS in 2002 quadrupled its oil estimate in Alaska's National Petroleum Reserve. 

To be sure, energy companies couldn't profitably recover all this oil even at today's prices 

and what they could wouldn't make it to market for years. But from the industry's perspective, 

the real problem with domestic oil is that the government has roped off most of these supplies. 

The Alaska National Interest Lands Conservation Act of 1980, for example, put a huge swatch of 

land off-limits to drilling. And in 1982, Congress blocked access to most of the oil in the Outer 

Continental Shelf. Much of the oil on federal lands is also off-limits. 
151 

Obama and others say the industry's claim about lack of access isn't true, since they aren't even 

using many of the offshore leases they already have. The industry counters that this is 

misleading, since a company needs the lease before it can determine if any oil exists there a 

potentially time-consuming process. 

In any case, any attempt to get at these vast new oil supplies is sure to face fierce opposition 

from environmental groups worried about oil production's direct impact on the environment, as 

well as global warming worries. 

But given today's prices, most of the public is willing to expand drilling offshore, in ANWR, and 

in shale oil reserves, according to the latest IBDfTIPP poll. 

"This is not a geological problem - it's a political problem," said Dan Kish, senior vice 

president for policy at the Institute for Energy Research. "We've embargoed our own supplies." 
152 

ARTICLE SUBMITTED BY CHAIRMAN RALPH HALL

New regs could create 'nightmare 

scenario' for industry -- Texas regulator 

Nathanial Gronewold, E&E reporter 

http://www.eenews.netlenergywire/printl2012/04/16/4 

PUblished: Monday, April 16, 2012 

HOUSTON -- Texas' crude oil production could peak at 4 million barrels per day should the industry be 

freed from regulation and allowed to grow, about a fourfold expansion from where it stands today, the 

head of the state's oil and gas regulatory body declared last week. 

Such a feat would see Texas alone becoming a major global oil powerhouse, eclipsed only by Saudi 

Arabia, Russia, Canada and the rest of the United States. But a "nightmare scenario" could see this 

optimistic picture reversed by 2020, the official warned. 

Up for election this year for one of two openings on the three-member Texas Railroad Commission, 

current Chairman Barry Smitherman delivered a speech and took questions during an energy and 

environment forum, hosted by the Texas Tribune, at the University of Houston on Friday. 

Smitherman gave some lofty predictions on where domestic oil supplies could be headed based on his 

reading of developments, but warned that the boom in oil drilling and production grow1h the United States 

is experiencing today could be upended by what he sees as onerous federal regulations and misguided 

environmental activism. 

The greatest threat to Texas and U.S. energy potential, Smitherman said, is "regulations ... that kill the 

technology that's taking us to energy independence: hydraulic fracturing" 

According to data from the commission and others, Texas is producing around 1.1 million barrels per day, 

up by roughly 200,000 barrels a day from 2011. The United States is thought to be pumping 6 million 

barrels a day of crude oil domestically. 

Conservative estimates antiCipate Texas doubling its production to more than 2 million barrels a day by 

around the next decade, returning to levels nol seen since the early 1980s. But the TRC chairman 

indicated last week that a better estimate sees an output potential of almost quadruple what the state 

pulls from the ground today -- up to 4 million barrels per day in crude oil production thanks to enhanced 

extraction techniques. 

Smitherman said his estimate comes from just looking at the state's two largest crude oil plays -- the 

Permian Basin and the Eagle Ford Shale. 

In his speech, Smitherman noted that the Permian is already producing most of the state's crude oil: 

700,000 barrels a day thanks to a combination of conventional production, enhanced oil recovery using 

carbon dioxide and other methods, and increasingly via hydraulic fracturing and horizontal drilling. Texas 

regulators and industry see this figure rising to 2 million barrels a day just from that field in the coming 

years, Smitherman said. 

Those comments largely echoed what other Permian Basin drillers were saying at a recent industry 

conference in Midland, Texas. Constraints on infrastructure needed to move the crude to market could 
153 

Æ 

slow developments down, but by and large oil and gas producers are reporting strong results from using 

new oil extraction methods in the Permian Basin. 

Smitherman complained that efforts to get new resources out of the Permian threaten to be delayed or 

derailed entirely because of environmental litigation aiming to add a species of lizard common in the 

region to the Endangered Species Act. 

For the Eagle Ford Shale, he offered figures that are much more bullish than some previous estimates of 

where production at that field could be headed. 

At around 300,000 barrels per day of crude output and rising quickly, the Eagle Ford is still considered a 

smaller play than North Dakota's Bakken Shale, where production now exceeds 500,000 barrels per day. 

Nevertheless, Smitherman said, it's entirely probable that Eagle Ford output could grow to match the 

Permian Basin's expected figures, adding another 2 million barrels per day to Texas crude production. 

Adding his estimates of the Eagle Ford and Permian Basin together gives Smitherman his 4-millionbarrel-per-day target in Texas oil production. 

Embracing hydraulic fracturing will "make the U.S. more significant ... than Iran, China, Iraq or 

Venezuela," Smitherman said. 

During a discussion narrowing in on developments in the Eagle Ford, state Sen. Carlos Uresti (D), whose 

San Antonio district is in the shale play, acknowledged that developments there are moving faster than 

many communities can handle. 

Uresti said he estimates oil and gas project spending in the Eagle Ford rose from $1.8 billion in 2007 to 

$14.6 billion last year. The resulting stresses on infrastructure and pressures felt by rural communities in 

the region are not being addressed by an interim state senate committee "to try to come up with core 

ideas on how to deal with the infrastructure problems," he said.